00101954000101954000000001325670--12-312021FYfalse24368612245746191.001.000001325670frst:SnbvSubordinatedNotesMemberus-gaap:SubordinatedDebtMember2021-12-310001325670frst:SnbvSubordinatedNotesMemberus-gaap:SubordinatedDebtMember2020-12-310001325670us-gaap:CommonStockMember2021-01-012021-12-310001325670us-gaap:CommonStockMember2019-01-012019-12-310001325670us-gaap:AvailableforsaleSecuritiesMemberus-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2021-12-310001325670us-gaap:RetainedEarningsMember2021-12-310001325670us-gaap:CommonStockMember2021-12-310001325670us-gaap:AdditionalPaidInCapitalMember2021-12-310001325670us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2021-12-310001325670srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:AccountingStandardsUpdate201613Memberus-gaap:RetainedEarningsMember2020-12-310001325670us-gaap:HeldtomaturitySecuritiesMemberus-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-310001325670us-gaap:AvailableforsaleSecuritiesMemberus-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2020-12-310001325670srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:AccountingStandardsUpdate201613Member2020-12-310001325670srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMemberus-gaap:RetainedEarningsMember2020-12-310001325670srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMemberus-gaap:CommonStockMember2020-12-310001325670srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMemberus-gaap:AdditionalPaidInCapitalMember2020-12-310001325670srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMemberus-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-310001325670us-gaap:RetainedEarningsMember2020-12-310001325670us-gaap:CommonStockMember2020-12-310001325670us-gaap:AdditionalPaidInCapitalMember2020-12-310001325670us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2020-12-310001325670srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMember2020-12-310001325670us-gaap:HeldtomaturitySecuritiesMemberus-gaap:AccumulatedOtherComprehensiveIncomeMember2019-12-310001325670us-gaap:AvailableforsaleSecuritiesMemberus-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2019-12-310001325670us-gaap:RetainedEarningsMember2019-12-310001325670us-gaap:CommonStockMember2019-12-310001325670us-gaap:AdditionalPaidInCapitalMember2019-12-310001325670us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-12-310001325670us-gaap:HeldtomaturitySecuritiesMemberus-gaap:AccumulatedOtherComprehensiveIncomeMember2018-12-310001325670us-gaap:AvailableforsaleSecuritiesMemberus-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2018-12-310001325670us-gaap:RetainedEarningsMember2018-12-310001325670us-gaap:CommonStockMember2018-12-310001325670us-gaap:AdditionalPaidInCapitalMember2018-12-310001325670us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-12-310001325670us-gaap:EmployeeStockOptionMember2021-12-310001325670us-gaap:EmployeeStockOptionMember2020-12-310001325670frst:StockOptionPlan2017Member2017-06-210001325670frst:TimeVestedRestrictedStockMember2020-12-310001325670frst:PerformanceBasedRestrictedStockUnitsMember2021-01-012021-12-310001325670us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ConsumerPortfolioSegmentMember2021-01-012021-12-310001325670us-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMember2021-01-012021-12-310001325670frst:LoansAndLeasesReceivableSecuredByFarmlandMemberus-gaap:ResidentialPortfolioSegmentMember2021-01-012021-12-310001325670srt:MinimumMemberus-gaap:FurnitureAndFixturesMember2021-01-012021-12-310001325670srt:MaximumMemberus-gaap:FurnitureAndFixturesMember2021-01-012021-12-310001325670us-gaap:LeaseholdImprovementsMember2021-12-310001325670us-gaap:LandMember2021-12-310001325670us-gaap:LandAndLandImprovementsMember2021-12-310001325670us-gaap:FurnitureAndFixturesMember2021-12-310001325670us-gaap:ConstructionInProgressMember2021-12-310001325670us-gaap:BuildingAndBuildingImprovementsMember2021-12-310001325670us-gaap:LeaseholdImprovementsMember2020-12-310001325670us-gaap:LandMember2020-12-310001325670us-gaap:LandAndLandImprovementsMember2020-12-310001325670us-gaap:FurnitureAndFixturesMember2020-12-310001325670us-gaap:ConstructionInProgressMember2020-12-310001325670us-gaap:BuildingAndBuildingImprovementsMember2020-12-310001325670us-gaap:FurnitureAndFixturesMember2021-01-012021-12-310001325670us-gaap:BuildingAndBuildingImprovementsMember2021-01-012021-12-310001325670us-gaap:FairValueInputsLevel3Member2020-12-310001325670us-gaap:FairValueInputsLevel3Member2021-12-310001325670us-gaap:InvestmentsMember2021-12-310001325670us-gaap:InvestmentsMember2020-12-310001325670us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2021-01-012021-12-310001325670us-gaap:HeldtomaturitySecuritiesMemberus-gaap:AccumulatedOtherComprehensiveIncomeMember2020-01-012020-12-310001325670us-gaap:AvailableforsaleSecuritiesMemberus-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2020-01-012020-12-310001325670us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-01-012020-12-310001325670us-gaap:HeldtomaturitySecuritiesMemberus-gaap:AccumulatedOtherComprehensiveIncomeMember2019-01-012019-12-310001325670us-gaap:AvailableforsaleSecuritiesMemberus-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2019-01-012019-12-310001325670us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-01-012019-12-310001325670us-gaap:HeldtomaturitySecuritiesMemberus-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-012021-12-310001325670us-gaap:AvailableforsaleSecuritiesMemberus-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2021-01-012021-12-310001325670us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-012021-12-310001325670srt:RestatementAdjustmentMember2020-12-310001325670us-gaap:ResidentialPortfolioSegmentMember2021-01-012021-12-310001325670us-gaap:ResidentialPortfolioSegmentMember2020-01-012020-12-310001325670frst:LoansAndLeasesReceivableSecuredByFarmlandMemberus-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMember2021-12-310001325670us-gaap:DoubtfulMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMember2020-12-310001325670us-gaap:DoubtfulMember2020-12-310001325670frst:SpecificAllocationMemberus-gaap:CommercialPortfolioSegmentMemberus-gaap:CommercialLoanMember2021-12-310001325670frst:QFactorAndOtherQualitativeAdjustmentsMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:HomeEquityLoanMember2021-12-310001325670frst:QFactorAndOtherQualitativeAdjustmentsMemberus-gaap:ResidentialPortfolioSegmentMemberfrst:OneToFourResidentialFamilyMember2021-12-310001325670frst:QFactorAndOtherQualitativeAdjustmentsMemberus-gaap:ResidentialPortfolioSegmentMemberfrst:LoansAndLeasesReceivableMultiFamilyResidentialMember2021-12-310001325670frst:QFactorAndOtherQualitativeAdjustmentsMemberus-gaap:CommercialPortfolioSegmentMemberus-gaap:ConstructionLoansMember2021-12-310001325670frst:QFactorAndOtherQualitativeAdjustmentsMemberus-gaap:CommercialPortfolioSegmentMemberus-gaap:CommercialLoanMember2021-12-310001325670frst:QFactorAndOtherQualitativeAdjustmentsMemberfrst:LoansAndLeasesReceivableSecuredByFarmlandMemberus-gaap:CommercialRealEstatePortfolioSegmentMember2021-12-310001325670frst:QFactorAndOtherQualitativeAdjustmentsMemberfrst:CommercialRealEstateOwnerOccupiedMemberus-gaap:CommercialRealEstatePortfolioSegmentMember2021-12-310001325670frst:QFactorAndOtherQualitativeAdjustmentsMemberfrst:CommercialRealEstateNonOwnerOccupiedMemberus-gaap:CommercialRealEstatePortfolioSegmentMember2021-12-310001325670frst:ModeledExpectedCreditLossesMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:HomeEquityLoanMember2021-12-310001325670frst:ModeledExpectedCreditLossesMemberus-gaap:ResidentialPortfolioSegmentMemberfrst:OneToFourResidentialFamilyMember2021-12-310001325670frst:ModeledExpectedCreditLossesMemberus-gaap:ResidentialPortfolioSegmentMemberfrst:LoansAndLeasesReceivableMultiFamilyResidentialMember2021-12-310001325670frst:ModeledExpectedCreditLossesMemberus-gaap:CommercialPortfolioSegmentMemberus-gaap:ConstructionLoansMember2021-12-310001325670frst:ModeledExpectedCreditLossesMemberus-gaap:CommercialPortfolioSegmentMemberus-gaap:CommercialLoanMember2021-12-310001325670frst:ModeledExpectedCreditLossesMemberfrst:LoansAndLeasesReceivableSecuredByFarmlandMemberus-gaap:CommercialRealEstatePortfolioSegmentMember2021-12-310001325670frst:ModeledExpectedCreditLossesMemberfrst:CommercialRealEstateOwnerOccupiedMemberus-gaap:CommercialRealEstatePortfolioSegmentMember2021-12-310001325670frst:ModeledExpectedCreditLossesMemberfrst:CommercialRealEstateNonOwnerOccupiedMemberus-gaap:CommercialRealEstatePortfolioSegmentMember2021-12-310001325670us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ConsumerPortfolioSegmentMember2021-12-310001325670us-gaap:CommercialPortfolioSegmentMemberus-gaap:ConstructionLoansMember2021-12-310001325670frst:SpecificAllocationMemberus-gaap:FinancialAssetAcquiredWithCreditDeteriorationMember2021-12-310001325670frst:SpecificAllocationMemberfrst:OtherConsumerLoanMember2021-12-310001325670frst:ModeledExpectedCreditLossesMemberfrst:OtherConsumerLoanMember2021-12-310001325670frst:LoansAndLeasesReceivableSecuredByFarmlandMemberus-gaap:ResidentialPortfolioSegmentMember2021-12-310001325670us-gaap:ConsumerPortfolioSegmentMember2021-12-310001325670frst:SpecificAllocationMember2021-12-310001325670frst:QFactorAndOtherQualitativeAdjustmentsMember2021-12-310001325670frst:ModeledExpectedCreditLossesMember2021-12-310001325670frst:SpecificAllocationMemberus-gaap:ResidentialPortfolioSegmentMemberfrst:OneToFourResidentialFamilyMember2020-12-310001325670frst:SpecificAllocationMemberus-gaap:CommercialPortfolioSegmentMemberus-gaap:ConstructionLoansMember2020-12-310001325670frst:SpecificAllocationMemberus-gaap:CommercialPortfolioSegmentMemberus-gaap:CommercialLoanMember2020-12-310001325670frst:QFactorAndOtherQualitativeAdjustmentsMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:HomeEquityLoanMember2020-12-310001325670frst:QFactorAndOtherQualitativeAdjustmentsMemberus-gaap:ResidentialPortfolioSegmentMemberfrst:OneToFourResidentialFamilyMember2020-12-310001325670frst:QFactorAndOtherQualitativeAdjustmentsMemberus-gaap:ResidentialPortfolioSegmentMemberfrst:LoansAndLeasesReceivableMultiFamilyResidentialMember2020-12-310001325670frst:QFactorAndOtherQualitativeAdjustmentsMemberus-gaap:CommercialPortfolioSegmentMemberus-gaap:ConstructionLoansMember2020-12-310001325670frst:QFactorAndOtherQualitativeAdjustmentsMemberus-gaap:CommercialPortfolioSegmentMemberus-gaap:CommercialLoanMember2020-12-310001325670frst:QFactorAndOtherQualitativeAdjustmentsMemberfrst:LoansAndLeasesReceivableSecuredByFarmlandMemberus-gaap:CommercialRealEstatePortfolioSegmentMember2020-12-310001325670frst:QFactorAndOtherQualitativeAdjustmentsMemberfrst:CommercialRealEstateOwnerOccupiedMemberus-gaap:CommercialRealEstatePortfolioSegmentMember2020-12-310001325670frst:QFactorAndOtherQualitativeAdjustmentsMemberfrst:CommercialRealEstateNonOwnerOccupiedMemberus-gaap:CommercialRealEstatePortfolioSegmentMember2020-12-310001325670frst:ModeledExpectedCreditLossesMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:HomeEquityLoanMember2020-12-310001325670frst:ModeledExpectedCreditLossesMemberus-gaap:ResidentialPortfolioSegmentMemberfrst:OneToFourResidentialFamilyMember2020-12-310001325670frst:ModeledExpectedCreditLossesMemberus-gaap:ResidentialPortfolioSegmentMemberfrst:LoansAndLeasesReceivableMultiFamilyResidentialMember2020-12-310001325670frst:ModeledExpectedCreditLossesMemberus-gaap:CommercialPortfolioSegmentMemberus-gaap:ConstructionLoansMember2020-12-310001325670frst:ModeledExpectedCreditLossesMemberus-gaap:CommercialPortfolioSegmentMemberus-gaap:CommercialLoanMember2020-12-310001325670frst:ModeledExpectedCreditLossesMemberfrst:LoansAndLeasesReceivableSecuredByFarmlandMemberus-gaap:CommercialRealEstatePortfolioSegmentMember2020-12-310001325670frst:ModeledExpectedCreditLossesMemberfrst:CommercialRealEstateOwnerOccupiedMemberus-gaap:CommercialRealEstatePortfolioSegmentMember2020-12-310001325670frst:ModeledExpectedCreditLossesMemberfrst:CommercialRealEstateNonOwnerOccupiedMemberus-gaap:CommercialRealEstatePortfolioSegmentMember2020-12-310001325670us-gaap:ResidentialPortfolioSegmentMemberus-gaap:HomeEquityLoanMember2020-12-310001325670us-gaap:ResidentialPortfolioSegmentMemberfrst:OneToFourResidentialFamilyMember2020-12-310001325670us-gaap:ResidentialPortfolioSegmentMemberfrst:LoansAndLeasesReceivableMultiFamilyResidentialMember2020-12-310001325670us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ConsumerPortfolioSegmentMember2020-12-310001325670us-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMember2020-12-310001325670us-gaap:CommercialPortfolioSegmentMemberus-gaap:ConstructionLoansMember2020-12-310001325670us-gaap:CommercialPortfolioSegmentMemberus-gaap:CommercialLoanMember2020-12-310001325670frst:SpecificAllocationMemberus-gaap:FinancialAssetAcquiredWithCreditDeteriorationMember2020-12-310001325670frst:SpecificAllocationMemberfrst:OtherConsumerLoanMember2020-12-310001325670frst:QFactorAndOtherQualitativeAdjustmentsMemberfrst:OtherConsumerLoanMember2020-12-310001325670frst:ModeledExpectedCreditLossesMemberfrst:OtherConsumerLoanMember2020-12-310001325670frst:LoansAndLeasesReceivableSecuredByFarmlandMemberus-gaap:ResidentialPortfolioSegmentMember2020-12-310001325670frst:LoansAndLeasesReceivableSecuredByFarmlandMemberus-gaap:CommercialRealEstatePortfolioSegmentMember2020-12-310001325670frst:CommercialRealEstateOwnerOccupiedMemberus-gaap:CommercialRealEstatePortfolioSegmentMember2020-12-310001325670frst:CommercialRealEstateNonOwnerOccupiedMemberus-gaap:CommercialRealEstatePortfolioSegmentMember2020-12-310001325670us-gaap:ConsumerPortfolioSegmentMember2020-12-310001325670frst:SpecificAllocationMember2020-12-310001325670frst:QFactorAndOtherQualitativeAdjustmentsMember2020-12-310001325670frst:OtherConsumerLoanMember2020-12-310001325670frst:ModeledExpectedCreditLossesMember2020-12-310001325670srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:HomeEquityLoanMember2019-12-310001325670srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:ResidentialPortfolioSegmentMemberfrst:OneToFourResidentialFamilyMember2019-12-310001325670srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:ResidentialPortfolioSegmentMemberfrst:LoansAndLeasesReceivableMultiFamilyResidentialMember2019-12-310001325670srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:FinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ConsumerPortfolioSegmentMember2019-12-310001325670srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMember2019-12-310001325670srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:CommercialPortfolioSegmentMemberus-gaap:CommercialLoanMember2019-12-310001325670srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberfrst:LoansAndLeasesReceivableSecuredByFarmlandMemberus-gaap:ResidentialPortfolioSegmentMember2019-12-310001325670srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberfrst:CommercialRealEstateOwnerOccupiedMemberus-gaap:CommercialRealEstatePortfolioSegmentMember2019-12-310001325670srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberfrst:CommercialRealEstateNonOwnerOccupiedMemberus-gaap:CommercialRealEstatePortfolioSegmentMember2019-12-310001325670srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMemberus-gaap:ResidentialPortfolioSegmentMemberfrst:OneToFourResidentialFamilyMember2019-12-310001325670srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMemberus-gaap:ResidentialPortfolioSegmentMemberfrst:LoansAndLeasesReceivableMultiFamilyResidentialMember2019-12-310001325670srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMemberus-gaap:FinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ConsumerPortfolioSegmentMember2019-12-310001325670srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMemberus-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMember2019-12-310001325670srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMemberus-gaap:CommercialPortfolioSegmentMemberus-gaap:CommercialLoanMember2019-12-310001325670srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMemberfrst:LoansAndLeasesReceivableSecuredByFarmlandMemberus-gaap:ResidentialPortfolioSegmentMember2019-12-310001325670srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMemberfrst:CommercialRealEstateOwnerOccupiedMemberus-gaap:CommercialRealEstatePortfolioSegmentMember2019-12-310001325670srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMemberfrst:CommercialRealEstateNonOwnerOccupiedMemberus-gaap:CommercialRealEstatePortfolioSegmentMember2019-12-310001325670us-gaap:ResidentialPortfolioSegmentMemberus-gaap:HomeEquityLoanMember2019-12-310001325670us-gaap:ResidentialPortfolioSegmentMemberfrst:OneToFourResidentialFamilyMember2019-12-310001325670us-gaap:ResidentialPortfolioSegmentMemberfrst:LoansAndLeasesReceivableMultiFamilyResidentialMember2019-12-310001325670us-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMember2019-12-310001325670us-gaap:CommercialPortfolioSegmentMemberus-gaap:CommercialLoanMember2019-12-310001325670srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:UnallocatedFinancingReceivablesMember2019-12-310001325670srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:ConsumerPortfolioSegmentMember2019-12-310001325670srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMemberus-gaap:ConsumerPortfolioSegmentMember2019-12-310001325670frst:LoansAndLeasesReceivableSecuredByFarmlandMemberus-gaap:ResidentialPortfolioSegmentMember2019-12-310001325670frst:CommercialRealEstateOwnerOccupiedMemberus-gaap:CommercialRealEstatePortfolioSegmentMember2019-12-310001325670frst:CommercialRealEstateNonOwnerOccupiedMemberus-gaap:CommercialRealEstatePortfolioSegmentMember2019-12-310001325670us-gaap:UnallocatedFinancingReceivablesMember2019-12-310001325670us-gaap:ConsumerPortfolioSegmentMember2019-12-310001325670srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2019-12-310001325670srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMember2019-12-310001325670us-gaap:JuniorSubordinatedDebtMember2021-12-310001325670us-gaap:OtherAssetsMember2021-12-310001325670us-gaap:OtherAssetsMember2020-12-310001325670frst:SouthernTrustMortgageMemberus-gaap:DiscontinuedOperationsHeldforsaleMember2020-01-012020-12-310001325670frst:SouthernTrustMortgageMemberus-gaap:DiscontinuedOperationsHeldforsaleMember2019-01-012019-12-310001325670srt:MinimumMemberus-gaap:CoreDepositsMember2021-01-012021-12-310001325670srt:MaximumMemberus-gaap:CoreDepositsMember2021-01-012021-12-310001325670frst:CoreDepositsAndServicingRightsMember2021-12-310001325670us-gaap:CoreDepositsMember2021-12-310001325670us-gaap:CoreDepositsMember2020-12-310001325670us-gaap:ResidentialPortfolioSegmentMemberfrst:LoansAndLeasesReceivableMultiFamilyResidentialMember2021-01-012021-12-310001325670frst:CommercialRealEstateNonOwnerOccupiedMemberus-gaap:CommercialRealEstatePortfolioSegmentMember2021-01-012021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:HomeEquityLoanMemberus-gaap:FinancialAssetNotPastDueMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ResidentialPortfolioSegmentMemberfrst:OneToFourResidentialFamilyMemberus-gaap:FinancialAssetNotPastDueMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ResidentialPortfolioSegmentMemberfrst:LoansAndLeasesReceivableMultiFamilyResidentialMemberus-gaap:FinancialAssetNotPastDueMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:FinancialAssetNotPastDueMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMemberus-gaap:FinancialAssetNotPastDueMemberfrst:PaycheckProtectionProgramLoansMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMemberus-gaap:CommercialLoanMemberus-gaap:FinancialAssetNotPastDueMember2021-12-310001325670frst:LoansAndLeasesReceivableSecuredByFarmlandMemberus-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMemberus-gaap:FinancialAssetNotPastDueMember2021-12-310001325670frst:LoansAndLeasesReceivableSecuredByFarmlandMemberus-gaap:FinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:NonperformingFinancingReceivableMemberus-gaap:CommercialRealEstatePortfolioSegmentMember2021-12-310001325670frst:CommercialRealEstateOwnerOccupiedMemberus-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:FinancialAssetNotPastDueMember2021-12-310001325670frst:CommercialRealEstateNonOwnerOccupiedMemberus-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:FinancialAssetNotPastDueMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:HomeEquityLoanMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ConsumerPortfolioSegmentMemberus-gaap:FinancialAssetNotPastDueMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:FinancialAssetNotPastDueMember2021-12-310001325670us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:FinancialAssetNotPastDueMember2021-12-310001325670us-gaap:FinancialAssetNotPastDueMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:HomeEquityLoanMemberus-gaap:FinancialAssetNotPastDueMember2020-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ResidentialPortfolioSegmentMemberfrst:OneToFourResidentialFamilyMemberus-gaap:FinancialAssetNotPastDueMember2020-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ResidentialPortfolioSegmentMemberfrst:LoansAndLeasesReceivableMultiFamilyResidentialMemberus-gaap:FinancialAssetNotPastDueMember2020-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:FinancialAssetNotPastDueMember2020-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMemberus-gaap:FinancialAssetNotPastDueMemberfrst:PaycheckProtectionProgramLoansMember2020-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMemberus-gaap:CommercialLoanMemberus-gaap:FinancialAssetNotPastDueMember2020-12-310001325670frst:LoansAndLeasesReceivableSecuredByFarmlandMemberus-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:FinancialAssetNotPastDueMember2020-12-310001325670frst:CommercialRealEstateOwnerOccupiedMemberus-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:FinancialAssetNotPastDueMember2020-12-310001325670frst:CommercialRealEstateNonOwnerOccupiedMemberus-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:FinancialAssetNotPastDueMember2020-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ResidentialPortfolioSegmentMemberfrst:LoansAndLeasesReceivableMultiFamilyResidentialMember2020-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ConsumerPortfolioSegmentMemberus-gaap:FinancialAssetNotPastDueMember2020-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:FinancialAssetNotPastDueMember2020-12-310001325670us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:FinancialAssetNotPastDueMember2020-12-310001325670us-gaap:FinancialAssetNotPastDueMember2020-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:NonperformingFinancingReceivableMemberfrst:OtherConsumerLoanMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberfrst:PaycheckProtectionProgramLoansMember2021-12-310001325670us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:NonperformingFinancingReceivableMember2020-12-310001325670us-gaap:NonperformingFinancingReceivableMemberfrst:SmallBusinessAdministrationLoanMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:NonperformingFinancingReceivableMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:HomeEquityLoanMember2020-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:NonperformingFinancingReceivableMemberus-gaap:ResidentialPortfolioSegmentMemberfrst:OneToFourResidentialFamilyMember2020-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:NonperformingFinancingReceivableMemberus-gaap:ResidentialPortfolioSegmentMemberfrst:LoansAndLeasesReceivableMultiFamilyResidentialMember2020-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:NonperformingFinancingReceivableMemberus-gaap:CommercialPortfolioSegmentMemberus-gaap:CommercialLoanMember2020-12-310001325670frst:LoansAndLeasesReceivableSecuredByFarmlandMemberus-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:NonperformingFinancingReceivableMemberus-gaap:CommercialRealEstatePortfolioSegmentMember2020-12-310001325670frst:CommercialRealEstateOwnerOccupiedMemberus-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:NonperformingFinancingReceivableMemberus-gaap:CommercialRealEstatePortfolioSegmentMember2020-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:NonperformingFinancingReceivableMemberus-gaap:ConsumerPortfolioSegmentMember2020-12-310001325670us-gaap:NonperformingFinancingReceivableMemberfrst:SmallBusinessAdministrationLoanMember2020-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:NonperformingFinancingReceivableMember2020-12-310001325670us-gaap:NonperformingFinancingReceivableMember2020-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ResidentialPortfolioSegmentMemberfrst:OneToFourResidentialFamilyMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ResidentialPortfolioSegmentMemberfrst:LoansAndLeasesReceivableMultiFamilyResidentialMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMemberus-gaap:ConstructionLoansMember2021-12-310001325670frst:LoansAndLeasesReceivableSecuredByFarmlandMemberus-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialRealEstatePortfolioSegmentMember2021-12-310001325670frst:CommercialRealEstateOwnerOccupiedMemberus-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialRealEstatePortfolioSegmentMember2021-12-310001325670frst:CommercialRealEstateNonOwnerOccupiedMemberus-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialRealEstatePortfolioSegmentMember2021-12-310001325670frst:SmallBusinessAdministrationLoanMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:HomeEquityLoanMember2020-12-310001325670frst:LoansAndLeasesReceivableSecuredByFarmlandMemberus-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialRealEstatePortfolioSegmentMember2020-12-310001325670frst:CommercialRealEstateOwnerOccupiedMemberus-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialRealEstatePortfolioSegmentMember2020-12-310001325670frst:CommercialRealEstateNonOwnerOccupiedMemberus-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialRealEstatePortfolioSegmentMember2020-12-310001325670frst:SmallBusinessAdministrationLoanMember2020-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:NonperformingFinancingReceivableMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:HomeEquityLoanMemberus-gaap:FinancialAssetNotPastDueMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:NonperformingFinancingReceivableMemberus-gaap:ResidentialPortfolioSegmentMemberfrst:OneToFourResidentialFamilyMemberus-gaap:FinancialAssetNotPastDueMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:NonperformingFinancingReceivableMemberus-gaap:ResidentialPortfolioSegmentMemberfrst:LoansAndLeasesReceivableMultiFamilyResidentialMemberus-gaap:FinancialAssetNotPastDueMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:NonperformingFinancingReceivableMemberus-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:FinancialAssetNotPastDueMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:NonperformingFinancingReceivableMemberus-gaap:CommercialPortfolioSegmentMemberus-gaap:CommercialLoanMemberus-gaap:FinancialAssetNotPastDueMember2021-12-310001325670frst:LoansAndLeasesReceivableSecuredByFarmlandMemberus-gaap:FinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:NonperformingFinancingReceivableMemberus-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:FinancialAssetNotPastDueMember2021-12-310001325670frst:CommercialRealEstateOwnerOccupiedMemberus-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:NonperformingFinancingReceivableMemberus-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:FinancialAssetNotPastDueMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:HomeEquityLoanMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:HomeEquityLoanMemberus-gaap:FinancingReceivables30To59DaysPastDueMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:HomeEquityLoanMemberus-gaap:FinancialAssetPastDueMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ResidentialPortfolioSegmentMemberfrst:OneToFourResidentialFamilyMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ResidentialPortfolioSegmentMemberfrst:OneToFourResidentialFamilyMemberus-gaap:FinancingReceivables60To89DaysPastDueMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ResidentialPortfolioSegmentMemberfrst:OneToFourResidentialFamilyMemberus-gaap:FinancingReceivables30To59DaysPastDueMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ResidentialPortfolioSegmentMemberfrst:OneToFourResidentialFamilyMemberus-gaap:FinancialAssetPastDueMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:NonperformingFinancingReceivableMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:HomeEquityLoanMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:NonperformingFinancingReceivableMemberus-gaap:ResidentialPortfolioSegmentMemberfrst:OneToFourResidentialFamilyMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:NonperformingFinancingReceivableMemberus-gaap:ResidentialPortfolioSegmentMemberfrst:LoansAndLeasesReceivableMultiFamilyResidentialMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:NonperformingFinancingReceivableMemberus-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:NonperformingFinancingReceivableMemberus-gaap:CommercialPortfolioSegmentMemberus-gaap:CommercialLoanMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:NonperformingFinancingReceivableMemberfrst:OtherConsumerLoanMemberus-gaap:FinancialAssetNotPastDueMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:FinancingReceivables60To89DaysPastDueMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:FinancingReceivables30To59DaysPastDueMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:FinancialAssetPastDueMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMemberfrst:PaycheckProtectionProgramLoansMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMemberus-gaap:FinancingReceivables60To89DaysPastDueMemberfrst:PaycheckProtectionProgramLoansMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMemberus-gaap:FinancingReceivables30To59DaysPastDueMemberfrst:PaycheckProtectionProgramLoansMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMemberus-gaap:FinancialAssetPastDueMemberfrst:PaycheckProtectionProgramLoansMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMemberus-gaap:CommercialLoanMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMemberus-gaap:CommercialLoanMemberus-gaap:FinancingReceivables30To59DaysPastDueMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMemberus-gaap:CommercialLoanMemberus-gaap:FinancialAssetPastDueMember2021-12-310001325670frst:LoansAndLeasesReceivableSecuredByFarmlandMemberus-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:NonperformingFinancingReceivableMemberus-gaap:CommercialRealEstatePortfolioSegmentMember2021-12-310001325670frst:LoansAndLeasesReceivableSecuredByFarmlandMemberus-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMemberus-gaap:FinancingReceivables30To59DaysPastDueMember2021-12-310001325670frst:LoansAndLeasesReceivableSecuredByFarmlandMemberus-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMemberus-gaap:FinancialAssetPastDueMember2021-12-310001325670frst:CommercialRealEstateOwnerOccupiedMemberus-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:NonperformingFinancingReceivableMemberus-gaap:CommercialRealEstatePortfolioSegmentMember2021-12-310001325670frst:CommercialRealEstateOwnerOccupiedMemberus-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:FinancingReceivables60To89DaysPastDueMember2021-12-310001325670frst:CommercialRealEstateOwnerOccupiedMemberus-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:FinancingReceivables30To59DaysPastDueMember2021-12-310001325670frst:CommercialRealEstateOwnerOccupiedMemberus-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:FinancialAssetPastDueMember2021-12-310001325670us-gaap:ResidentialPortfolioSegmentMemberus-gaap:HomeEquityLoanMemberus-gaap:SubstandardMember2021-12-310001325670us-gaap:ResidentialPortfolioSegmentMemberus-gaap:HomeEquityLoanMemberus-gaap:SpecialMentionMember2021-12-310001325670us-gaap:ResidentialPortfolioSegmentMemberus-gaap:HomeEquityLoanMemberus-gaap:PassMember2021-12-310001325670us-gaap:ResidentialPortfolioSegmentMemberfrst:OneToFourResidentialFamilyMemberus-gaap:SubstandardMember2021-12-310001325670us-gaap:ResidentialPortfolioSegmentMemberfrst:OneToFourResidentialFamilyMemberus-gaap:SpecialMentionMember2021-12-310001325670us-gaap:ResidentialPortfolioSegmentMemberfrst:OneToFourResidentialFamilyMemberus-gaap:PassMember2021-12-310001325670us-gaap:ResidentialPortfolioSegmentMemberfrst:LoansAndLeasesReceivableMultiFamilyResidentialMemberus-gaap:SubstandardMember2021-12-310001325670us-gaap:ResidentialPortfolioSegmentMemberfrst:LoansAndLeasesReceivableMultiFamilyResidentialMemberus-gaap:SpecialMentionMember2021-12-310001325670us-gaap:ResidentialPortfolioSegmentMemberfrst:LoansAndLeasesReceivableMultiFamilyResidentialMemberus-gaap:PassMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:NonperformingFinancingReceivableMemberus-gaap:FinancialAssetNotPastDueMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:NonperformingFinancingReceivableMemberus-gaap:ConsumerPortfolioSegmentMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ConsumerPortfolioSegmentMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ConsumerPortfolioSegmentMemberus-gaap:FinancingReceivables60To89DaysPastDueMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ConsumerPortfolioSegmentMemberus-gaap:FinancingReceivables30To59DaysPastDueMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ConsumerPortfolioSegmentMemberus-gaap:FinancialAssetPastDueMember2021-12-310001325670us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:NonperformingFinancingReceivableMemberus-gaap:FinancialAssetNotPastDueMember2021-12-310001325670us-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:SubstandardMember2021-12-310001325670us-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:PassMember2021-12-310001325670us-gaap:CommercialPortfolioSegmentMemberus-gaap:CommercialLoanMemberus-gaap:SubstandardMember2021-12-310001325670us-gaap:CommercialPortfolioSegmentMemberus-gaap:CommercialLoanMemberus-gaap:SpecialMentionMember2021-12-310001325670us-gaap:CommercialPortfolioSegmentMemberus-gaap:CommercialLoanMemberus-gaap:PassMember2021-12-310001325670frst:LoansAndLeasesReceivableSecuredByFarmlandMemberus-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:SubstandardMember2021-12-310001325670frst:LoansAndLeasesReceivableSecuredByFarmlandMemberus-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:SpecialMentionMember2021-12-310001325670frst:LoansAndLeasesReceivableSecuredByFarmlandMemberus-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:PassMember2021-12-310001325670frst:CommercialRealEstateOwnerOccupiedMemberus-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:SubstandardMember2021-12-310001325670frst:CommercialRealEstateOwnerOccupiedMemberus-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:SpecialMentionMember2021-12-310001325670frst:CommercialRealEstateOwnerOccupiedMemberus-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:PassMember2021-12-310001325670frst:CommercialRealEstateNonOwnerOccupiedMemberus-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:SubstandardMember2021-12-310001325670frst:CommercialRealEstateNonOwnerOccupiedMemberus-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:SpecialMentionMember2021-12-310001325670frst:CommercialRealEstateNonOwnerOccupiedMemberus-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:PassMember2021-12-310001325670us-gaap:PassMemberfrst:PaycheckProtectionProgramLoansMember2021-12-310001325670us-gaap:NonperformingFinancingReceivableMemberus-gaap:FinancialAssetNotPastDueMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:NonperformingFinancingReceivableMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:FinancingReceivables60To89DaysPastDueMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:FinancingReceivables30To59DaysPastDueMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:FinancialAssetPastDueMember2021-12-310001325670us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:SubstandardMember2021-12-310001325670us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:SpecialMentionMember2021-12-310001325670us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:PassMember2021-12-310001325670us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:NonperformingFinancingReceivableMember2021-12-310001325670us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:FinancingReceivables30To59DaysPastDueMember2021-12-310001325670us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:FinancialAssetPastDueMember2021-12-310001325670frst:OtherConsumerLoanMemberus-gaap:SubstandardMember2021-12-310001325670frst:OtherConsumerLoanMemberus-gaap:SpecialMentionMember2021-12-310001325670frst:OtherConsumerLoanMemberus-gaap:PassMember2021-12-310001325670us-gaap:NonperformingFinancingReceivableMember2021-12-310001325670us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2021-12-310001325670us-gaap:FinancingReceivables60To89DaysPastDueMember2021-12-310001325670us-gaap:FinancingReceivables30To59DaysPastDueMember2021-12-310001325670us-gaap:FinancialAssetPastDueMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:NonperformingFinancingReceivableMemberus-gaap:ResidentialPortfolioSegmentMemberfrst:OneToFourResidentialFamilyMemberus-gaap:FinancialAssetNotPastDueMember2020-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:NonperformingFinancingReceivableMemberus-gaap:ResidentialPortfolioSegmentMemberfrst:LoansAndLeasesReceivableMultiFamilyResidentialMemberus-gaap:FinancialAssetNotPastDueMember2020-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:NonperformingFinancingReceivableMemberus-gaap:CommercialPortfolioSegmentMemberus-gaap:CommercialLoanMemberus-gaap:FinancialAssetNotPastDueMember2020-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:HomeEquityLoanMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2020-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:HomeEquityLoanMemberus-gaap:FinancingReceivables60To89DaysPastDueMember2020-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:HomeEquityLoanMemberus-gaap:FinancingReceivables30To59DaysPastDueMember2020-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:HomeEquityLoanMemberus-gaap:FinancialAssetPastDueMember2020-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ResidentialPortfolioSegmentMemberfrst:OneToFourResidentialFamilyMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2020-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ResidentialPortfolioSegmentMemberfrst:OneToFourResidentialFamilyMemberus-gaap:FinancingReceivables60To89DaysPastDueMember2020-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ResidentialPortfolioSegmentMemberfrst:OneToFourResidentialFamilyMemberus-gaap:FinancingReceivables30To59DaysPastDueMember2020-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ResidentialPortfolioSegmentMemberfrst:OneToFourResidentialFamilyMemberus-gaap:FinancialAssetPastDueMember2020-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:FinancingReceivables60To89DaysPastDueMember2020-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:FinancingReceivables30To59DaysPastDueMember2020-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:FinancialAssetPastDueMember2020-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMemberus-gaap:CommercialLoanMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2020-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMemberus-gaap:CommercialLoanMemberus-gaap:FinancingReceivables60To89DaysPastDueMember2020-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMemberus-gaap:CommercialLoanMemberus-gaap:FinancingReceivables30To59DaysPastDueMember2020-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMemberus-gaap:CommercialLoanMemberus-gaap:FinancialAssetPastDueMember2020-12-310001325670frst:LoansAndLeasesReceivableSecuredByFarmlandMemberus-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2020-12-310001325670frst:LoansAndLeasesReceivableSecuredByFarmlandMemberus-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:FinancialAssetPastDueMember2020-12-310001325670frst:CommercialRealEstateOwnerOccupiedMemberus-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2020-12-310001325670frst:CommercialRealEstateOwnerOccupiedMemberus-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:FinancialAssetPastDueMember2020-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:NonperformingFinancingReceivableMemberus-gaap:FinancialAssetNotPastDueMember2020-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ConsumerPortfolioSegmentMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2020-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ConsumerPortfolioSegmentMemberus-gaap:FinancingReceivables60To89DaysPastDueMember2020-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ConsumerPortfolioSegmentMemberus-gaap:FinancingReceivables30To59DaysPastDueMember2020-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ConsumerPortfolioSegmentMemberus-gaap:FinancialAssetPastDueMember2020-12-310001325670us-gaap:NonperformingFinancingReceivableMemberus-gaap:FinancialAssetNotPastDueMember2020-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2020-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:FinancingReceivables60To89DaysPastDueMember2020-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:FinancingReceivables30To59DaysPastDueMember2020-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:FinancialAssetPastDueMember2020-12-310001325670us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2020-12-310001325670us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:FinancialAssetPastDueMember2020-12-310001325670us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2020-12-310001325670us-gaap:FinancingReceivables60To89DaysPastDueMember2020-12-310001325670us-gaap:FinancingReceivables30To59DaysPastDueMember2020-12-310001325670us-gaap:FinancialAssetPastDueMember2020-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ResidentialPortfolioSegmentMemberfrst:OneToFourResidentialFamilyMember2020-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMemberus-gaap:ConstructionLoansMember2020-12-310001325670us-gaap:FederalHomeLoanBankAdvancesMemberus-gaap:SubsequentEventMember2022-03-012022-03-010001325670us-gaap:CommercialPortfolioSegmentMemberus-gaap:CommercialLoanMemberus-gaap:FederalHomeLoanBankAdvancesMember2021-12-310001325670us-gaap:SecuritiesInvestmentMemberus-gaap:FederalHomeLoanBankAdvancesMember2021-12-310001325670us-gaap:HomeEquityLoanMemberus-gaap:FederalHomeLoanBankAdvancesMember2021-12-310001325670frst:OneToFourResidentialFamilyMemberus-gaap:FederalHomeLoanBankAdvancesMember2021-12-310001325670us-gaap:CommercialPortfolioSegmentMemberus-gaap:CommercialLoanMemberus-gaap:FederalHomeLoanBankAdvancesMember2020-12-310001325670us-gaap:SecuritiesInvestmentMemberus-gaap:FederalHomeLoanBankAdvancesMember2020-12-310001325670us-gaap:HomeEquityLoanMemberus-gaap:FederalHomeLoanBankAdvancesMember2020-12-310001325670frst:OneToFourResidentialFamilyMemberus-gaap:FederalHomeLoanBankAdvancesMember2020-12-310001325670frst:MaturityPeriodNineteenMember2021-12-310001325670frst:MaturityPeriodNineteenMember2020-12-310001325670us-gaap:FederalHomeLoanBankAdvancesMember2021-12-310001325670us-gaap:FederalHomeLoanBankAdvancesMember2020-12-310001325670frst:SouthernTrustMortgageMemberus-gaap:DiscontinuedOperationsHeldforsaleMemberus-gaap:PreferredStockMember2020-12-310001325670frst:SouthernTrustMortgageMemberus-gaap:DiscontinuedOperationsHeldforsaleMemberus-gaap:CommonStockMember2020-12-310001325670frst:SouthernTrustMortgageMemberus-gaap:DiscontinuedOperationsHeldforsaleMember2020-12-310001325670frst:SouthernTrustMortgageMember2021-12-310001325670frst:SouthernTrustMortgageMemberus-gaap:PreferredStockMember2021-12-300001325670frst:SouthernTrustMortgageMemberus-gaap:CommonStockMember2021-12-300001325670frst:TimeVestedRestrictedStockMember2021-12-310001325670frst:OfficersAndDirectorsAndPrincipalShareholdersAndTheirAffiliatesMember2021-12-310001325670frst:SouthernTrustMortgageMember2020-12-310001325670frst:OfficersAndDirectorsAndPrincipalShareholdersAndTheirAffiliatesMember2020-12-310001325670frst:SouthernTrustMortgageMember2019-12-310001325670us-gaap:RetainedEarningsMember2021-01-012021-12-310001325670us-gaap:RetainedEarningsMember2020-01-012020-12-310001325670us-gaap:RetainedEarningsMember2019-01-012019-12-310001325670srt:ExecutiveOfficerMember2021-12-310001325670srt:ExecutiveOfficerMember2020-12-310001325670srt:ExecutiveOfficerMember2021-01-012021-12-310001325670srt:ExecutiveOfficerMember2020-01-012020-12-310001325670srt:ExecutiveOfficerMember2019-01-012019-12-310001325670us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:USStatesAndPoliticalSubdivisionsMember2021-12-310001325670us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:USGovernmentAgenciesDebtSecuritiesMember2021-12-310001325670us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:ResidentialMortgageBackedSecuritiesMember2021-12-310001325670us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:MortgageBackedSecuritiesIssuedByUSGovernmentSponsoredEnterprisesMember2021-12-310001325670us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateDebtSecuritiesMember2021-12-310001325670us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CommercialMortgageBackedSecuritiesMember2021-12-310001325670us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberfrst:SbaPoolSecuritiesMember2021-12-310001325670us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USStatesAndPoliticalSubdivisionsMember2021-12-310001325670us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USGovernmentAgenciesDebtSecuritiesMember2021-12-310001325670us-gaap:FairValueMeasurementsRecurringMemberus-gaap:ResidentialMortgageBackedSecuritiesMember2021-12-310001325670us-gaap:FairValueMeasurementsRecurringMemberus-gaap:MortgageBackedSecuritiesIssuedByUSGovernmentSponsoredEnterprisesMember2021-12-310001325670us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateDebtSecuritiesMember2021-12-310001325670us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CommercialMortgageBackedSecuritiesMember2021-12-310001325670us-gaap:FairValueMeasurementsRecurringMemberfrst:SbaPoolSecuritiesMember2021-12-310001325670us-gaap:FairValueInputsLevel3Memberus-gaap:CorporateDebtSecuritiesMember2021-12-310001325670us-gaap:FairValueInputsLevel2Memberus-gaap:MortgageBackedSecuritiesMember2021-12-310001325670us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2021-12-310001325670frst:FairValueInputsLevel2AndLevel3Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2021-12-310001325670frst:FairValueInputsLevel2AndLevel3Memberus-gaap:CarryingReportedAmountFairValueDisclosureMember2021-12-310001325670us-gaap:MortgageBackedSecuritiesMember2021-12-310001325670us-gaap:FairValueMeasurementsRecurringMember2021-12-310001325670us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateDebtSecuritiesMember2020-12-310001325670us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:USStatesAndPoliticalSubdivisionsMember2020-12-310001325670us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:USGovernmentAgenciesDebtSecuritiesMember2020-12-310001325670us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:ResidentialMortgageBackedSecuritiesMember2020-12-310001325670us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:MortgageBackedSecuritiesIssuedByUSGovernmentSponsoredEnterprisesMember2020-12-310001325670us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateDebtSecuritiesMember2020-12-310001325670us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CommercialMortgageBackedSecuritiesMember2020-12-310001325670us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberfrst:SbaPoolSecuritiesMember2020-12-310001325670us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USStatesAndPoliticalSubdivisionsMember2020-12-310001325670us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USGovernmentAgenciesDebtSecuritiesMember2020-12-310001325670us-gaap:FairValueMeasurementsRecurringMemberus-gaap:ResidentialMortgageBackedSecuritiesMember2020-12-310001325670us-gaap:FairValueMeasurementsRecurringMemberus-gaap:MortgageBackedSecuritiesIssuedByUSGovernmentSponsoredEnterprisesMember2020-12-310001325670us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateDebtSecuritiesMember2020-12-310001325670us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CommercialMortgageBackedSecuritiesMember2020-12-310001325670us-gaap:FairValueMeasurementsRecurringMemberfrst:SbaPoolSecuritiesMember2020-12-310001325670us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2020-12-310001325670us-gaap:FairValueInputsLevel3Memberus-gaap:CorporateDebtSecuritiesMember2020-12-310001325670us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2020-12-310001325670frst:SouthernTrustMortgageMemberus-gaap:DiscontinuedOperationsHeldforsaleMember2020-12-310001325670frst:FairValueInputsLevel2AndLevel3Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2020-12-310001325670frst:FairValueInputsLevel2AndLevel3Memberus-gaap:CarryingReportedAmountFairValueDisclosureMember2020-12-310001325670us-gaap:FairValueMeasurementsRecurringMember2020-12-310001325670frst:SouthernTrustMortgageMemberus-gaap:DiscontinuedOperationsHeldforsaleMember2019-12-310001325670frst:EasternVirginiaBanksharesIncMemberus-gaap:JuniorSubordinatedDebtMember2021-12-310001325670frst:EasternVirginiaBanksharesIncMemberus-gaap:JuniorSubordinatedDebtMember2020-12-310001325670frst:SnbvSubordinatedNotesMemberus-gaap:SeniorSubordinatedNotesMember2020-08-250001325670frst:SnbvSubordinatedNotesMemberus-gaap:SubordinatedDebtMember2020-08-250001325670frst:SnbvSeniorSubordinatedNotesMemberus-gaap:SeniorSubordinatedNotesMember2017-01-200001325670frst:EasternVirginiaBanksharesIncMemberus-gaap:SeniorSubordinatedNotesMember2015-04-220001325670us-gaap:JuniorSubordinatedDebtMember2021-01-012021-12-310001325670frst:SnbvSeniorSubordinatedNotesMemberus-gaap:SeniorSubordinatedNotesMember2017-01-202017-01-200001325670us-gaap:LoansReceivableMember2021-12-310001325670frst:EasternVirginiaBanksharesIncAndGreaterAtlanticBankAndHarvestBankOfMarylandAndPrinceGeorgeFederalSavingsBankMember2021-12-310001325670us-gaap:LoansReceivableMember2020-12-310001325670frst:EasternVirginiaBanksharesIncAndGreaterAtlanticBankAndHarvestBankOfMarylandAndPrinceGeorgeFederalSavingsBankMember2020-12-310001325670us-gaap:LoansReceivableMember2019-12-310001325670srt:ParentCompanyMembersrt:ReportableLegalEntitiesMember2019-12-3100013256702019-12-310001325670srt:ParentCompanyMembersrt:ReportableLegalEntitiesMember2018-12-3100013256702018-12-310001325670frst:EasternVirginiaBanksharesIncMember2017-06-230001325670us-gaap:MortgageBackedSecuritiesMember2021-12-310001325670us-gaap:USStatesAndPoliticalSubdivisionsMember2021-12-310001325670us-gaap:USGovernmentAgenciesDebtSecuritiesMember2021-12-310001325670us-gaap:ResidentialMortgageBackedSecuritiesMember2021-12-310001325670us-gaap:MortgageBackedSecuritiesIssuedByUSGovernmentSponsoredEnterprisesMember2021-12-310001325670us-gaap:CorporateDebtSecuritiesMember2021-12-310001325670us-gaap:CommercialMortgageBackedSecuritiesMember2021-12-310001325670frst:SbaPoolSecuritiesMember2021-12-310001325670us-gaap:USStatesAndPoliticalSubdivisionsMember2020-12-310001325670us-gaap:USGovernmentAgenciesDebtSecuritiesMember2020-12-310001325670us-gaap:ResidentialMortgageBackedSecuritiesMember2020-12-310001325670us-gaap:MortgageBackedSecuritiesIssuedByUSGovernmentSponsoredEnterprisesMember2020-12-310001325670us-gaap:CorporateDebtSecuritiesMember2020-12-310001325670us-gaap:CommercialMortgageBackedSecuritiesMember2020-12-310001325670frst:SbaPoolSecuritiesMember2020-12-310001325670us-gaap:EmployeeStockOptionMember2021-01-012021-12-310001325670us-gaap:EmployeeStockOptionMember2020-01-012020-12-310001325670us-gaap:EmployeeStockOptionMember2019-01-012019-12-310001325670us-gaap:ResidentialPortfolioSegmentMemberus-gaap:HomeEquityLoanMember2021-01-012021-12-310001325670us-gaap:ResidentialPortfolioSegmentMemberfrst:OneToFourResidentialFamilyMember2021-01-012021-12-310001325670us-gaap:CommercialPortfolioSegmentMemberus-gaap:CommercialLoanMember2021-01-012021-12-310001325670frst:CommercialRealEstateOwnerOccupiedMemberus-gaap:CommercialRealEstatePortfolioSegmentMember2021-01-012021-12-310001325670us-gaap:ConsumerPortfolioSegmentMember2021-01-012021-12-310001325670us-gaap:ResidentialPortfolioSegmentMemberus-gaap:HomeEquityLoanMember2020-01-012020-12-310001325670us-gaap:ResidentialPortfolioSegmentMemberfrst:OneToFourResidentialFamilyMember2020-01-012020-12-310001325670us-gaap:ResidentialPortfolioSegmentMemberfrst:LoansAndLeasesReceivableMultiFamilyResidentialMember2020-01-012020-12-310001325670us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ConsumerPortfolioSegmentMember2020-01-012020-12-310001325670us-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMember2020-01-012020-12-310001325670us-gaap:CommercialPortfolioSegmentMemberus-gaap:CommercialLoanMember2020-01-012020-12-310001325670frst:LoansAndLeasesReceivableSecuredByFarmlandMemberus-gaap:ResidentialPortfolioSegmentMember2020-01-012020-12-310001325670frst:CommercialRealEstateOwnerOccupiedMemberus-gaap:CommercialRealEstatePortfolioSegmentMember2020-01-012020-12-310001325670frst:CommercialRealEstateNonOwnerOccupiedMemberus-gaap:CommercialRealEstatePortfolioSegmentMember2020-01-012020-12-310001325670us-gaap:ConsumerPortfolioSegmentMember2020-01-012020-12-310001325670us-gaap:EmployeeStockOptionMember2021-01-012021-12-310001325670frst:TimeVestedRestrictedStockMember2021-01-012021-12-310001325670us-gaap:EmployeeStockOptionMember2020-01-012020-12-310001325670frst:TimeVestedRestrictedStockMember2020-01-012020-12-310001325670us-gaap:EmployeeStockOptionMember2019-01-012019-12-310001325670frst:TimeVestedRestrictedStockMember2019-01-012019-12-310001325670us-gaap:AdditionalPaidInCapitalMember2019-01-012019-12-310001325670us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-12-310001325670srt:ParentCompanyMembersrt:ReportableLegalEntitiesMember2020-12-310001325670us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-310001325670frst:CloudComputingArrangementsMember2021-12-310001325670us-gaap:ResidentialPortfolioSegmentMemberus-gaap:HomeEquityLoanMember2021-12-310001325670us-gaap:ResidentialPortfolioSegmentMemberfrst:OneToFourResidentialFamilyMember2021-12-310001325670us-gaap:ResidentialPortfolioSegmentMemberfrst:LoansAndLeasesReceivableMultiFamilyResidentialMember2021-12-310001325670us-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMember2021-12-310001325670us-gaap:CommercialPortfolioSegmentMemberus-gaap:CommercialLoanMember2021-12-310001325670frst:LoansAndLeasesReceivableSecuredByFarmlandMemberus-gaap:CommercialRealEstatePortfolioSegmentMember2021-12-310001325670frst:CommercialRealEstateOwnerOccupiedMemberus-gaap:CommercialRealEstatePortfolioSegmentMember2021-12-310001325670frst:CommercialRealEstateNonOwnerOccupiedMemberus-gaap:CommercialRealEstatePortfolioSegmentMember2021-12-310001325670frst:OtherConsumerLoanMember2021-12-310001325670us-gaap:AdditionalPaidInCapitalMember2021-01-012021-12-310001325670frst:SouthernTrustMortgageMember2021-01-012021-12-310001325670frst:SouthernTrustMortgageMember2020-01-012020-12-310001325670frst:EasternVirginiaBanksharesIncMember2003-09-170001325670frst:EasternVirginiaBanksharesIncMemberus-gaap:JuniorSubordinatedDebtMember2021-01-012021-12-310001325670frst:SnbvSubordinatedNotesMemberus-gaap:SubordinatedDebtMember2021-01-012021-12-310001325670frst:SnbvSeniorSubordinatedNotesMemberus-gaap:SeniorSubordinatedNotesMember2021-01-012021-12-310001325670srt:MinimumMemberfrst:OtherRealEstateOwnedMember2021-01-012021-12-310001325670srt:MaximumMemberfrst:OtherRealEstateOwnedMember2021-01-012021-12-310001325670srt:MinimumMemberfrst:OtherRealEstateOwnedMember2020-01-012020-12-310001325670srt:MaximumMemberfrst:OtherRealEstateOwnedMember2020-01-012020-12-310001325670us-gaap:FairValueInputsLevel3Memberus-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:ResidentialPortfolioSegmentMemberfrst:OneToFourResidentialFamilyMember2021-12-310001325670us-gaap:FairValueInputsLevel3Memberus-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMember2021-12-310001325670us-gaap:CarryingReportedAmountFairValueDisclosureMemberus-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:ResidentialPortfolioSegmentMemberfrst:OneToFourResidentialFamilyMember2021-12-310001325670us-gaap:CarryingReportedAmountFairValueDisclosureMemberus-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMember2021-12-310001325670us-gaap:FairValueInputsLevel3Memberus-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:ResidentialPortfolioSegmentMemberfrst:OneToFourResidentialFamilyMember2020-12-310001325670us-gaap:FairValueInputsLevel3Memberus-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMember2020-12-310001325670frst:CommercialRealEstateOwnerOccupiedMemberus-gaap:FairValueInputsLevel3Memberus-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:CommercialRealEstatePortfolioSegmentMember2020-12-310001325670us-gaap:CarryingReportedAmountFairValueDisclosureMemberus-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:ResidentialPortfolioSegmentMemberfrst:OneToFourResidentialFamilyMember2020-12-310001325670us-gaap:CarryingReportedAmountFairValueDisclosureMemberus-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMember2020-12-310001325670frst:CommercialRealEstateOwnerOccupiedMemberus-gaap:CarryingReportedAmountFairValueDisclosureMemberus-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:CommercialRealEstatePortfolioSegmentMember2020-12-3100013256702019-10-012019-12-310001325670us-gaap:SubsequentEventMember2022-01-272022-01-270001325670stpr:VA2021-01-012021-12-310001325670stpr:MD2021-01-012021-12-310001325670frst:PerformanceBasedRestrictedStockUnitsMember2021-12-310001325670us-gaap:RealEstateMemberus-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:HomeEquityLoanMember2021-12-310001325670us-gaap:RealEstateMemberus-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ResidentialPortfolioSegmentMemberfrst:OneToFourResidentialFamilyMember2021-12-310001325670us-gaap:RealEstateMemberus-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMember2021-12-310001325670us-gaap:RealEstateMemberus-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMemberfrst:LoansAndLeasesReceivableMultiFamilyResidentialMember2021-12-310001325670frst:LoansAndLeasesReceivableSecuredByFarmlandMemberus-gaap:RealEstateMemberus-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialRealEstatePortfolioSegmentMember2021-12-310001325670frst:CommercialRealEstateOwnerOccupiedMemberus-gaap:RealEstateMemberus-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialRealEstatePortfolioSegmentMember2021-12-310001325670frst:CommercialRealEstateNonOwnerOccupiedMemberus-gaap:RealEstateMemberus-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialRealEstatePortfolioSegmentMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMemberus-gaap:CommercialLoanMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMemberfrst:PaycheckProtectionProgramLoansMember2021-12-310001325670us-gaap:RealEstateMemberus-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ConsumerPortfolioSegmentMember2021-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember2021-12-310001325670us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMember2021-12-310001325670us-gaap:RealEstateMemberus-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:HomeEquityLoanMember2020-12-310001325670us-gaap:RealEstateMemberus-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ResidentialPortfolioSegmentMemberfrst:OneToFourResidentialFamilyMember2020-12-310001325670us-gaap:RealEstateMemberus-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialRealEstatePortfolioSegmentMemberus-gaap:ConstructionLoansMember2020-12-310001325670us-gaap:RealEstateMemberus-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMemberfrst:LoansAndLeasesReceivableMultiFamilyResidentialMember2020-12-310001325670frst:LoansAndLeasesReceivableSecuredByFarmlandMemberus-gaap:RealEstateMemberus-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialRealEstatePortfolioSegmentMember2020-12-310001325670frst:CommercialRealEstateOwnerOccupiedMemberus-gaap:RealEstateMemberus-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialRealEstatePortfolioSegmentMember2020-12-310001325670frst:CommercialRealEstateNonOwnerOccupiedMemberus-gaap:RealEstateMemberus-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialRealEstatePortfolioSegmentMember2020-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMemberus-gaap:CommercialLoanMember2020-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMemberfrst:PaycheckProtectionProgramLoansMember2020-12-310001325670us-gaap:RealEstateMemberus-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember2020-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ConsumerPortfolioSegmentMember2020-12-310001325670us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember2020-12-310001325670us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMember2020-12-310001325670srt:ParentCompanyMembersrt:ReportableLegalEntitiesMember2021-12-310001325670frst:OfficersAndDirectorsAndPrincipalShareholdersAndTheirAffiliatesMember2021-01-012021-12-310001325670frst:PaycheckProtectionProgramLoansMember2021-12-310001325670us-gaap:FairValueInputsLevel3Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2021-12-310001325670us-gaap:FairValueInputsLevel3Memberus-gaap:CarryingReportedAmountFairValueDisclosureMember2021-12-310001325670us-gaap:FairValueInputsLevel3Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2020-12-310001325670us-gaap:FairValueInputsLevel3Memberus-gaap:CarryingReportedAmountFairValueDisclosureMember2020-12-310001325670us-gaap:FairValueInputsLevel1Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2021-12-310001325670us-gaap:FairValueInputsLevel1Memberus-gaap:CarryingReportedAmountFairValueDisclosureMember2021-12-310001325670us-gaap:FairValueInputsLevel1Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2020-12-310001325670us-gaap:FairValueInputsLevel1Memberus-gaap:CarryingReportedAmountFairValueDisclosureMember2020-12-310001325670frst:MaturityPeriodNineteenMember2021-01-012021-12-310001325670srt:WeightedAverageMemberus-gaap:LoansPayableMember2021-01-012021-12-310001325670srt:MinimumMemberus-gaap:LoansPayableMember2021-01-012021-12-310001325670srt:MaximumMemberus-gaap:LoansPayableMember2021-01-012021-12-310001325670srt:ParentCompanyMembersrt:ReportableLegalEntitiesMember2021-01-012021-12-310001325670srt:ParentCompanyMembersrt:ReportableLegalEntitiesMember2020-01-012020-12-310001325670srt:ParentCompanyMembersrt:ReportableLegalEntitiesMember2019-01-012019-12-310001325670frst:SouthernTrustMortgageMemberus-gaap:DiscontinuedOperationsHeldforsaleMember2021-01-012021-12-310001325670frst:SouthernTrustMortgageMemberus-gaap:DiscontinuedOperationsHeldforsaleMember2020-01-012020-12-310001325670frst:SouthernTrustMortgageMemberus-gaap:DiscontinuedOperationsHeldforsaleMember2019-01-012019-12-310001325670us-gaap:DiscontinuedOperationsDisposedOfBySaleMemberfrst:SouthernTrustMortgageLlcMember2021-09-230001325670us-gaap:FairValueInputsLevel2Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2021-12-310001325670us-gaap:FairValueInputsLevel2Memberus-gaap:CarryingReportedAmountFairValueDisclosureMember2021-12-310001325670us-gaap:FairValueInputsLevel2Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2020-12-310001325670us-gaap:FairValueInputsLevel2Memberus-gaap:CarryingReportedAmountFairValueDisclosureMember2020-12-3100013256702020-12-310001325670frst:SnbvSubordinatedNotesMemberus-gaap:SeniorSubordinatedNotesMember2020-08-252020-08-250001325670frst:PrimisBankMember2021-12-3100013256702021-12-310001325670frst:PrimisBankMember2020-12-310001325670us-gaap:FairValueInputsLevel3Memberus-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:FairValueMeasurementsNonrecurringMember2021-12-310001325670us-gaap:CarryingReportedAmountFairValueDisclosureMemberus-gaap:FairValueMeasurementsNonrecurringMember2021-12-310001325670us-gaap:CommonStockMember2020-01-012020-12-310001325670us-gaap:AdditionalPaidInCapitalMember2020-01-012020-12-3100013256702020-01-012020-12-3100013256702019-01-012019-12-3100013256702021-06-3000013256702022-03-0400013256702021-01-012021-12-31xbrli:sharesiso4217:USDxbrli:pureiso4217:USDxbrli:sharesfrst:loanfrst:itemfrst:buildingfrst:segment

Table of Contents

​

​

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

☒   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2021

or

☐   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from             to

Commission file number: 001-33037

PRIMIS FINANCIAL CORP.

(Exact name of registrant as specified in its charter)

Virginia

(State or other jurisdiction of

incorporation or organization)

20-1417448

(I.R.S. Employer

Identification No.)

​

6830 Old Dominion Drive

McLean, Virginia 22101

(Address of principal executive offices) (Zip code)

(703) 893-7400

(Registrant’s telephone number including area code)

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

​

​

​

Title of each class

Trading symbol

Name of each exchange on which registered

Common Stock, $0.01 par value

FRST

Nasdaq Global Market

​

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act. Yes ◻               No ⌧

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ◻               No ⌧

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧               No ◻

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧               No ◻

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

Large accelerated filer ◻

Accelerated filer ⌧

Smaller reporting company ◻

Emerging growth company ◻

​

Non-accelerated filer ◻

​

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

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issues its audit report. ☒ Yes            ☐ No

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes  ☐               No  ⌧

The aggregate market value of voting stock held by non-affiliates of the registrant as of June 30, 2021 was approximately $333.8 million based on the closing price of the common stock on such date.

The number of shares of common stock outstanding as of March 4, 2022 was 24,575,835.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement pursuant to Regulation 14A of the Securities Exchange Act of 1934 in conjunction with the registrant’s 2022 Annual Meeting of Shareholders are incorporated by reference into Part III, Items 10-14 of this Annual Report on Form 10-K.

​

​

​

​

Table of Contents

PRIMIS FINANCIAL CORP.

FORM 10-K

TABLE OF CONTENTS

​

​

​

​

PART I

​

​

Page

Item 1.

Business

5

Item 1A.

Risk Factors

20

Item 1B.

Unresolved Staff Comments

32

Item 2.

Properties

32

Item 3.

Legal Proceedings

32

Item 4.

Mine Safety Disclosures

32

​

PART II

​

​

​

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

33

Item 6.

[Reserved]

34

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

35

Item 7A.

Quantitative and Qualitative Disclosures about Market Risk

57

Item 8.

Financial Statements and Supplementary Data

57

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

110

Item 9A.

Controls and Procedures

110

Item 9B.

Other Information

110

​

PART III

​

​

​

Item 10.

Directors, Executive Officers and Corporate Governance

111

Item 11.

Executive Compensation

111

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

111

Item 13.

Certain Relationships and Related Transactions, and Director Independence

111

Item 14.

Principal Accounting Fees and Services

111

​

PART IV

​

​

​

Item 15.

Exhibits and Financial Statement Schedules

112

Item 16.

Form 10-K Summary

115

​

​

2

Table of Contents

​

CAUTIONARY NOTE 

REGARDING FORWARD-LOOKING STATEMENTS

​

This Annual Report on Form 10-K contains statements about future expectations, activities and events that constitute forward-looking statements within the meaning of, and subject to the protection of, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act and are intended to be covered by the safe harbor provided by the same. Forward-looking statements are not historical facts and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control, particularly with regard to developments related to the novel coronavirus (“COVID-19”) and the related variants. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. The words “believe,” “may,”  “forecast,” “should,” “anticipate,” “estimate,” “expect,” “intend,” “continue,” “would,” “could,” “hope,” “might,” “assume,” “objective,” “seek,” “plan,” “strive” or similar words, or the negatives of these words, identify forward-looking statements.

​

Forward-looking statements involve risks and uncertainties that may cause our actual results to differ materially from the expectations of future results we express or imply in any forward-looking statements. In addition to the other factors discussed in the “Risk Factors” section of this Annual Report on Form 10-K, factors that could contribute to those differences include, but are not limited to:

●the effects of future economic, business and market conditions and disruptions in the credit and financial markets, domestic and foreign;
●the impact of COVID-19 on our business, including the impact of the actions taken by governmental authorities to contain the virus or address the impact of the virus on the United States economy (including, without limitation, the Coronavirus Aid, Relief and Economic Security (“CARES” Act)), and the resulting effect of all of such items on our operations, liquidity and capital position, and on the financial condition of our borrowers and other customers;
●adverse results from current or future litigation, regulatory examinations or other legal and/or regulatory actions, including as a result of our participation in and execution of government programs related to the COVID-19 pandemic;
●changes in the local economies in our market areas which adversely affect our customers and their ability to transact profitable business with us, including the ability of our borrowers to repay their loans according to their terms or a change in the value of the related collateral;
●changes in the availability of funds resulting in increased costs or reduced liquidity, as well as the adequacy of our cash flow from operations and borrowings to meet our short-term liquidity needs;
●a deterioration or downgrade in the credit quality and credit agency ratings of the investment securities in our investment securities portfolio;
●impairment concerns and risks related to our investment securities portfolio of collateralized mortgage obligations, agency mortgage-backed securities and obligations of states and political subdivisions;
●the incurrence and possible impairment of goodwill associated with current or future acquisitions and possible adverse short-term effects on our results of operations;
●increased credit risk in our assets and increased operating risk caused by a material change in commercial, consumer and/or real estate loans as a percentage of our total loan portfolio, including as a result of the financial impact of COVID-19;
●the concentration of our loan portfolio in loans collateralized by real estate;
●our level of construction and land development and commercial real estate loans;
●failure to prevent a breach to our Internet-based system and online commerce security, including as a result of increased remote working by our employees;
●changes in the levels of loan prepayments and the resulting effects on the value of our loan portfolio;

3

Table of Contents

●the failure of assumptions and estimates underlying the establishment of and provisions made to the allowance for credit losses;
●our ability to expand and grow our business and operations, including the establishment of additional branches and acquisition of additional branches and banks, and our ability to realize the cost savings and revenue enhancements we expect from such activities;
●government intervention in the U.S. financial system, including the effects of legislative, tax, accounting and regulatory actions and reforms, including the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), the Jumpstart Our Business Startups Act, the Consumer Financial Protection Bureau, the capital ratios of Basel III as adopted by the federal banking authorities, and the Tax Cuts and Jobs Act of 2017 and the CARES Act, as well as the risk of inflation and interest rate increases resulting from monetary and fiscal stimulus response, which may have unanticipated adverse effects on our customers, and our financial condition and results of operations;
●uncertainty related to the transition away from the London Inter-bank Offered Rate (“LIBOR”);
●increased competition for deposits and loans adversely affecting rates and terms;
●the continued service of key management personnel;
●the potential payment of interest on demand deposit accounts to effectively compete for customers;
●potential environmental liability risk associated with properties that we assume upon foreclosure;
●increased asset levels and changes in the composition of assets and the resulting impact on our capital levels and regulatory capital ratios;
●risks of current or future mergers and acquisitions, including the related time and cost of implementing transactions and the potential failure to achieve expected gains, revenue growth or expense savings;
●increases in regulatory capital requirements for banking organizations generally, which may adversely affect our ability to expand our business or could cause us to shrink our business;
●acts of God or of war or other conflicts, acts of terrorism, pandemics or other catastrophic events that may affect general economic conditions;
●changes in accounting policies, rules and practices and applications or determinations made thereunder, including the impact of the adoption of the current expected credit losses (“CECL”) methodology;
●fraudulent and negligent acts by loan applicants, mortgage brokers and our employees;
●failure to maintain effective internal controls and procedures;
●the risk that our deferred tax assets could be reduced if future taxable income is less than currently estimated, if corporate tax rates in the future are less than current rates, or if sales of our capital stock trigger limitations on the amount of net operating loss carryforwards that we may utilize for income tax purposes;
●our ability to attract and retain qualified employees, including as a result of heightened labor shortages; and
●other factors and risks described under “Risk Factors” herein and in any of our subsequent reports that we file with the Securities and Exchange Commission (the “Commission” or “SEC”) under the Exchange Act.

​

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

​

4

Table of Contents

​

PART I

Item 1. Business

Overview

On March 31, 2021, Southern National Bancorp of Virginia, Inc. (“Southern National”) changed its name to Primis Financial Corp. (“Primis,” “we,” “us,” “our” or the “Company”) and Sonabank changed its name to Primis Bank. Primis is the bank holding company for Primis Bank (“Primis Bank” or the “Bank”), a Virginia state-chartered bank which commenced operations on April 14, 2005. Primis Bank provides a range of financial services to individuals and small and medium-sized businesses. As of December 31, 2021, Primis had $3.40 billion in total assets, $2.34 billion in total loans,  $2.76 billion in total deposits and $411.9 million in total stockholders’ equity. At December 31, 2021, Primis Bank had forty full-service branches in Virginia and Maryland and also provides services to customers through certain online and mobile applications. Thirty-five full-service retail branches are in Virginia and five full-service retail branches are in Maryland. The Company is headquartered in McLean, Virginia and has administrative offices in Warrenton, Virginia and Glen Allen, Virginia. Our deposits are insured, up to applicable limits, by the Federal Deposit Insurance Corporation (the “FDIC”).

​

We make our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act available free of charge on our website at www.primisbank.com as soon as reasonably practicable after we electronically file such material with the SEC. These reports are also available without charge on the SEC’s website at www.sec.gov.

​

Strategy

​

Primis is focused on building a new, innovative, and better banking experience for its consumers and small and medium-sized businesses. The bank intends to grow its business, expand its customer base and improve profitability. This is being achieved through a seven-pronged approach:

1.Ensuring deposit and lending products are competitive, easy to understand and readily accessible;
2.Developing business and cash management services that are robust and easy to use;
3.Supporting lines of business that offer differentiable value to consumers and businesses;
4.Executing intuitive, forward-thinking and pioneering electronic banking services that go beyond merely providing access to finances 24-hours a day, 7-days a week;
5.Maintaining a relationship-oriented and needs-based approach to banking;
6.Providing employees with resources for personal and professional development; and,
7.Providing Primis communities and the people within them purposeful and meaningful Primis financial support and volunteerism.

​

Critical to executing this approach:

●Executing a New Name and Brand: On January 28, 2021, the Board of Directors of the Company approved changing the Company’s name to Primis Financial Corp., to be effective as of March 31, 2021. On March 31, 2021, the Company’s wholly-owned banking subsidiary, Sonabank, changed its name to Primis Bank, and the Company’s ticker symbol changed from SONA to FRST. The website became www.primisbank.com. Primis is focused on delivering a better return for its shareholders and a better experience for its customers. Changing the Bank’s name and brand, and committing to an image that mirrors this attitude is critical to the Company’s long-term success. Over the last year, the Company focused on building the foundation for a Company with higher expectations for innovation and technology. Primis has a deep commitment to training harder, developing more expertise in all areas of the Bank, and building lasting customer relationships.

​

5

Table of Contents

●Utilizing the Primis Management Team’s Strength. The experience and market knowledge of the Bank’s management team is one of its greatest strengths and competitive advantages. Since the Company’s board of directors appointed Mr. Dennis J. Zember, Jr. as the new president and chief executive officer, effective February 19, 2020, Mr. Zember has added several members to the executive management team. These additional members all bring strong expertise and years of experience.

​

●Leveraging the Existing Foundation for Additional Growth. Based on the management team’s depth of experience and certain infrastructure investments, Primis looks to take advantage of certain economies of scale typically enjoyed by larger organizations, thus expanding its operations both organically and through strategic cost-effective branch or bank acquisitions. Primis’ investments in data processing, risk management infrastructure, and the staff and branch network will support a much larger asset base. Primis is committed to controlling additional growth in a manner designed to minimize risk and to maintain strong capital ratios.

​

●Continuing to Pursue Selective Acquisition Opportunities. Primis has the skillsets and experience necessary to acquire and successfully integrate financial institutions, banks and branches. This, along with its strong capital position, well-positions Primis to take advantage of acquisition opportunities.

​

●Focusing on the Business Owner. Primis looks to be the primary bank for small- and medium-sized businesses by offering a suite of competitive electronic banking services, robust treasury services and compre-hensive lending options. We believe that Primis’ localized decision-making capabilities, prompt credit decisions, and superior customer service supported by a highly experienced and knowledgeable management team offers Primis a distinct competitive advantage in the marketplace.

​

●Focusing on Asset Quality and Underwriting. Strong asset quality is of primary importance. Therefore, despite the growth in the Bank’s loan portfolio, Primis has taken measures to ensure it maintains a strong asset quality by upholding its well-defined underwriting standards.

​

●Building a Stable Core Deposit Base. Primis continues to grow a stable core deposit base of business and retail customers. Primis intends to continue its practice of developing a deposit relationship with each of its loan customers.

​

BANKING SERVICES

​

Our principal business is the acquisition of deposits from the general public through our branch offices and deposit intermediaries and the use of these deposits to fund our loan and investment security portfolios. We seek to be a full service bank that provides a wide variety of financial services to our middle market corporate clients as well as to our retail clients. We are an active commercial lender, and also invest funds in mortgage-backed securities, collateralized mortgage obligations, securities issued by agencies of the federal government and obligations of states and political subdivisions.

Lending Activities Overview

​

Primis offers a wide range of commercial banking services; however, we are focused 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, including home equity lines of credit. We are a Small Business Administration (“SBA”) lender with Preferred Lending Partner (“PLP”) status that allows us to offer this program nationwide. We also invest in real estate-related securities, including collateralized mortgage obligations and agency mortgage backed securities. Our principal sources of funds for loans and investing in securities are deposits and, to a lesser extent, borrowings.

The following is a discussion of each of the major types of lending in which we engage. For more information on our lending activities, see “Item 7. Management’s Discussion and Analysis of Financial Condition.”

6

Table of Contents

Commercial Lending
​

Commercial Business Lending. These loans consist of lines of credit, revolving credit facilities, demand loans, term loans, equipment loans, SBA loans, stand-by letters of credit, and unsecured loans. Commercial business loans are generally secured by business assets, equipment, accounts receivable, inventory and other collateral, such as readily marketable stocks and bonds with adequate margins, cash value in life insurance policies and savings and time deposits at Primis Bank.

Commercial Real Estate Lending. Commercial real estate lending includes loans for permanent financing. Commercial real estate lending typically involves higher loan principal amounts and the repayment of loans is dependent, in large part, on sufficient income from the properties securing the loans to cover operating expenses and debt service. Owner occupied real estate is evaluated in conjunction with the operations of the business.

Construction Lending. Primis provides construction loans for commercial, multi-family, assisted living and other non-residential properties, and builder/developer lines for established companies in our market footprint. Construction loan borrowers are generally pre-qualified for the permanent loan by us or a third party.

Secured Asset Based Lending (SABL). Primis has developed a proprietary Asset Based Lending software system that allows the Bank to monitor the collateral of its commercial borrowers who have pledged their working assets (accounts receivables and other qualifying assets such as inventory) as collateral. SABL has the ability to track other offsets (liabilities, e.g. other loans the customer has with the Bank) to the line of credit. SABL serves to provide more stringent controls and supervision that this type of lending requires.

SBA Lending. Primis has developed expertise in the federally guaranteed SBA programs. The SBA programs provide economic development programs which finance start-up and expansion of small businesses. We are a nationwide Preferred Lender. As an SBA Preferred Lender, our pre-approved status allows us to quickly respond to customers’ needs. Under the SBA program, we generally originate and fund SBA 7(a) and 504 loans. Benefits to Primis are low LTV commercial loans and government guarantees up to 80%.

Panacea Practice Solutions. Primis, through its Panacea division, provides financing for medical, dental and veterinary businesses. Financing purposes cover a range of needs in this sector to include acquisition, start-up, expansion, real estate purchase and refinance, leasehold, equipment financing, as well as practice buy-ins.

Mortgage Warehouse Lending. Primis provides warehouse lending lines of credit to residential mortgage originators. Program parameters and underwriting guidelines are processed and monitored through our Warehouse Loan System (WLS) to ensure program compliance.

Consumer Lending

​

Primis offers various types of secured and unsecured consumer loans. We make consumer loans primarily for personal, family or household purposes.

Residential Mortgage. Primis does not currently originate permanent residential mortgage loans. Primis will purchase originated residential mortgages from our Warehouse Line clients, as well as other loan pools. We have no sub-prime loans.

Southern Trust Mortgage. Primis Bank previously had an interest in one mortgage company, Southern Trust Mortgage, LLC (“STM”). Prior to December 31, 2021, Primis Bank owned 43.28% and 100% of STM’s common and preferred stock, respectively. On September 23, 2021, Primis Bank announced that it entered into an agreement with STM, whereby STM agreed to purchase all of the Bank's common membership interests and a portion of the Bank's preferred interests in STM for a combination of $1.6 million in cash and a promissory note for $8.5 million. The transaction closed on December 31, 2021. Upon closing, STM continues to be a borrower of the Bank, but the Bank is no longer a minority owner of STM

7

Table of Contents

and STM is no longer considered an affiliate of the Company. STM has mortgage banking originators in Delaware, Virginia, Maryland, North Carolina and South Carolina and only originated retail mortgages.

Home Equity Lines of Credit. Primis offers credit lines secured by primary residential properties with maximum loan-to-values of 80%. The product provides for a 10 year draw period followed by a 20 year repayment period.

Secured Personal Loans. Primis offers secured personal loans for a variety of purposes including auto, motorcycle, boats, and recreational vehicles. Pledged collateral could also include marketable securities and certificates of deposits.

Premium Life Finance. Primis offers life insurance premium financing. The loan is utilized to pay the annual premiums due on the whole or universal life policy. The loan is fully secured by the cash value of the policy and personal liquid assets of the borrower or guarantor.

Unsecured Personal Loans. Primis offers unsecured personal loans up to $50,000 and overdraft protection loans up to $10,000, based on specified underwriting criteria.

Panacea Consumer Loans. Panacea offers several unsecured consumer loan products to include student loan refinancing and PRN loans. PRN loans may be utilized by graduating doctors to fund costs as they move into their chosen professions. Strict criteria has been established around these products.

Because future loan losses are so closely intertwined with our underwriting policy, we have instituted what management believes is a stringent loan underwriting policy. Our underwriting guidelines are tailored for particular credit types, including lines of credit, revolving credit facilities, demand loans, term loans, equipment loans, real estate loans, SBA loans, stand-by letters of credit and unsecured loans. We have instituted a no exceptions policy for our consumer credit programs.

​

Deposit Activities Overview

​

We offer a broad range of deposit products, including checking, NOW, savings, and money market accounts and certificates of deposit, supporting the needs of businesses and individuals. We actively pursue business relationships by utilizing the business contacts of our senior management, other bank officers and our directors, thereby capitalizing on our knowledge of our local market areas.

Commercial deposit products are enhanced by a robust suite of treasury and cash management services, including:

●Investment/sweep accounts
●Wire transfer services
●Employer services/payroll processing services
●Zero balance accounts
●Night depository services
●Depository transfers
●Merchant services (third party)
●ACH originations
●Business debit cards
●Controlled disbursement accounts
●Remote deposit capture
●Mobile and online banking

​

Other products and services offered by the Bank include: Debit cards, ATM services, notary services, and wire transfer.

​

8

Table of Contents

Lines of Businesses

​

Panacea Financial. In November 2020, the Company launched the Panacea Financial division, which focuses on providing unique financial products and services for the medical community. Panacea offers personal, student debt refinance, commercial real estate and practice loans as well as deposit products nationally. In 2021, Panacea announced partnerships with three national and state medical associations. Additionally, Panacea launched its In-Training Medical/Dental School Loan Refinance product which allows physicians and dentists that are in training the opportunity to refinance their student debt at a lower interest rate, while benefiting from affordable monthly payments during training. As of December 31, 2021, Panacea had approximately $50.2 million in outstanding loans, the majority of which were originated in the second half of 2021. The division has successfully built a nationally-recognized brand and finished 2021 with a growing team of industry-leading commercial bankers experienced in providing financial services to the medical community across the United States.

Life Premium Financing. The Company launched a division in the fourth quarter of 2021 focussed on financing life insurance premiums for high net worth individuals across the United States. Within the first 45 days of operation and as of December 31, 2021, the Life Premium Finance Division originated and closed five loans with committed balances totaling $69.4 million and outstanding balances, net of deferred fees, of $12.9 million. Outstanding balances on these loans grow over three to five years so the Company is expecting a sustainable growth rate in the division with each new loan originated.

Digital Banking

​

In the fourth quarter of 2021, Primis successfully launched its new digital bank platform to friends and family of the Bank. The platform includes an all-new mobile banking application that provides a quick and seamless account opening process all from within the app. Additional build-out of the digital banking application is in testing and the Bank anticipates a full launch to the public in near future.

Also in the fourth quarter of 2021, Primis launched its new V1BE service, the first bank delivery app for on-demand ordering of branch services. V1BE brings in-branch banking services right to the customer’s doorstep, including cash delivery/withdrawals, cash pick-up/deposits, check deposits, change orders, cashier checks, and the instant issue of replacement debit cards. In August 2021, V1BE was piloted in the Richmond market, and as of December 2021, the service expanded into Northern Virginia. With V1BE, Primis is able to support any market and grow customer relationships without the need for a large branch presence.

Funding and Revenue Sources

The principal sources of funds for our lending and investment activities are deposits, repayment of loans, prepayments from mortgage-backed securities, repayments of maturing investment securities, Federal Home Loan Bank (“FHLB”) advances and other borrowed money.

Principal sources of revenue are interest and fees on loans and investment securities as well as fee income derived from the maintenance of deposit accounts and income from bank-owned life insurance policies. Our principal expenses include interest paid on deposits, advances from the FHLB of Atlanta, junior subordinated debt, senior subordinated notes and other borrowings, and operating expenses.

CREDIT ADMINISTRATION

Because future loan losses are so closely intertwined with our underwriting policy, we have instituted what management believes are well-defined loan underwriting criteria and portfolio management practices. Our underwriting guidelines are tailored for particular credit types, including lines of credit, revolving credit facilities, demand loans, term loans, equipment loans, real estate loans, SBA loans, stand-by letters of credit and unsecured loans. We will make extensions of credit based, among other factors, on the potential borrower’s creditworthiness and likelihood of repayment.

9

Table of Contents

For loans less than $2.5 million, we have named Credit Officers, each of whom has a defined lending authority. These individual lending authorities are determined by our Chief Executive Officer and Chief Credit Officer and are based on the individual’s technical ability and experience. Primis also has three Specialty Executive Credit Officers, each with extensive industry specific experience. Designated lending authorities are approved by our board of directors. All credit extensions in excess of 60% of the Bank’s legal lending limit are also reviewed and approved by the Board of Directors. As of December 31, 2021, our legal lending limit was approximately $60.1 million.

Portfolio management is an integral part of sound credit practices. The responsible relationship manager in conjunction with credit administration will service loan credits through their life cycle. Primis has a dedicated Special Assets team that provides oversight on credit collection activities, to include legal negotiations, forbearance agreements, collateral sale, foreclosures and management of other real estate owned (“OREO”). This coordinated approach to credit provides a high quality portfolio. Credit Administration is responsible for monthly reporting to the Board of Directors on asset quality and performance.

​

COMPETITION

The banking business is highly competitive, and our profitability depends principally on our ability to compete in the market areas in which our banking operations are located. We experience substantial competition in attracting and retaining deposits and in lending funds. The primary factors we encounter in competing for deposits are convenient office locations and rates offered. Direct competition for deposits comes from other commercial bank and thrift institutions, money market mutual funds and corporate and government securities which may offer more attractive rates than insured depository institutions are willing to pay. The primary factors we encounter in competing for loans include, among others, interest rate and loan origination fees and the range of services offered. Competition for origination of loans normally comes from other commercial banks, thrift institutions, mortgage bankers, mortgage brokers, insurance companies and fintech or digital lending companies. We have been able to compete effectively with other financial institutions by:

●emphasizing customer service and technology;
●establishing long-term customer relationships and building customer loyalty; and
●providing products and services designed to address the specific needs of our customers.

HUMAN CAPITAL

At Primis, we are committed to ensuing that our employees reach their personal, professional and financial peaks. We are attracting, developing, retaining and planning for the succession of key talent and executives to achieve our strategic objectives. Primis is continually investing in our workforce to further emphasize diversity and inclusion and to foster our employees' growth and career development. At December 31, 2021, we had 418 employees, nearly all of whom are full-time and of which approximately 75% were female and 25% were minorities.

​

Employee Feedback. Fostering an inclusive environment requires that all employees are heard. Our Intranet houses the “Employee Voice” which is a vehicle for employees to make suggestions, asks questions or voice an opinion regarding the Company’s practices.

​

Recruitment. While the majority of our employees reside in Virginia, our recruitment efforts are both local and nationwide. We utilize a wide range of recruitment vehicles ranging from college recruitment sites such as “Handshake” to posting on popular job boards and conducting nationwide profile searches to find qualified candidates. Primis realizes that great people know other great people so we also offer a referral bonus to our employees.

​

Benefits. Primis offers a comprehensive and competitive benefits package to meet a variety of individual needs. We offer four different medical plans, two of which allow for the employee to make contributions and receive an employer match on a Health Savings Account. In addition to dental insurance, supplemental insurance and a 401k, Primis offers employer paid short-term and long-term disability and life insurance. Our employees also enjoy a cash incentive for participating in our Wellness Program.

​

10

Table of Contents

Development. All new employees benefit from training to learn how to utilize key Company systems. New employees are also required to complete multiple learning modules that cover important compliance and regulatory requirements in the banking industry. Continuing education and advance training is offered to employees throughout their tenure at Primis. We encourage all employees to obtain job related training by covering the cost of the classes and/or learning materials and tests.

​

Volunteerism. Primis is committed to the communities we serve and to supporting our employees in their volunteerism. Beginning in 2021, each employee receives eight paid hours to volunteer in their community or charity of choice each year. We maintain a commitment to the prosperity of each community the Company serves, donating to community, civic and philanthropic organizations in 2021. In addition to providing financial products built for the needs of our customers, the Company uses associate volunteerism and corporate philanthropy to build strong community partnerships.

​

COVID-19. New challenges were presented to the workplace as a result of COVID-19 in 2021. Primis responded with personal protection equipment and guidance on how to mitigate the threat of COVID. Our branches were equipped with plexi-glass barriers and all employees were provided with masks and gloves. The COVID Guide with corresponding Incident Report Form was implemented in 2020.

​

SUPERVISION AND REGULATION

Bank holding companies and banks are extensively regulated under federal and state law. This discussion is a summary and is qualified in its entirety by reference to the particular statutory and regulatory provisions described below, and is not intended to be an exhaustive description of the statutes or regulations applicable to Primis or the Bank. The business of Primis and the Bank is subject to extensive regulation and supervision under federal and state law, including oversight by the Board of Governors of the Federal Reserve System (“Federal Reserve”) and the Virginia Bureau of Financial Institutions (“VBFI”), a regulatory division of the Virginia State Corporation Commission.

​

Changes in laws and regulations may alter the structure, regulation and competitive relationships of financial institutions. In addition, bank regulatory agencies may issue enforcement actions, policy statements, interpretive letters and similar written guidance applicable to us or the Bank. It cannot be predicted whether and in what form new laws and regulations, or interpretations thereof, may be adopted or the extent to which the business of Primis and the Bank may be affected thereby, but they may have a material adverse effect on our business, operations, and earnings.

​

Violations of laws and regulations, or other unsafe and unsound practices, may result in regulatory agencies imposing fines or penalties, cease and desist orders, or taking other enforcement actions. Under certain circumstances, these agencies may enforce these remedies directly against officers, directors, employees and other parties participating in the affairs of a bank or bank holding company. Under federal and state laws and regulations pertaining to the safety and soundness of insured depository institutions, federal and state banking regulators have the authority to compel or restrict certain actions on our part if they determine that we have insufficient capital or other resources, or are otherwise operating in a manner that may be deemed to be inconsistent with safe and sound banking practices. Under this authority, our bank regulators can require us or our subsidiaries to enter into informal or formal supervisory agreements, including board resolutions, memoranda of understanding, written agreements and consent or cease and desist orders, pursuant to which we would be required to take identified corrective actions to address cited concerns and to refrain from taking certain actions.

​

If we become subject to and are unable to comply with the terms of any future regulatory actions or directives, supervisory agreements, or orders, then we could become subject to additional, heightened supervisory actions and orders, possibly including consent orders, prompt corrective action restrictions and/or other regulatory actions, including prohibitions on the payment of dividends on our common stock and preferred stock. If our regulators were to take such additional supervisory actions, then we could, among other things, become subject to significant restrictions on our ability to develop any new business, as well as restrictions on our existing business, and we could be required to raise additional capital, dispose of certain assets and liabilities within a prescribed period of time, or both. The terms of any such supervisory action could have a material negative effect on our business, reputation, operating flexibility, financial condition, and the value of our common stock and preferred stock.

​

11

Table of Contents

Supervision, regulation, and examination of Primis, the Bank, and our respective subsidiaries by the appropriate regulatory agencies, as described herein, are intended primarily for the protection of consumers, bank depositors and the Deposit Insurance Fund (“DIF”) of The Federal Deposit Insurance Corporation (“FDIC”) and the U.S. banking and financial system, rather than holders of our capital stock.

Bank Holding Company Regulation

​

Primis is subject to extensive supervision and regulation by the Federal Reserve System pursuant to the Bank Holding Company Act of 1956, as amended (the “Bank Holding Company Act”). We are required to file with the Federal Reserve periodic reports and such other information as the Federal Reserve may request.  Ongoing supervision is provided through regular examinations by the Federal Reserve and other means that allow the regulators to gauge management’s ability to identify, assess and control risk in all areas of operations in a safe and sound manner and to ensure compliance with laws and regulations. In addition to regulation by the Federal Reserve as a bank holding company, Primis is subject to supervision and regulation by the VBFI under the banking and general business corporation laws of the Commonwealth of Virginia.

​

Activity Limitations.  Primis is registered with the Federal Reserve as a bank holding company. Bank holding companies generally are limited to the business of banking, managing or controlling banks, and other activities that the Federal Reserve determines to be closely related to banking, or managing or controlling banks as to be a proper incident thereto. Bank holding companies are prohibited from acquiring or obtaining control of more than five percent (5%) of the outstanding voting interests of any company that engages in activities other than those activities permissible for bank holding companies. Examples of activities that the Federal Reserve has determined to be permissible are making, acquiring, brokering, or servicing loans; leasing personal property; providing certain investment or financial advice; performing certain data processing services; acting as agent or broker in selling credit life insurance and other insurance products in certain locations; and performing certain insurance underwriting activities. The Bank Holding Company Act does not place geographic limits on permissible non-banking activities of bank holding companies. Even with respect to permissible activities, however, the Federal Reserve has the power to order a holding company or its subsidiaries to terminate any activity or its control of any subsidiary when the Federal Reserve has reasonable cause to believe that continuation of such activity or control of such subsidiary would pose a serious risk to the financial safety, soundness or stability of any bank subsidiary of that holding company.

Source of Strength Obligations.  A bank holding company is required to act as a source of financial and managerial strength to its subsidiary bank. The term “source of financial strength” means the ability of a company, such as us, that directly or indirectly owns or controls an insured depository institution, such as the Bank, to provide financial assistance to such insured depository institution in the event of financial distress.  The appropriate federal banking agency for the depository institution (in the case of the Bank, this agency is the Federal Reserve) may require reports from us to assess our ability to serve as a source of strength and to enforce compliance with the source of strength requirements by requiring us to provide financial assistance to the Bank in the event of financial distress.  If we were to enter bankruptcy or become subject to the orderly liquidation process established by the Dodd-Frank Act, any commitment by us to a federal bank regulatory agency to maintain the capital of the Bank would be assumed by the bankruptcy trustee or the FDIC, as appropriate, and entitled to a priority of payment. In addition, the FDIC provides that any insured depository institution generally will be liable for any loss incurred by the FDIC in connection with the default of, or any assistance provided by the FDIC to, a commonly controlled insured depository institution. The Bank is an FDIC-insured depository institution and thus subject to these requirements.

​

Acquisitions. The Bank Holding Company Act requires every bank holding company to obtain the prior approval of the Federal Reserve or waiver of such prior approval before it (1) acquires ownership or control of any voting shares of any bank if, after such acquisition, such bank holding company will own or control more than five percent (5%) of the voting shares of such bank, (2) acquires all of the assets of a bank, or (3) merges with any other bank holding company. In reviewing a proposed covered acquisition, among other factors, the Federal Reserve considers (1) the financial and managerial resources of the companies involved, including pro forma capital ratios; (2) the risk to the stability of the United States banking or financial system; (3) the convenience and needs of the communities to be served, including performance under the CRA; and (4) the effectiveness of the companies in combatting money laundering. The Federal Reserve also reviews any indebtedness to be incurred by a bank holding company in connection with a proposed acquisition

12

Table of Contents

to ensure that the bank holding company can service such indebtedness without adversely affecting its ability to serve as a source of strength to its bank subsidiaries. Well capitalized and well managed bank holding companies are permitted to acquire control of banks in any state, subject to federal regulatory approval, without regard to whether such a transaction is prohibited by the laws of any state. However, a bank holding company may not, following an interstate acquisition, control more than 10% of nationwide insured deposits or 30% of deposits within any state in which the acquiring bank operates.

​

Change in Control.  Federal law restricts the amount of voting stock of a bank holding company or a bank that a person (including an entity) may acquire without the prior approval of banking regulators. Under the federal Change in Bank Control Act and the regulations thereunder, a person or group must give advance notice to and obtain approval from the Federal Reserve before acquiring control of any bank holding company, such as Primis. The Change in Bank Control Act creates a rebuttable presumption of control if a person or group acquires the power to vote 10% or more of our outstanding common stock. The overall effect of such laws is to make it more difficult to acquire a bank holding company and a bank by tender offer or similar means than it might be to acquire control of another type of corporation. Consequently, shareholders of the Company may be less likely to benefit from the rapid increases in stock prices that may result from tender offers or similar efforts to acquire control of other companies. Investors should be aware of these requirements when acquiring shares of our stock.

​

Virginia Law.  Certain state corporation laws may have an anti-takeover affect. Virginia law restricts transactions between a Virginia corporation and its affiliates and potential acquirers. The following discussion summarizes the two Virginia statutes that may discourage an attempt to acquire control of Primis.

Virginia Code Sections 13.1-725 – 727.1 govern “Affiliated Transactions.” These provisions, with several exceptions discussed below, require approval by the holders of at least two-thirds of the remaining voting shares of material acquisition transactions between a Virginia corporation and any holder of more than 10% of any class of its outstanding voting shares. Affiliated Transactions include mergers, share exchanges, material dispositions of corporate assets not in the ordinary course of business, any dissolution of the corporation proposed by or on behalf of an interested shareholder, or any reclassification, including a reverse stock split, recapitalization, or merger of the corporation with its subsidiaries which increases the percentage of voting shares owned beneficially by any 10% shareholder by more than 5%.

These provisions were designed to deter certain takeovers of Virginia corporations. In addition, the statute provides that, by affirmative vote of a majority of the voting shares other than shares owned by any 10% shareholder, a corporation can adopt an amendment to its articles of incorporation or bylaws providing that the Affiliated Transactions provisions shall not apply to the corporation. Primis “opted out” of the Affiliated Transactions provisions when it incorporated.

Virginia law also provides that shares acquired in a transaction that would cause the acquiring person’s voting strength to meet or exceed any of the three thresholds (20%, 33.33% or 50%) have no voting rights for those shares exceeding that threshold, unless granted by a majority vote of shares not owned by the acquiring person. This provision empowers an acquiring person to require the Virginia Corporation to hold a special meeting of shareholders to consider the matter within 50 days of the request. Primis also “opted out” of this provision at the time of its incorporation.

Governance and Financial Reporting Obligations. We are required to comply with various corporate governance and financial reporting requirements under the Sarbanes-Oxley Act of 2002, as well as rules and regulations adopted by the SEC, the Public Company Accounting Oversight Board, and NASDAQ. In particular, we are required to include management and independent registered public accounting firm reports on internal controls as part of our Annual Report on Form 10-K in order to comply with Section 404 of the Sarbanes-Oxley Act. We have evaluated our controls, including compliance with the SEC rules on internal controls, and have and expect to continue to spend significant amounts of time and money on compliance with these rules. Our failure to comply with these internal control rules may materially adversely affect our reputation, ability to obtain the necessary certifications to financial statements, and the values of our securities.

​

Corporate Governance.  The Dodd-Frank Act addressed many investor protections, corporate governance, and executive compensation matters that will affect most U.S. publicly traded companies. The Dodd-Frank Act (1) granted shareholders of U.S. publicly traded companies an advisory vote on executive compensation; (2) enhanced independence

13

Table of Contents

requirements for Compensation Committee members; and (3) required companies listed on national securities exchanges to adopt incentive-based compensation claw-back policies for executive officers.

​

Incentive Compensation. The Dodd-Frank Act required the banking agencies and the SEC to establish joint rules or guidelines for financial institutions with more than $1.0 billion in assets, such as Primis and the Bank, which prohibit incentive compensation arrangements that the agencies determine to encourage inappropriate risks by the institution. The federal banking agencies issued proposed rules in 2011 and previously issued guidance on sound incentive compensation policies. In 2016, the federal banking agencies also proposed rules that would, depending upon the assets of the institution, directly regulate incentive compensation arrangements and would require enhanced oversight and recordkeeping. As of December 31, 2021, these rules have not been implemented. We and Primis Bank have undertaken efforts to ensure that our incentive compensation plans do not encourage inappropriate risks, consistent with three key principles—that incentive compensation arrangements should appropriately balance risk and financial rewards, be compatible with effective controls and risk management, and be supported by strong corporate governance.

​

Shareholder Say-On-Pay Votes. The Dodd-Frank Act requires public companies to take shareholders’ votes on proposals addressing compensation (known as say-on-pay), the frequency of a say-on-pay vote, and the golden parachutes available to executives in connection with change-in-control transactions. Public companies must give shareholders the opportunity to vote on the compensation at least every three years and the opportunity to vote on frequency at least every six years, indicating whether the say-on-pay vote should be held annually, biennially, or triennially.

​

Anti-tying rules.  A bank holding company and its subsidiaries are prohibited from engaging in certain tying arrangements in connection with extensions of credit, leases or sales of property, or furnishing of services.

​

Capital Requirements

​

Primis and the Bank are each required under federal law to maintain certain minimum capital levels based on ratios of capital to total assets and capital to risk-weighted assets. The required capital ratios are minimums, and the federal banking agencies may determine that a banking organization, based on its size, complexity or risk profile, must maintain a higher level of capital in order to operate in a safe and sound manner. Risks such as concentration of credit risks and the risk arising from non-traditional activities, as well as the institution’s exposure to a decline in the economic value of its capital due to changes in interest rates, and an institution’s ability to manage those risks are important factors that are to be taken into account in assessing an institution’s overall capital adequacy. The following is a brief description of the relevant provisions of these capital rules and their potential impact on our capital levels.

Primis and the Bank are each subject to the following risk-based capital ratios: a common equity Tier 1 ("CET1") risk-based capital ratio, a Tier 1 risk-based capital ratio, which includes CET1 and additional Tier 1 capital, and a total risk-based capital ratio, which includes Tier 1 and Tier 2 capital.  CET1 is primarily comprised of the sum of common stock instruments and related surplus net of treasury stock, plus retained earnings and certain qualifying minority interests, less certain adjustments and deductions, including with respect to goodwill, intangible assets, mortgage servicing assets and deferred tax assets subject to temporary timing differences. Additional Tier 1 capital is primarily comprised of noncumulative perpetual preferred stock, tier 1 minority interests and grandfathered trust preferred securities. Tier 2 capital consists of instruments disqualified from Tier 1 capital, including qualifying subordinated debt, other preferred stock and certain hybrid capital instruments, and a limited amount of loan loss reserves up to a maximum of 1.25% of risk-weighted assets, subject to certain eligibility criteria. The capital rules also define the risk-weights assigned to assets and off-balance sheet items to determine the risk-weighted asset components of the risk-based capital rules, including, for example, certain “high volatility” commercial real estate, past due assets, structured securities and equity holdings.

The leverage capital ratio, which serves as a minimum capital standard, is the ratio of Tier 1 capital to quarterly average total consolidated assets net of goodwill, certain other intangible assets, and certain required deduction items. The required minimum leverage ratio for all banks is 4%.

In addition, effective January 1, 2019, the capital rules require a capital conservation buffer of CET1 of 2.5% above each of the minimum capital ratio requirements (CET1, Tier 1, and total risk-based capital), which is designed to absorb losses during periods of economic stress. These buffer requirements must be met for a bank or bank holding company to

14

Table of Contents

be able to pay dividends, engage in share buybacks or make discretionary bonus payments to executive management without restriction.

The Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”), among other things, requires the federal bank regulatory agencies to take “prompt corrective action” regarding depository institutions that do not meet minimum capital requirements. FDICIA establishes five regulatory capital tiers: “well capitalized”, “adequately capitalized”, “undercapitalized”, “significantly undercapitalized”, and “critically undercapitalized”. A depository institution’s capital tier will depend upon how its capital levels compare to various relevant capital measures and certain other factors, as established by regulation. FDICIA generally prohibits a depository institution from making any capital distribution (including payment of a dividend) or paying any management fee to its holding company if the depository institution would thereafter be undercapitalized. The FDICIA imposes progressively more restrictive restraints on operations, management and capital distributions, depending on the category in which an institution is classified.  

To be well-capitalized, the Bank must maintain at least the following capital ratios:

​

●6.5% CET1 to risk-weighted assets;
●8.0% Tier 1 capital to risk-weighted assets;
●10.0% Total capital to risk-weighted assets; and
●5.0% leverage ratio.

​

The Federal Reserve has not yet revised the well-capitalized standard for bank holding companies to reflect the higher capital requirements imposed under the current capital rules. For purposes of the Federal Reserve’s Regulation Y, bank holding companies, such as Primis, must maintain a Tier 1 risk-based capital ratio of 6.0% or greater and a total risk-based capital ratio of 10.0% or greater to be well-capitalized. If the Federal Reserve were to apply the same or a similar well-capitalized standard to bank holding companies as that applicable to the Bank, Primis’ capital ratios as of December 31, 2021 would exceed such revised well-capitalized standard. Also, the Federal Reserve may require bank holding companies, including Primis, to maintain capital ratios substantially in excess of mandated minimum levels, depending upon general economic conditions and a bank holding company’s particular condition, risk profile and growth plans.

Failure to be well-capitalized or to meet minimum capital requirements could result in certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have an adverse material effect on our operations or financial condition. Failure to meet minimum capital requirements could also result in restrictions on Primis’ or the Bank’s ability to pay dividends or otherwise distribute capital or to receive regulatory approval of applications or other restrictions on its growth.

Both Primis and the Bank’s regulatory capital ratios were above the applicable well-capitalized standards and met the capital conservation buffer as of December 31, 2021. Based on current estimates, we believe that Primis and the Bank will continue to exceed all applicable well-capitalized regulatory capital requirements and the capital conservation buffer in 2022.  

On October 29, 2019, the federal banking agencies jointly issued a final rule to simplify the regulatory capital requirements for eligible banks and holding companies with less than $10 billion in consolidated assets that opt into the Community Bank Leverage Ratio (“CBLR”) framework. A qualifying community banking organization with total consolidated assets of less than $10 billion that exceeds the CBLR threshold would be exempt from the agencies’ current capital framework, including the risk-based capital requirements and capital conservation buffer described above, and would be deemed well-capitalized under the agencies’ prompt corrective action regulations. Under the final rule, if a qualifying community banking organization elects to use the CBLR framework, it will be considered “well-capitalized” so long as its CBLR is greater than 9%. Primis does not use the CBLR framework.

Payment of Dividends

Primis is a legal entity separate and distinct from the Bank and other subsidiaries.  Its primary source of cash, other than securities offerings, is dividends from the Bank. Under the Federal Deposit Insurance Act, no dividends may be paid by an insured bank if the bank is in arrears in the payment of any insurance assessment due to the FDIC.  The payment of

15

Table of Contents

dividends by the Bank may also be affected by other regulatory requirements and policies, such as the maintenance of adequate capital. If, in the opinion of the applicable regulatory authority, a bank under its jurisdiction is engaged in, or is about to engage in, an unsafe or unsound practice (which, depending on the financial condition of the bank, could include the payment of dividends), such authority may require, after notice and hearing, that the bank cease and desist from that practice. The Federal Reserve has formal and informal policies which provide that insured banks should generally pay dividends only out of current operating earnings.

Under a Federal Reserve policy adopted in 2009, the board of directors of a bank holding company must consider certain factors to ensure that its dividend level is prudent relative to maintaining a strong financial position, and is not based on overly optimistic earnings scenarios, such as potential events that could affect its ability to pay, while still maintaining a strong financial position. As a general matter, the Federal Reserve has indicated that the board of directors of a bank holding company should consult with the Federal Reserve and eliminate, defer or significantly reduce the bank holding company’s dividends if:

​

●its net income available to shareholders for the past four quarters, net of dividends previously paid during that period, is not sufficient to fully fund the dividends;
●its prospective rate of earnings retention is not consistent with its capital needs and overall current and prospective financial condition; or
●it will not meet, or is in danger of not meeting, its minimum regulatory capital adequacy ratios.

​

Bank Regulation

​

The operation of the Bank is subject to state and federal statutes applicable to state banks and the regulations of the Federal Reserve, the FDIC and the Consumer Financial Protection Bureau (“CFPB”). The operations of the Bank may also be subject to applicable Office of the Comptroller of the Currency (“OCC”) regulation to the extent state banks are granted parity with national banks. Such statutes and regulations relate to, among other things, required reserves, investments, loans, mergers and consolidations, issuances of securities, payments of dividends, establishment of branches, consumer protection and other aspects of the Bank’s operations. Violations of laws and regulations, or other unsafe and unsound practices, may result in these agencies imposing fines or penalties, cease and desist orders, or taking other enforcement actions.  Under certain circumstances, these agencies may enforce these remedies directly against officers, directors, employees and other parties participating in the affairs of a bank or bank holding company.

​

Safety and Soundness.  The Federal Deposit Insurance Act requires the federal prudential bank regulatory agencies, such as the Federal Reserve, to prescribe, by regulation or guideline, operational and managerial standards for all insured depository institutions relating to: (1) internal controls; (2) information systems and audit systems; (3) loan documentation; (4) credit underwriting; (5) interest rate risk exposure; and (6) asset quality. The agencies also must prescribe standards for asset quality, earnings, and stock valuation, as well as standards for compensation, fees and benefits. The federal banking agencies have adopted regulations and Interagency Guidelines Establishing Standards for Safety and Soundness to implement these required standards. These guidelines set forth the safety and soundness standards used to identify and address problems at insured depository institutions before capital becomes impaired. Under the regulations, if a regulator determines that a bank fails to meet any standards prescribed by the guidelines, the regulator may require the bank to submit an acceptable plan to achieve compliance, consistent with deadlines for the submission and review of such safety and soundness compliance plans.

​

Examinations. The Bank is subject to regulation, reporting, and periodic examinations by the Federal Reserve and the VBFI. These regulatory authorities routinely examine the Bank’s reserves, loan and investment quality, consumer compliance, management policies, procedures and practices and other aspects of operations. The Federal Reserve has adopted the Federal Financial Institutions Examination Council’s (“FFIEC”) rating system and assigns each financial institution a confidential composite rating based on an evaluation and rating of six essential components of an institution’s financial condition and operations, including Capital Adequacy, Asset Quality, Management, Earnings, Liquidity and Sensitivity to Market Risk, as well as the quality of risk management practices.  

​

Consumer Protection. The Dodd-Frank Act established the CFPB, an independent regulatory authority housed within the Federal Reserve having centralized authority, including examination and enforcement authority, for consumer

16

Table of Contents

protection in the banking industry.  The CFPB has rule writing, examination, and enforcement authority with regard to the Bank’s (and Primis’) compliance with a wide array of consumer financial protection laws, including the Truth in Lending Act, the Real Estate Settlement Procedures Act, the Truth in Savings Act, the Electronic Funds Transfer Act, the Equal Credit Opportunity Act, the Home Mortgage Disclosure Act, the S.A.F.E. Mortgage Licensing Act, the Fair Credit Reporting Act (except Sections 615(e) and 628), the Fair Debt Collection Practices Act, and the Gramm-Leach-Bliley Act (sections 502 through 509 relating to privacy), among others. The CFPB has broad authority to enforce a prohibition on unfair, deceptive, or abusive acts and practices. Authority to supervise and examine Primis and the Bank for compliance with federal consumer laws remains largely with the Federal Reserve. However, the CFPB may participate in examinations on a “sampling basis” and may refer potential enforcement actions against such institutions to their primary regulators. In addition, the Dodd-Frank Act permits states to adopt consumer protection laws and regulations that are stricter than those regulations promulgated by the CFPB, and state attorneys general are permitted to enforce consumer protection rules adopted by the CFPB against certain institutions.

​

Deposit Insurance Assessments. The Deposit Insurance Fund (“DIF”) of the FDIC insures the deposits of the Bank generally up to a maximum of $250,000 per depositor, per insured bank, for each account ownership category.  The FDIC charges insured depository institutions quarterly premiums to maintain the DIF.  Deposit insurance assessments are based on average total consolidated assets minus its average tangible equity, and take into account certain risk-based financial ratios and other factors. The assessment rate schedule can change from time to time, at the discretion of the FDIC, subject to certain limits.

​

Insurance of deposits may be terminated by the FDIC upon a finding that an institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by a bank’s federal regulatory agency. In addition, the Federal Deposit Insurance Act provides that, in the event of the liquidation or other resolution of an insured depository institution, the claims of depositors of the institution, including the claims of the FDIC as subrogee of insured depositors, and certain claims for administrative expenses of the FDIC as a receiver, will have priority over other general unsecured claims against the institution, including those of the parent bank holding company.

​

Insider Transactions. The Federal Reserve has adopted regulations that restrict preferential loans and loan amounts to “affiliates” and “insiders” of banks, require banks to keep information on loans to major shareholders and executive officers and bar certain director and officer interlocks between financial institutions.

​

Reserves. The Bank is subject to Federal Reserve regulations that require the Bank to maintain reserves against transaction accounts (primarily checking accounts). These reserve requirements are subject to annual adjustment by the Federal Reserve. Effective March 26, 2020, reserve requirement ratios were reduced to zero percent.

​

Anti-Money Laundering.  A continued focus of governmental policy relating to financial institutions in recent years has been combating money laundering and terrorist financing. The USA PATRIOT Act broadened the application of anti-money laundering regulations to apply to additional types of financial institutions such as broker-dealers, investment advisors and insurance companies, and strengthened the ability of the U.S. Government to help prevent, detect and prosecute international money laundering and the financing of terrorism. The principal provisions of Title III of the USA PATRIOT Act require that regulated financial institutions, including state member banks: (i) establish an anti-money laundering program that includes training and audit components; (ii) comply with regulations regarding the verification of the identity of any person seeking to open an account; (iii) take additional required precautions with non-U.S. owned accounts; and (iv) perform certain verification and certification of money laundering risk for their foreign correspondent banking relationships. Failure of a financial institution to comply with the USA PATRIOT Act’s requirements could have serious legal and reputational consequences for the institution. Primis Bank has augmented its systems and procedures to meet the requirements of these regulations and will continue to revise and update its policies, procedures and controls to reflect changes required by law.

FinCEN has adopted rules that require financial institutions to obtain beneficial ownership information with respect to legal entities with which such institutions conduct business, subject to certain exclusions and exemptions. Bank regulators are focusing their examinations on anti-money laundering compliance, and we continue to monitor and augment, where necessary, our anti-money laundering compliance programs.

17

Table of Contents

Bank regulators routinely examine institutions for compliance with these anti-money laundering obligations and have been active in imposing “cease and desist” and other regulatory orders and money penalty sanctions against institutions found to be in violation of these requirements. On January 1, 2021, Congress passed federal legislation that made sweeping changes to federal anti-money laundering laws, including changes that will be implemented in subsequent years.

​

Economic Sanctions. The Office of Foreign Assets Control (“OFAC”) is responsible for helping to ensure that U.S. entities do not engage in transactions with certain prohibited parties, as defined by various Executive Orders and acts of Congress.  OFAC publishes, and routinely updates, lists of names of persons and organizations suspected of aiding, harboring or engaging in terrorist acts, including the Specially Designated Nationals and Blocked Persons List.  If we find a name on any transaction, account or wire transfer that is on an OFAC list, we must undertake certain specified activities, which could include blocking or freezing the account or transaction requested, and we must notify the appropriate authorities.

Concentrations in Lending.  During 2006, the federal bank regulatory agencies released guidance on “Concentrations in Commercial Real Estate Lending” (the “Guidance”) and advised financial institutions of the risks posed by CRE lending concentrations. The Guidance requires that appropriate processes be in place to identify, monitor and control risks associated with real estate lending concentrations. Higher allowances for credit losses and capital levels may also be required. The Guidance is triggered when CRE loan concentrations exceed either:

​

●Total reported loans for construction, land development, and other land of 100% or more of a bank’s total risk based capital; or
●Total reported loans secured by multifamily and nonfarm nonresidential properties and loans for construction, land development, and other land of 300% or more of a bank’s total risk based capital.

​

The Guidance also applies when a bank has a sharp increase in CRE loans or has significant concentrations of CRE secured by a particular property type. The Guidance also applies when a bank has a sharp increase in CRE loans or has significant concentrations of CRE secured by a particular property type.

Community Reinvestment Act.  The Bank is subject to the provisions of the CRA, which imposes a continuing and affirmative obligation, consistent with their safe and sound operation, to help meet the credit needs of entire communities where the bank accepts deposits, including low- and moderate-income neighborhoods. The Federal Reserve’s assessment of the Bank’s CRA record is made available to the public. Further, a less than satisfactory CRA rating will slow, if not preclude, expansion of banking activities and prevent a company from becoming or remaining a financial holding company. Federal CRA regulations require, among other things, that evidence of discrimination against applicants on a prohibited basis, and illegal or abusive lending practices be considered in the CRA evaluation. On September 21, 2020, the Federal Reserve issued an advanced notice of proposed rulemaking that would modernize and substantially revise the regulations implementing the CRA. The Bank has a rating of “Satisfactory” in its most recent CRA evaluation.

Consumer Regulation. Activities of the Bank are subject to a variety of statutes and regulations designed to protect consumers. These laws and regulations include, among numerous other things, provisions that:

​

●limit the interest and other charges collected or contracted for by the Bank, including rules respecting the terms of credit cards and of debit card overdrafts;
●govern the Bank’s disclosures of credit terms to consumer borrowers;
●require the Bank to provide information to enable the public and public officials to determine whether it is fulfilling its obligation to help meet the housing needs of the community it serves;
●prohibit the Bank from discriminating on the basis of race, creed or other prohibited factors when it makes decisions to extend credit;
●govern the manner in which the Bank may collect consumer debts; and
●prohibit unfair, deceptive or abusive acts or practices in the provision of consumer financial products and services.

​

Mortgage Rules. Pursuant to rules adopted by the CFPB, banks that make residential mortgage loans are required to make a good faith determination that a borrower has the ability to repay a mortgage loan prior to extending such credit,

18

Table of Contents

require that certain mortgage loans contain escrow payments, obtain new appraisals under certain circumstances, comply with integrated mortgage disclosure rules, and follow specific rules regarding the compensation of loan originators and the servicing of residential mortgage loans.

​

Transactions with affiliates. There are various restrictions that limit the ability of the Bank to finance, pay dividends or otherwise supply funds to Primis or other affiliates. In addition, banks are subject to certain restrictions under Section 23A and B of the Federal Reserve Act on certain transactions, including any extension of credit to its bank holding company or any of its other affiliates, on investments in the securities thereof, and on the taking of such securities as collateral for loans to any borrower.

​

Privacy and Cybersecurity.  The Bank is subject to federal and state banking regulations that limit its ability to disclose non-public information about consumers to non-affiliated third parties. These limitations require us to periodically disclose our privacy policies to consumers and allow consumers to prevent disclosure of certain personal information to a non-affiliated third party under certain circumstances. Consumers also have the option to direct banks and other financial institutions not to share information about transactions and experiences with affiliated companies for the purpose of marketing products or services. Banking institutions are required to implement a comprehensive information security program that includes administrative, technical, and physical safeguards to ensure the security and confidentiality of customer records and information. These security and privacy policies and procedures for the protection of confidential and personal information are in effect across our lines of business. Furthermore, the federal banking regulators regularly issue guidance regarding cybersecurity intended to enhance cyber risk management. A financial institution is expected to implement multiple lines of defense against cyber-attacks and ensure that their risk management procedures address the risk posed by potential cyber threats. A financial institution is further expected to maintain procedures to effectively respond to a cyber-attack and resume operations following any such attack. Primis has adopted and implemented policies and procedures to comply with these privacy, information security, and cybersecurity requirements. On November 18, 2021, the federal banking agencies issued a new rule effective in 2022 that requires banks to notify their regulators within 36 hours of a “computer-security incident” that rises to the level of a “notification incident.” 

​

Audit Reports. Insured institutions with total assets of $500 million or more must submit annual audit reports prepared by independent auditors to federal and state regulators. In some instances, the audit report of the institution’s holding company can be used to satisfy this requirement. Independent auditors must receive examination reports, supervisory agreements and reports of enforcement actions. For insured institutions with total assets of $1.0 billion or more, financial statements prepared in accordance with U.S. GAAP, management’s certifications concerning responsibility for the financial statements, internal controls and compliance with legal requirements designated by the FDIC, and an attestation by the independent auditor regarding the statements of management relating to the internal controls must be submitted. For insured institutions with total assets of more than $3.0 billion, independent auditors may be required to review quarterly financial statements. The FDICIA requires that institutions with total assets of $1.0 billion or more have independent audit committees, consisting of outside directors only. The committees of insured institutions with total assets of $3.0 billion or more must include members with experience in banking or financial management, must have access to outside counsel, and must not include representatives of large customers.

The foregoing is only a brief summary of certain statutes, rules, and regulations that may affect Primis and the Bank. Numerous other statutes and regulations also will have an impact on the operations of Primis and the Bank. Supervision, regulation and examination of banks by the regulatory agencies are intended primarily for the protection of depositors, not shareholders.

​

​

​

19

Table of Contents

Item 1A. Risk Factors

An investment in our common stock involves risks. The following is a description of the material risks and uncertainties that Primis Financial Corp. believes affect its business and should be considered before making an investment in our common stock. Additional risks and uncertainties that we are unaware of, or that we currently deem immaterial, also may become important factors that affect us and our business. If any of the risks described in this Annual Report on Form 10-K were to actually occur, our financial condition, results of operations and cash flows could be materially and adversely affected. If this were to happen, the value of our common stock could decline significantly and you could lose part or all of your investment. This Form 10-K also contains forward-looking statements that may not be realized as a result of certain factors, including, but not limited to, the risks described herein and in our other public filings with the SEC. Please refer to the section in this Form 10-K entitled “Special Cautionary Notice Regarding Forward-Looking Statements” for additional information regarding forward-looking statements.

Strategic Risks

Our business strategy includes strategic growth, and our financial condition and results of operations could be negatively affected if we fail to grow or fail to manage our growth effectively.

We intend to continue pursuing a growth strategy for our business. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by growing companies such as the continuing need for infrastructure and personnel, the time and costs inherent in integrating a series of different operations and the ongoing expense of acquiring and staffing new banks or branches. We may not be able to expand our presence in our existing markets or successfully enter new markets and any expansion could adversely affect our results of operations. Failure to manage our growth effectively could have a material adverse effect on our business, future prospects, financial condition or results of operations, and could adversely affect our ability to successfully implement our business strategy. Our ability to grow successfully will depend on a variety of factors, including the continued availability of desirable business opportunities, the competitive responses from other financial institutions in our market areas and our ability to manage our growth.

Although there can be no assurance of success or the availability of branch or financial services acquisitions in the future, we may seek to supplement our internal growth through attractive acquisitions. We cannot predict the number, size or timing of acquisitions, or whether any such acquisition will occur at all. Our acquisition efforts have traditionally focused on targeted entities in markets in which we currently operate and markets in which we believe we can compete effectively. However, as consolidation of the financial services industry continues, the competition for suitable acquisition candidates may increase and, as the number of appropriate targets decreases, the prices for potential acquisitions could increase which could reduce our potential returns, and reduce the attractiveness of these opportunities to us. We may compete with other financial services companies for acquisition opportunities, and many of these competitors have greater financial resources than we do and may be able to pay more for an acquisition than we are able or willing to pay.

​

We must respond to rapid technological changes and these changes may be more difficult or expensive than anticipated.

If competitors introduce new products and services embodying new technologies, or if new industry standards and practices emerge, our existing product and service offerings, technology and systems may become obsolete. Further, if we fail to adopt or develop new technologies or to adapt our products and services to emerging industry standards, we may lose current and future customers, which could have a material adverse effect on our business, financial condition and results of operations. The financial services industry is changing rapidly and in order to remain competitive, we must continue to enhance and improve the functionality and features of our products, services and technologies. These changes may be more difficult or expensive than we anticipate.

20

Table of Contents

New lines of business, products or services and technological advancements may subject us to additional risks.

From time to time, we implement new lines of business or offer new products and services within existing lines of business. There are substantial risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed. In developing and marketing new lines of business and/or new products and services we invest significant time and resources. Initial timetables for the introduction and development of new lines of business and/or new products or services may not be achieved and price and profitability targets may not prove feasible. External factors, such as compliance with regulations, competitive alternatives, and shifting market preferences, may also impact the successful implementation of a new line of business or a new product or service.

The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products and services. Our future success depends, in part, upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in our operations. Many of our competitors have substantially greater resources to invest in technological improvements. We may not be able to effectively implement new technology driven products and services or be successful in marketing these products and services to our customers. In addition, our implementation of certain new technologies, such as those related to artificial intelligence, automation and algorithms, in our business processes may have unintended consequences due to their limitations or our failure to use them effectively. In addition, cloud technologies are also critical to the operation of our systems, and our reliance on cloud technologies is growing. Failure to successfully keep pace with technological change affecting the financial services industry could have a material adverse effect on our business, financial condition and results of operations.

Furthermore, any new line of business, new product or service and/or new technology could have a significant impact on the effectiveness of our system of internal controls. Failure to successfully manage these risks in the development and implementation of new lines of business, new products or services and/or new technologies could have a material adverse effect on our business, financial condition and results of operations.

We may not be able to successfully integrate our acquisitions or to realize the anticipated benefits of them.

A successful integration of each acquired business with ours will depend substantially on our ability to successfully consolidate operations, corporate cultures, systems and procedures and to eliminate redundancies and costs. While we have substantial experience in successfully integrating institutions we have acquired, we may encounter difficulties during integration, such as:

●the loss of key employees;
●the disruption of operations and businesses;
●loan and deposit attrition, customer loss and revenue loss;
●possible inconsistencies in standards, control procedures and policies;
●unexpected issues with expected branch closures; and/or
●unexpected issues with costs, operations, personnel, technology and credit;

​

all of which could divert resources from regular banking operations.  Additionally, general market and economic conditions or governmental actions affecting the financial industry generally may inhibit our successful merger integrations.

Further, we acquire businesses with the expectation that these mergers will result in various benefits including, among other things, benefits relating to enhanced revenues, a strengthened market position for the combined company, cross selling opportunities, technology, cost savings and operating efficiencies. Achieving the anticipated benefits of these mergers is subject to a number of uncertainties, including whether we integrate these institutions in an efficient and effective manner, and general competitive factors in the marketplace. Failure to achieve these anticipated benefits could result in a reduction in the price of our shares as well as in increased costs, decreases in the amount of expected revenues and diversion of management's time and energy and could materially and adversely affect our business, financial condition and operating results.

21

Table of Contents

Operational Risks

We rely on third-party vendors to provide key components of our business infrastructure.

Third-party vendors provide key components of our business operations such as data processing, recording and monitoring transactions, online banking interfaces and services, Internet connections and network access. We have selected these third-party vendors carefully and have conducted the due diligence consistent with regulatory guidance and best practices. While we have ongoing programs to review third-party vendors and assess risk, we do not control their actions. Any problems caused by these third parties, including those resulting from disruptions in communication services provided by a vendor, failure of a vendor to handle current or higher volumes, cyber-attacks and security breaches at a vendor, failure of a vendor to provide services for any reason or poor performance of services, could adversely affect our ability to deliver products and services to our customers and otherwise conduct our business. Financial or operational difficulties of a third-party vendor could also hurt our operations if those difficulties interfere with the vendor’s ability to serve us. Furthermore, our vendors could also be sources of operational and information security risk to us, including from breakdowns or failures of their own systems or capacity constraints. Replacing these third-party vendors could also create significant delay and expense. Accordingly, use of such third parties creates an unavoidable inherent risk to our business operations.

We face significant cyber and data security risk that could result in the disclosure of confidential information, adversely affect our business or reputation and expose us to significant liabilities.

As a financial institution, we are under threat of loss due to hacking and cyber-attacks. This risk has increased in recent years, and continues to increase, as we continue to expand customer capabilities to utilize internet and other remote channels to transact business. Two of the most significant cyber-attack risks that we face are e-fraud and loss of sensitive customer data. Loss from e-fraud occurs when cybercriminals breach and extract funds directly from customer or our accounts. The attempts to breach sensitive customer data, such as account numbers and social security numbers, are less frequent but would present significant reputational, legal and/or regulatory costs to us if successful. Our risk and exposure to these matters remains heightened because of the evolving nature and complexity of these threats from cybercriminals and hackers, our plans to continue to provide internet banking and mobile banking channels, and our plans to develop additional remote connectivity solutions to serve our customers. While we have not experienced any material losses relating to cyber-attacks or other information security breaches since 2017, we have been subject of hacking and cyber-attack and there can be no assurance that we will not suffer additional losses in the future.

In response to the COVID-19 pandemic, we have modified our business practices with a portion of our employees working remotely from their homes to have our operations uninterrupted as much as possible. Technology in employees’ homes may not be as robust as in our offices and could cause the networks, information systems, applications, and other tools available to employees to be more limited or less reliable than in our offices. The continuation of these work-from-home measures also introduces additional operational risk, including increased cybersecurity risk. These cyber risks include greater phishing, malware, and other cybersecurity attacks, vulnerability to disruptions of our information technology infrastructure and telecommunications systems for remote operations, increased risk of unauthorized dissemination of confidential information, limited ability to restore the systems in the event of a systems failure or interruption, greater risk of a security breach resulting in destruction or misuse of valuable information, and potential impairment of our ability to perform critical functions, including wiring funds, all of which could expose us to risks of data or financial loss, litigation and liability and could seriously disrupt our operations and the operations of any impacted customers.

The occurrence of any cyber-attack or information security breach could result in material adverse consequences to us including damage to our reputation and the loss of customers. We also could face litigation or additional regulatory scrutiny. Litigation or regulatory actions in turn could lead to significant liability or other sanctions, including fines and penalties or reimbursement of customers adversely affected by security breach. Even if we do not suffer any material adverse consequences as a result of other future events, successful attacks or systems failures at the Bank or at other financial institutions could lead to a general loss of customer confidence in financial institutions including the Bank.

22

Table of Contents

Our ability to mitigate the adverse consequences of occurrences is in part dependent on the quality of our information security procedures and contracts and our ability to anticipate the timing and nature of any such event that occurs. In recent years, we have incurred significant expense towards improving the reliability of our systems and their security from attack. Nonetheless, there remains the risk that we may be materially harmed by cyber-attacks and information security breaches in the future. Methods used to attack information systems change frequently (with generally increasing sophistication), often are not recognized until launched against a target, may be supported by foreign governments or other well-financed entities, and may originate from less regulated and remote areas around the world. As a result, we may be unable to address these methods in advance of attacks, including by implementing adequate preventive measures. If such an attack or breach does occur, we might not be able to fix it timely or adequately. To the extent that such an attack or breach relates to products or services provided by others, we seek to engage in due diligence and monitoring to limit the risk. In addition, as the regulatory environment related to information security, data collection and use, and privacy becomes increasingly rigorous, with new and constantly changing requirements applicable to our business, compliance with those requirements could also result in additional costs.

We are dependent on key personnel and the loss of one or more of those key personnel could impair our relationship with our customers and adversely affect our business.

Many community banks attract customers based on the personal relationships that the banks’ officers and customers establish with each other and the confidence that the customers have in the officers. We significantly depend on the continued service and performance of our key management personnel. We also believe our management team’s depth and breadth of experience in the banking industry is integral to executing our business plan. The loss of the services of members of our senior management team or other key employees or the inability to attract additional qualified personnel as needed could have a material adverse effect on our business.

Credit Risks

We are subject to risks related to our concentration of construction and land development and commercial real estate loans.

As of December 31, 2021, we had $121.4 million of construction and land development loans, or 5.2% of our loan portfolio. Construction and land development loans are subject to risks during the construction phase that are not present in standard residential real estate and commercial real estate loans. These risks include:

●the viability of the contractor;
●the contractor’s ability to successfully complete the project, to meet deadlines and time schedules and to stay within cost estimates, especially in the event of supply disruptions and labor shortages; and
●concentrations of such loans with a single contractor and its affiliates.

Real estate construction and land development loans may involve the disbursement of substantial funds with repayment dependent, in part, on the success of the ultimate project rather than the ability of a borrower or guarantor to repay the loan and also present risks of default in the event of declines in property values or volatility in the real estate market during the construction phase. Our practice, in the majority of instances, is to secure the personal guaranty of individuals in support of our real estate construction and land development loans which provides us with an additional source of repayment. As of December 31, 2021, we did not have any nonperforming construction and land development loans and had $266 thousand of assets that have been foreclosed. If one or more of our larger borrowers were to default on their construction and land development loans, and we did not have alternative sources of repayment through personal guarantees or other sources, or if any of the aforementioned risks were to occur, we could incur significant losses.

As of December 31, 2021, we had $1.15 billion of commercial real estate loans outstanding, or 49.1% of our loan portfolio, including multi-family residential loans and loans secured by farmland. Commercial real estate lending typically involves higher loan principal amounts and the repayment is dependent, in large part, on sufficient income from the properties securing the loan to cover operating expenses and debt service.

23

Table of Contents

A significant amount of our loans are secured by real estate and any declines in real estate values in our primary markets could be detrimental to our financial condition and results of operations.

Real estate lending (including commercial, construction, land development, and residential loans) is a large portion of our loan portfolio, constituting $1.89 billion, or approximately 80.8% of our total loan portfolio, as of December 31, 2021. Although residential and commercial real estate values are currently strong in our market area, such values may not remain elevated. If loans that are collateralized by real estate become troubled during a time when market conditions are declining or have declined, then we may not be able to realize the full value of the collateral that we anticipated at the time of originating the loan, which could require us to increase our provision for credit losses and adversely affect our financial condition and results of operations.

As of December 31, 2021, $621.4 million, or approximately 26.6% of our total loans, were secured by single-family residential real estate. This includes $547.6 million in residential 1-4 family loans and $73.8 million in home equity lines of credit. If housing prices in our market areas do not remain strong or deteriorate, we may experience an increase in nonperforming loans, provision for credit losses and charge-offs.

If the value of real estate in our market areas were to decline materially, a significant portion of our loan portfolio could become under-collateralized, which could have a material adverse effect on our asset quality, capital structure and profitability.

As of December 31, 2021, 49.1% of our loan portfolio was comprised of loans secured by commercial real estate, including multi-family residential loans and loans secured by farmland. In the majority of these loans, real estate was the primary collateral component. In some cases we take real estate as security for a loan even when it is not the primary component of collateral. The real estate collateral that provides the primary or an alternate source of repayment in the event of default may deteriorate in value during the term of the loan as a result of changes in economic conditions, fluctuations in interest rates and the availability of loans to potential purchasers, changes in tax and other laws and acts of nature. If we are required to liquidate the collateral securing a loan to satisfy the debt during a period of reduced real estate values, our earnings and capital could be adversely affected. We are subject to increased lending risks in the form of loan defaults as a result of the high concentration of real estate lending in our loan portfolio. A weak real estate market in our primary market areas could have an adverse effect on the demand for new loans, the ability of borrowers to repay outstanding loans, the value of real estate and other collateral securing the loans and the value of real estate owned by us. If real estate values decline, it is also more likely that we would be required to increase our allowance for credit losses, which could adversely affect our financial condition and results of operations.

If our nonperforming assets increase, our earnings will suffer.

At December 31, 2021, our nonperforming assets (which consist of nonaccrual loans, loans past due 90 days and accruing and OREO) totaled $16.5 million, or 0.70% of total loans and OREO, which is a decrease of $1.1 million, or 6.1%, compared with non-covered nonperforming assets (which consist of non-covered nonaccrual loans, loans past due 90 days and accruing and OREO), which totaled $17.5 million, or 0.72% of total non-covered loans and OREO at December 31, 2020. At December 31, 2019, our non-covered nonperforming assets were $15.1 million, or 0.69% of total non-covered loans and OREO.

Economic and market conditions are unstable, and although our nonperforming assets as a percentage of total loans and OREO has improved, we may incur losses if there is an increase in nonperforming assets in the future. Our nonperforming assets adversely affect our net income in various ways. We do not record interest income on nonaccrual loans or OREO, thereby adversely affecting our net interest income, and increasing loan administration costs. When we take collateral in foreclosures and similar proceedings, we are required to mark the related loan to the then fair value of the collateral, which may ultimately result in a loss. We must reserve for probable losses, which is established through a current period charge to the provision for credit losses as well as from time to time, as appropriate, a write down of the value of properties in our OREO portfolio to reflect changing market values. Additionally, there are legal fees associated with the resolution of problem assets as well as carrying costs such as taxes, insurance and maintenance related to our OREO. Further, the resolution of nonperforming assets requires the active involvement of management, which can distract

24

Table of Contents

them from more profitable activity. Finally, an increase in the level of nonperforming assets increases our regulatory risk profile. There can be no assurance that we will not experience future increases in nonperforming assets.

If our allowance for credit losses is not adequate to cover actual loan losses, our earnings will decrease.

As a lender, we are exposed to the risk that our borrowers may not repay their loans according to the terms of these loans, and the collateral securing the payment of these loans may be insufficient to ensure repayment. We make various assumptions and judgments about the collectability of our loan portfolio, including the creditworthiness of the borrowers and the value of the real estate and other assets serving as collateral for the repayment of many of our loans. The amount of the allowance represents management's best estimate of current expected credit losses on loans considering available information, from internal and external sources, relevant to assessing collectability over the loans' contractual terms, adjusted for expected prepayments when appropriate. If our assumptions prove to be incorrect or if we experience significant loan losses, our current allowance may not be sufficient to cover actual loan losses and adjustments may be necessary to allow for different economic conditions or adverse developments in our loan portfolio. A material addition to the allowance for credit losses could cause our earnings to decrease. Due to the relatively unseasoned nature of our loan portfolio, we may experience an increase in delinquencies and losses as these loans continue to mature.

In addition, federal regulators periodically review our allowance for credit losses and may require us to increase our provision for credit losses or recognize further charge-offs, based on judgments different than those of our management. Any significant increase in our allowance for credit losses or charge-offs required by these regulatory agencies could have a material adverse effect on our results of operations and financial condition.

We are subject to credit quality risks and our credit policies may not be sufficient to avoid losses.

We are subject to the risk of losses resulting from the failure of borrowers, guarantors and related parties to pay interest and principal amounts on their loans. Although we maintain credit policies and credit underwriting, monitoring and collection procedures, these policies and procedures may not prevent losses, particularly during periods in which the local, regional or national economy suffers a general decline. If borrowers fail to repay their loans, our financial condition and results of operations would be adversely affected.

Interest rates on our outstanding financial instruments might be subject to change based on developments related to LIBOR, which could adversely affect our revenue, expense, and the value of our financial instruments.

​

On July 27, 2017, the FCA, which regulates LIBOR, publicly announced that it intends to stop persuading or compelling banks to submit LIBOR rates after 2021. On November 30, 2020, a joint announcement by the Board of Governors of the Federal Reserve, the FDIC, and the OCC was released and included a statement that the administrator of LIBOR has announced it will consult on its intention to cease the publication of the one week and two month USD LIBOR settings immediately following the LIBOR publication on December 31, 2021, and the remaining USD LIBOR settings immediately following the LIBOR publications on June 30, 2023. In the U.S., the Alternative Reference Rates Committee has proposed SOFR as the preferred alternative to LIBOR. SOFR is a broad measure of the cost of borrowing cash in the overnight U.S. treasury repurchase market. At this time, various iterations of the SOFR index are being used within the market, as are other indices such as the Bloomberg Short-Term Bank Yield index and the American Financial Exchange's AMERIBOR index. It is unclear as to the degree to which the market will adopt such non-LIBOR indices or how the industry may transition various products to an accepted alternative to LIBOR.

​

The uncertainty regarding the future of LIBOR as well as the transition from LIBOR to another benchmark rate or rates is complex and could have a range of adverse effects on our business, financial condition and results of operations. In particular, any such transition could:

●adversely affect the interest rates paid or received on, and the revenue and expense associated with, and the value of floating rate obligations, loans, deposits and other financial instruments tied to LIBOR rates, or other securities or financial arrangements given LIBOR’s role in determining market interest rates globally;
●prompt inquiries or other actions from regulators in respect of our preparation and readiness for the replacement of LIBOR with an alternative reference rate;

25

Table of Contents

●result in disputes, litigation or other actions with counterparties regarding the interpretation and enforceability of certain fallback language, or the absence of such language, in LIBOR-based instruments, including securities and loans;
●result in customer uncertainty and disputes around how variable rates should be calculated in light of the foregoing, thereby damaging our reputation and resulting in a loss of customers and additional costs to us; and
●require the transition to or development of appropriate systems and analytics to effectively transition risk management processes from LIBOR-based products to those based on an applicable alternative pricing benchmark.

​

The manner and impact of this transition, as well as the effect of these developments on our funding costs, loan, and investment and trading securities portfolios, asset liability management and business are uncertain.

Market Risks

Our profitability depends significantly on local economic conditions in the areas where our operations and loans are concentrated, and our geographic concentration makes us vulnerable to local weather catastrophes, public health issues, and other external events, which could adversely affect our results of operations and financial condition.

We operate in a mixed market environment with influences from both rural and urban areas. Our profitability depends on the general economic conditions in our market areas of Northern Virginia, Maryland, Washington, D.C., Charlottesville, Northern Neck, Middle Peninsula, Richmond, Hampton Roads and the surrounding areas. Unlike larger banks that are more geographically diversified, we provide banking and financial services to clients primarily in these market areas. As of December 31, 2021, substantially all of our commercial real estate, real estate construction and residential real estate loans were made to borrowers in our market area. The local economic conditions in this area have a significant impact on our commercial, real estate and construction and consumer loans, the ability of the borrowers to repay these loans and the value of the collateral securing these loans. In addition, if the population or income growth in these market areas slows, stops or declines, income levels, deposits and housing starts could be adversely affected and could result in the curtailment of our expansion, growth and profitability. Political conditions could also impact our earnings.

Our business is subject to interest rate risk and variations in interest rates may negatively affect our financial performance.

The majority of our assets and liabilities are monetary in nature and subject us to significant risk from changes in interest rates. Fluctuations in interest rates are not predictable or controllable. Like most financial institutions, changes in interest rates can impact our net interest income as well as the valuation of our assets and liabilities, 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. We expect that we will periodically experience “gaps” in the interest rate sensitivities of our assets and liabilities, meaning that either our interest-bearing liabilities will be more sensitive to changes in market interest rates than our interest-earning assets, or vice versa. In either event, if market interest rates should move contrary to our position, this “gap” will negatively impact our earnings. Many factors impact interest rates, including governmental monetary policies, inflation, recession, changes in unemployment, the money supply, and international disorder and instability in domestic and foreign financial markets.

Based on our analysis of the interest rate sensitivity of our assets, an increase in the general level of interest rates may negatively affect the market value of the portfolio equity, but will positively affect our net interest income since most of our assets have floating rates of interest that adjust fairly quickly to changes in market rates of interest. Additionally, an increase in interest rates may, among other things, reduce the demand for loans and our ability to originate loans. A decrease in the general level of interest rates may affect us through, among other things, increased prepayments on our loan and mortgage-backed securities portfolios and increased competition for deposits. Accordingly, changes in the level of market interest rates affect our net yield on interest-earning assets, loan origination volume, loan and mortgage-backed securities portfolios, and our overall results. Although our asset liability management strategy is designed to control our risk from changes in market interest rates, it may not be able to prevent changes in interest rates from having a material adverse effect on our results of operations and financial condition.

26

Table of Contents

Declines in asset values may result in impairment charges and adversely affect the value of our investment securities, financial performance and capital.

We maintain an investment securities portfolio that includes, but is not limited to, collateralized mortgage obligations, agency mortgage-backed securities and pooled trust preferred securities. The market value of investment securities may be affected by factors other than the underlying performance of the issuer or composition of the bonds themselves, such as ratings downgrades, adverse changes in the business climate and a lack of liquidity for resales of certain investment securities. At each reporting period, we evaluate investment securities and other assets for impairment indicators. We may be required to record additional impairment charges if our investment securities suffer a decline in value that is considered other-than-temporary. During the years ended December 31, 2021, 2020 and 2019, we incurred no other-than-temporary impairment charges related to credit losses or sales of securities. If in future periods we determine that a significant impairment has occurred, we would be required to charge against earnings the credit-related portion of the other-than-temporary impairment, which could have a material adverse effect on our results of operations in the periods in which the write-offs occur.

Our stock price can be volatile.

Stock price volatility may make it more difficult for you to resell your common stock when you want and at prices you find attractive. Our stock price can fluctuate significantly in response to a variety of factors including, among other things:

●actual or anticipated variations in quarterly results of operations;
●recommendations by securities analysts;
●operating and stock price performance of other companies that investors deem comparable to us;
●news reports relating to trends, concerns and other issues in the financial services industry;
●perceptions in the marketplace regarding us and/or our competitors;
●new technology used, or services offered, by competitors;
●significant acquisitions or business combinations, strategic partnerships, joint ventures or capital commitments by or involving us or our competitors;
●failure to integrate acquisitions or realize anticipated benefits from acquisitions;
●changes in valuations of Goodwill and other Intangible Assets;
●changes in government regulations; and
●geopolitical conditions such as acts or threats of terrorism, military conflicts or pandemics.

General market fluctuations, industry factors and general economic and political conditions and events, such as economic slowdowns or recessions, interest rate changes or credit loss trends, could also cause our stock price to decrease regardless of operating results.

The trading volume in our common stock is less than that of other larger financial services companies.

Although our common stock is listed for trading on the NASDAQ Global Market, the trading volume is low, and you are not assured liquidity with respect to transactions in our common stock. A public trading market having the desired characteristics of depth, liquidity and orderliness depends on the presence in the marketplace of willing buyers and sellers of our common stock at any given time. This presence depends on the individual decisions of investors and general economic and market conditions over which we have no control. Given the lower trading volume of our common stock, significant sales of our common stock, or the expectation of these sales, could cause our stock price to fall.

Inflation could negatively impact our business, our profitability and our stock price.

​

Prolonged periods of inflation may impact our profitability by negatively impacting our fixed costs and expenses, including increasing funding costs and expense related to talent acquisition and retention, and negatively impacting the demand for our products and services. Additionally, inflation may lead to a decrease in consumer and client’s purchasing power and negatively affect the need or demand for our products and services. If significant inflation continues, our business could be negatively affected by, among other things, increased default rates leading to credit losses which could

27

Table of Contents

decrease our appetite for new credit extensions. These inflationary pressures could result in missed earnings and budgetary projections causing our stock price to suffer.

​

Changes in the policies of monetary authorities and other government action could adversely affect our profitability.

 

Interest rates and our financial performance are affected by credit policies of monetary authorities, particularly the Federal Reserve. The instruments of monetary policy employed by the Federal Reserve include open market transactions in U.S. government securities, changes in the discount rate or the federal funds rate on bank borrowings and changes in reserve requirements against bank deposits. In view of changing conditions in the national economy and in the money markets, we cannot predict the potential impact of future changes in interest rates, deposit levels, and loan demand on our business and earnings. Furthermore, the actions of the U.S. government and other governments may result in currency fluctuations, exchange controls, market disruption, material decreases in the values of certain of our financial assets and other adverse effects.

 

The Federal Reserve reduced rates to near zero in March 2020 in response to economic disruption that occurred at the outset of the COVID-19 pandemic, which has continued into 2022. The prolonged period of low interest rates has and is expected to continue to cause downward pressure on our net interest margin, including reduced yield on our variable rate loans and on new loans, and realized yields on investments securities. Further rate changes are dependent on the Federal Reserve’s assessment of economic data as it becomes available. We expect the Federal Reserve to raise rates more than once in the next twelve months. Historically, when the Federal Reserve Board increases the Fed Funds rate, overall interest rates have also risen, which may negatively impact the U.S. economy, and could have a negative impact on our business by reducing the amount of money our customers borrow or by adversely affecting their ability to repay outstanding loan balances that may increase due to adjustments in their variable rates. In addition, in a rising interest rate environment we may have to offer more attractive interest rates to depositors to compete for deposits, or pursue other sources of liquidity, such as wholesale funds. Further, when interest-bearing liabilities reprice or mature more quickly than interest-earning assets, an increase in interest rates generally would tend to result in a decrease in net interest income.  

 

Changes in monetary policy, including changes in interest rates, could influence (i) the amount of interest we receive on loans and securities, (ii) the amount of interest we pay on deposits and borrowings, (iii) our ability to originate loans and obtain deposits, (iv) the fair value of our assets and liabilities, and (v) the reinvestment risk associated with changes in the duration of our mortgage-backed securities portfolio.

​

Liquidity Risks

Liquidity risk could impair our ability to fund operations and jeopardize our financial condition, results of operations and cash flows.

Liquidity is essential to our business. Our ability to implement our business strategy will depend on our ability to obtain funding for loan originations, working capital, possible acquisitions and other general corporate purposes. An inability to raise funds through deposits, borrowings, securities sold under agreements to repurchase, the sale of loans and other sources could have a substantial negative effect on our liquidity. We anticipate that our retail and commercial deposits will be sufficient to meet our funding needs in the foreseeable future. We may rely on deposits obtained through intermediaries, FHLB advances, and other wholesale funding sources to obtain the funds necessary to implement our growth strategy.

Our access to funding sources in amounts adequate to finance our activities or on terms which are acceptable to us could be impaired by factors that affect us specifically or the financial services industry or economy in general, including a decrease in the level of our business activity as a result of a downturn in the markets in which our loans are concentrated or adverse regulatory action against us. Our ability to borrow could also be impaired by factors that are not specific to us, such as a disruption in the financial markets or negative views and expectations about the prospects for the financial services industry. To the extent we are not successful in obtaining such funding, we will be unable to implement our strategy as planned which could have a material adverse effect on our financial condition, results of operations and cash flows.

28

Table of Contents

Capital Adequacy Risks

Future growth or operating results may require us to raise additional capital, but that capital may not be available, be available on unfavorable terms or may be dilutive.

Primis Bank is required by the FRB to maintain adequate levels of capital to support our operations. In the event that our future operating results erode capital, if the Bank is required to maintain capital in excess of well-capitalized standards, or if we elect to expand through loan growth or acquisitions, we may be required to raise additional capital. Our ability to raise capital will depend on conditions in the capital markets, which are outside our control, and on our financial performance. Accordingly, we cannot be assured of our ability to raise capital on favorable terms when needed, or at all. If we cannot raise additional capital when needed, we will be subject to increased regulatory supervision and the imposition of restrictions on our growth and business. These outcomes could negatively impact our ability to operate or further expand our operations through acquisitions or the establishment of additional branches and may result in increases in operating expenses and reductions in revenues that could have a material adverse effect on our financial condition and results of operations. In addition, in order to raise additional capital, we may need to issue shares of our common stock that would dilute the book value of our common stock and reduce our current shareholders’ percentage ownership interest to the extent they do not participate in future offerings.

We may issue a new series of preferred stock or debt securities, which would be senior to our common stock and may cause the market price of our common stock to decline.

We have issued $27.0 million in aggregate principal amount of 5.875% Fixed-to-Floating Rate Subordinated Notes due January 31, 2027 and $60.0 million of fixed-to-floating rate Subordinated Notes due 2030. In the future, we may increase our capital resources by making additional offerings of debt or equity securities, which may include senior or additional subordinated notes, classes of preferred shares and/or common shares. Holders of our common stock are not entitled to preemptive rights or other protections against dilution. Preferred shares and debt, if issued, have a preference on liquidating distributions or a preference on dividend or interest payments that could limit our ability to make a distribution to the holders of our common stock. Future issuances and sales of parity preferred stock, or the perception that such issuances and sales could occur, may also cause prevailing market price for our common stock to decline and may adversely affect our ability to raise additional capital in the financial markets at times and prices favorable to us. Further issuances of our common stock could be dilutive to holders of our common stock.

We currently intend to pay dividends on our common stock; however, our future ability to pay dividends is subject to restrictions.

We declared the first cash dividend on our common stock in February 2012, and each quarter thereafter through 2021. There are a number of restrictions on our ability to pay dividends. It is the policy of the FRB that bank holding companies should pay cash dividends on common stock only out of income available over the past year and only if prospective earnings retention is consistent with the organization’s expected future needs and financial condition. The policy provides that bank holding companies should not maintain a level of cash dividends that undermines the bank holding company’s ability to serve as a source of strength to its banking subsidiaries.

Our principal source of funds to pay dividends on our common stock is cash dividends that we receive from the Bank. The payment of dividends by the Bank to us is subject to certain restrictions imposed by federal banking laws, regulations and authorities. The federal banking statutes prohibit federally insured banks from making any capital distributions (including a dividend payment) if, after making the distribution, the institution would be "under capitalized" as defined by statute. In addition, the relevant federal regulatory agencies have authority to prohibit an insured bank from engaging in an unsafe or unsound practice, as determined by the agency, in conducting an activity. The payment of dividends could be deemed to constitute such an unsafe or unsound practice, depending on the financial condition of the Bank. Regulatory authorities could impose administratively stricter limitations on the ability of the Bank to pay dividends to us if such limits were deemed appropriate to preserve certain capital adequacy requirements.

​

29

Table of Contents

Regulatory Risks

We are heavily regulated by federal and state agencies; changes in laws and regulations or failures to comply with such laws and regulations may adversely affect our operations and our financial results.

We and the Bank are subject to extensive regulation, supervision and examination by federal and state banking authorities. Any change in applicable regulations or federal or state legislation could have a substantial impact on us and the Bank, and our respective operations. Additional legislation and regulations may be enacted or adopted in the future that could significantly affect our powers, authority and operations or the powers, authority and operations of the Bank, which could have a material adverse effect on our financial condition and results of operations.

Further, bank regulatory authorities have the authority to bring enforcement actions against banks and their holding companies for unsafe or unsound practices in the conduct of their businesses or for violations of any law, rule or regulation, any condition imposed in writing by the appropriate bank regulatory agency or any written agreement with the agency. Possible enforcement actions against us could include the issuance of a cease-and-desist order that could be judicially enforced, the imposition of civil monetary penalties, the issuance of directives to increase capital or enter into a strategic transaction, whether by merger or otherwise, with a third party, the appointment of a conservator or receiver, the termination of insurance on deposits, the issuance of removal and prohibition orders against institution-affiliated parties, and the enforcement of such actions through injunctions or restraining orders. The exercise of this regulatory discretion and power may have a negative impact on us.

As a regulated entity, Primis and the Bank must maintain certain required levels of regulatory capital that may limit our operations and potential growth.

As further described above under Supervision and Regulation—Capital Requirements, Primis and the Bank each are subject to various regulatory capital requirements administered by the FRB.

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 the Bank’s and our consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities and certain off-balance sheet commitments as calculated under these regulations.

As of December 31, 2021, Primis and the Bank exceeded the amounts required to be well capitalized with respect to all four required capital ratios. As of December 31, 2021, Primis’ leverage, CET1 risk-based capital, Tier 1 risk-based capital and Total risk-based capital ratios were 9.41%, 13.09%, 13.52% and 18.52%, respectively. As of December 31, 2021, the Bank’s leverage, CET1 risk-based capital, Tier 1 risk-based capital and Total risk-based capital ratios were 11.14%, 16.18%, 16.18% and 17.43%, respectively.

Many factors affect the calculation of Primis and the Bank’s risk-based assets and its ability to maintain the level of capital required to achieve acceptable capital ratios. For example, changes in risk weightings of assets relative to capital and other factors may combine to increase the amount of risk-weighted assets in the Tier 1 risk-based capital ratio and the Total risk-based capital ratio. Any increases in its risk-weighted assets will require a corresponding increase in its capital to maintain the applicable ratios. In addition, recognized loan losses in excess of amounts reserved for such losses, loan impairments, impairment losses on investment securities and other factors will decrease the Bank’s capital, thereby reducing the level of the applicable ratios.

Primis and the Bank’s failure to remain well capitalized for bank regulatory purposes could affect customer confidence, our ability to grow, our costs of funds and FDIC insurance costs, our ability to pay dividends on our capital stock, our ability to make acquisitions, and on our business, results of operations and financial condition. Under FRB rules, if the Bank ceases to be a well-capitalized institution for bank regulatory purposes, the interest rates that it pays on deposits and its ability to accept, renew or rollover brokered deposits may be restricted. As of December 31, 2021, we did not have any brokered certificates of deposits.

30

Table of Contents

Financial Reporting Risks

Failure to maintain an effective system of disclosure controls and procedures could have a material adverse effect on our business, results of operations and financial condition and could impact the price of our common stock.

Failure to maintain an effective internal control environment could result in us not being able to accurately report our financial results, prevent or detect fraud, or provide timely and reliable financial information pursuant to our reporting obligations, which could have a material adverse effect on our business, financial condition, and results of operations. Further, it could cause our investors to lose confidence in the financial information we report, which could affect the trading price of our common stock.

Management regularly reviews and updates our disclosure controls and procedures, including our internal control over financial reporting. Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met. Any failure or circumvention of our controls and procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on our business, results of operations and financial condition.

​

Risks Related to the COVID-19 Pandemic

​

Our business, financial condition, liquidity and results of operations have been, and will likely continue to be, adversely affected by the COVID-19 pandemic.

​

The COVID-19 pandemic has created economic and financial disruptions that have adversely affected, and are likely to continue to adversely affect, our business, financial condition, liquidity and results of operations. The extent to which the COVID-19 pandemic will continue to negatively affect our business, financial condition, liquidity and results of operations will depend on future developments, which are highly uncertain and cannot be predicted and many of which are outside of our control, including the scope and duration of the pandemic, the emergence of new variants, the direct and indirect impact of the pandemic on our employees, customers, clients, counterparties and service providers, as well as other market participants, and actions taken, or that may yet be taken, or inaction, by governmental authorities and other third parties in response to the pandemic. Should the pandemic continue for a more extended period or worsen, we may face additional circumstances such as significant draws on credit lines should customers seek to increase liquidity. Furthermore, should the pandemic continue, we may experience increased rates of employee illness or unavailability, and may experience challenges recruiting new employees.

​

Any disruption to our ability to deliver financial products or services to, or interact with, our clients and customers could result in losses or increased operational costs, regulatory fines, penalties and other sanctions, or harm our reputation. We are also subject to litigation and reputational risk arising from our response to the COVID-19 pandemic. The length of the pandemic and the efficacy of the measures being put in place to address it are unknown as efforts to combat the virus have been complicated by viral variants and uneven access to, and acceptance and effectiveness of, vaccines globally. To the extent the pandemic adversely affects our business, financial condition, liquidity or results of operations, it may also have the effect of heightening many of the other risks described in this report.

​

31

Table of Contents

​

Item 1B. Unresolved Staff Comments

Primis Financial Corp. does not have any unresolved staff comments from the SEC to report for the year ended December 31, 2021.

Item 2. Properties

Primis Financial Corp.’s principal office is located at 6830 Old Dominion Drive, McLean, Virginia. The Company has administrative offices in Warrenton and Glen Allen, Virginia. Including these main locations, our bank owns 32 properties and leases 20 properties, all of which are used as branch locations or for housing operational units in Maryland and Virginia. At December 31, 2021, Primis Bank had forty full-service branches in Virginia and Maryland and provides services to customers through certain online and mobile applications. Thirty-five full-service retail branches are in Virginia (Ashland, Burgess, Callao, Central Garage, Charlottesville, Chester, Clifton Forge, Colonial Heights, Courtland, Fairfax, Front Royal, Gloucester, Gloucester Point, Hampton, Hartfield, Heathsville, Kilmarnock, Leesburg, McLean, Mechanicsville (2), Middleburg, Midlothian, New Market, Newport News, Quinton, Reston, Richmond, Surry, Tappahannock (2), Urbanna, Warrenton, Waverly, and Williamsburg) and five full-service retail branches are in Maryland (Bethesda, Brandywine, Owings, Rockville, and Upper Marlboro).

​

Primis believes its facilities are in good operating condition, are suitable and adequate for its operational needs and are adequately insured.

Item 3. Legal Proceedings

Primis and Primis Bank are from time to time a party, as both plaintiff and defendant, to various claims and proceedings arising in the ordinary course of the Bank’s business, including administrative and/or legal proceedings that may include employment-related claims, as well as claims of lender liability, breach of contract, and other similar lending-related claims. While the ultimate resolution of these matters cannot be determined at this time, the Bank’s management presently believes that such matters, individually and in the aggregate, will not have a material adverse effect on the Bank’s financial condition or results of operations. There are no proceedings pending, or to management’s knowledge, threatened, that represent a significant risk against Primis or Primis Bank as of December 31, 2021.

Item 4. Mine Safety Disclosures.

Not applicable.

​

​

32

Table of Contents

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Common Stock Market Prices

Primis’ common stock is traded on the Nasdaq Global Market under the symbol “FRST”. There were 24,575,835 shares of our common stock outstanding at the close of business on March 4, 2022, which were held by 1,238 shareholders of record. As of that date, the closing price of our common stock on the NASDAQ Global Market was $14.23.

Recent Sales of Unregistered Securities

None.

Securities Authorized for Issuance under Equity Compensation Plans

As of December 31, 2021, Primis had outstanding stock options granted under the 2010 Stock Awards and Incentive Plan (the “2010 Plan”) and the 2017 Equity Compensation Plan (the “2017 Plan”), which were approved by its shareholders. The following table provides information as of December 31, 2021 regarding Primis’ equity compensation plans under which our equity securities are authorized for issuance:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Number of securities

​

​

​

​

​

​

​

remaining available for

​

​

​

​

​

​

​

future issuance under

​

​

Number of securities

​

Weighted average

​

equity compensation plans

​

​

to be issued upon exercise

​

exercise price of

​

(excluding securities reflected

​

​

of outstanding options

​

​

outstanding options

​

in column A)

Plan category

    

A

    

B

    

C

Equity compensation plans approved by security holders

 

283,800

​

$

10.98

 

453,395

Equity compensation plans not approved by security holders

 

—

​

 

—

 

—

Total

 

283,800

​

$

10.98

 

453,395

​

Issuer Purchases of Equity Securities

None.

Dividends

We declared the first cash dividend on our common stock in February 2012, and each quarter thereafter through 2021. There are a number of restrictions on our ability to pay dividends. It is the policy of the FRB that bank holding companies should pay cash dividends on common stock only out of income available over the past year and only if prospective earnings retention is consistent with the organization’s expected future needs and financial condition. The policy provides that bank holding companies should not maintain a level of cash dividends that undermines the bank holding company’s ability to serve as a source of strength to its banking subsidiaries. Banking regulations require maintaining certain capital levels and may limit the dividends paid by the Bank to Primis or by Primis to shareholders. The Company’s ability to pay dividends to stockholders is largely dependent upon the dividends it receives from the Bank, and the Bank is subject to regulatory limitations on the amount of cash dividends it may pay.

​

33

Table of Contents

Performance Graph

The following chart compares the cumulative total shareholder return on Primis common stock during the five years ended December 31, 2021, with the cumulative total return of the Russell 2000 Index and the NASDAQ Bank Index for the same period. Dividend reinvestment has been assumed. This comparison assumes $100 invested on December 31, 2016 in Primis common stock, the Russell 2000 Index and the NASDAQ Bank Index. The historical stock price performance for Primis common stock shown on the graph below is not necessarily indicative of future stock performance.

Graphic

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

2016

    

2017

    

2018

    

2019

    

2020

    

2021

Primis Financial Corp.

 

100.00

​

100.02

​

84.11

​

106.50

​

81.87

​

104.49

Russell 2000 Index

 

100.00

​

114.65

​

102.02

​

128.06

​

153.62

​

176.39

NASDAQ Bank Index

 

100.00

​

118.39

​

83.60

​

137.18

​

87.20

​

137.31

​

​

​

​

​

Item 6. [Reserved]

​

​

​

​

34

Table of Contents

​

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, 2021 and 2020. Discussions of comparisons between 2020 and 2019 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 Annual Report on Form10-K for the year ended December 31, 2020.

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.

Impact of COVID-19 Pandemic

​

The COVID-19 pandemic and related restrictive measures taken by governments, businesses and individuals have caused and continue to cause unprecedented uncertainty, volatility and disruption in financial markets and in governmental, commercial and consumer activity in the United States and globally, including the markets that we serve. As the restrictive measures eased during the latter part of 2020 and continued to ease during 2021, the U.S. economy has begun to improve, and with the availability and distribution of COVID-19 vaccines, we anticipate continued improvements in commercial and consumer activity and the U.S. economy.

While positive trends existed in 2021, we recognized that our business and consumer customers were continuing to experience varying degrees of financial distress, though to a lesser degree. Commercial activity has improved in our market area, but has not returned to the levels existing prior to the outbreak of the COVID-19 pandemic, which may result in our customers’ inability to meet their loan obligations to us. In addition, the economic pressures and uncertainties related to the COVID-19 pandemic, including the emergence and spread of variants, have resulted in changes in consumer spending behaviors, which may negatively impact the demand for loans and other services we offer. Labor shortages and supply chain interruptions continue to present obstacles to economic recovery and have contributed to inflationary conditions. These conditions have and are expected to continue to result in overall economic and financial market instability and affect businesses’ profitability and individuals’ purchasing power, all of which could also result in our customers’ inability to make scheduled loan payments. Our borrowing base includes customers in industries such as hotels, restaurants, retail and commercial real estate, which have been significantly impacted by the COVID-19 pandemic. We recognize that these industries may take longer to recover as consumers may be hesitant to return to full social interaction or may change their spending habits on a more permanent basis as a result of the COVID-19 pandemic. We continue to monitor these customers closely.

We have taken deliberate actions to meet our goal of ensuring that we have the balance sheet strength to serve our clients and communities, including by seeking to increase our liquidity and manage our assets and liabilities in order to maintain a strong capital position; however, future economic conditions are subject to significant uncertainty. Uncertainties associated with the COVID-19 pandemic include the duration of the COVID-19 outbreak and any related variants, the effectiveness and acceptance of COVID-19 vaccines, the impact to our customers, employees and vendors and the impact to the economy as a whole. COVID-19 had a significant adverse impact on our business, financial position and operating results and while uncertainty still exists, we believe we are well-positioned to operate effectively through the present economic environment.

Our branch locations are currently open and operating during normal business hours. We continue to take additional precautions within our branch locations, including enhanced cleaning procedures, to ensure the safety of our customers and our employees.

​

35

Table of Contents

CRITICAL ACCOUNTING POLICIES

We follow accounting and reporting policies that conform, in all material respects, to accounting principles generally accepted in the United States and to general practices within the financial services industry. The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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.

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. As discussed in Note 1 - Organization and significant accounting policies, our policies related to allowances for credit losses changed on January 1, 2020 in connection with the adoption of a new accounting standard update as codified in Accounting Standards Codification (“ASC”) Topic 326 (“ASC 326”) Financial Instruments - Credit Losses. In the case of loans, the allowance for credit losses is a contra-asset valuation account, calculated in accordance with ASC 326, that is deducted from the amortized cost basis of loans to present the net amount expected to be collected.

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. Relevant available information includes historical credit loss experience, current conditions and reasonable and supportable forecasts. 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. 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 classification of assets. See the section captioned “Allowance for Credit Losses” elsewhere in this discussion as well as Note 1 – Organization and significant accounting policies and Note 3 - Loans in the notes to consolidated financial statements included in Item 8. Financial Statements and Supplementary Data elsewhere in this report for further details of the risk factors considered by management in estimating the necessary level of the allowance for credit losses.

OVERVIEW

On March 31, 2021, Southern National Bancorp of Virginia, Inc. (“Southern National”) changed its name to Primis Financial Corp. (“Primis,” “we,” “us,” “our” or the “Company”) and Sonabank changed its name to Primis Bank. Primis 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, 2021, Primis Bank had forty full-service branches in Virginia and Maryland and provides services to customers through certain online and mobile applications. Thirty-five full-service retail branches are in Virginia (Ashland, Burgess, Callao, Central Garage, Charlottesville, Chester, Clifton Forge, Colonial Heights, Courtland, Fairfax, Front Royal, Gloucester, Gloucester Point, Hampton, Hartfield, Heathsville, Kilmarnock, Leesburg, McLean, Mechanicsville (2), Middleburg, Midlothian, New Market, Newport News, Quinton, Reston, Richmond, Surry, Tappahannock (2), Urbanna, Warrenton, Waverly, and Williamsburg) and five full-service retail branches are in Maryland (Bethesda,

36

Table of Contents

Brandywine, Owings, Rockville, and Upper Marlboro). The Company has administrative offices in Warrenton and Glen Allen, Virginia.

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.

​

FINANCIAL HIGHLIGHTS

●Net income for the year ended December 31, 2021 totaled $31.2 million, or $1.28 per basic and $1.27 per diluted share, compared to $23.3 million, or $0.96 per basic and diluted share for the year ended December 31, 2020.
●Total assets as of December 31, 2021 were $3.40 billion, an increase of 10.2% compared to December 31, 2020.
●Total loans, excluding Paycheck Protection Program (PPP) balances as of December 31, 2021, were $2.26 billion, an increase of $137.2 million, or 6.2%, from December 31, 2020.
●Total deposits were $2.76 billion at December 31, 2021, an increase of 13.6% compared to December 31, 2020.
●Non-time deposits increased to $2.40 billion at December 31, 2021, an increase of $460.0 million over the past year.
●Non-interest bearing demand deposits increased to $530.3 million or 19.2% of total deposits while time deposits decreased to 13.0% of total deposits at December 31, 2021.
●Cost of deposits declined to 0.48% for the year ended December 31, 2021 compared to 0.92% for the year ended December 31, 2020.
●Return on average assets from continuing operations totaled 0.93% for the year ended December 31, 2021, compared to 0.78% for the year ended December 31, 2020.
●Recovery of credit losses were $5.8 million for the year ended December 31, 2021 compared to provision for credit losses of $19.5 million for the year ended December 31, 2020.
●Allowance for credit losses to total loans (excluding PPP balances) were 1.29% at December 31, 2021 compared to 1.71% at December 31, 2020.
●Book value per share of $16.76 at December 31, 2021, representing an increase of $0.73 from December 31, 2020  after $0.40 in dividends paid over the last twelve months.

​

​

RESULTS OF OPERATIONS

Net Income

Net income from continuing operations for the year ended December 31, 2021 was $31.0 million, or $1.27 basic and $1.26 diluted earnings per share, compared to $14.9 million, or $0.61 basic and diluted earnings per share, for the year ended December 31, 2020. The 108.4% increase in the net income during the year ended December 31, 2021 compared to the year ended December 31, 2020 was primarily driven by recoveries for credit losses in 2021 compared to provision for credit losses in 2020 as loans on deferral and the economic impact of COVID-19 declined dramatically in 2021. The increase in net income was offset by a decrease in recoveries related to acquired charged-off loans and investment securities in the current year.

Net income from discontinued operation for the year ended December 31, 2021 was $0.23 million, or $0.01 basic and diluted earnings per share, compared to net income from discontinued operation of $8.4 million, or $0.35 basic and diluted earnings per share, for the year ended December 31, 2020. The decline in net income from discontinued operation is

37

Table of Contents

primarily driven by the pre-tax charge of approximately $2.9 million related to the closing of the STM transaction in 2021, as discussed in Note 1 - Organization and significant accounting policies.

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.

Net interest income was $94.2 million for the year ended December 31, 2021, compared to $91.6 million for the year ended December 31, 2020. Primis’ net interest margin for the year ended December 31, 2021 was 3.01%, compared to 3.35% for the year ended December 31, 2020. Net interest margin was impacted heavily by the origination of PPP loans. Net PPP fee income recognized was $11.7 million for the year ended December 31, 2021 versus $6.2 million for the year ended December 31, 2020. Net interest margin excluding the effects of PPP loans was 2.79% for the year ended December 31, 2021, comparted to 3.33% for the year ended December 31, 2020. Net interest margin, excluding the effects of PPP loans, continues to be negatively impacted by high cash balances at the Bank. Total income on interest-earning assets was $113.2 million and $117.8 million for the years ended December 31, 2021 and 2020, respectively. The yield on average interest-earning assets was 3.62% and 4.31% for the years ended December 31, 2021 and 2020, respectively. The decrease was primarily driven by market conditions. The cost of average interest-bearing deposits decreased 53 basis points to 0.60% for the year ended December 31, 2021, compared to 1.13% cost on average interest-bearing deposits for the year ended December 31, 2020. Interest and fees on loans totaled $107.0 million and $111.6 million for the years ended December 31, 2021 and 2020, respectively. The accretion of the discount on loans acquired in the acquisitions contributed $2.0 million to net interest income during the year ended December 31, 2021, compared to $4.3 million during the year ended December 31, 2020. The decrease in accretion was due to slowdown in the volume of acquired loan prepayments and payoffs. Average loans during the year ended December 31, 2021 were $2.34 billion compared to $2.40 billion during the year ended December 31, 2020.

​

38

Table of Contents

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

 

​

​

Analysis For the Year Ended

 

​

​

December 31, 2021

​

December 31, 2020

​

December 31, 2019

 

​

​

​

​

​

Interest

​

​

​

​

​

​

Interest

​

​

​

​

​

Interest

​

​

 

​

​

Average

​

Income/

​

Yield/

​

Average

​

Income/

​

Yield/

​

Average

​

Income/

​

Yield/

 

​

    

Balance

    

Expense

    

Rate

    

Balance

    

Expense

    

Rate

    

Balance

    

Expense

    

Rate

 

​

​

(Dollar amounts in thousands)

 

Assets

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

 

Interest-earning assets:

​

​

  

​

​

  

​

  

​

​

  

​

​

  

​

  

​

​

  

​

​

  

​

  

 

Loans, net of deferred fees (1) (2)

​

$

2,342,802

​

$

107,021

​

4.57

%  

$

2,400,896

​

$

111,647

​

4.65

%  

$

2,159,681

​

$

112,181

​

5.19

%

Investment securities

​

​

224,505

​

​

4,440

​

1.98

%  

​

217,932

​

​

4,730

​

2.17

%  

​

241,800

​

​

6,224

​

2.57

%

Other earning assets

​

​

560,994

​

​

1,782

​

0.32

%  

​

114,275

​

​

1,402

​

1.23

%  

​

66,582

​

​

2,119

​

3.18

%

Total earning assets

​

​

3,128,301

​

​

113,243

​

3.62

%  

​

2,733,103

​

​

117,779

​

4.31

%  

​

2,468,063

​

​

120,524

​

4.88

%

Allowance for credit losses

​

​

(33,088)

​

​

​

​

​

​

​

(20,638)

​

​

​

​

​

​

​

(11,852)

​

​

  

​

  

 

Investments in mortgage company - held for sale

​

​

11,974

​

​

​

​

​

​

​

12,168

​

​

​

​

​

​

​

4,281

​

​

​

​

​

​

Total non-earning assets

​

​

261,791

​

​

​

​

​

​

​

261,505

​

​

​

​

​

​

​

259,983

​

​

  

​

  

 

Total assets

​

$

3,368,978

​

​

​

​

​

​

$

2,986,138

​

​

​

​

​

​

$

2,720,475

​

​

  

​

  

 

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

  

 

Liabilities and stockholders' equity

​

​

  

​

​

  

​

​

​

​

  

​

​

  

​

​

​

​

  

​

​

  

​

​

 

Interest-bearing liabilities:

​

​

  

​

​

  

​

​

​

​

  

​

​

  

​

​

​

​

  

​

​

  

​

  

 

NOW and other demand accounts

​

$

860,482

​

$

4,010

​

0.47

%  

$

481,470

​

$

3,505

​

0.73

%  

$

360,254

​

$

2,989

​

0.83

%

Money market accounts

​

​

726,059

​

​

4,246

​

0.58

%  

​

508,260

​

​

4,188

​

0.82

%  

​

439,097

​

​

7,745

​

1.76

%

Savings accounts

​

​

208,202

​

​

618

​

0.30

%  

​

167,567

​

​

490

​

0.29

%  

​

145,855

​

​

461

​

0.32

%

Time deposits

​

​

405,670

​

​

4,238

​

1.04

%  

​

645,123

​

​

12,149

​

1.88

%  

​

868,420

​

​

19,407

​

2.23

%

Total interest-bearing deposits

​

​

2,200,413

​

​

13,112

​

0.60

%  

​

1,802,420

​

​

20,332

​

1.13

%  

​

1,813,626

​

​

30,602

​

1.69

%

Borrowings

​

​

218,955

​

​

5,928

​

2.71

%  

​

358,087

​

​

5,807

​

1.62

%  

​

188,647

​

​

6,322

​

3.35

%

Total interest-bearing liabilities

​

​

2,419,368

​

​

19,040

​

0.79

%  

​

2,160,507

​

​

26,139

​

1.21

%  

​

2,002,273

​

​

36,924

​

1.84

%

Noninterest-bearing liabilities:

​

​

  

​

​

  

​

​

​

​

  

​

​

  

​

​

​

​

  

​

​

  

​

​

 

Demand deposits

​

​

522,683

​

​

​

​

​

​

​

416,249

​

​

​

​

​

​

​

332,924

​

​

  

​

  

 

Other liabilities

​

​

22,358

​

​

​

​

​

​

​

24,693

​

​

​

​

​

​

​

22,115

​

​

  

​

  

 

Total liabilities

​

​

2,964,409

​

​

​

​

​

​

​

2,601,449

​

​

​

​

​

​

​

2,357,312

​

​

  

​

  

 

Stockholders' equity

​

​

404,569

​

​

​

​

​

​

​

384,689

​

​

​

​

​

​

​

363,163

​

​

  

​

  

 

Total liabilities and stockholders' equity

​

$

3,368,978

​

​

​

​

​

​

$

2,986,138

​

​

​

​

​

​

$

2,720,475

​

​

  

​

  

 

Net interest income

​

​

​

​

$

94,203

​

​

​

​

​

​

$

91,640

​

​

​

​

  

​

$

83,600

​

​

 

Interest rate spread

​

​

​

​

​

​

​

2.97

%  

​

​

​

​

​

​

3.10

%  

​

  

​

​

  

​

3.04

%

Net interest margin

​

​

​

​

​

​

​

3.01

%  

​

​

​

​

​

​

3.35

%  

​

  

​

​

  

​

3.39

%

(1)Includes loan fees in both interest income and the calculation of the yield on loans.
(2)Calculations include non-accruing loans in average loan amounts outstanding.

​

39

Table of Contents

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

​

Year Ended

​

​

December 31, 2021 vs. 2020

​

December 31, 2020 vs. 2019

​

​

Increase (Decrease)

​

Increase (Decrease)

​

​

Due to Change in:

​

Due to Change in:

​

​

​

​

​

​

​

​

Net

​

​

​

​

​

​

​

Net

​

    

Volume

    

Rate

    

Change

    

Volume

    

Rate

    

Change

​

​

(in thousands)

Interest-earning assets:

 

​

  

 

​

  

 

​

  

 

​

  

 

​

  

 

​

  

Loans, net of deferred fees

​

$

(2,725)

​

$

(1,901)

​

$

(4,626)

​

$

(6,602)

​

$

6,068

​

$

(534)

Investment securities

​

 

105

​

 

(395)

​

 

(290)

​

 

(468)

​

 

(1,026)

​

 

(1,494)

Other earning assets

​

 

471

​

 

(91)

​

 

380

​

 

(4,950)

​

 

4,233

​

 

(717)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Total interest-earning assets

​

 

(2,149)

​

 

(2,387)

​

 

(4,536)

​

 

(12,020)

​

 

9,275

​

 

(2,745)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Interest-bearing liabilities:

​

 

​

​

 

  

​

 

  

​

 

  

​

 

  

​

 

  

NOW and other demand accounts

​

 

943

​

​

(438)

​

 

505

​

 

808

​

 

(293)

​

 

515

Money market accounts

​

 

152

​

​

(94)

​

 

58

​

 

1,493

​

 

(5,049)

​

 

(3,556)

Savings accounts

​

 

111

​

​

17

​

 

128

​

 

62

​

 

(33)

​

 

29

Time deposits

​

 

(3,591)

​

​

(4,320)

​

 

(7,911)

​

 

(4,515)

​

 

(2,743)

​

 

(7,258)

Total interest-bearing deposits

​

 

(2,385)

​

 

(4,835)

​

 

(7,220)

​

 

(2,152)

​

 

(8,118)

​

 

(10,270)

Borrowings

​

 

(193)

​

​

314

​

 

121

​

 

(1,217)

​

 

702

​

 

(515)

Total interest-bearing liabilities

​

 

(2,578)

​

 

(4,521)

​

 

(7,099)

​

 

(3,369)

​

 

(7,416)

​

 

(10,785)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Change in net interest income

​

$

429

​

$

2,134

​

$

2,563

​

$

(8,651)

​

$

16,691

​

$

8,040

​

​

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 to an appropriate level for inherent probable losses in the loan portfolio based on an evaluation of the loan portfolio, current economic conditions, changes in the nature and volume of lending, historical loan experience and other known internal and external factors affecting loan collectability. 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.

In 2020, the Company elected to defer the adoption of ASC Topic 326, Financial Instruments-Credit Losses, under the CARES Act. At December 31, 2020, ASC Topic 326 became effective for the Company and the Company recorded a gross cumulative effect adjustment of $8.3 million as of January 1, 2020. Prior periods, including December 31, 2019 and interim periods ending September 30, 2020 and prior, were not restated to reflect the adoption of ASC Topic 326. The recovery for credit losses for the year ended December 31, 2021 was $5.8 million, primarily as a result of an improving economic outlook. The provision for credit losses for the year ended December 31, 2020 was $19.5 million and the provision for loan losses for the year ended December 31, 2019 was $0.35 million. We had charge-offs totaling $2.5 million during 2021, $2.3 million during 2020 and $3.3 million during 2019. There were recoveries totaling $1.1 million during 2021, $0.69 million during 2020 and $0.91 million during 2019.

The Financial Condition Section of Management’s Discussion and Analysis provides information on our loan portfolio, past due loans, nonperforming assets and the allowance for credit losses.

40

Table of Contents

Noninterest Income

The following tables present the major categories of noninterest income for the years ended December 31, 2021 and 2020 (in thousands):

​

​

​

​

​

​

​

​

​

​

​

​

For the Year Ended

​

​

December 31, 

(dollars in thousands)

    

2021

    

2020

    

Change

Account maintenance and deposit service fees

​

$

7,309

​

$

6,520

 

$

789

Income from bank-owned life insurance

​

 

1,687

​

 

1,559

 

​

128

Gain on debt extinguishment

​

 

573

​

 

—

 

​

573

Loss on sales of investment securities

​

 

—

​

 

(620)

 

​

620

Recoveries related to acquired charged-off loans and investment securities

​

​

836

​

​

6,500

​

​

(5,664)

Other

​

 

730

​

 

703

 

​

27

Total noninterest income

​

$

11,135

​

$

14,662

 

$

(3,527)

​

​

​

​

​

​

​

​

​

​

​

​

Noninterest income decreased 24.1% to $11.1 million for the year ended December 31, 2021, compared to $14.7 million for the year ended December 31, 2020. Noninterest income no longer includes equity in earnings (loss) related to Southern Trust Mortgage which is now included in discontinued operation. The decrease in noninterest income was driven by a $5.7 million decrease in recoveries related to acquired charged-off loans and investment securities, primarily attributable to a recovery related to a previously charged-off acquired loan of approximately $2.0 million during 2020. This decrease was partially offset by a $0.79 million increase in account maintenance and deposit service fees primarily in account service charges and non-sufficient funds fee, $0.62 million loss on sales of investments securities in the prior year and $0.57 million gain on debt extinguishment in 2021.

Noninterest Expense

The following tables present the major categories of noninterest expense for the years ended December 31, 2021 and 2020 (in thousands):

​

​

​

​

​

​

​

​

​

​

​

​

For the Year Ended

​

​

December 31, 

(dollars in thousands)

    

2021

    

2020

    

Change

Salaries and benefits

​

$

36,741

​

$

36,675

​

$

66

Occupancy expenses

​

 

5,956

​

 

6,142

​

 

(186)

Furniture and equipment expenses

​

 

3,622

​

 

2,725

​

 

897

Amortization of core deposit intangible

​

 

1,364

​

 

1,364

​

 

—

Virginia franchise tax expense

​

 

2,899

​

 

2,457

​

 

442

Data processing expense

​

 

3,850

​

 

3,178

​

 

672

Telephone and communication expense

​

 

1,790

​

 

1,497

​

 

293

Net (gain) loss on other real estate owned

​

 

87

​

 

960

​

 

(873)

Professional fees

​

 

5,467

​

 

4,726

​

 

741

Other operating expenses

​

 

9,624

​

 

8,016

​

 

1,608

Total noninterest expenses

​

$

71,400

​

$

67,740

​

$

3,660

​

​

​

​

​

​

​

​

​

​

​

Noninterest expenses were $71.4 million during the year ended December 31, 2021, compared to $67.7 million during the year ended December 31, 2020. The 5.4% increase in noninterest expenses was primarily due to an increase in other operating expenses in 2021. Other operating expenses increased in 2021 compared to 2020, largely driven by a $0.24 million increase in the reserve for unfunded commitments and a $0.49 million increase in marketing and advertising expenses related to general promotional activities as well as marketing related to the new V1BE service. Occupancy and furniture and equipment expenses increased $0.71 million during the year ended December 31, 2021 compared to year ended December 31, 2020. Professional fees increased $0.74 million in 2021 compared to 2020 due to increased consulting fees and legal expenses largely related to the STM transaction and from increased recruiter fees for management and Life Premium hires. The increase in noninterest expense during the year ended December 31, 2021 was also attributable to a

41

Table of Contents

$0.67 million increase in data processing expense. Virginia franchise tax expense increased $0.44 million in 2021 compared to 2020.

​

FINANCIAL CONDITION

Balance Sheet Overview

Total assets were $3.40 billion and $3.09 billion as of December 31, 2021 and 2020, respectively. Total loans decreased 4.1%, from $2.44 billion at December 31, 2020 to $2.34 billion at December 31, 2021. Excluding PPP loans, loans outstanding increased $137.2 million, or 6.5%, since December 31, 2020. Total deposits were $2.76 billion and $2.43 billion at December 31, 2021 and 2020, respectively, and total equity was $411.9 million and $390.6 million at December 31, 2021 and 2020, respectively.

Loans

Total loans were $2.34 billion and $2.44 billion at December 31, 2021 and 2020, respectively. PPP loan originations totaled $77.0 million and $319.4 million at December 31, 2021 and 2020, respectively. Excluding PPP loans, loans outstanding increased $137.2 million, or 6.5%, since December 31, 2020.

​

At December 31, 2021, the Company had no loans on deferral compared to $122.0 million of loans on deferral, or 5.75% of total loans excluding PPP loans, at December 31, 2020.

As of December 31, 2021 and 2020, substantially all 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 operations.

​

42

Table of Contents

The following table summarizes the composition of our loans, net of unearned income, at December 31 for the years indicated (in thousands):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

2021

​

2020

​

​

    

Amount

    

Percent

    

Amount

    

Percent

    

Loans secured by real estate:

 

​

  

 

  

 

​

  

 

  

 

Commercial real estate - owner occupied

​

$

387,703

 

16.6

%  

$

434,816

​

17.8

%  

Commercial real estate - non-owner occupied

​

 

588,000

 

25.1

%  

 

599,578

​

24.6

%  

Secured by farmland

​

 

8,612

 

0.4

%  

 

11,687

​

0.5

%  

Construction and land development

​

 

121,444

 

5.2

%  

 

103,401

​

4.2

%  

Residential 1-4 family

​

 

547,560

 

23.4

%  

 

557,953

​

22.9

%  

Multi- family residential

​

 

164,071

 

7.0

%  

 

107,130

​

4.4

%  

Home equity lines of credit

​

 

73,846

 

3.2

%  

 

91,748

​

3.8

%  

Total real estate loans

​

 

1,891,236

 

80.8

%  

 

1,906,313

 

78.1

%  

​

​

​

​

​

​

​

​

​

​

​

​

Commercial loans

​

 

301,980

 

12.9

%  

​

187,797

​

7.7

%  

Paycheck protection program loans

​

​

77,319

​

3.3

%  

​

314,982

​

12.9

%  

Consumer loans

​

 

60,996

 

2.6

%  

 

22,496

​

0.9

%  

Total Non-PCD loans

​

 

2,331,531

 

99.6

%  

 

2,431,588

 

99.6

%  

PCD loans

​

​

8,455

​

0.4

%  

​

8,908

​

0.4

%  

Total loans

​

$

2,339,986

​

100.0

%  

$

2,440,496

​

100.0

%  

​

​

 

​

 

​

​

 

​

 

  

​

​

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, 2021 (in thousands):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

After 1 Year

​

After 5 Years

​

​

​

​

​

​

​

​

 

​

​

​

​

​

Through 5 Years

​

Through 15 Years

​

After 15 Years

​

​

 

​

​

One Year

​

Fixed

​

Floating

​

Fixed

​

Floating

​

Fixed

​

Floating

​

​

 

​

    

or Less

    

Rate

    

Rate

    

Rate

    

Rate

    

Rate

    

Rate

    

Total

Loans secured by real estate:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commercial real estate - owner occupied

​

$

38,879

​

$

90,110

​

$

11,568

​

$

61,737

​

$

98,359

​

$

1,501

​

$

85,549

​

$

387,703

Commercial real estate - non-owner occupied

​

​

24,088

​

​

226,431

​

​

6,128

​

​

47,630

​

​

42,809

​

​

—

​

​

240,914

​

​

588,000

Secured by farmland

​

​

2,890

​

​

1,835

​

​

—

​

​

717

​

​

1,622

​

​

—

​

​

1,548

​

​

8,612

Construction and land development

​

​

58,671

​

​

33,904

​

​

20,908

​

​

40

​

​

4,220

​

​

704

​

​

2,997

​

​

121,444

Residential 1-4 family

​

​

19,566

​

​

48,157

​

​

5,957

​

​

24,947

​

​

52,967

​

​

81,804

​

​

314,162

​

​

547,560

Multi- family residential

​

​

17,739

​

​

58,715

​

​

16,441

​

​

7,347

​

​

19,395

​

​

—

​

​

44,434

​

​

164,071

Home equity lines of credit

​

​

9,225

​

​

3,881

​

​

16,632

​

​

—

​

​

11,022

​

​

—

​

​

33,086

​

​

73,846

Total real estate loans

​

​

171,058

​

​

463,033

​

​

77,634

​

​

142,418

​

​

230,394

​

​

84,009

​

​

722,690

​

​

1,891,236

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commercial loans

​

​

175,438

​

 

32,145

​

 

13,156

​

 

45,762

​

 

29,290

​

 

2,217

​

 

3,972

​

​

301,980

Paycheck protection program loans

​

​

13,742

​

​

63,577

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

77,319

Consumer loans

​

​

9,592

​

​

18,709

​

​

9,393

​

​

19,478

​

​

1,471

​

​

2,347

​

​

6

​

​

60,996

Total Non-PCD loans

​

​

369,830

​

​

577,464

​

​

100,183

​

​

207,658

​

​

261,155

​

​

88,573

​

​

726,668

​

​

2,331,531

PCD loans

​

 

5,895

​

​

381

​

​

—

​

​

—

​

​

1,617

​

​

414

​

​

148

​

 

8,455

Total loans

​

$

375,725

​

$

577,845

​

$

100,183

​

$

207,658

​

$

262,772

​

$

88,987

​

$

726,816

​

$

2,339,986

​

Asset Quality; Past Due Loans and Nonperforming Assets

Asset quality remained solid during 2021. The outbreak of COVID-19 and resulting economic instability has had and will likely continue to have an impact on our asset quality. While COVID-19 cases are no longer at their peak and vaccinations have stemmed the outbreak, the residual effect of COVID-19 and the different variants continue to cause economic instability and uncertainty in evaluating the impact on our asset quality. We will generally place a loan on nonaccrual status when it becomes 90 days past due. Loans will also be placed on nonaccrual status in cases where we are uncertain whether the borrower can satisfy the contractual terms of the loan agreement. Cash payments received while a

43

Table of Contents

loan is categorized as nonaccrual will be recorded as a reduction of principal as long as doubt exists as to future collections. We defer COVID-impacted loans to the end of the deferral date and track delinquency from the end of that new deferral date. During the third and fourth quarters of 2020 and 2021, the Company saw deferred loans return to traditional loan terms.  

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 loss and delinquency experience on our loan portfolio has been limited by a number of factors, including our underwriting standards and the relatively short period of time since the loans were originated. 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 in our market area, including as a result of the impact of COVID-19.

The following table presents a comparison of nonperforming assets as of December 31, for the years indicated (in thousands):

​

​

​

​

​

​

​

​

​

    

December 31, 

​

December 31, 

​

​

​

2021

    

2020

    

Nonaccrual loans

​

$

15,029

​

$

14,462

​

Loans past due 90 days and accruing interest

​

 

283

​

 

—

​

Total nonperforming loans

​

 

15,312

​

 

14,462

​

Other real estate owned

​

 

1,163

​

 

3,078

​

Total nonperforming assets

​

$

16,475

​

$

17,540

​

​

​

​

​

​

​

​

​

Troubled debt restructurings

​

$

3,401

​

$

987

​

SBA guaranteed amounts included in nonperforming loans

​

$

1,388

​

$

3,076

​

​

​

​

​

​

​

​

​

Allowance for credit losses to total loans

​

 

1.24

%  

 

1.52

%  

Allowance for credit losses to nonaccrual loans

​

 

193.66

%  

 

251.32

%  

Allowance for credit losses to nonperforming loans

​

 

190.09

%  

 

251.32

%  

Nonaccrual to total loans

​

 

0.64

%  

 

0.59

%  

Nonperforming assets excluding SBA guaranteed loans to total assets

​

 

0.44

%  

 

0.47

%  

​

Not included in the table above are $122.0 million of loans that were subject to COVID-related deferrals at December 31, 2020.

OREO at December 31, 2021 was $1.2 million, compared to $3.1 million at December 31, 2020. The decrease was primarily driven by sale of properties and write-downs on OREO during 2021.

Nonaccrual loans were $15.0 million (excluding $1.1 million of loans fully covered by SBA guarantees) at December 31, 2021, compared to $14.5 million (excluding $3.1 million of loans fully covered by SBA guarantees) at December 31, 2020, an increase of 3.9%. The ratio of nonperforming assets (excluding the SBA guaranteed loans) to total assets was 0.44% and 0.47% at December 31, 2021 and 2020, respectively.

At December 31, 2021, our total substandard loans totaled $40.4 million. Included in the total substandard loans were SBA guarantees of $1.0 million. Special mention loans totaled $31.1 million at December 31, 2021.

As of December 31, 2021, there were ten TDR loans in the amount of $3.4 million. There have been no defaults of TDRs modified during the past twelve months.

44

Table of Contents

We identify potential problem loans based on loan portfolio credit quality. We define our potential problem loans as our substandard loans less total nonperforming loans noted above. At December 31, 2021, our potential problem loans totaled $25.1 million.

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 $2.5 million. We have three specialty Executive Credit Officers with extensive industry experience in mortgage, medical practice and life premium credit financing with authority up to $6.0 million and 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 President/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 makes 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 in the normal course of business. 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.

Loan Review

Our loan review program is administrated by the Chief Risk Officer who reports the results directly to the Audit Committee of the Board of Directors. In 2021, internal loan review performed loan reviews on loans and commitments totaling 28.3% of this loan portfolio outstanding as of December 31, 2020. An independent third party consultant performed loan reviews on 74.6% of this portfolio. In 2021, excluding 5 loans totaling $66.1 million reviewed by both internal and external loan review, loan reviews totaling $1.21 billion were performed representing 97.6% of the specified portfolio of loans.

Primis Bank’s 2022 Loan Review Program was approved by the Audit Committee on January 27, 2022. The Program’s goal is to have an overall review penetration rate of at least 50% of the Commercial Loan Portfolio outstanding as of December 31, 2021. The overall lower penetration rate in 2022 as compared to previous years was intended to allow for the Program to incorporate a robust risk-based approach review of the Bank’s Loan Portfolio that will include process, 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 Loan Review Program will utilize and incorporate both internal and 3rd party external resources in a complementary fashion to achieve the objectives of the Program.

45

Table of Contents

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, 

​

​

2021

​

2020

​

​

​

​

​

​

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

​

$

4,562

​

16.6

%  

$

6,699

​

17.8

%  

Commercial real estate - non-owner occupied

​

​

9,028

​

25.1

%  

​

11,426

​

24.6

%  

Secured by farmland

​

​

56

​

0.4

%  

​

104

​

0.5

%  

Construction and land development

​

​

998

​

5.2

%  

​

1,815

​

4.2

%  

Residential 1-4 family

​

​

3,588

​

23.4

%  

​

9,579

​

22.9

%  

Multi- family residential

​

​

3,280

​

7.0

%  

​

1,412

​

4.4

%  

Home equity lines of credit

​

​

437

​

3.2

%  

​

901

​

3.8

%  

Commercial loans

​

​

4,088

​

12.9

%  

​

1,498

​

7.7

%  

Paycheck Protection Program loans

​

​

—

​

3.3

%  

​

—

​

12.9

%  

Consumer loans

​

​

787

​

2.6

%  

​

517

​

0.9

%  

PCD loans

​

​

2,281

​

0.4

%  

​

2,394

​

0.4

%  

Total

​

​

29,105

​

100.0

%  

​

36,345

​

100.0

%  

Allowance for acquired loans

​

​

—

​

​

​

​

—

​

​

​

Total allocated allowance

​

​

29,105

​

​

​

​

36,345

​

​

​

Unallocated allowance

​

​

—

​

  

​

​

—

​

  

​

Total

​

$

29,105

​

  

​

$

36,345

​

  

​

​

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

​

​

​

​

​

​

​

​

​

​

For the Years Ended December 31, 

​

    

2021

    

2020

    

Balance, beginning of period

​

$

36,345

​

$

10,261

​

Provision charged to operations:

​

​

​

​

​

​

​

Adoption of ASC 326

​

​

—

​

​

8,292

​

Total provisions (recovery)

​

​

(5,801)

​

​

19,450

​

Recoveries credited to allowance:

​

 

​

​

 

​

​

Commercial real estate - owner occupied

​

​

—

​

​

5

​

Commercial real estate - non-owner occupied

​

​

—

​

​

135

​

Residential 1-4 family

​

 

11

​

​

362

​

Home equity lines of credit

​

 

2

​

​

56

​

Commercial loans

​

​

1,005

​

​

94

​

Consumer loans

​

​

39

​

​

33

​

Total recoveries

​

 

1,057

​

 

685

​

Loans charged off:

​

 

  

​

 

  

​

Commercial real estate - owner occupied

​

​

176

​

​

52

​

Residential 1-4 family

​

 

469

​

​

308

​

Home equity lines of credit

​

 

—

​

​

125

​

Commercial loans

​

​

1,706

​

​

1,734

​

Consumer loans

​

​

145

​

​

124

​

Total loans charged-off

​

 

2,496

​

 

2,343

​

Net charge-offs

​

 

1,439

​

 

1,658

​

Balance, end of period

​

$

29,105

​

$

36,345

​

​

​

​

​

​

​

​

​

Net charge-offs to average loans, net of unearned income

​

 

0.06

%  

 

0.07

%  

​

We believe that the allowance for credit losses at December 31, 2021 is sufficient to absorb probable incurred credit losses in our loan portfolio based on our assessment of all known factors affecting the collectability of our loan portfolio.

46

Table of Contents

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 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.

Investment Securities

Our investment securities portfolio provides us with required liquidity and investment securities to pledge as collateral 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:

●Government National Mortgage Association (“GNMA”), Federal National Mortgage Association (“FNMA”) and the Federal Home Loan Mortgage Corporation (“FHLMC”) residential mortgage-backed securities (“MBS”) and commercial mortgage backed securities (“CMBS”)
●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 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.

Primis’ 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.

47

Table of Contents

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. Investment securities totaling $22.9 million were in the held-to-maturity portfolio at December 31, 2021, compared to $40.7 million at December 31, 2020. Investment securities totaling $271.3 million were in the available-for-sale portfolio at December 31, 2021, compared to $153.2 million at December 31, 2020. During 2021 and 2020, $160.5 million and $38.9 million, respectively, of available-for-sale investment securities were purchased. No held-to-maturity investments were purchased in 2021. During 2020, $15.2 million of held-to-maturity investment securities were purchased. No investment securities were sold during 2021. During 2020, $1.9 million and $1.7 million, respectively, of available-for-sale investment securities and held-to-maturity investment securities were sold. Realized losses on sales of investment securities of $0.62 million were recorded for the year ended December 31, 2020.

Investment securities in our portfolio as of December 31, 2021 were as follows:

●agency commercial mortgage-backed securities in the amount of $136.2 million;
●corporate bonds in the amount of $13.7 million;
●collateralized loan obligations of $5.0 million;
●residential government-sponsored collateralized mortgage obligations in the amount of $20.3 million;
●callable agency securities in the amount of $22.5 million;
●commercial mortgage-backed securities in the amount of $52.7 million;
●SBA loan pool securities in the amount of $8.8 million; and
●municipal bonds in the amount of $35.0 million (fair value of $31.2 million) with a taxable equivalent yield of 2.68%

For additional information regarding investment securities refer to “Item 8. Financial Statements and Supplementary Data, Note 2-Investment Securities.”

48

Table of Contents

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, 

​

    

2021

    

2020

Available-for-sale investment securities:

 

​

  

 

​

  

Residential government-sponsored mortgage-backed securities

​

$

122,610

​

$

37,060

Obligations of states and political subdivisions

​

 

31,231

​

 

24,042

Corporate securities

​

 

13,685

​

 

15,079

Collateralized loan obligations

​

 

5,010

​

 

—

Residential government-sponsored collateralized mortgage obligations

​

 

19,807

​

 

29,416

Government-sponsored agency securities

​

 

17,488

​

 

6,075

Agency commercial mortgage-backed securities

​

 

52,667

​

 

30,190

SBA pool securities

​

 

8,834

​

 

11,371

Total

​

$

271,332

​

$

153,233

​

​

​

​

​

​

​

Held-to-maturity investment securities:

​

 

  

​

 

  

Residential government-sponsored mortgage-backed securities

​

$

13,616

​

$

25,037

Obligations of states and political subdivisions

​

 

3,805

​

 

9,594

Trust preferred securities

​

 

—

​

 

—

Residential government-sponsored collateralized mortgage obligations

​

 

519

​

 

1,090

Government-sponsored agency securities

​

 

5,000

​

 

5,000

Total

​

$

22,940

​

$

40,721

​

​

49

Table of Contents

The following table sets forth the amortized cost, fair value, and weighted average yield of our investment securities by contractual maturity at December 31, 2021. 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 less than one year

​

$

787

​

$

789

​

3.18

%

Due after one year through five years

​

​

2,314

​

​

2,415

 

2.37

%

Due after five years through ten years

​

 

7,960

​

 

8,250

 

2.70

%

Due after ten years

​

 

19,667

​

 

19,777

 

2.03

%

​

​

 

30,728

​

 

31,231

 

2.26

%

Collateralized loan obligations

​

 

  

​

 

  

 

  

​

Due after ten years

​

 

5,026

​

 

5,010

 

1.20

%

​

​

​

​

​

​

​

​

​

​

Corporate securities

​

 

  

​

 

​

 

  

​

Due after five years through ten years

​

​

11,000

​

​

11,560

​

4.67

%

Due after ten years

​

 

2,000

​

 

2,125

 

4.50

%

​

​

​

13,000

​

​

13,685

​

4.64

%

Government-sponsored agency securities

​

 

  

​

 

  

 

  

​

Due after one year through five years

​

 

1,500

​

 

1,532

 

2.00

%

Due after five years through ten years

​

​

6,832

​

​

6,783

​

1.32

%

Due after ten years

​

 

9,339

​

 

9,173

 

1.94

%

​

​

 

17,671

​

 

17,488

 

1.70

%

Residential government-sponsored mortgage-backed securities

​

 

  

​

 

  

 

  

​

Due after one year through five years

​

 

6,189

​

 

6,388

 

2.47

%

Due after five years through ten years

​

 

16,009

​

 

16,009

 

1.37

%

Due after ten years

​

 

100,308

​

 

100,213

 

1.70

%

​

​

 

122,506

​

 

122,610

 

1.71

%

Residential government-sponsored collateralized mortgage obligations

​

 

  

​

 

  

 

  

​

Due after five years through ten years

​

 

5,199

​

 

5,298

 

2.17

%

Due after ten years

​

 

14,472

​

 

14,509

 

1.62

%

​

​

 

19,671

​

 

19,807

 

1.76

%

Agency commercial mortgage-backed securities

​

 

  

​

 

  

 

  

​

Due less than one year

​

​

7,697

​

​

7,792

​

2.12

%

Due after one year through five years

​

 

13,634

​

 

14,024

 

2.34

%

Due after five years through ten years

​

 

23,243

​

 

23,058

 

1.49

%

Due after ten years

​

​

7,878

​

​

7,793

​

1.46

%

​

​

 

52,452

​

 

52,667

 

1.80

%

SBA pool securities

​

 

  

​

 

  

 

  

​

Due after one year through five years

​

​

129

​

​

128

​

2.70

%

Due after five years through ten years

​

 

3,132

​

 

3,159

 

2.39

%

Due after ten years

​

 

5,609

​

 

5,547

 

2.23

%

​

​

 

8,870

​

 

8,834

 

2.30

%

​

​

$

269,924

​

$

271,332

 

1.94

%

​

​

​

​

​

​

​

​

​

​

​

​

Investment Securities Held-to-Maturity

 

​

​

​

​

​

  

​

​

Weighted

 

​

​

Amortized

​

​

​

​

Average

 

​

    

Cost

    

Fair Value

    

Yield

 

Obligations of states and political subdivisions

​

 

  

​

 

  

 

  

​

Due less than one year

​

$

406

​

$

413

​

2.51

%

Due after one year through five years

​

​

1,545

​

​

1,588

 

2.79

%

Due after five years through ten years

​

 

1,518

​

 

1,562

 

2.63

%

Due after ten years

​

 

336

​

 

335

 

6.70

%

​

​

 

3,805

​

 

3,898

 

3.04

%

Government-sponsored agency securities

​

 

  

​

 

  

 

  

​

Due after ten years

​

 

5,000

​

 

5,023

 

3.32

%

​

​

 

5,000

​

 

5,023

 

3.32

%

Residential government-sponsored mortgage-backed securities

​

 

  

​

 

  

 

​

​

Due after five years through ten years

​

 

1,852

​

 

1,916

 

2.25

%

Due after ten years

​

 

11,764

​

 

11,995

 

1.58

%

​

​

 

13,616

​

 

13,911

 

1.67

%

Residential government-sponsored collateralized mortgage obligations

​

 

  

​

 

  

 

  

​

Due after ten years

​

 

519

​

 

532

 

1.69

%

​

​

 

519

​

 

532

 

1.69

%

​

​

$

22,940

​

$

23,364

 

2.26

%

​

50

Table of Contents

Deposits and Other Borrowings

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, 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 13.6% to $2.76 billion at December 31, 2021 from $2.43 billion at December 31, 2020. Noninterest-bearing demand deposits increased from $440.7 million as of December 31, 2021 to $530.3 million as of December 31, 2021. Time deposits decreased from $490.0 million to $360.6 million and savings accounts increased from $183.8 million to $222.9 million over the same period.

The following table sets forth the average balance and average rate paid on each of the deposit categories for the years ended December 31, 2021 and 2020:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

2021

​

2020

​

​

    

Average

    

Average

    

Average

    

Average

    

​

​

Balance

​

Rate

​

Balance

​

Rate

​

​

​

(in thousands)

Noninterest-bearing demand deposits

​

$

522,683

 

  

​

$

416,249

 

  

​

Interest-bearing deposits:

​

 

  

 

  

​

 

  

 

  

​

Savings accounts

​

 

208,202

 

0.30

%  

 

167,567

 

0.29

%  

Money market accounts

​

 

726,059

 

0.58

%  

 

508,260

 

0.82

%  

NOW and other demand accounts

​

 

860,482

 

0.47

%  

 

481,470

 

0.73

%  

Time deposits

​

 

405,670

 

1.04

%  

 

645,123

 

1.88

%  

Total interest-bearing deposits

​

 

2,200,413

 

0.60

%  

 

1,802,420

 

1.13

%  

Total deposits

​

$

2,723,096

 

  

​

$

2,218,669

 

  

​

​

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, 2021 (in thousands):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Within

    

3 to 6

    

6 to 12

    

Over 12

    

 

​

3 Months

​

Months

​

Months

​

Months

​

Total

$

43,726

​

$

55,276

​

$

91,324

​

$

47,618

​

$

237,944

​

We use 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 our FHLB stock and other collateral acceptable to the FHLB. At December 31, 2021 and 2020, total FHLB borrowings were $100.0 million. At December 31, 2021, we had $763.2 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 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, 2021 and 2020 was $10.0 million and $16.1 million, respectively.

51

Table of Contents

Other borrowings consist of the following (in thousands):

​

​

​

​

​

​

​

​

​

​

December 31, 

​

    

2021

    

2020

    

FHLB convertible advances maturing 3/1/2030

​

$

100,000

​

$

100,000

​

Total FHLB advances

​

​

100,000

​

​

100,000

​

Securities sold under agreements to repurchase

​

 

9,962

​

 

16,065

​

Total

​

$

109,962

​

$

116,065

​

​

​

​

​

​

​

​

​

Weighted average interest rate at year end

​

 

3.55

%  

 

3.35

%  

​

​

​

​

​

​

​

​

For the periods ended December 31, 2021 and 2020:

​

 

  

​

 

  

​

Average outstanding balance

​

$

114,580

​

$

118,099

​

Average interest rate during the year

​

 

0.39

%  

 

0.89

%  

​

​

​

​

​

​

​

​

Maximum month-end outstanding balance

​

$

116,445

​

$

273,893

​

​

Junior Subordinated Debt and Senior Subordinated Notes

In 2017, the Company assumed $10.3 million of trust preferred securities that were issued on September 17, 2003 and placed through a trust in a pooled underwriting totaling approximately $650 million. The trust issuer invested the total proceeds from the sale of the trust preferred securities in Floating Rate Junior Subordinated Deferrable Interest Debentures. At December 31, 2021 and 2020, there was $10.3 million outstanding, net of approximately $600 thousand of debt issuance costs. These securities pay cumulative cash distributions quarterly at a variable rate per annum, reset quarterly, equal to the three-month LIBOR plus 2.95%. As of December 31, 2021 and 2020, the interest rate was 3.17% and 3.18%, respectively. The dividends paid to holders of these securities, which are recorded as interest expense, are deductible for income tax purposes.

​

The trust preferred securities may be included in Tier 1 capital for regulatory capital adequacy determination purposes up to 25% of Tier 1 capital after its inclusion. At December 31, 2021, all of the trust preferred securities qualified as Tier 1 capital.

On January 20, 2017, Primis completed the sale of $27.0 million of its fixed-to-floating rate senior Subordinated Notes due 2027. These notes initially beared interest at 5.875% per annum until January 31, 2022; interest is currently payable at an annual floating rate equal to three-month LIBOR plus a spread of 3.95% until maturity or early redemption. At December 31, 2021, all of these notes qualified as Tier 2 capital.

In 2017, the Company assumed a Senior Subordinated Note Purchase Agreement, dated April 22, 2015, entered into with certain institutional accredited investors, pursuant to which $20.0 million in aggregate principal amount of its 6.50% Fixed-to-Floating Rate Subordinated Notes due 2025 was sold to the investors. On February 1, 2021, the Company redeemed all of these notes.

On August 25, 2020, Primis completed the sale of $60.0 million of its fixed-to-floating rate Subordinated Notes due 2030. These notes will bear interest at an initial rate of 5.40% per annum, payable semi-annually in arrears on March 1 and September 1 of each year, commencing on March 1, 2021. From and including September 1, 2025 to, but excluding the maturity date or the date of earlier redemption (the “floating rate period”), the interest rate will reset quarterly to an annual interest rate equal to the Benchmark rate, which is expected to be three-month Term SOFR, plus 531 basis points, for each quarterly interest period during the floating rate period, payable quarterly in arrears on March 1, June 1, September 1, and December 1 of each year, commencing on December 1, 2025. Notwithstanding the foregoing, in the event that the Benchmark rate is less than zero, the Benchmark rate shall be deemed to be zero. At December 31, 2021, all of these notes qualified as Tier 2 capital.  

52

Table of Contents

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 100 basis points, measured in 100 basis point increments) as of December 31, 2021 and 2020. All changes are within our Asset/Liability Risk Management Policy guidelines.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Sensitivity of Economic Value of Equity

 

​

​

As of December 31, 2021

 

​

​

​

​

​

​

​

​

​

​

Economic Value of

 

​

​

Economic Value of Equity

​

Equity as a % of

 

Change in Interest Rates

​

​

​

​

$ Change

​

% Change

​

Total

​

Equity

 

in Basis Points (Rate Shock)

    

Amount

    

From Base

    

From Base

    

Assets

    

Book Value

 

​

​

(dollar amounts in thousands)

 

Up 400

​

$

419,520

​

$

10,937

 

2.68

%  

12.31

%  

101.85

%

Up 300

​

 

419,238

​

 

10,655

 

2.61

%  

12.30

%  

101.79

%

Up 200

​

 

417,156

​

 

8,573

 

2.10

%  

12.24

%  

101.28

%

Up 100

​

 

418,107

​

 

9,524

 

2.33

%  

12.27

%  

101.51

%

Base

​

 

408,583

​

 

—

 

—

%  

11.99

%  

99.20

%

Down 100

​

 

341,573

​

 

(67,010)

 

(16.40)

%  

10.02

%  

82.93

%

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Sensitivity of Economic Value of Equity

 

​

​

As of December 31, 2020

 

​

​

​

​

​

​

​

​

​

​

Economic Value of

 

​

​

Economic Value of Equity

​

Equity as a % of

 

Change in Interest Rates

​

​

​

​

$ Change

​

% Change

​

Total

​

Equity

 

in Basis Points (Rate Shock)

    

Amount

    

From Base

    

From Base

    

Assets

    

Book Value

 

​

​

(dollar amounts in thousands)

 

Up 400

​

$

339,057

​

$

5,568

 

1.67

%  

10.98

%  

86.81

%

Up 300

​

 

341,652

​

 

8,163

 

2.45

%  

11.06

%  

87.48

%

Up 200

​

 

342,561

​

 

9,072

 

2.72

%  

11.09

%  

87.71

%

Up 100

​

 

343,842

​

 

10,353

 

3.10

%  

11.13

%  

88.04

%

Base

​

 

333,489

​

 

—

 

—

%  

10.80

%  

85.39

%

Down 100

​

 

282,586

​

 

(50,903)

 

(15.26)

%  

9.15

%  

72.36

%

​

​

53

Table of Contents

Our interest rate sensitivity is also monitored by management through the use of a model that generates estimates of the change in the net interest income (“NII”) over a range of interest rate scenarios. NII depends upon the relative amounts of interest-earning assets and interest-bearing liabilities and the interest rates earned or paid on them. In this regard, the model assumes that the composition of our interest sensitive assets and liabilities existing at December 31, 2021 and 2020 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, 2021 and 2020.

​

​

​

​

​

​

​

​

​

Sensitivity of Net Interest Income

​

​

As of December 31, 2021

​

​

Adjusted Net Interest Income

Change in Interest Rates

​

​

​

​

$ Change

in Basis Points (Rate Shock)

    

Amount

    

From Base

​

​

(dollar amounts in thousands)

Up 400

​

$

88,531

​

$

2,341

Up 300

​

 

87,863

​

 

1,673

Up 200

​

 

87,127

​

 

937

Up 100

​

 

86,713

​

 

523

Base

​

 

86,190

​

 

—

Down 100

​

 

82,670

​

 

(3,520)

​

​

​

​

​

​

​

​

​

​

Sensitivity of Net Interest Income

​

​

As of December 31, 2020

​

​

Adjusted Net Interest Income

Change in Interest Rates

​

​

​

​

$ Change

in Basis Points (Rate Shock)

    

Amount

    

From Base

​

​

(dollar amounts in thousands)

Up 400

​

$

78,988

​

$

(4,760)

Up 300

​

 

80,341

​

 

(3,407)

Up 200

​

 

81,604

​

 

(2,144)

Up 100

​

 

83,039

​

 

(709)

Base

​

 

83,748

​

 

—

Down 100

​

 

82,667

​

 

(1,081)

​

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

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 borrowing from the Federal Home Loan Bank of Atlanta, institutional certificates of deposit and the sale of available-for-sale investment securities. In addition, we maintain federal funds lines of credit with two correspondent banks and utilize securities sold under agreements to repurchase and reverse repurchase agreement borrowings from approved securities dealers. 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 9 – Securities Sold Under Agreements To Repurchase And Other Short-Term Borrowings and Note 10 – Junior Subordinated Debt and Senior Subordinated Notes.”

54

Table of Contents

We prepare a cash flow forecast on a 30, 60 and 90 day basis along with a one and a two year basis. The projections incorporate expected cash flows on loans, investment securities, and deposits based on data used to prepare our interest rate risk analyses.

At December 31, 2021, we had $411.0 million of unfunded lines of credit and undisbursed construction loan funds. The amount of certificate of deposit accounts maturing in less than one year was $285.2 million as of December 31, 2021. Management anticipates that funding requirements for these commitments can be met from the normal sources of funds.

As of December 31, 2021, 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, 2021, 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 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. At December 31, 2021 and 2020, the most recent regulatory notifications categorized the Bank as well capitalized under regulatory framework for PCA.

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, 2021, that Primis meets all capital adequacy requirements to which it is subject.

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

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

​

​

​

​

​

​

​

​

​

​

​

​

Minimum

​

​

​

​

​

​

 

​

​

Required for

​

​

​

​

​

​

 

​

​

Capital

​

To Be

​

Actual Ratio at

 

​

​

Adequacy

​

 Categorized as

​

December 31, 

​

December 31, 

​

    

Purposes

    

 Well Capitalized (1)

    

2021

    

2020

 

Primis Financial Corp.

 

  

 

  

 

  

 

  

​

Leverage ratio

 

4.00

%  

n/a

 

9.41

%  

9.69

%  

Common equity tier 1 capital ratio

 

4.50

%  

n/a

 

13.09

%  

13.05

%  

Tier 1 risk-based capital ratio

 

6.00

%  

n/a

 

13.52

%  

13.52

%  

Total risk-based capital ratio

 

8.00

%  

n/a

 

18.52

%  

19.58

%  

​

​

​

​

​

​

​

​

​

​

Primis Bank

 

​

 

​

​

​

 

​

​

Leverage ratio

 

4.00

%  

5.00

%  

11.14

%  

11.25

%

Common equity tier 1 capital ratio

 

7.00

%  

6.50

%  

16.18

%  

15.83

%

Tier 1 risk-based capital ratio

 

8.50

%  

8.00

%  

16.18

%  

15.83

%

Total risk-based capital ratio

 

10.50

%  

10.00

%  

17.43

%  

17.09

%

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

Primis Financial Corp. and Primis Bank are required to meet minimum capital requirements set forth by regulatory authorities. 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%,

55

Table of Contents

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 9.43% at December 31, 2021, which exceeded the 2.50% minimum requirement below which the regulators may impose limits on distributions.

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

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 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.

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 sheet. 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 $13.1 million and $15.9 million as of December 31, 2021 and 2020, 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

56

Table of Contents

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.

At December 31, 2021 and 2020, we had unfunded lines of credit and undisbursed construction loan funds totaling $411.0 million and $355.3 million, respectively. Virtually all of our unfunded lines of credit and undisbursed construction loan funds are variable rate.

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

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

​

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.

​

​

Item 8. Financial Statements and Supplementary Data

​

57

Table of Contents

​

​

​

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

​

Shareholders and the Board of Directors

Primis Financial Corp.

​

Opinion on the Consolidated Financial Statements

​

We have audited the accompanying consolidated balance sheets of Primis Financial Corp. (the "Company") as of December 31, 2021 and 2020, the related consolidated statements of income and comprehensive income, changes in stockholders’ equity, and cash flows, for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the "financial statements"). In our opinion, based on our audits and the report of the other auditors, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.

We did not audit the financial statements of Southern Trust Mortgage, LLC (“STM”) as of and for the year ended December 31, 2020. STM, an affiliate of the Company as of December 31, 2020, was accounted for as an equity method investment.  The Company’s financial statements for the year ended December 31, 2020 reported an equity gain from mortgage affiliate totaling $10.8 million, or approximately 36% of the Company’s income before income taxes.  STM’s financial statements were audited by other auditors whose report was furnished to us, and our opinion, insofar as it relates to the amounts included for STM as of and for the year ended December 31, 2020, is based solely on the report of the other auditors.

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, 2021, 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 March 14, 2022 expressed an unqualified opinion thereon.

Adoption of New Accounting Standard

​

As discussed in Note 1 to the financial statements, the Company changed its method of accounting for credit losses effective January 1, 2020 due to the adoption of Accounting Standards Codification (ASC) Topic 326, Financial Instruments – Credit Losses.

Basis for Opinion

​

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's 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 audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

58

Table of Contents

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the 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 financial statements. We believe that our audits and the report of the other auditors provide a reasonable basis for our opinion.

Critical Audit Matters

​

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Allowance for Credit Losses

​

As described in Notes 1 and 3 to the financial statements, the Company’s allowance for credit losses was $29.1 million at December 31, 2021.

The Company’s allowance for credit losses (“ACL”) is measured on a collective basis when similar risk characteristics exist, and by individually evaluating loans that do not share similar risk characteristics. 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 allowance 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, 2021 include the determination of a reasonable and supportable forecast and the impact of qualitative factors.

We identified the ACL as a critical audit matter. The principal considerations for our determination of the ACL as a critical audit matter included the high degree of judgment and subjectivity relating to management’s determination of reasonable and supportable forecasts and the identification and measurement of the qualitative factors.  In turn, auditing management’s judgments regarding credit loss estimates and assumptions, specifically the determination of reasonable and supportable forecasts and qualitative factors involved a high degree of subjectivity and an increased extent of audit effort.

​

59

Table of Contents

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

●We tested the design and operating effectiveness of controls relating to management’s determination of the ACL, including controls relating to the:
oCompleteness and accuracy of inputs into the model used to determine the ACL.
oPerformance of an independent model validation and appropriate responses to any findings.
oThe determination of a reasonable and supportable forecast.
oThe determination of qualitative factors.
●We evaluated management’s application of and changes to qualitative adjustments, including testing the accuracy of the supporting calculations, evaluating whether the qualitative factors appropriately addressed risks that were not fully accounted for in the quantitative ACL component of the methodology, and evaluating the appropriateness and level of the qualitative factor adjustments.
●We evaluated management’s determination of a reasonable and supportable forecast, including testing the application of the forecast in quantitative ACL calculation. We also utilized our internal valuation specialists to assist us in testing the application of the forecast to the ACL calculation.
●We evaluated the mathematical accuracy of the ACL, including the mathematical application of the qualitative adjustments on the loan segments.
●We assessed the overall trends in credit quality, including adjustments for the qualitative factors by comparing the overall ACL to those recorded by the Company’s peer institutions.
●We involved our internal valuation specialists to assist in evaluating the appropriateness of model inputs and assumptions and testing the design of the model calculation through a re-performance of the discounted cash flow.

/s/ Dixon Hughes Goodman LLP

We have served as the Company's auditor since 2013.

​

Greenville, North Carolina

March 14, 2022

​

​

​

​

60

Table of Contents

​

​

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

​

Shareholders and the Board of Directors

Primis Financial Corp.

​

Opinion on Internal Control Over Financial Reporting

We have audited Primis Financial Corp.’s (the “Company”) internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

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, 2021 and 2020, and for each of the three years in the period ended December 31, 2021, and our report dated March 14, 2022, expressed an unqualified opinion on those consolidated financial statements.

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, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition 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 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

61

Table of Contents

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/ Dixon Hughes Goodman LLP

Greenville, North Carolina

March 14, 2022

​

​

62

Table of Contents

​

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

​

​

To the Board of Directors
Southern Trust Mortgage, LLC
Virginia Beach, Virginia

​

Opinion on the Financial Statements

​

We have audited the accompanying balance sheets of Southern Trust Mortgage, LLC (the Company) as of December 31, 2020 and 2019, and the related statements of operations, changes in membersʹ equity, and cash flows for the years then ended, and the related notes (collectively, referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

​

Basis for Opinion

​

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (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 financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

​

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the 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 financial statements. We believe that our audits provide a reasonable basis for our opinion.

​

Critical Audit Matters

​

Critical audit matters are matters arising from the current period audit of the 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 financial statements and (2) involved our especially challenging, subjective, or complex judgements. We determined that there are no critical audit matters.

​

​

/s/ Richey, May & Co., LLP.

​

We have served as Southern Trust Mortgage, LLC’s auditor since 2014.

​

Englewood, Colorado
March 12, 2021

63

Table of Contents

PRIMIS FINANCIAL CORP.

CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except per share amounts)

​

​

​

​

​

​

​

​

​

    

December 31, 

    

December 31, 

​

​

2021

​

2020

ASSETS

​

​

​

​

​

​

Cash and cash equivalents:

 

​

  

 

​

  

Cash and due from financial institutions

​

$

8,380

 

$

8,585

Interest-bearing deposits in other financial institutions

​

 

521,787

 

​

187,600

Total cash and cash equivalents

​

 

530,167

 

​

196,185

​

​

​

​

​

​

​

Securities available-for-sale, at fair value

​

 

271,332

 

​

153,233

​

​

​

​

​

​

​

Securities held-to-maturity, at amortized cost (fair value of $23,364 and $41,832, respectively)

​

 

22,940

 

​

40,721

​

​

​

​

​

​

​

Total loans

​

 

2,339,986

 

​

2,440,496

Less allowance for credit losses

​

 

(29,105)

 

​

(36,345)

Net loans

​

 

2,310,881

 

​

2,404,151

Stock in Federal Reserve Bank (FRB) and Federal Home Loan Bank (FHLB)

​

 

15,521

 

​

16,927

Investments in mortgage company - held for sale

​

 

—

 

​

12,952

Preferred investment in mortgage company

​

​

3,005

​

​

3,005

Bank premises and equipment, net

​

 

30,410

 

​

30,306

Operating lease right-of-use assets

​

​

5,866

​

​

7,511

Goodwill

​

 

101,954

 

​

101,954

Core deposit intangibles, net

​

 

4,462

 

​

5,826

Bank-owned life insurance

​

 

66,724

 

​

65,409

Other real estate owned

​

 

1,163

 

​

3,078

Deferred tax assets, net

​

 

9,571

 

​

14,646

Accrued interest receivable

​

​

11,882

​

​

19,998

Other assets

​

 

21,475

 

​

12,771

Total assets

​

$

3,407,353

 

$

3,088,673

​

​

​

​

​

​

​

LIABILITIES AND STOCKHOLDERS' EQUITY

​

 

  

 

​

  

Noninterest-bearing demand deposits

​

$

530,282

 

$

440,674

Interest-bearing deposits:

​

 

  

 

​

  

NOW accounts

​

 

849,738

 

​

714,752

Money market accounts

​

 

799,759

 

​

603,318

Savings accounts

​

 

222,862

 

​

183,814

Time deposits

​

 

360,575

 

​

490,048

Total interest-bearing deposits

​

 

2,232,934

 

​

1,991,932

Total deposits

​

 

2,763,216

 

​

2,432,606

​

​

​

​

​

​

​

Securities sold under agreements to repurchase - short term

​

 

9,962

 

​

16,065

FHLB advances

​

 

100,000

 

​

100,000

Junior subordinated debt - long term

​

 

9,731

 

​

9,682

Senior subordinated notes - long term

​

 

85,297

 

​

105,647

Operating lease liabilities

​

​

6,498

​

​

8,238

Other liabilities

​

 

20,768

 

​

25,881

Total liabilities

​

 

2,995,472

 

​

2,698,119

Commitments and contingencies (See Note 14)

​

 

​

 

​

​

​

​

​

​

​

​

​

Stockholders' equity:

​

 

  

 

​

  

Preferred stock, $0.01 par value. Authorized 5,000,000 shares; no shares issued and outstanding

​

 

—

 

​

—

Common stock, $0.01 par value. Authorized 45,000,000 shares; 24,574,619 and 24,368,612 shares issued and outstanding at December 31, 2021 and December 31, 2020, respectively

​

 

245

 

​

243

Additional paid in capital

​

 

311,127

 

​

308,870

Retained earnings

​

 

99,397

 

​

77,956

Accumulated other comprehensive income

​

 

1,112

 

​

3,485

Total stockholders' equity

​

 

411,881

 

​

390,554

Total liabilities and stockholders' equity

​

$

3,407,353

 

$

3,088,673

​

See accompanying notes to consolidated financial statements.

​

​

64

Table of Contents

PRIMIS FINANCIAL CORP.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(dollars in thousands, except per share amounts)

​

​

​

​

​

​

​

​

​

​

​

​

For the Years Ended December 31, 

​

    

2021

    

2020

    

2019

Interest and dividend income:

 

​

  

 

​

  

 

​

  

Interest and fees on loans

​

$

107,021

​

$

111,647

​

$

112,181

Interest and dividends on taxable securities

​

 

3,977

​

 

4,244

​

 

5,639

Interest and dividends on tax exempt securities

​

 

463

​

 

486

​

 

585

Interest and dividends on other earning assets

​

 

1,782

​

 

1,402

​

 

2,119

Total interest and dividend income

​

 

113,243

​

 

117,779

​

 

120,524

Interest expense:

​

 

  

​

 

  

​

 

  

Interest on deposits

​

 

13,112

​

 

20,332

​

 

30,602

Interest on FRB borrowings

​

​

—

​

​

424

​

​

—

Interest on repurchase agreements

​

 

86

​

 

96

​

 

87

Interest on junior subordinated debt

​

 

355

​

 

426

​

 

589

Interest on senior subordinated notes

​

 

5,127

​

 

3,909

​

 

2,847

Interest on other borrowings

​

 

360

​

 

952

​

 

2,799

Total interest expense

​

 

19,040

​

 

26,139

​

 

36,924

Net interest income

​

 

94,203

​

 

91,640

​

 

83,600

Provision for (recovery of) credit losses

​

 

(5,801)

​

 

19,450

​

 

350

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

​

 

100,004

​

 

72,190

​

 

83,250

​

​

​

​

​

​

​

​

​

​

Noninterest income:

​

 

  

​

 

  

​

 

  

Account maintenance and deposit service fees

​

 

7,309

​

 

6,520

​

 

7,159

Income from bank-owned life insurance

​

 

1,687

​

 

1,559

​

 

1,699

Gain on debt extinguishment

​

 

573

​

 

—

​

 

—

Realized losses on sales of investment securities

​

 

—

​

 

(620)

​

 

—

Recoveries related to acquired charged-off loans and investment securities

​

​

836

​

​

6,500

​

​

1,537

Other

​

 

730

​

 

703

​

 

1,000

Total noninterest income

​

 

11,135

​

 

14,662

​

 

11,395

​

​

​

​

​

​

​

​

​

​

Noninterest expenses:

​

 

  

​

 

  

​

 

  

Salaries and benefits

​

 

36,741

​

 

36,675

​

 

26,261

Occupancy expenses

​

 

5,956

​

 

6,142

​

 

6,204

Furniture and equipment expenses

​

 

3,622

​

 

2,725

​

 

2,719

Amortization of core deposit intangible

​

 

1,364

​

 

1,364

​

 

1,418

Virginia franchise tax expense

​

 

2,899

​

 

2,457

​

 

2,251

Data processing expense

​

 

3,850

​

 

3,178

​

 

2,381

Telephone and communication expense

​

 

1,790

​

 

1,497

​

 

1,615

Net (gain) loss on other real estate owned

​

 

87

​

 

960

​

 

(38)

Professional fees

​

 

5,467

​

​

4,726

​

 

3,612

Other operating expenses

​

 

9,624

​

 

8,016

​

 

10,169

Total noninterest expenses

​

 

71,400

​

 

67,740

​

 

56,592

Income from continuing operations before income taxes

​

 

39,739

​

 

19,112

​

 

38,053

Income tax expense

​

 

8,721

​

 

4,228

​

 

5,892

Income from continuing operations

​

​

31,018

​

​

14,884

​

​

32,161

Income from discontinued operation before income taxes

​

​

294

​

​

10,789

​

​

1,191

Income tax expense

​

​

64

​

​

2,386

​

​

185

Income from discontinued operation

​

​

230

​

​

8,403

​

​

1,006

Net income

​

$

31,248

​

$

23,287

​

$

33,167

Other comprehensive income:

​

 

  

​

 

  

​

 

  

Unrealized gain (loss) on available-for-sale securities

​

$

(3,193)

​

$

2,789

​

$

4,256

Reclassification of loss on sales of investment securities

​

 

—

​

 

620

​

 

—

Accretion of amounts previously recorded upon transfer to held-to-maturity from available-for-sale

​

 

151

​

 

12

​

 

13

Net unrealized gain (loss)

​

 

(3,042)

​

 

3,421

​

 

4,269

Tax effect

​

 

(669)

​

 

719

​

 

897

Other comprehensive income (loss)

​

 

(2,373)

​

 

2,702

​

 

3,372

Comprehensive income

​

$

28,875

​

$

25,989

​

$

36,539

Earnings per share from continuing operations, basic

​

$

1.27

​

$

0.61

​

$

1.34

Earnings per share from discontinued operation, basic

​

$

0.01

​

$

0.35

​

$

0.04

Earnings per share from continuing operations, diluted

​

$

1.26

​

$

0.61

​

$

1.32

Earnings per share from discontinued operation, diluted

​

$

0.01

​

$

0.35

​

$

0.04

​

​

​

See accompanying notes to consolidated financial statements.

​

​

65

Table of Contents

PRIMIS FINANCIAL CORP.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019

(dollars in thousands, except per share amounts)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

For the Year Ended December 31, 2021

​

​

​

​

​

​

​

​

​

​

​

Accumulated

​

​

​

​

​

​

​

Additional

​

​

​

Other

​

​

​

​

Common

​

Paid in

​

Retained

​

Comprehensive

​

​

​

    

Stock

    

Capital

    

Earnings

    

Income (Loss)

    

Total

Balance - December 31, 2018

​

$

240

​

$

305,654

​

$

44,985

​

$

(2,589)

​

$

348,290

Net income

​

 

—

​

 

—

​

 

33,167

​

 

—

​

 

33,167

Changes in other comprehensive income on investment securities (net of tax expense, $897)

​

​

—

​

​

—

​

​

—

​

​

3,372

​

 

3,372

Dividends on common stock ($0.36 per share)

​

 

—

​

 

—

​

 

(8,690)

​

 

—

​

 

(8,690)

Stock Option exercises

​

 

1

​

 

669

​

 

—

​

 

—

​

 

670

Stock-based compensation expense

​

 

—

​

 

432

​

 

—

​

 

—

​

 

432

Balance - December 31, 2019

​

$

241

​

$

306,755

​

$

69,462

​

$

783

​

$

377,241

Impact of adoption of ASU 2016-13

​

​

—

​

​

—

​

​

(5,056)

​

​

—

​

​

(5,056)

Adjusted beginning balance

​

​

241

​

​

306,755

​

​

64,406

​

​

783

​

​

372,185

Net income

​

 

—

​

 

—

​

 

23,287

​

 

—

​

 

23,287

Changes in other comprehensive income on investment securities (net of tax expense, $719)

​

​

—

​

​

—

​

​

—

​

​

2,702

​

​

2,702

Dividends on common stock ($0.40 per share)

​

 

—

​

 

—

​

 

(9,737)

​

 

—

​

 

(9,737)

Stock Option exercises

​

 

1

​

 

708

​

 

—

​

 

—

​

 

709

Vesting of restricted stock

​

​

1

​

​

(1)

​

​

—

​

​

—

​

​

—

Repurchase of restricted stock

​

​

—

​

​

(135)

​

​

—

​

​

—

​

​

(135)

Stock-based compensation expense

​

 

—

​

 

1,543

​

 

—

​

 

—

​

 

1,543

Balance - December 31, 2020

​

$

243

​

$

308,870

​

$

77,956

​

$

3,485

​

$

390,554

Net income

​

 

—

​

 

—

​

 

31,248

​

 

—

​

 

31,248

Changes in other comprehensive loss on investment securities (net of tax benefit $669)

​

​

—

​

​

—

​

​

—

​

​

(2,373)

​

​

(2,373)

Dividends on common stock ($0.40 per share)

​

 

—

​

 

—

​

 

(9,807)

​

 

—

​

 

(9,807)

Stock Option exercises

​

 

2

​

 

1,524

​

 

—

​

 

—

​

 

1,526

Repurchase of restricted stock

​

​

—

​

​

(14)

​

​

—

​

​

—

​

​

(14)

Stock-based compensation expense

​

 

—

​

 

747

​

 

—

​

 

—

​

 

747

Balance - December 31, 2021

​

$

245

​

$

311,127

​

$

99,397

​

$

1,112

​

$

411,881

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

See accompanying notes to consolidated financial statements.

​

​

​

66

Table of Contents

PRIMIS FINANCIAL CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

​

​

​

​

​

​

​

​

​

​

​

​

For the Year Ended December 31, 

​

    

2021

    

2020

    

2019

Operating activities:

 

​

  

 

​

  

 

​

  

Net income from continuing operations

​

$

31,018

​

$

14,884

​

$

32,161

Adjustments to reconcile net income from continuing operations to net cash and cash equivalents provided by operating activities:

​

 

  

​

 

  

​

 

  

Depreciation and amortization

​

 

5,627

​

 

5,285

​

 

5,632

Amortization of operating lease right-of-use assets

​

​

2,413

​

​

2,909

​

​

2,546

Accretion of loan discount

​

 

(1,989)

​

 

(4,346)

​

 

(3,859)

Amortization of FDIC indemnification asset

​

 

—

​

 

—

​

 

649

Provision (recovery) for credit losses

​

 

(5,801)

​

 

19,450

​

 

350

Earnings on bank-owned life insurance

​

 

(1,681)

​

 

(1,559)

​

 

(1,565)

Stock-based compensation expense

​

 

747

​

 

1,543

​

 

432

Loss on sales of investment securities

​

 

—

​

 

620

​

 

—

Gain on bank-owned life insurance death benefit

​

​

(6)

​

​

—

​

​

(134)

(Gain) loss on other real estate owned

​

 

87

​

 

960

​

 

(38)

Gain on debt extinguishment

​

​

(573)

​

​

—

​

​

—

Provision (benefit) for deferred income taxes

​

 

6,054

​

 

(1,411)

​

 

1,477

Net decrease (increase) in other assets

​

 

(588)

​

 

(11,942)

​

 

(2,203)

Net increase (decrease) in other liabilities

​

 

(7,620)

​

 

2,707

​

 

1,558

Net cash and cash equivalents provided by operating activities from continuing operations

​

​

27,688

​

​

29,100

​

​

37,006

Investing activities:

​

 

  

​

 

  

​

 

  

Proceeds from sales of held-to-maturity investment securities

​

​

—

​

​

1,660

​

​

—

Proceeds from sales of available-for-sale investment securities

​

 

—

​

 

1,910

​

 

—

Purchases of held-to-maturity investment securities

​

 

—

​

 

(15,197)

​

 

(15,260)

Purchases of available-for-sale investment securities

​

 

(160,531)

​

 

(38,938)

​

 

(45,135)

Proceeds from paydowns, maturities and calls of available-for-sale investment securities

​

 

37,878

​

 

50,068

​

 

26,283

Proceeds from paydowns, maturities and calls of held-to-maturity investment securities

​

 

17,652

​

 

44,738

​

 

35,006

Net decrease of FRB and FHLB stock

​

​

1,406

​

​

905

​

​

1,690

Net (increase) decrease in loans

​

 

109,375

​

 

(251,000)

​

 

(7,059)

Proceeds from bank-owned life insurance death benefit

​

​

371

​

​

—

​

​

344

Proceeds from sales of other real estate owned, net of improvements

​

​

2,014

​

​

2,663

​

​

214

Purchases of bank premises and equipment

​

 

(2,456)

​

 

(1,082)

​

 

(1,101)

Net cash and cash equivalents provided by (used in) investing activities from continuing operations

​

 

5,709

​

 

(204,273)

​

 

(5,018)

Financing activities:

​

 

  

​

 

  

​

 

  

Net increase in deposits

​

 

330,610

​

 

307,888

​

 

27,129

Cash dividends paid on common stock

​

 

(9,807)

​

 

(9,737)

​

 

(8,690)

Proceeds from exercised stock options

​

 

1,526

​

 

709

​

 

670

Repurchase of restricted stock

​

​

(14)

​

​

(135)

​

​

—

Issuance of subordinated notes, net of cost

​

 

—

​

 

58,600

​

 

—

Extinguishment of subordinated debt

​

 

(20,000)

​

 

—

​

 

—

Net decrease in other borrowings

​

 

(6,103)

​

 

(18,458)

​

 

(47,538)

Net cash and cash equivalents provided by (used in) financing activities from continuing operations

​

 

296,212

​

 

338,867

​

 

(28,429)

Net change in cash and cash equivalents from continuing operations

​

 

329,609

​

 

163,694

​

 

3,559

​

​

​

​

​

​

​

​

​

​

Cash flows provided by (used in) discontinued operation:

​

​

​

​

​

​

​

​

​

Net cash and cash equivalents used in operating activities

​

​

(373)

​

​

(2,593)

​

​

(242)

Net cash and cash equivalents provided by investing activities

​

​

4,746

​

​

3,156

​

​

—

Net change in cash and cash equivalents from discontinued operation

​

​

4,373

​

​

563

​

​

(242)

​

​

​

​

​

​

​

​

​

​

Net change in cash and cash equivalents

​

​

333,982

​

​

164,257

​

​

3,317

Cash and cash equivalents at beginning of period

​

 

196,185

​

 

31,928

​

 

28,611

Cash and cash equivalents at end of period

​

$

530,167

​

$

196,185

​

$

31,928

Supplemental disclosure of cash flow information

​

 

  

​

 

  

​

 

  

Cash payments for:

​

 

  

​

 

  

​

​

​

Interest

​

$

20,234

​

$

27,988

​

$

36,002

Income taxes

​

 

6,151

​

 

7,693

​

 

4,897

Supplemental schedule of noncash investing and financing activities:

​

​

  

​

​

  

​

​

  

Transfer from loans to other real estate owned

​

​

186

​

​

477

​

​

1,323

Notes receivable from discontinued operation, included in loans

​

​

8,500

​

​

—

​

​

—

​

​

See accompanying notes to consolidated financial statements.

​

67

Table of Contents

​

1.          ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

On March 31, 2021, the Company changed its name from Southern National Bancorp of Virginia, Inc. (“Southern National”) to Primis Financial Corp. (“Primis,” “we,” “us,” “our” or the “Company”) and Sonabank changed its name to Primis Bank. Primis 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, 2021, Primis Bank had forty full-service branches in Virginia and Maryland and also provides services to customers through certain online and mobile applications. Thirty-five full-service retail branches are in Virginia and five full-service retail branches are in Maryland. The Company has administrative offices in Warrenton and Glen Allen, Virginia.

The accounting policies and practices of Primis and its subsidiaries conform to U.S. generally accepted accounting principles (“U.S. GAAP”) and to general practice within the banking industry. Major policies and practices are described below:

Principles of Consolidation

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

In addition, Primis Bank has an interest in one mortgage company, Southern Trust Mortgage, LLC (“STM”). Prior to December 31, 2021, Primis Bank owned 43.28% and 100% of STM’s common and preferred stock, respectively, and STM was considered an unconsolidated affiliate of the Company. On September 23, 2021, Primis Bank announced that it entered into an agreement with STM, whereby STM agreed to purchase all of the Bank's common membership interests and a portion of the Bank's preferred interests in STM for a combination of $1.6 million in cash and a promissory note for $8.5 million. The transaction closed on December 31, 2021. Upon closing, STM continues to be a borrower of the Bank, but the Bank is no longer a minority owner of STM and STM is no longer considered an affiliate of the Company. The Company still holds 100% of STM’s preferred stock at December 31, 2021 but no longer has a position on STM’s board of directors and STM no longer represents a reportable operating segment of the Company.  

Discontinued Operation

As discussed above the Company disposed of all of its common stock ownership and a portion of its preferred stock ownership in STM on December 31, 2021. The common stock investment was accounted for using the equity method of accounting and efffective July 1, 2021, in accordance with the terms of the agreement, the Company no longer accrued earnings related to its common membership interests in STM; however, the Company maintain significant influence over STM until closing of the transaction. The preferrd stock investment is considered a non-marketable equity security that does not have a readily determinable fair value and is carried at cost, less impairment.

The historical investments in STM that were disposed of on December 31, 2021 have been classified as held for sale on the consolidated balance sheet as of December 31, 2020 and totaled $13.0 million and consisted of $12.7 million in equity method investment and $300 thousand in preferred stock. The consolidated statements of income and comprehensive income have been adjusted to reflect the equity in earnings and income tax expense associated with the equity method investment as a discontinued operation, included in that amount for 2021 is a pre-tax impairment charge of approximately $2.9 million related to the transaction. Pre-tax equity in earnings for the years ended December 31, 2021, 2020 and 2019 were $294 thousand, after impairment, $10.8 million, and $1.2 million, respectively.

68

Table of Contents

For the years ended December 31, 2020 and 2019, STM was considered a reportable segment. As of December 31, 2020 and 2019, total mortgage loans held for sale by STM were $143.4 million and $100.2 million, respectively. STM’s warehouse lines of credit were $136.1 million and $92.1 million as of December 31, 2020 and 2019, respectively and total members’ equity was $26.4 million and $11.1 million as of December 31, 2020 and 2019. For the years ended December 31, 2020 and 2019, STM’s net income was $22.2 million and $2.7 million, respectively. The primary source of revenue for STM was gains on sale of mortgage loans held for sale, net of direct costs. For the years ended December 31, 2020 and 2019, gains on sale of mortgage loans held for sale, net of direct costs were $107.1 million and $45.7 million, respectively. STM’s salaries, commissions and benefits were $84.1 million and $39.0 million for the years ended December 31, 2020 and 2019, respectively.

Operating Segments

Operating segments are defined as components of a company about which separate financial information is available that is evaluated regularly by the chief financial officer and chief accounting officer in deciding how to allocate resources and in assessing performance. Discrete financial information is not available other than on a company-wide basis. Accordingly, all of the financial service operations are considered by management to be aggregated in one reportable operating segment.

Reclassifications

In certain instances, due to the discontinued operation, amounts reported in prior years’ consolidated financial statements have been reclassified to conform to the current financial statement presentation.

Use of Estimates

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

​

Investment Securities

​

Securities Available-for-Sale and Held-to Maturity

Debt securities that Primis has the positive intent and ability to hold to maturity are classified as held-to-maturity and carried at amortized cost.

​

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. 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.

Premiums and discounts are generally amortized using the interest method with a constant effective yield without anticipating prepayments, except for mortgage-backed securities where prepayments are anticipated. Premiums on callable securities are amortized to their earliest call date. Gains and losses on the sale of investment securities are recorded on the settlement date and are determined using the specific identification method.

Primis purchases amortizing investment securities. The actual principal reduction on these assets varies from the expected contractual principal reduction due to principal prepayments resulting from the borrowers’ election to refinance the underlying mortgage based on market and other conditions. The purchased premiums and discounts associated with these assets are amortized or accreted to interest income over the estimated life of the related assets. The estimated life is calculated by projecting future prepayments and the resulting principal cash flows until maturity. Prepayment rate projections utilize actual prepayment speed experience and available market information on like-kind instruments. The

69

Table of Contents

prepayment rates form the basis for income recognition of premiums and discounts on the related assets. Changes in prepayment estimates may cause the earnings recognized on these assets to vary over the term that the assets are held, creating volatility in the net interest margin. Prepayment rate assumptions are monitored and updated monthly to reflect actual activity and the most recent market projections.

Non-marketable Equity Securities

Primis’ investment in STM’s preferred stock and fintech investments are considered to be non-marketable equity securities that do not have a readily determinable fair value. Equity securities with no recurring market value data available are reviewed periodically and any observable market value change are adjusting through net income. Primis evaluates these non-marketable equity securities for impairment and recoverability of the recorded investment by considering positive and negative evidence, including the profitability and asset quality, dividend payment history and recent redemption experience. Impairment is assessed at each reporting period and if identified, is recognized in noninterest income.

Other investments include stock acquired for regulatory purposes. The Bank is a member of the FHLB system. Members are required to own a certain amount of stock based on the level of borrowings and other factors, and may invest in additional amounts. The Bank is also required to own FRB stock with a par value equal to 6% of capital and FHLB stock of 4.25% of borrowings outstanding. FHLB and FRB stock are carried at cost, classified as a restricted security, and periodically evaluated for impairment based on ultimate recovery of par value. Both cash and stock dividends are reported as income.

Loans

Primis purchases mortgage loans from mortgage loans originators. Primis also provides commercial and consumer loans to customers. A substantial portion of the loan portfolio is represented by loans secured by real estate throughout its market area. The ability of Primis’ debtors to honor their contracts is in varying degrees dependent upon the real estate market conditions and general economic conditions in this area.

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are reported at their outstanding unpaid principal balances, purchased premiums and discounts and any deferred loan fees or costs on originated loans. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield using the interest method without anticipating prepayments.

Commercial real estate consists of borrowings secured by owner occupied and non-owner occupied commercial real estate. Repayment of these loans is dependent upon rental income or the subsequent sale of the property for loans secured by non-owner occupied commercial real estate and by cash flows from business operations for owner occupied commercial real estate. Loans for which the source of repayment is rental income are primarily impacted by local economic conditions which dictate occupancy rates and the amount of rent charged. Commercial real estate loans that are dependent on cash flows from operations can also be adversely affected by current market conditions for their product or service.

Construction and land development primarily consist of borrowings to purchase and develop raw land into residential and non-residential properties. Construction loans are extended to individuals as well as corporations for the construction of an individual or multiple properties and are secured by raw land and the subsequent improvements. Repayment of the loans to real estate developers is dependent upon the sale or lease of properties to third parties in a timely fashion upon completion. Should there be delays in construction or a downturn in the market for those properties, there may be significant erosion in value which may be absorbed by Primis.

Commercial loans consist of borrowings for commercial purposes to individuals, corporations, partnerships, sole proprietorships, and other business enterprises. Commercial loans are generally secured by business assets such as equipment, accounts receivable, inventory, or any other asset excluding real estate and generally made to finance capital expenditures or operations. Primis’ risk exposure is related to deterioration in the value of collateral securing the loan

70

Table of Contents

should foreclosure become necessary. Generally, business assets used or produced in operations do not maintain their value upon foreclosure which may require Primis to write-down the value significantly to sell.

Residential real estate loans consist of loans to individuals for the purchase of primary residences with repayment primarily through wage or other income sources of the individual borrower. Primis’ loss exposure to these loans is dependent on local market conditions for residential properties as loan amounts are determined, in part, by the fair value of the property at origination.

STM is a regional mortgage banking company headquartered in Virginia Beach, Virginia that has mortgage banking originators in Delaware, Virginia, Maryland, North Carolina and South Carolina. STM only originated retail mortgage products.

Other consumer loans are comprised of loans to individuals both unsecured and secured and home equity loans secured by real estate (closed and open-end), with repayment dependent on individual wages and other income. The risk of loss on consumer loans is elevated as the collateral securing these loans, if any, rapidly depreciate in value or may be worthless and/or difficult to locate if repossession is necessary. Losses in this portfolio are generally relatively low, however, due to the small individual loan size and the balance outstanding as a percentage of Primis’ entire portfolio.

The accrual of interest on all loans is discontinued at the time the loan is 90 days delinquent unless the credit is well secured and in process of collection. In all cases, loans are placed on nonaccrual status or charged-off at an earlier date if collection of principal and interest is considered doubtful.

All interest accrued but not collected for loans that are placed on nonaccrual status or charged-off is reversed against interest income. The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual status. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Most of Primis’ business activity is with customers located within Virginia and Maryland. Therefore, our exposure to credit risk is significantly affected by changes in the economy in those areas. We are not dependent on any single customer or group of customers whose insolvency would have a material adverse effect on operations.

Primis has purchased, primarily through acquisitions, individual loans and groups of loans, some of which have shown evidence of credit deterioration since origination. These purchased loans are recorded at fair value such that there is no carryover of the seller’s allowance for credit losses. We adopted ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, on January 1, 2020 which requires the Bank to record purchased financial assets with credit deterioration (PCD assets), defined as a more-than-insignificant deterioration in credit quality since origination or issuance, at the purchase price plus the allowance for credit losses expected at the time of acquisition. Under this method, there is no credit loss expense affecting net income on acquisition of PCD assets. Changes in estimates of expected credit losses after acquisition are recognized as credit loss expense (or reversal of credit loss expense) in subsequent periods as they arise. Any non-credit discount or premium resulting from acquiring a pool of purchased financial assets with credit deterioration shall be allocated to each individual asset. At the acquisition date, the initial allowance for credit losses determined on a collective basis shall be allocated to individual assets to appropriately allocate any non-credit discount or premium. The non-credit discount or premium, after the adjustment for the allowance for credit losses, shall be accreted to interest income using the interest method based on the effective interest rate determined after the adjustment for credit losses at the adoption date.

A purchased financial asset that does not qualify as a PCD asset is accounted for similar to an originated financial asset. Generally, this means that an entity recognizes the allowance for credit losses for non-PCD assets through net income at the time of acquisition. In addition, both the credit discount and non-credit discount or premium resulting from acquiring a pool of purchased financial assets that do not qualify as PCD assets shall be allocated to each individual asset. This combined discount or premium shall be accreted to interest income using the effective yield method.

71

Table of Contents

Allowance for Credit Losses (“ACL”)

Allowance For Credit Losses - Held-to-Maturity Securities

The allowance for credit losses on held-to-maturity securities is a contra-asset valuation account, calculated in accordance with ASC 326 that is deducted from the amortized cost basis of held-to-maturity securities to present management's best estimate of the net amount expected to be collected. Held-to-maturity securities are charged-off against the allowance when deemed uncollectible by management. Adjustments to the allowance are reported in our income statement as a component of credit loss expense. Management measures expected credit losses on held-to-maturity securities on a collective basis by major security type with each type sharing similar risk characteristics and considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. Management has made the accounting policy election to exclude accrued interest receivable on held-to-maturity securities from the estimate of credit losses. Further information regarding our policies and methodology used to estimate the allowance for credit losses on held-to-maturity securities is presented in Note 2 – Investment Securities.

Allowance For Credit Losses - Available-for-Sale Securities

For available-for-sale securities in an unrealized loss position, we first assess whether (i) we intend to sell or (ii) it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis. If either case is affirmative, any previously recognized allowances are charged-off and the security's amortized cost is written down to fair value through income. If neither case is affirmative, the security is evaluated to determine whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency and any adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income. Adjustments to the allowance are reported in our income statement as a component of credit loss expense. Management has made the accounting policy election to exclude accrued interest receivable on available-for-sale securities from the estimate of credit losses. Available-for-sale securities are charged-off against the allowance or, in the absence of any allowance, written down through income when deemed uncollectible by management or when either of the aforementioned criteria regarding intent or requirement to sell is met.

Allowance for Credit Losses – Loans

The allowance for credit losses on loans is a contra-asset valuation account, calculated in accordance with ASC 326, which is deducted from the amortized cost basis of loans to present management's best estimate of the net amount expected to be collected. Loans are charged-off against the allowance when deemed uncollectible by management. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off. Adjustments to the allowance are reported in our income statement as a component of credit loss expense. Management has made the accounting policy election to exclude accrued interest receivable on loans from the estimate of credit losses. Further information regarding our policies and methodology used to estimate the allowance for credit losses on loans is presented in Note 3 – Loans and Allowance.

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. 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. Further information regarding our policies and methodology used to estimate the allowance for credit losses on off-balance-sheet credit exposures is presented in Note 14 – Financial Instruments with Off-Balance-Sheet Risks.

72

Table of Contents

​

Transfers of Financial Assets

Transfers of financial assets are accounted for as sales, when control over the assets has been relinquished. Control over transferred assets is deemed to be surrendered when the assets have been isolated from Primis, the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and Primis does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Bank Premises and Equipment

Land is carried at cost. Premises and equipment are stated at cost less accumulated depreciation. Buildings and related components are depreciated using the straight-line method with useful lives of 30 years. Leasehold improvements are amortized on the straight-line method over the shorter of the estimated useful lives of the improvements or the terms of the related leases including lease renewals only when the Company is reasonably assured of the aggregate term of the lease. Furniture, fixtures, equipment and software are depreciated using the straight-line method with useful lives ranging from 3 to 10 years.

Operating Leases

The Company leases certain properties and equipment under operating leases. The Company recognizes a liability to make lease payments, the operating lease liability, and an asset representing the right to use the underlying asset during the lease term, the right-of-use asset. In recognizing lease right-of-use assets and related right-of-use liabilities, we account for lease and non-lease components (such as taxes, insurance, and common area maintenance costs) separately as such amounts are generally readily determinable under our lease contracts. The operating lease liability is measured at the present value of the remaining lease payments, discounted at the Company’s incremental borrowing rate at inception. The right-of-use asset is measured at the amount of the operating lease liability adjusted for the remaining balance of any lease incentives received, any cumulative prepaid or accrued rent if the lease payments are uneven throughout the lease term, any unamortized initial direct costs, and any impairment of the right-of-use-asset. Lease expense consists of a single lease cost calculated so that the remaining cost of the lease is allocated over the remaining lease term on a straight-line basis, variable lease payments not included in the operating lease liability, and any impairment of the right-of-use asset. Lease renewal options are generally not included in the calculation of the operating lease liabilities, unless they are not reasonably certain to be exercised. The Company does not recognize short-term leases on the balance sheet.

Goodwill and Intangible Assets

Goodwill resulting from business combinations after January 1, 2009, is generally determined as the excess of the fair value of the consideration transferred, plus the fair value of any noncontrolling interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. Goodwill and intangible assets acquired in a business combination and determined to have an indefinite useful life are not amortized, but evaluated for impairment on an annual basis or more frequently if events or circumstances warrant. Intangible assets with definite useful lives are amortized over their estimated useful lives to their estimated residual values. Goodwill is the only intangible asset with an indefinite life on our balance sheet and is subject to an impairment analysis when there are triggering events.

Other intangible assets consist of core deposit intangible assets arising from whole-bank and branch acquisitions and are amortized over their estimated useful lives, which range from 6 to 15 years.

Stock-Based Compensation

Compensation cost is recognized for stock options issued to employees, based on the fair value of these awards at the date of grant. A Black-Scholes option-pricing model is utilized to estimate the fair value of stock options. Compensation cost for grants of restricted shares is accounted for based on the closing price of Primis’ common stock on the date the restricted shares are awarded. Compensation cost for stock options and restricted shares is recognized over the required service period, generally defined as the vesting period. For awards with graded vesting, compensation cost is recognized

73

Table of Contents

on a straight-line basis over the requisite service period for the entire award. Compensation cost for performance Units is measured based on the grant date fair value of the units, adjusted for the Company’s best estimate of the outcome of vesting conditions at the end of the performance period.

Bank-Owned Life Insurance

Primis has purchased, and acquired through acquisitions, life insurance policies on certain former and current key executives. Bank-owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement.

Other Real Estate Owned (“OREO”)

Real estate acquired through or instead of foreclosure is held for sale and initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. If fair value declines subsequent to foreclosure, a direct charge-off is recorded through expense. Operating costs after acquisition are expensed as incurred.

Cloud Computing Arrangements

Primis engaged Finxact to define, design, and develop a new cloud-based banking core. The multiple phases of the cloud computing arrangements are assessed and reviewed as the software is placed into production. Total costs paid is capitalized upon initial launch and production rollout and classified in other assets in our consolidated balance sheet. Depreciation/amortization is set up based on the estimated life of the core infrastructure as it relates to obsolescence, technology, competition, and the nature of changes in software. Operating costs such as monthly licensing, usage, and storage are expensed as incurred in data processing expense on our consolidated statements of income and comprehensive income. As of December 31, 2021, the Company had gross cloud computing arrangements totaling $5.8 million and accumulated amortization of $0.1 million.

Impairment of Long-Lived Assets

Premises and equipment, core deposit intangible assets, right of use assets, and other long-term assets are reviewed for impairment when events indicate their carrying amount may not be recoverable from future undiscounted cash flows. If impaired, the assets are recorded at fair value.

Retirement Plans

Employee 401(k) plan expense is the amount of matching contributions. Supplemental retirement plan expense allocates the benefits over years of service.

Loss Contingencies

Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe there are such matters that will have a material effect on the consolidated financial statements.

Dividend Restriction

Banking regulations require maintaining certain capital levels and may limit the dividends paid by the Bank to Primis or by Primis to shareholders.

Advertising Costs

Advertising costs are expensed as incurred.

74

Table of Contents

Income Taxes

Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized.

A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. We have no unrecognized tax benefits and do not anticipate any increase in unrecognized tax benefits during the next twelve months. Should the accrual of any interest or penalties relative to unrecognized tax benefits be necessary, it is our policy to record such accruals in our income tax accounts; no such accruals exist as of December 31, 2021 and 2020.

Restrictions on Cash

No regulatory reserve or clearing requirements with the FRB were needed at December 31, 2021 and 2020.

Consolidated Statements of Cash Flows

For purposes of reporting cash flows, Primis defines cash and cash equivalents as cash due from financial institutions, interest-bearing deposits and federal funds sold in other financial institutions with maturities less than 90 days.

Earnings Per Share (“EPS”)

Basic EPS is computed by dividing net income by the weighted average number of common shares outstanding during the year. Diluted EPS reflects additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to net income that would result from the assumed issuance. Potential common shares that may be issued by Primis relate solely to outstanding stock options and restricted stock units and are determined using the treasury stock method. Performance awards cannot be dilutive until the Company’s best estimate of the outcome of vesting conditions become probable.

Comprehensive Income

Comprehensive income consists of net income and other comprehensive (loss) income. Other comprehensive (loss) income includes unrealized gains and losses on investment securities available-for-sale which are also recognized as a separate component of equity.

Off-Balance Sheet Credit Related Financial Instruments

In the ordinary course of business, Primis has entered into commitments to extend credit and standby letters of credit. The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay.

Fair Value Measurements

In general, fair values of financial instruments are based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon observable market-based parameters. Valuation assumptions may be made to ensure that financial instruments are recorded at fair value. These assumptions may reflect assumptions that market participants would use in pricing an asset or liability, among other things, as well as unobservable parameters. Any such valuation assumptions are applied consistently over time.

75

Table of Contents

Recent Accounting Pronouncements

New Accounting Standards Adopted:

In December 2019, Financial Accounting Standards Board (“FASB”) issued ASU 2019-12, Simplifying the Accounting for Income Taxes (Topic 740). This ASU simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in ASC 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition for deferred tax liabilities for outside basis differences. This ASU also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting transactions that result in a step-up in the tax basis of goodwill. ASU 2019-12 is effective for annual periods beginning after December 15, 2020, including interim periods within those annual periods. Early adoption was permitted. The Company adopted ASU 2019-12 in the first quarter of 2021 and it did not have a material impact on the Company’s consolidated financial statements.

In March 2020, FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued. The ASU is intended to help stakeholders during the global market-wide reference rate transition period. ASU 2020-04 is effective upon issuance and can be applied through December 31, 2022. The Company adopted ASU 2020-04 in the first quarter of 2021 and it did not have a material impact on the Company’s consolidated financial statements.

In October 2020, FASB issued ASU 2020-08, Codification Improvements to Subtopic 310-20, Receivables - Nonrefundable Fees and Other Costs. This ASU clarifies the accounting for the amortization of purchase premiums for callable debt securities with multiple call dates. ASU 2020-08 is effective for annual periods beginning after December 15, 2020, including interim periods within those annual periods. Early adoption was not permitted. The Company adopted ASU 2020-08 in the first quarter of 2021 and it did not have a material impact on the Company’s consolidated financial statements.

In October 2020, FASB issued ASU 2020-10, Codification Improvements. This ASU clarifies various topics in the Codification, including the addition of existing disclosure requirements to the relevant disclosure sections. ASU 2020-10 is effective for annual periods beginning after December 15, 2020, including interim periods within those annual periods. Early adoption is permitted. The Company adopted ASU 2020-10 in the first quarter of 2021 and it did not have a material impact on the Company’s consolidated financial statements and disclosures.

​

​

​

​

76

Table of Contents

2.          INVESTMENT SECURITIES

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

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Amortized

​

Gross Unrealized

​

Fair

​

    

Cost

    

Gains

    

Losses

    

Value

December 31, 2021

​

​

​

​

​

​

​

​

​

​

​

​

Residential government-sponsored mortgage-backed securities

​

$

122,506

​

$

740

​

$

(636)

​

$

122,610

Obligations of states and political subdivisions

​

 

30,728

​

 

755

​

 

(252)

​

 

31,231

Corporate securities

​

 

13,000

​

 

685

​

 

—

​

 

13,685

Collateralized loan obligations

​

 

5,026

​

 

—

​

 

(16)

​

 

5,010

Residential government-sponsored collateralized mortgage obligations

​

 

19,671

​

 

297

​

 

(161)

​

 

19,807

Government-sponsored agency securities

​

 

17,671

​

 

32

​

 

(215)

​

 

17,488

Agency commercial mortgage-backed securities

​

 

52,452

​

​

513

​

​

(298)

​

 

52,667

SBA pool securities

​

 

8,870

​

 

48

​

 

(84)

​

 

8,834

Total

​

$

269,924

​

$

3,070

​

$

(1,662)

​

$

271,332

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Amortized

​

Gross Unrealized

​

Fair

​

    

Cost

    

Gains

    

Losses

    

Value

December 31, 2020

​

​

​

​

​

​

​

​

​

​

​

​

Residential government-sponsored mortgage-backed securities

​

$

35,442

​

$

1,618

​

$

—

​

$

37,060

Obligations of states and political subdivisions

​

​

22,966

​

 

1,076

​

 

—

​

 

24,042

Corporate securities

​

​

15,000

​

 

81

​

 

(2)

​

 

15,079

Residential government-sponsored collateralized mortgage obligations

​

​

28,680

​

 

737

​

 

(1)

​

 

29,416

Government-sponsored agency securities

​

​

5,985

​

 

90

​

 

—

​

 

6,075

Agency commercial mortgage-backed securities

​

​

29,118

​

​

1,087

​

​

(15)

​

 

30,190

SBA pool securities

​

​

11,441

​

 

80

​

 

(150)

​

 

11,371

Total

​

$

148,632

​

$

4,769

​

$

(168)

​

$

153,233

​

​

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

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Amortized

​

Gross Unrecognized

​

Allowance for

​

Fair

​

    

Cost

    

Gains

    

Losses

    

Credit Losses

    

Value

December 31, 2021

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Residential government-sponsored mortgage-backed securities

​

$

13,616

​

$

296

​

$

(1)

​

$

—

​

$

13,911

Obligations of states and political subdivisions

​

 

3,805

 

​

93

 

​

—

 

​

—

​

 

3,898

Residential government-sponsored collateralized mortgage obligations

​

 

519

 

​

13

 

​

—

 

​

—

​

 

532

Government-sponsored agency securities

​

 

5,000

 

​

23

 

​

—

 

​

—

​

 

5,023

Total

​

$

22,940

​

$

425

​

$

(1)

​

$

—

​

$

23,364

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Amortized

​

Gross Unrecognized

​

Allowance for

​

Fair

​

    

Cost

    

Gains

    

Losses

    

Credit Losses

    

Value

December 31, 2020

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Residential government-sponsored mortgage-backed securities

​

$

25,037

​

$

729

​

$

(2)

​

$

—

​

$

25,764

Obligations of states and political subdivisions

 

​

9,594

 

​

183

 

​

—

 

​

(1)

​

 

9,776

Residential government-sponsored collateralized mortgage obligations

 

​

1,090

 

​

39

 

​

—

 

​

—

​

 

1,129

Government-sponsored agency securities

 

​

5,000

 

​

163

 

​

—

 

​

—

​

 

5,163

Total

​

$

40,721

​

$

1,114

​

$

(2)

​

$

(1)

​

$

41,832

​

​

77

Table of Contents

During 2021 and 2020, $160.5 million and $38.9 million, respectively, of available-for-sale investment securities were purchased. No held-to-maturity investments were purchased in 2021. During 2020, $15.2 million of held-to-maturity investment securities were purchased. No investment securities were sold during 2021. During 2020, $1.9 million and $1.7 million, respectively, of available-for-sale investment securities and held-to-maturity investment securities were sold. Realized losses on sales of investment securities of $620 thousand were recorded for the year ended December 31, 2020.

The fair value and carrying amount of available-for-sale and held-to-maturity investment securities as of December 31, 2021, by contractual maturity were as follows (in thousands). Investment securities not due at a single maturity date are shown separately.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Available-for-Sale

​

Held-to-Maturity

​

    

Amortized

    

​

​

    

Amortized

    

​

​

​

​

Cost

​

Fair Value

​

Cost

​

Fair Value

Due within one year

​

$

787

​

$

789

​

$

406

​

$

413

Due in one to five years

​

​

3,814

​

​

3,946

​

​

1,545

​

​

1,587

Due in five to ten years

​

 

25,792

​

 

26,593

​

 

1,518

​

 

1,562

Due after ten years

​

 

36,032

​

 

36,086

​

 

5,336

​

 

5,359

Residential government-sponsored mortgage-backed securities

​

 

122,506

​

 

122,610

​

 

13,616

​

 

13,911

Residential government-sponsored collateralized mortgage obligations

​

 

19,671

​

 

19,807

​

 

519

​

 

532

Agency commercial mortgage-backed securities

​

 

52,452

​

 

52,667

​

 

—

​

 

—

SBA pool securities

​

 

8,870

​

 

8,834

​

 

—

​

 

—

Total

​

$

269,924

​

$

271,332

​

$

22,940

​

$

23,364

​

Investment securities with a carrying amount of approximately $180.7 million and $125.3 million at December 31, 2021 and 2020, respectively, were pledged to secure public deposits, certain other deposits, a line of credit for advances from the FHLB of Atlanta, and repurchase agreements.

Management measures expected credit losses on held-to-maturity securities on a collective basis by major security type with each type sharing similar risk characteristics, and considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. With regard to U.S. Treasury and residential mortgage-backed securities issued by the U.S. government, or agencies thereof, it is expected that the securities will not be settled at prices less than the amortized cost bases of the securities as such securities are backed by the full faith and credit of and/or guaranteed by the U.S. government. Accordingly, no allowance for credit losses has been recorded for these securities. With regard to securities issued by States and political subdivisions and other held-to-maturity securities, management considers (i) issuer bond ratings, (ii) historical loss rates for given bond ratings, (iii) whether issuers continue to make timely principal and interest payments under the contractual terms of the securities and (iv) internal forecasts. As of December 31, 2021, Primis did not have any allowance for credit losses on held-to-maturity securities.

​

78

Table of Contents

The following tables present information regarding investment securities available-for-sale and held-to-maturity in a continuous unrealized loss position as of December 31, 2021 and 2020 by duration of time in a loss position (in thousands):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Less than 12 months

​

12 Months or More

​

Total

December 31, 2021

    

Fair

    

Unrealized

    

Fair

    

Unrealized

    

Fair

    

Unrealized

Available-for-Sale

​

value

​

Losses

​

value

​

Losses

​

value

​

Losses

Residential government-sponsored mortgage-backed securities

​

$

84,123

​

$

(636)

​

$

—

​

$

—

​

$

84,123

​

$

(636)

Obligations of states and political subdivisions

​

​

14,472

​

​

(252)

​

​

—

​

​

—

​

​

14,472

​

​

(252)

Collateralized loan obligations

​

​

5,010

​

​

(16)

​

​

—

​

​

—

​

​

5,010

​

​

(16)

Residential government-sponsored collateralized mortgage obligations

​

​

5,589

​

​

(161)

​

​

—

​

​

—

​

​

5,589

​

​

(161)

Government-sponsored agency securities

​

 

15,956

​

 

(215)

​

 

—

​

 

—

​

 

15,956

​

 

(215)

Agency commercial mortgage-backed securities

​

 

20,786

​

 

(194)

​

 

2,027

​

 

(104)

​

 

22,813

​

 

(298)

SBA pool securities

​

 

—

​

 

—

​

 

4,544

​

 

(84)

​

 

4,544

​

 

(84)

Total

​

$

145,936

​

$

(1,474)

​

$

6,571

​

$

(188)

​

$

152,507

​

$

(1,662)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Less than 12 months

​

12 Months or More

​

Total

December 31, 2021

    

Fair

    

Unrecognized

    

Fair

    

Unrecognized

    

Fair

    

Unrecognized

Held-to-Maturity

​

value

​

Losses

​

value

​

Losses

​

value

​

Losses

Residential government-sponsored mortgage-backed securities

​

$

—

​

$

—

​

$

324

​

$

(1)

​

$

324

​

$

(1)

Total

​

$

—

​

$

—

​

$

324

​

$

(1)

​

$

324

​

$

(1)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Less than 12 months

​

12 Months or More

​

Total

December 31, 2020

    

Fair

    

Unrealized

    

Fair

    

Unrealized

    

Fair

    

Unrealized

Available-for-Sale

​

value

​

Losses

​

value

​

Losses

​

value

​

Losses

Corporate securities

​

$

998

​

$

(2)

​

$

—

​

$

—

​

$

998

​

$

(2)

Residential government-sponsored collateralized mortgage obligations

​

​

954

​

​

(1)

​

​

—

​

​

—

​

​

954

​

​

(1)

Agency commercial mortgage-backed securities

​

​

2,170

​

 

(15)

​

 

—

​

 

—

​

 

2,170

​

 

(15)

SBA pool securities

​

​

—

​

 

—

​

 

8,119

​

 

(150)

​

 

8,119

​

 

(150)

Total

​

$

4,122

​

$

(18)

​

$

8,119

​

$

(150)

​

$

12,241

​

$

(168)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Less than 12 months

​

12 Months or More

​

Total

December 31, 2020

    

Fair

    

Unrecognized

    

Fair

    

Unrecognized

    

Fair

    

Unrecognized

Held-to-Maturity

​

value

​

Losses

​

value

​

Losses

​

value

​

Losses

Residential government-sponsored mortgage-backed securities

​

$

331

​

$

(1)

​

$

126

​

$

(1)

​

$

457

​

$

(2)

Total

​

$

331

​

$

(1)

​

$

126

​

$

(1)

​

$

457

​

$

(2)

​

​

79

Table of Contents

​

Changes in accumulated other comprehensive income (loss) by component for the years ended December 31, 2021, 2020 and 2019 are shown in the tables below. All amounts are net of tax (in thousands).

​

​

​

​

​

​

​

​

​

​

​

​

Unrealized Holding

​

​

​

​

​

​

​

​

Gains on

​

Held-to-Maturity

​

​

​

For the year ended December 31, 2021

    

Available-for-Sale

    

Securities

    

Total

Beginning balance

​

$

3,636

​

$

(151)

​

$

3,485

Current period other comprehensive income (loss)

​

 

(2,524)

​

 

151

​

 

(2,373)

Ending balance

​

$

1,112

​

$

—

​

$

1,112

​

​

​

​

​

​

​

​

​

​

​

​

​

Unrealized Holding

​

​

​

​

​

​

​

​

Gains on

​

Held-to-Maturity

​

​

​

For the year ended December 31, 2020

​

Available-for-Sale

​

Securities

​

Total

Beginning balance

​

$

943

​

$

(160)

​

$

783

Current period other comprehensive income

​

 

2,693

​

 

9

​

 

2,702

Ending balance

​

$

3,636

​

$

(151)

​

$

3,485

​

​

​

​

​

​

​

​

​

​

​

​

​

Unrealized Holding

​

​

​

​

​

​

​

​

Gains (Losses) on

​

Held-to-Maturity

​

​

​

For the year ended December 31, 2019

​

Available-for-Sale

​

Securities

​

Total

Beginning balance

​

$

(2,419)

​

$

(170)

​

$

(2,589)

Current period other comprehensive income

​

 

3,362

​

 

10

​

 

3,372

Ending balance

​

$

943

​

$

(160)

​

$

783

​

​

​

​

80

Table of Contents

3.          LOANS AND ALLOWANCE FOR CREDIT LOSSES

The following table summarizes the composition of our loan portfolio as of December 31, 2021 and 2020 (in thousands):

​

​

​

​

​

​

​

​

    

December 31, 2021

    

December 31, 2020

Loans secured by real estate:

​

​

​

 

​

  

Commercial real estate - owner occupied

​

$

387,703

​

$

434,816

Commercial real estate - non-owner occupied

​

 

588,000

​

 

599,578

Secured by farmland

​

 

8,612

​

 

11,687

Construction and land development

​

 

121,444

​

 

103,401

Residential 1-4 family

​

 

547,560

​

 

557,953

Multi-family residential

​

 

164,071

​

 

107,130

Home equity lines of credit

​

 

73,846

​

 

91,748

Total real estate loans

​

 

1,891,236

​

 

1,906,313

​

​

​

​

​

​

​

Commercial loans

​

 

301,980

​

 

187,797

Paycheck Protection Program loans

​

​

77,319

​

​

314,982

Consumer loans

​

 

60,996

​

 

22,496

Total Non-PCD loans

​

 

2,331,531

​

 

2,431,588

PCD loans

​

​

8,455

​

​

8,908

Total loans

​

$

2,339,986

​

$

2,440,496

​

​

​

​

​

​

​

​

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

Accrued Interest Receivable

Accrued interest receivable on loans totaled $10.8 million and $19.0 million at December 31, 2021 and 2020, respectively and is included in accrued interest receivable in the consolidated balance sheets.

COVID-19 Loan Deferments

The Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus was published by banking regulators in April 2020 to clarify expectations around loan modifications and the determination of TDRs for borrowers experiencing COVID-19-related financial difficulty. Primis applied this regulatory guidance during its troubled debt restructurings (“TDR”) identification process for short-term loan forbearance agreements as a result of COVID-19 and in most cases is not recording these as TDRs, except as disclosed below.

Certain borrowers were unable to meet their contractual payment obligations because of the adverse economic effects of COVID-19. To help mitigate these effects, loan customers could apply for a deferral of payments, or portions thereof, for up to six months. After six months, customers could apply for an additional deferral in 90 days increments, and a small proportion of our customers requested such an additional deferral. In the absence of other intervening factors, such short-term modifications made on a good faith basis were not categorized as TDR, nor were loans granted payment deferrals related to COVID-19 reported as past due or placed on non-accrual status (provided the loans were not past due or on non-accrual status prior to the deferral). We implemented deferral arrangements for TDRs in accordance with the Coronavirus Aid, Relief and Economic Security (“CARES” Act) and bank regulatory guidance. At December 31, 2021, there were no loans in COVID-19 related deferment. At December 31, 2020, there were 44 loans in COVID-19 related deferment with an aggregate outstanding balance of $122.0 million, all of which were current as of December 31, 2020.

81

Table of Contents

​

Accretion

The accretable discount on the acquired loans totaled $4.3 million and $6.2 million at December 31, 2021 and 2020, respectively. Accretion associated with the acquired loans held for investment of $2.0 million, $4.3 million and $3.9 million was recognized during the twelve months ended December 31, 2021, 2020 and 2019, respectively.

Non-Accrual and Past Due Loans

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

​

82

Table of Contents

The following tables present the aging of the recorded investment in past due loans by class of loans as of December 31, 2021 and 2020 (in thousands):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

30 - 59

    

60 - 89

    

90 

    

​

​

    

​

​

    

​

​

​

​

Days

​

Days

​

Days 

​

Total

​

Loans Not

​

Total

December 31, 2021

​

Past Due

​

Past Due

​

or More

​

Past Due

​

Past Due

​

Loans

Commercial real estate - owner occupied

​

$

194

​

$

346

​

$

—

​

$

540

​

$

387,163

​

$

387,703

Commercial real estate - non-owner occupied

​

 

—

​

 

—

​

 

—

​

 

—

​

 

588,000

​

 

588,000

Secured by farmland

​

​

791

​

​

—

​

​

—

​

​

791

​

​

7,821

​

​

8,612

Construction and land development

​

 

204

​

​

131

​

 

4,575

​

 

4,910

​

 

116,534

​

 

121,444

Residential 1-4 family

​

 

9,384

​

​

254

​

 

137

​

 

9,775

​

 

537,785

​

 

547,560

Multi- family residential

​

​

—

​

​

—

​

​

—

​

​

—

​

​

164,071

​

​

164,071

Home equity lines of credit

​

 

331

​

​

—

​

 

171

​

 

502

​

 

73,344

​

 

73,846

Commercial loans

​

​

387

​

​

—

​

​

1,246

​

​

1,633

​

​

300,347

​

​

301,980

Paycheck Protection Program loans

​

​

4,954

​

​

8,559

​

​

283

​

​

13,796

​

​

63,523

​

​

77,319

Consumer loans

​

 

193

​

​

130

​

 

2

​

 

325

​

 

60,671

​

 

60,996

Total Non-PCD loans

​

​

16,438

​

​

9,420

​

​

6,414

​

​

32,272

​

​

2,299,259

​

​

2,331,531

PCD loans

​

​

1,717

​

​

—

​

​

—

​

​

1,717

​

​

6,738

​

​

8,455

Total

​

$

18,155

​

$

9,420

​

$

6,414

​

$

33,989

​

$

2,305,997

​

$

2,339,986

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

30 - 59

    

60 - 89

    

90 

    

​

​

    

​

​

    

​

​

    

​

​

Days

​

Days

​

Days 

​

Total

​

Loans Not

​

Total

​

December 31, 2020

​

Past Due

​

Past Due

​

or More

​

Past Due

​

Past Due

​

Loans (1)

​

Commercial real estate - owner occupied

​

$

—

​

$

—

​

$

2,641

​

$

2,641

​

$

432,175

​

$

434,816

​

Commercial real estate - non-owner occupied

​

 

—

​

 

—

​

 

—

​

 

—

​

 

599,578

​

 

599,578

​

Secured by farmland

​

​

—

​

 

—

​

 

1,098

​

 

1,098

​

​

10,589

​

​

11,687

​

Construction and land development

​

 

23

​

 

39

​

 

—

​

 

62

​

 

103,339

​

 

103,401

​

Residential 1-4 family

​

 

1,235

​

 

349

​

 

1,512

​

 

3,096

​

 

554,857

​

 

557,953

​

Multi- family residential

​

​

—

​

​

—

​

​

—

​

​

—

​

​

107,130

​

​

107,130

​

Home equity lines of credit

​

​

310

​

​

39

​

​

523

​

​

872

​

​

90,876

​

​

91,748

​

Commercial loans

​

 

64

​

 

33

​

 

2,104

​

 

2,201

​

 

185,596

​

 

187,797

​

Paycheck Protection Program loans

​

​

—

​

​

—

​

​

—

​

​

—

​

​

314,982

​

​

314,982

​

Consumer loans

​

 

207

​

 

4

​

 

9

​

 

220

​

 

22,276

​

 

22,496

​

Total Non-PCD loans

​

​

1,839

​

​

464

​

​

7,887

​

​

10,190

​

​

2,421,398

​

​

2,431,588

​

PCD loans

​

​

—

​

​

—

​

​

1,853

​

​

1,853

​

​

7,055

​

​

8,908

​

Total

​

$

1,839

​

$

464

​

$

9,740

​

$

12,043

​

$

2,428,453

​

$

2,440,496

​

(1)Includes $122.0 million of loans that were subject to deferrals at December 31, 2020.

​

​

83

Table of Contents

​

The amortized cost, by class, of loans and leases on nonaccrual status at December 31, 2021 and 2020, were as follows (in thousands):

​

​

​

​

​

​

​

​

​

​

​

​

    

90 

    

​

​

    

Total

​

​

Days 

​

​

Loans Not

​

Nonaccrual

December 31, 2021

​

or More

​

​

Past Due

​

Loans (1)

Commercial real estate - owner occupied

​

$

—

​

$

842

​

$

842

Secured by farmland

​

​

—

​

​

836

​

​

836

Construction and land development

​

 

4,575

​

 

34

​

 

4,609

Residential 1-4 family

​

 

137

​

 

411

​

 

548

Multi- family residential

​

​

—

​

​

4,301

​

​

4,301

Home equity lines of credit

​

​

171

​

​

253

​

​

424

Commercial loans

​

 

1,246

​

 

476

​

 

1,722

Consumer loans

​

 

2

​

 

16

​

 

18

Total Non-PCD loans

​

​

6,131

​

​

7,169

​

​

13,300

PCD loans

​

​

—

​

​

1,729

​

​

1,729

Total

​

$

6,131

​

$

8,898

​

$

15,029

​

​

​

​

​

​

​

​

​

​

​

    

90 

    

​

​

    

Total

​

​

Days 

​

​

Loans Not

​

Nonaccrual

December 31, 2020

​

or More

​

​

Past Due

​

Loans (1)

Commercial real estate - owner occupied

​

$

2,641

​

$

—

​

$

2,641

Secured by farmland

​

​

1,098

​

​

—

​

​

1,098

Residential 1-4 family

​

 

1,512

​

 

13

​

 

1,525

Multi- family residential

​

​

—

​

​

4,481

​

​

4,481

Home equity lines of credit

​

​

523

​

​

—

​

​

523

Commercial loans

​

 

2,104

​

 

228

​

 

2,332

Consumer loans

​

 

9

​

 

—

​

 

9

Total Non-PCD loans

​

​

7,887

​

​

4,722

​

​

12,609

PCD loans

​

​

1,853

​

​

—

​

​

1,853

Total

​

$

9,740

​

$

4,722

​

$

14,462

(1)Nonaccrual loans include SBA guaranteed amounts totaling $1.1 million and $3.1 million at December 31, 2021 and 2020, respectively.

​

We had $283 thousand of PPP loans greater than 90 days past due and still accruing at December 31, 2021 and did not have any loans and leases greater than 90 days past due and still accruing at December 31, 2020.

84

Table of Contents

The following table presents non-accrual loans as of December 31, 2021 and 2020, segregated by class of loans (in thousands):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

December 31, 2021

    

December 31, 2020

​

​

​

​

​

Non-Accrual With

​

​

​

​

Non-Accrual With

​

​

Total

​

No Credit

​

Total

​

No Credit

​

​

Non-Accrual (1)

​

Loss Allowance (2)

​

Non-Accrual (1)

​

Loss Allowance (2)

Commercial real estate - owner occupied

​

$

842

​

$

842

​

$

2,641

​

$

2,641

Secured by farmland

​

​

836

​

​

836

​

​

1,098

​

​

1,098

Construction and land development

​

 

4,609

​

 

4,609

​

 

—

​

 

—

Residential 1-4 family

​

​

548

​

​

548

​

​

1,525

​

​

164

Multi- family residential

​

​

4,301

​

​

4,301

​

​

4,481

​

​

4,481

Home equity lines of credit

​

​

424

​

​

424

​

​

523

​

​

523

Commercial loans

​

 

1,722

​

 

745

​

 

2,332

​

 

582

Consumer loans

​

​

18

​

​

10

​

​

9

​

​

9

Total non-PCD loans

​

​

13,300

​

​

12,315

​

​

12,609

​

​

9,498

PCD loans

​

​

1,729

​

​

—

​

​

1,853

​

​

—

Total non-accrual loans

​

$

15,029

​

$

12,315

​

$

14,462

​

$

9,498

(1)Nonaccrual loans include SBA guaranteed amounts totaling $1.1 million and $3.1 million at December 31, 2021 and 2020, respectively.
(2)Nonaccrual loans with no credit loss allowance include SBA guaranteed amounts totaling $1.1 million and $1.7 million at December 31, 2021 and 2020, respectively.

​

The following table presents non-accrual loans as of December 31, 2021 by class and year of origination (in thousands):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Revolving

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Loans

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Revolving

​

Converted

​

​

​

​

​

2021

​

2020

​

2019

​

2018

 

2017

​

Prior

​

Loans

​

To Term

 

Total

Commercial real estate - owner occupied

​

$

—

​

$

—

​

$

476

​

$

—

​

$

—

​

$

366

​

$

—

​

$

—

​

$

842

Secured by farmland

​

​

—

​

​

—

​

​

24

​

​

—

​

​

681

​

​

—

​

​

131

​

​

—

​

​

836

Construction and land development

​

 

—

​

 

—

​

 

4,575

​

 

—

​

 

—

​

 

34

​

 

—

​

 

—

​

 

4,609

Residential 1-4 family

​

​

—

​

 

—

​

​

—

​

​

—

​

​

—

​

​

252

​

​

—

​

​

296

​

​

548

Multi- family residential

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

4,301

​

​

—

​

​

—

​

​

4,301

Home equity lines of credit

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

398

​

​

26

​

​

424

Commercial loans

​

 

—

​

 

9

​

 

—

​

 

236

​

 

—

​

 

314

​

 

1,163

​

 

—

​

 

1,722

Consumer loans

​

​

—

​

 

—

​

​

—

​

​

8

​

​

8

​

​

2

​

​

—

​

​

—

​

​

18

Total non-PCD non-accruals

​

​

—

​

​

9

​

​

5,075

​

​

244

​

​

689

​

​

5,269

​

​

1,692

​

​

322

​

​

13,300

PCD loans

​

​

—

​

​

—

​

​

—

​

​

—

​

​

1,717

​

​

12

​

​

—

​

​

—

​

​

1,729

Total non-accrual loans (1)

​

$

—

​

$

9

​

$

5,075

​

$

244

​

$

2,406

​

$

5,281

​

$

1,692

​

$

322

​

$

15,029

(1)Nonaccrual loans include SBA guaranteed amounts totaling $1.1 million and $3.1 million at December 31, 2021 and 2020, respectively.

​

Interest received on non-accrual loans was $523 thousand and $469 thousand for the years ended December 31, 2021 and 2020, respectively.

​

85

Table of Contents

Troubled Debt Restructurings

A modification is classified as a TDR if both of the following exist: (1) the borrower is experiencing financial difficulty and (2) the Bank has granted a concession to the borrower. The Bank determines that a borrower may be experiencing financial difficulty if the borrower is currently delinquent on any of its debt, or if the Bank is concerned that the borrower may not be able to perform in accordance with the current terms of the loan agreement in the foreseeable future. Many aspects of the borrower’s financial situation are assessed when determining whether they are experiencing financial difficulty, particularly as it relates to commercial borrowers due to the complex nature of the loan structure, business/industry risk and borrower/guarantor structures. Concessions may include the reduction of an interest rate at a rate lower than current market rates for a new loan with similar risk, extension of the maturity date, reduction of accrued interest, or principal forgiveness. When evaluating whether a concession has been granted, the Bank also considers whether the borrower has provided additional collateral or guarantors and whether such additions adequately compensate the Bank for the restructured terms, or if the revised terms are consistent with those currently being offered to new loan customers. The assessments of whether a borrower is experiencing (or is likely to experience) financial difficulty and whether a concession has been granted is subjective in nature and management’s judgment is required when determining whether a modification is a TDR.

Although each occurrence is unique to the borrower and is evaluated separately, for all portfolio segments, TDRs are typically modified through reduction in interest rates, reductions in payments, changing the payment terms from principal and interest to interest only, and/or extensions in term maturity.

For the year ended December 31, 2021, there were ten TDR loans outstanding in the amount of $3.4 million primarily due to the economic impact of COVID-19. There have been no defaults of TDRs modified during the past twelve months.

Credit Quality Indicators

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

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

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

Doubtful loans have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Primis had no loans classified Doubtful at December 31, 2021 or 2020.

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

​

​

86

Table of Contents

The following table presents weighted-average risk grades for all loans, by class and year of origination/renewal as of December 31, 2021 (in thousands):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Revolving

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Loans

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Revolving

​

Converted

​

​

​

​

​

2021

​

2020

​

2019

​

2018

 

2017

​

Prior

​

Loans

​

To Term

 

Total

Commercial real estate - owner occupied

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

58,596

​

$

18,411

​

$

35,498

​

$

28,163

​

$

45,013

​

$

187,461

​

$

3,010

​

$

6,937

​

$

383,089

Special Mention

​

​

—

​

​

—

​

​

—

​

​

—

​

​

140

​

​

1,184

​

​

—

​

​

—

​

​

1,324

Substandard

​

​

—

​

​

—

​

​

475

​

​

—

​

​

—

​

​

2,815

​

​

—

​

​

—

​

​

3,290

Doubtful

​

​

—

​

​

​

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

$

58,596

​

$

18,411

​

$

35,973

​

$

28,163

​

$

45,153

​

$

191,460

​

$

3,010

​

$

6,937

​

$

387,703

Weighted average risk grade

​

​

3.43

​

​

3.42

​

​

3.47

​

​

3.43

​

​

3.55

​

​

3.53

​

​

3.29

​

​

3.96

​

​

3.51

Commercial real estate - nonowner occupied

​

 

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

107,572

​

$

55,956

​

​

19,816

​

$

76,076

​

$

58,883

​

$

235,676

​

$

3,668

​

$

—

​

$

557,647

Special Mention

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

12,097

​

​

—

​

​

—

​

​

12,097

Substandard

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

17,655

​

​

—

​

​

601

​

​

18,256

Doubtful

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

$

107,572

​

$

55,956

​

$

19,816

​

$

76,076

​

$

58,883

​

$

265,428

​

$

3,668

​

$

601

​

$

588,000

Weighted average risk grade

​

​

3.05

​

​

3.47

​

​

3.83

​

​

3.45

​

​

3.81

​

​

3.81

​

​

2.94

​

​

6.00

​

​

3.59

Secured by farmland

​

 

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

320

​

$

66

​

$

—

​

$

—

​

$

445

​

$

3,734

​

$

1,955

​

$

—

​

$

6,520

Special Mention

​

​

—

​

​

—

​

​

—

​

​

—

​

​

852

​

​

404

​

​

—

​

​

—

​

​

1,256

Substandard

​

​

—

​

​

—

​

​

24

​

​

—

​

​

681

​

​

—

​

​

131

​

​

—

​

​

836

Doubtful

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

$

320

​

$

66

​

$

24

​

$

—

​

$

1,978

​

$

4,138

​

$

2,086

​

$

—

​

$

8,612

Weighted average risk grade

​

​

3.17

​

​

4.00

​

​

6.00

​

​

N/A

​

​

5.04

​

​

3.61

​

​

4.09

​

​

N/A

​

​

4.05

Construction and land development

​

 

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

57,320

​

$

14,003

​

$

13,360

​

$

7,061

​

$

8,414

​

$

15,664

​

$

982

​

$

31

​

$

116,835

Special Mention

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

Substandard

​

​

—

​

​

—

​

​

4,575

​

​

—

​

​

—

​

​

34

​

​

—

​

​

—

​

​

4,609

Doubtful

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

$

57,320

​

$

14,003

​

$

17,935

​

$

7,061

​

$

8,414

​

$

15,698

​

$

982

​

$

31

​

$

121,444

Weighted average risk grade

​

​

3.15

​

​

3.56

​

​

4.48

​

​

3.26

​

​

3.91

​

​

3.54

​

​

3.31

​

​

4.00

​

​

3.50

Residential 1-4 family

​

 

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

165,106

​

$

54,037

​

$

81,905

​

$

49,694

​

$

43,173

​

$

138,711

​

$

1,845

​

$

3,484

​

$

537,955

Special Mention

​

​

—

​

​

—

​

​

8,514

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

8,514

Substandard

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

795

​

​

—

​

​

296

​

​

1,091

Doubtful

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

$

165,106

​

$

54,037

​

$

90,419

​

$

49,694

​

$

43,173

​

$

139,506

​

$

1,845

​

$

3,780

​

$

547,560

Weighted average risk grade

​

​

3.04

​

​

3.06

​

​

3.24

​

​

3.13

​

​

3.07

​

​

3.26

​

​

3.98

​

​

3.30

​

​

3.15

Multi- family residential

​

 

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

37,030

​

$

18,866

​

$

7,228

​

$

6,328

​

$

36,574

​

$

42,310

​

$

5,031

​

$

—

​

$

153,367

Special Mention

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

5,326

​

​

—

​

​

—

​

​

5,326

Substandard

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

5,076

​

​

—

​

​

302

​

​

5,378

Doubtful

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

$

37,030

​

$

18,866

​

$

7,228

​

$

6,328

​

$

36,574

​

$

52,712

​

$

5,031

​

$

302

​

$

164,071

Weighted average risk grade

​

​

3.40

​

​

3.90

​

​

3.00

​

​

3.59

​

3.00

3.00

​

​

3.92

​

​

4.00

​

​

6.00

​

​

3.55

Home equity lines of credit

​

 

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

715

​

$

59

​

$

75

​

$

235

​

$

425

​

$

4,337

​

$

67,157

​

$

143

​

$

73,146

Special Mention

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

276

​

​

—

​

​

276

Substandard

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

398

​

​

26

​

​

424

Doubtful

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

$

715

​

$

59

​

$

75

​

$

235

​

$

425

​

$

4,337

​

$

67,831

​

$

169

​

$

73,846

Weighted average risk grade

​

​

3.00

​

​

3.00

​

​

3.00

​

​

3.00

​

​

3.77

​

​

3.79

​

​

3.09

​

​

4.31

​

​

3.14

Commercial loans

​

 

​

​

 

​

​

 

​

​

 

​

​

 

​

​

 

​

​

 

​

​

 

​

​

 

​

Pass

​

$

95,085

​

$

10,415

​

$

11,923

​

$

10,648

​

$

10,522

​

$

18,284

​

$

134,302

​

$

5,338

​

$

296,517

Special Mention

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

845

​

​

—

​

​

845

Substandard

​

​

—

​

​

9

​

​

—

​

​

1,508

​

​

—

​

​

1,938

​

​

1,163

​

​

—

​

​

4,618

Doubtful

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

$

95,085

​

$

10,424

​

$

11,923

​

$

12,156

​

$

10,522

​

$

20,222

​

$

136,310

​

$

5,338

​

$

301,980

Weighted average risk grade

​

​

3.43

​

​

3.36

​

​

3.79

​

​

3.77

​

​

2.95

​

​

3.96

​

​

3.43

​

​

3.95

​

​

3.48

Paycheck Protection Program loans

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

56,087

​

$

21,232

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

77,319

Special Mention

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

Substandard

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

Doubtful

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

$

56,087

​

$

21,232

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

77,319

Weighted average risk grade

​

​

2.00

​

​

2.00

​

​

N/A

​

​

N/A

​

​

N/A

​

​

N/A

​

​

N/A

​

​

N/A

​

​

2.00

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

87

Table of Contents

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Revolving

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Loans

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Revolving

​

Converted

​

​

​

​

​

2021

​

2020

​

2019

​

2018

 

2017

​

Prior

​

Loans

​

To Term

 

Total

Consumer loans

​

 

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

48,107

​

$

2,351

​

$

1,002

​

$

914

​

$

237

​

$

5,766

​

$

2,519

​

$

—

​

$

60,896

Special Mention

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

82

​

​

—

​

​

—

​

​

82

Substandard

​

​

—

​

​

—

​

​

—

​

​

7

​

​

9

​

​

2

​

​

—

​

​

—

​

​

18

Doubtful

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

$

48,107

​

$

2,351

​

$

1,002

​

$

921

​

$

246

​

$

5,850

​

$

2,519

​

$

—

​

$

60,996

Weighted average risk grade

​

​

3.55

​

​

3.99

​

​

3.99

​

​

4.02

​

​

4.07

​

​

4.01

​

​

4.00

​

​

N/A

​

​

3.65

PCD

​

 

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

 

​

​

 

​

Pass

​

$

—

​

$

—

​

$

—

​

$

—

​

$

—

​

$

5,145

​

$

30

​

$

—

​

$

5,175

Special Mention

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

1,391

​

​

—

​

​

—

​

​

1,391

Substandard

​

​

—

​

​

—

​

​

—

​

​

—

​

​

1,717

​

​

172

​

​

—

​

​

—

​

​

1,889

Doubtful

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

$

—

​

$

—

​

$

—

​

$

—

​

$

1,717

​

$

6,708

​

$

30

​

$

—

​

$

8,455

Weighted average risk grade

​

​

N/A

​

​

N/A

​

​

N/A

​

​

N/A

​

​

6.00

​

​

4.08

​

​

3.00

​

​

N/A

​

​

4.47

Total

​

$

625,938

​

$

195,405

​

$

184,395

​

$

180,634

​

$

207,085

​

$

706,059

​

$

223,312

​

$

17,158

​

$

2,339,986

Weighted average risk grade

​

​

3.12

​

​

3.24

​

​

3.50

​

​

3.38

​

​

3.45

​

​

3.64

​

​

3.35

​

​

3.92

​

​

3.39

​

​

Revolving loans that converted to term during 2021 were as follows (in thousands):

​

​

​

​

​

​

For the year ended December 31, 2021

Commercial real estate - owner occupied

​

$

298

Commercial real estate - non-owner occupied

​

 

601

Residential 1-4 family

​

​

1,706

Multi- family residential

​

​

302

Commercial loans

​

 

561

Total loans

​

$

3,468

​

The amount of foreclosed residential real estate property held at December 31, 2021 and 2020 was $0.9 million and $1.0 million, respectively. The recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure was zero and $1.4 million at December 31, 2021 and 2020, respectively.

Allowance For Credit Losses – Loans

The allowance for credit losses on loans is a contra-asset valuation account, calculated in accordance with ASC 326 that is deducted from the amortized cost basis of loans to present the net amount expected to be collected. The amount of the allowance represents management's best estimate of current expected credit losses on loans considering available information, from internal and external sources, relevant to assessing collectability over the loans' contractual terms, adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions, renewals and modifications unless (i) management has a reasonable expectation that a TDR will be executed with an individual borrower or (ii) such extension or renewal options are not unconditionally cancellable by us and, in such cases, the borrower is likely to meet applicable conditions and likely to request extension or renewal. Relevant available information includes historical credit loss experience, current conditions and reasonable and supportable forecasts. 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. The allowance for credit losses is measured on a collective basis for portfolios of loans when similar risk characteristics exist. Loans that do not share risk characteristics are evaluated for expected credit losses on an individual basis and excluded from the collective evaluation. Expected credit losses for collateral dependent loans, including loans where the borrower is experiencing financial difficulty but foreclosure is not probable, are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate.

Credit loss expense related to loans reflects the totality of actions taken on all loans for a particular period including any necessary increases or decreases in the allowance related to changes in credit loss expectations associated with specific loans or pools of loans. Portions of the allowance may be allocated for specific credits; however, the entire allowance is

88

Table of Contents

available for any credit that, in management’s judgment, should be charged off. While management utilizes its best judgment and information available, the ultimate appropriateness of the allowance is dependent upon a variety of factors beyond our control, including the performance of our loan portfolio, the economy, changes in interest rates and the view of the regulatory authorities toward loan classifications.

In calculating the allowance for credit losses, most loans are segmented into pools based upon similar characteristics and risk profiles. Common characteristics and risk profiles include the type/purpose of loan, underlying collateral, geographical similarity and historical/expected credit loss patterns. In developing these loan pools for the purposes of modeling expected credit losses, we also analyzed the degree of correlation in how loans within each portfolio respond when subjected to varying economic conditions and scenarios as well as other portfolio stress factors. For allowance modeling purposes, our loan pools include (i) commercial real estate - owner occupied, (ii) commercial real estate - non-owner occupied, (iii) construction and land development, (iv) commercial, (v) agricultural loans, (vi) residential 1-4 family and (vii) consumer loans. We periodically reassess each pool to ensure the loans within the pool continue to share similar characteristics and risk profiles and to determine whether further segmentation is necessary.

For each loan pool, we measure expected credit losses over the life of each loan utilizing a combination of inputs:  (i) probability of default (“PD”), which is the likelihood that the loan will stop performing/default, (ii) probability of attrition (“PA”), which is the likelihood that a loan will pay-off prior to maturity, (iii) loss given default (“LGD”), which is the expected loss rate for loans in default and (iv) exposure at default (“EAD”), which is the estimated outstanding principal balance of the loans upon default, including the expected funding of unfunded commitments outstanding as of the measurement date. Inputs are pool-specific, though not necessarily solely reliant on internally-sourced data. Internal data is supplemented by, but not replaced by, peer data when required, primarily to determine the PD input. The various pool-specific inputs may be adjusted for current macroeconomic assumptions, as further discussed below, and other factors such as differences in underwriting standards, portfolio mix, or when historical asset terms do not reflect the contractual terms of the financial assets being evaluated as of the measurement date. Each time we measure expected credit losses, we assess the relevancy of historical information and consider any necessary adjustments to address any differences in current asset-specific characteristics.

Significant macroeconomic variables utilized in our allowance models include, among other things, (i) VA Gross Domestic Product, (ii) VA House Price Index, and (iii) VA unemployment rates. The macroeconomic variables utilized as inputs in forecast modeling were subjected to a variety of analysis procedures and were selected primarily based on statistical relevancy and correlation to historical credit losses, where historical credit losses may be fully internally-sourced or supplemented with peer data.

PDs were estimated by analyzing the relationship between the historical performance of each loan pool and historical economic trends over a complete economic cycle. Historical performance data is either fully internally-sourced or supplemented with peer data where necessary. PDs are adjusted to reflect the current impact of certain macroeconomic variables as well as their expected changes over a reasonable and supportable forecast period. We have determined that we are reasonably able to forecast the macroeconomic variables used in our forecast modeling processes with an acceptable degree of confidence for a total of four quarters. This forecast period is followed by an additional eight quarter reversion process whereby the forecasted macroeconomic variables are reverted to their historical mean on a straight-line basis. By reverting these economic inputs to their historical mean and considering loan/borrower specific attributes, our allowance models are intended to yield a measurement of expected credit losses that reflects average historical loss rates (which may be supplemented by peer data) for periods subsequent to the initial twelve-quarters consisting of the forecast and reversion periods. The LGD is linked to PD based on benchmark historical loss averages for each loan pool. LGD is dynamic with PD; as PD increases, so will LGD, and vice versa. In this context, “benchmark” refers to the use of third-party data, and “historical loss averages” refers to the fraction of defaulted balance that tends to be lost. By nature of its connection to PD, LGD is by extension adjusted to reflect the current impact of certain macroeconomic variables as well as their expected changes over the four-quarter forecast period and eight-quarter reversion process, which management considers to be both reasonable and supportable. This same forecast/reversion period is used for all macroeconomic variables used in all of our economic forecast models. PA and EAD are estimated using either a Discounted Cash Flow or Remaining Life model, both of which use various timing inputs to estimate the loan balance that remains at various future points in time, and thus also at the time of a default event.

89

Table of Contents

Management qualitatively adjusts allowance model results for risk factors that are not considered within our quantitative modeling processes but are nonetheless relevant in assessing the expected credit losses within our loan pools. Qualitative factor (“Q-Factor”) adjustments are driven by key risk indicators that management tracks on a pool-by-pool basis. The risk factors are large relationship concentrations, borrower debt service coverage exceptions, loan-to-value exceptions, and excessive growth in the loan pool. The framework established by management calculates suggested Q-Factor adjustments each period as these key risk indicators exceed certain thresholds. Management also has the ability to modify the suggested amounts based on management’s understanding of changes in the pool. In fourth quarter of 2021, management modified suggested qualitative reserves for seven loan pools related to loan growth and concentration components that were triggered by either the introduction of a new business line, reclassification of loans by loan pool or accounting system, isolated and identifiable projects driving growth and qualitative factors already recognized in another measure.

In some cases, management may determine that an individual loan exhibits unique risk characteristics which differentiate the loan from other loans within our loan pools. In such cases, the loans are evaluated for expected credit losses on an individual basis and excluded from the collective evaluation. Specific allocations of the allowance for credit losses are determined by analyzing the borrower’s ability to repay amounts owed, collateral deficiencies, the relative risk grade of the loan and economic conditions affecting the borrower’s industry, among other things. A loan is considered to be collateral dependent when, based upon management's assessment, the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. In such cases, expected credit losses are based on the fair value of the collateral at the measurement date, adjusted for estimated selling costs if satisfaction of the loan depends on the sale of the collateral. We reevaluate the fair value of collateral supporting collateral dependent loans on a quarterly basis. The fair value of real estate collateral supporting collateral dependent loans is evaluated by our internal appraisal services using a methodology that is consistent with the Uniform Standards of Professional Appraisal Practice. The fair value of collateral supporting collateral dependent construction loans is based on an “as is” valuation.

The following tables present details of the allowance for credit losses on loans segregated by loan portfolio segment as of December 31, 2021 and 2020, calculated in accordance with the CECL methodology described above (in thousands). 

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

Commercial

    

Commercial

    

​

​

    

​

​

    

​

​

    

​

​

    

Home

    

​

​

    

​

​

    

​

​

    

​

​

    

​

​

​

​

Real Estate

​

Real Estate

​

​

​

Construction

​

​

​

​

​

​

​

Equity

​

​

​

​

Paycheck

​

​

​

​

​

 

​

​

​

Owner

​

Non-owner

​

Secured by

​

and Land

​

1-4 Family

​

Multi-Family

​

Lines Of

​

Commercial

​

Protection

​

Consumer

​

PCD

​

 

​

December 31, 2021

​

Occupied

​

Occupied

​

Farmland

​

Development

​

Residential 

​

Residential 

​

Credit

​

Loans

​

Program

​

Loans

​

Loans

​

Total

Modeled expected credit losses

​

$

4,281

​

$

8,020

​

$

9

​

$

540

​

$

3,012

​

$

1,885

​

$

273

​

$

2,154

​

$

—

​

$

786

​

$

—

​

$

20,960

Q-factor and other qualitative adjustments

​

​

281

​

​

1,008

​

​

47

​

​

458

​

​

576

​

​

1,395

​

​

164

​

​

1,276

​

​

—

​

​

—

​

​

—

​

​

5,205

Specific allocations

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

658

​

 

—

​

 

1

​

 

2,281

​

 

2,940

Total

​

$

4,562

​

$

9,028

​

$

56

​

$

998

​

$

3,588

​

$

3,280

​

$

437

​

$

4,088

​

$

—

​

$

787

​

$

2,281

​

$

29,105

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

Commercial

    

Commercial

    

​

​

    

​

​

    

​

​

    

​

​

    

Home

    

​

​

    

​

​

    

​

​

    

​

​

    

​

​

​

​

Real Estate

​

Real Estate

​

​

​

Construction

​

​

​

​

​

​

​

Equity

​

​

​

​

Paycheck

​

​

​

​

​

 

​

​

​

Owner

​

Non-owner

​

Secured by

​

and Land

​

1-4 Family

​

Multi-Family

​

Lines Of

​

Commercial

​

Protection

​

Consumer

​

PCD

​

 

​

December 31, 2020

​

Occupied

​

Occupied

​

Farmland

​

Development

​

Residential 

​

Residential 

​

Credit

​

Loans

​

Program

​

Loans

​

Loans

​

Total

Modeled expected credit losses

​

$

2,565

​

$

3,959

​

$

58

​

$

1,297

​

$

4,579

​

$

649

​

$

534

​

$

544

​

$

—

​

$

306

​

$

—

​

$

14,491

Q-factor and other qualitative adjustments

​

​

4,134

​

​

7,467

​

​

46

​

​

516

​

​

4,963

​

​

763

​

​

367

​

​

917

​

​

—

​

​

194

​

​

—

​

​

19,367

Specific allocations

​

 

—

​

 

—

​

 

—

​

 

2

​

 

37

​

 

—

​

 

—

​

 

37

​

 

—

​

 

17

​

 

2,394

​

 

2,487

Total

​

$

6,699

​

$

11,426

​

$

104

​

$

1,815

​

$

9,579

​

$

1,412

​

$

901

​

$

1,498

​

$

—

​

$

517

​

$

2,394

​

$

36,345

​

As part of management’s ongoing review process and as an annual requirement, during the third quarter of 2021, the Company refreshed and recalibrated the historical loss rates, forecast assumptions, and qualitative factor framework of the CECL model. Updated peer groups were also determined in collaboration with the Company’s CECL consultant. Management included banks in Virginia, Maryland, North Carolina, and Pennsylvania that were between $2.0 billion and $10.0 billion in asset size. Additionally, in this peer group the Company included the historical loss experience of Eastern Virginia Bank, which was acquired in 2017. The peer group population was further narrowed using statistical analysis with a focus on total loans, percent of charge-offs, portfolio yields, and percent of charge-offs during recession. Generally,

90

Table of Contents

the updated loss drivers displayed higher default expectations as compared to the prior models. This is a direct result of the peers included in the analysis yielding higher predicted probability of defaults under the new model applied in the third quarter 2021. Additionally, qualitative factors related to COVID-19 uncertainty were eliminated. COVID-19 related factors contributed 62% or $11.0 million to the first quarter of 2021 and 27% or $3.5 million to the second quarter of 2021 total qualitative reserves.

​

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

Activity in the allowance for credit losses by class of loan for the years ended December 31, 2021 and 2020 is summarized below (in thousands):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commercial

Commercial

    

​

    

​

    

​

    

​

    

​

    

​

    

​

    

​

    

​

 

​

​

Real Estate

Real Estate

​

Construction

​

​

​

​

Home Equity

​

​

​

​

​

​

​

 

​

​

Owner

Non-owner

Secured by

and Land

1-4 Family

Multi-Family

Lines Of

Commercial

Consumer

PCD

​

​

December 31, 2021

Occupied

Occupied 

Farmland

Development

Residential

Residential 

Credit

Loans

Loans

Loans

Unallocated

Total

Allowance for credit losses:

​

  

​

  

​

  

​

  

​

  

​

  

​

  

​

  

​

  

​

  

​

  

​

  

Beginning balance

$

6,699

$

11,426

$

104

$

1,815

$

9,579

$

1,412

$

901

$

1,498

$

517

$

2,394

$

—

$

36,345

Provision (recovery)

​

(1,961)

​

(2,398)

​

(48)

​

(817)

​

(5,533)

​

1,868

​

(466)

​

3,291

​

376

​

(113)

​

—

​

(5,801)

Charge offs

 

(176)

 

—

 

—

 

—

 

(469)

 

—

 

—

 

(1,706)

 

(145)

 

—

 

—

 

(2,496)

Recoveries

 

—

 

—

 

—

 

—

 

11

 

—

 

2

 

1,005

 

39

 

—

 

—

 

1,057

Ending balance

$

4,562

$

9,028

$

56

$

998

$

3,588

$

3,280

$

437

$

4,088

$

787

$

2,281

$

—

$

29,105

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

December 31, 2020

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Allowance for credit losses:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Beginning balance

$

810

$

1,596

$

5

$

683

$

1,049

$

119

$

217

$

5,418

$

190

$

—

$

174

$

10,261

Adoption of ASC 326

​

1,704

​

2,497

​

201

​

674

​

4,185

​

209

​

(217)

​

(3,246)

​

187

 

2,272

 

(174)

 

8,292

Balance

​

2,514

​

4,093

​

206

​

1,357

​

5,234

​

328

​

—

​

2,172

​

377

 

2,272

 

—

 

18,553

Provision (recovery)

​

4,232

​

7,198

​

(102)

​

458

​

4,291

​

1,084

​

970

​

966

​

231

​

122

​

—

​

19,450

Charge offs

 

(52)

 

—

 

—

 

—

 

(308)

 

—

 

(125)

 

(1,734)

 

(124)

​

—

​

—

​

(2,343)

Recoveries

 

5

 

135

 

—

 

—

 

362

 

—

 

56

 

94

 

33

​

—

​

—

​

685

Ending balance

$

6,699

$

11,426

$

104

$

1,815

$

9,579

$

1,412

$

901

$

1,498

$

517

$

2,394

$

—

$

36,345

​

​

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

​

91

Table of Contents

The following table presents loans that were evaluated for expected credit losses on an individual basis and the related specific allocations, by loan portfolio segment as of December 31, 2021 and 2020 (in thousands):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

December 31, 2021

    

December 31, 2020

​

​

Loan

​

Specific

​

Loan

​

Specific

​

​

Balance (1)

​

Allocations

​

Balance (1)

​

Allocations

Commercial real estate - owner occupied

​

$

3,291

​

$

—

​

$

23,397

​

$

—

Commercial real estate - non-owner occupied

​

 

18,256

​

 

—

​

 

7,467

​

 

—

Secured by farmland

​

​

681

​

​

—

​

​

1,069

​

​

—

Construction and land development

​

 

4,575

​

 

—

​

 

77

​

 

2

Residential 1-4 family

​

​

541

​

​

—

​

​

1,918

​

​

37

Multi- family residential

​

​

5,378

​

​

—

​

​

—

​

​

—

Home equity lines of credit

​

​

—

​

​

—

​

​

481

​

​

—

Commercial loans

​

 

3,688

​

 

658

​

 

5,515

​

 

37

Consumer loans

​

​

7

​

​

1

​

​

17

​

​

17

Total non-PCD loans

​

​

36,417

​

​

659

​

​

39,941

​

​

93

PCD loans

​

​

8,455

​

​

2,281

​

​

8,908

​

​

2,394

Total loans

​

$

44,872

​

$

2,940

​

$

48,849

​

$

2,487

(1)Includes SBA guarantees of $681 thousand and $2.5 million as of December 31, 2021 and 2020, respectively.

​

​

​

​

​

4.          FAIR VALUE

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

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

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

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

The following is a description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy:

Assets Measured on a Recurring Basis:

Investment Securities Available-for-sale

Where quoted prices are available in an active market, investment securities are classified within Level 1 of the valuation hierarchy. Level 1 investment securities include highly liquid government bonds and mortgage products. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of investment securities with similar characteristics or discounted cash flow. Level 2 investment securities include U.S. agency securities, mortgage-backed securities, obligations of states and political subdivisions and certain corporate, collateralized loan obligations and other securities. In certain cases where there is limited activity or less transparency around inputs to the valuation, investment securities are classified within Level 3 of the valuation hierarchy. Currently, a majority of Primis’

92

Table of Contents

available-for-sale debt investment securities are considered to be Level 2 investment securities, except for a few corporate securities that are classified as Level 3 investment securities.

​

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

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Fair Value Measurements Using

​

​

​

​

​

​

​

​

Significant

​

 

​

​

​

​

​

​

Quoted Prices in

​

Other

​

Significant

​

​

​

​

​

Active Markets for

​

Observable

​

Unobservable

​

​

Total at

​

Identical Assets

​

Inputs

​

Inputs

(dollars in thousands)

    

December 31, 2021

    

(Level 1)

    

(Level 2)

    

(Level 3)

Available-for-sale securities

 

​

  

 

​

  

 

​

  

 

​

  

Residential government-sponsored mortgage-backed securities

​

$

122,610

​

$

—

​

$

122,610

​

$

—

Obligations of states and political subdivisions

​

 

31,231

​

 

—

​

 

31,231

​

 

—

Corporate securities

​

 

13,685

​

 

—

​

 

13,685

​

 

—

Collateralized loan obligations

​

 

5,010

​

 

—

​

 

5,010

​

 

—

Residential government-sponsored collateralized mortgage obligations

​

 

19,807

​

 

—

​

 

19,807

​

 

—

Government-sponsored agency securities

​

 

17,488

​

 

—

​

 

17,488

​

 

—

Agency commercial mortgage-backed securities

​

 

52,667

​

 

—

​

 

52,667

​

 

—

SBA pool securities

​

 

8,834

​

 

—

​

 

8,834

​

 

—

Total

​

$

271,332

​

$

—

​

$

271,332

​

$

—

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Fair Value Measurements Using

​

​

​

​

​

​

​

​

Significant

​

 

​

​

​

​

​

​

Quoted Prices in

​

Other

​

Significant

​

​

​

​

​

Active Markets for

​

Observable

​

Unobservable

​

​

Total at

​

Identical Assets

​

Inputs

​

Inputs

(dollars in thousands)

    

December 31, 2020

    

(Level 1)

    

(Level 2)

    

(Level 3)

Available-for-sale securities

 

​

  

 

​

  

 

​

  

 

​

  

Residential government-sponsored mortgage-backed securities

​

$

37,060

​

$

—

​

$

37,060

​

$

—

Obligations of states and political subdivisions

​

 

24,042

​

 

—

​

 

24,042

​

 

—

Corporate securities

​

 

15,079

​

 

—

​

 

14,079

​

 

1,000

Residential government-sponsored collateralized mortgage obligations

​

 

29,416

​

 

—

​

 

29,416

​

 

—

Government-sponsored agency securities

​

 

6,075

​

 

—

​

 

6,075

​

 

—

Agency commercial mortgage-backed securities

​

 

30,190

​

 

—

​

 

30,190

​

 

—

SBA pool securities

​

 

11,371

​

 

—

​

 

11,371

​

 

—

Total

​

$

153,233

​

$

—

​

$

152,233

​

$

1,000

​

At December 31, 2020, the Company had $1.0 million of corporate securities that were classified as Level 3. During 2021, these securities matured and the balance at December 31, 2021 was zero. No corporate securities that are classified as Level 3 above were purchased or sold during 2020.

Assets and Liabilities Measured on a Non-recurring Basis:

Loans

We may be required to measure certain financial assets at fair value on a nonrecurring basis. These adjustments to fair value usually result from the application of lower of amortized cost or fair value accounting or write-downs of individual assets due to impairment.

​

Following the adoption of ASC 326, the population of loans measured at fair value on a non-recurring basis has greatly diminished and is limited to collateral-dependent loans evaluated individually. These collateral-dependent loans are deemed to be at fair value if there is an associated allowance for credit losses or if a charge-off has been recorded in the previous 12 months. Collateral values are determined using appraisals or other third-party value estimates of the subject property discounted based on estimated selling costs, generally between 5% and 10%, and immaterial adjustments for

93

Table of Contents

other external factors that may impact the marketability of the collateral. The weighted average discount for estimated selling costs applied was 6%.

Other Real Estate Owned

OREO is evaluated at the time of acquisition and recorded at fair value as determined by independent appraisal or evaluation less cost to sell. In some cases appraised value is net of costs to sell. Selling costs have been in the range from 5% to 10% of collateral valuation at December 31, 2021 and 2020. Fair value is classified as Level 3 in the fair value hierarchy. OREO is further evaluated quarterly for any additional impairment. At December 31, 2021 and 2020, the total amount of OREO was $1.2 million and $3.1 million, respectively.

​

94

Table of Contents

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

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Fair Value Measurements Using

​

​

​

​

​

​

​

​

Significant

​

​

 

​

​

​

​

​

Quoted Prices in

​

Other

​

Significant

​

​

​

​

​

Active Markets for

​

Observable

​

Unobservable

​

​

Total at

​

Identical Assets

​

Inputs

​

Inputs

(dollars in thousands)

    

December 31, 2021

    

(Level 1)

    

(Level 2)

    

(Level 3)

Collateral dependent loans

​

$

44,331

​

$

—

​

$

—

 

$

44,331

Other real estate owned:

​

 

​

​

 

​

​

 

  

 

​

​

Construction and land development

​

 

266

​

 

—

​

 

—

 

​

266

Residential 1-4 family

​

 

897

​

 

—

​

 

—

 

​

897

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Fair Value Measurements Using

​

​

​

​

​

​

​

​

Significant

​

​

​

​

​

​

​

​

Quoted Prices in

​

Other

​

Significant

​

​

​

​

​

Active Markets for

​

Observable

​

Unobservable

​

​

Total at

​

Identical Assets

​

Inputs

​

Inputs

(dollars in thousands)

    

December 31, 2020

    

(Level 1)

    

(Level 2)

    

(Level 3)

Collateral dependent loans

​

$

47,001

​

$

—

​

$

—

 

$

47,001

Other real estate owned:

​

 

​

​

 

​

​

 

  

 

​

​

Commercial real estate - non-owner occupied

​

 

865

​

 

—

​

 

—

 

​

865

Construction and land development

​

 

1,221

​

 

—

​

 

—

 

​

1,221

Residential 1-4 family

​

 

992

​

 

—

​

 

—

 

​

992

​

Fair Value of Financial Instruments

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

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

December 31, 2021

​

December 31, 2020

​

    

Fair Value

    

Carrying

    

Fair 

    

Carrying

    

Fair 

​

​

Hierarchy Level

​

Amount

​

Value

​

Amount

​

Value

Financial assets:

 

  

 

​

  

 

​

  

 

​

  

 

​

  

Cash and cash equivalents

 

Level 1

​

$

530,167

​

$

530,167

​

$

196,185

​

$

196,185

Securities available-for-sale

 

Level 2 & Level 3

​

 

271,332

​

 

271,332

​

 

153,233

​

 

153,233

Securities held-to-maturity

 

Level 2

​

 

22,940

​

 

23,364

​

 

40,721

​

 

41,832

Stock in Federal Reserve Bank and Federal Home Loan Bank

 

Level 2

​

 

15,521

​

 

15,521

​

 

16,927

​

 

16,927

Investments in mortgage company - held for sale

​

Level 2

​

​

—

​

​

—

​

​

12,952

​

​

12,952

Preferred investment in mortgage company

 

Level 2

​

 

3,005

​

 

3,005

​

 

3,005

​

 

3,005

Net loans

 

Level 3

​

 

2,310,881

​

 

2,278,456

​

 

2,404,151

​

 

2,435,612

Accrued interest receivable

 

Level 2

​

 

11,882

​

 

11,882

​

 

19,998

​

 

19,998

Financial liabilities:

 

  

​

 

​

​

 

​

​

 

​

​

 

​

Demand deposits and NOW accounts

 

Level 2

​

$

1,380,020

​

$

1,380,020

​

$

1,155,426

​

$

1,155,426

Money market and savings accounts

 

Level 2

​

 

1,022,621

​

 

1,022,621

​

 

787,132

​

 

787,132

Time deposits

 

Level 3

​

 

360,575

​

 

362,902

​

 

490,048

​

 

495,022

Securities sold under agreements to repurchase

 

Level 1

​

 

9,962

​

 

9,962

​

 

16,065

​

 

16,065

FHLB advances

 

Level 1

​

 

100,000

​

 

100,000

​

 

100,000

​

 

100,000

Junior subordinated debt

 

Level 2

​

 

9,731

​

 

10,367

​

 

9,682

​

 

8,863

Senior subordinated notes

 

Level 2

​

 

85,297

​

 

91,141

​

 

105,647

​

 

109,276

Accrued interest payable

 

Level 2

​

 

1,864

​

 

1,864

​

 

3,057

​

 

3,057

​

Carrying amount is the estimated fair value for cash and cash equivalents (including federal funds sold), accrued interest receivable and payable, demand deposits, savings accounts, money market accounts and FHLB advances and securities sold under agreements to repurchase.

95

Table of Contents

Fair value of long-term debt is based on current rates for similar financing. The carrying amount of Federal Reserve Bank and FHLB stock is a reasonable estimate of fair value as these securities are not readily marketable and are based on the ultimate recoverability of the par value. The fair value of off-balance-sheet items is not considered material. Fair value of net loans, time deposits, junior subordinated debt, and senior subordinated notes are measured using the exit-price notion.

​

​

5.          BANK PREMISES AND EQUIPMENT

Bank premises and equipment as of December 31, 2021 and 2020 were as follows (in thousands):

​

​

​

​

​

​

​

​

​

​

2021

​

2020

Land

​

$

8,139

​

$

8,139

Land improvements

​

 

1,558

​

 

1,558

Building and improvements

​

 

23,792

​

 

23,164

Leasehold improvements

​

 

3,001

​

 

3,001

Furniture, fixtures, equipment and software

​

 

12,182

​

 

8,962

Construction in progress

​

 

12

​

 

1,441

​

​

 

48,684

​

 

46,265

Less accumulated depreciation and amortization

​

 

18,274

​

 

15,959

Bank premises and equipment, net

​

$

30,410

​

$

30,306

​

    Depreciation and amortization expense related to bank premises and equipment for 2021, 2020 and 2019 was $2.4 million, $2.0 million and $2.3 million, respectively.

​

6. LEASES

The Company leases certain premises and equipment under operating leases. In recognizing lease right-of-use assets and related liabilities, we account for lease and non-lease components (such as taxes, insurance, and common area maintenance costs) separately as such amounts are generally readily determinable under our lease contracts. At December 31, 2021 and 2020, the Company had operating lease liabilities totaling $6.5 million and $8.2 million, respectively, and right-of-use assets totaling $5.9 million and $7.5 million, respectively, related to these leases. Operating lease liabilities and right-of-use assets are reflected in our consolidated balance sheets. We do not currently have any financing leases. For the year ended December 31, 2021 and 2020, our net operating lease cost was $2.4 million and $2.9 million, respectively, and was reflected in occupancy expenses on our income statements.

The following table presents supplemental cash flow and other information related to our operating leases:

​

​

​

​

​

​

​

​

​

​

​

​

For the Year Ended

​

(in thousands except for percent and period data)

​

December 31, 2021

​

​

December 31, 2020

​

Other information:

​

​

​

​

​

​

​

​

Weighted-average remaining lease term - operating leases, in years

​

​

4.4

​

​

​

4.8

​

Weighted-average discount rate - operating leases

​

 

2.5

%

​

 

2.5

%

​

​

96

Table of Contents

The following table summarizes the maturity of remaining lease liabilities:

​

​

​

​

​

​

​

​

​

​

​

As of

(dollars in thousands)

​

December 31, 2021

Lease payments due:

​

​

​

2022

​

$

2,424

2023

​

​

1,700

2024

​

​

950

2025

​

​

421

2026

​

​

356

Thereafter

​

 

1,080

Total lease payments

​

​

6,931

Less: imputed interest

​

​

(433)

Lease liabilities

​

$

6,498

​

As of December 31, 2021 and 2020, the Company did not have any operating leases that have not yet commenced that will create additional lease liabilities and right-of-use assets for the Company.

​

​

​

7.          GOODWILL AND INTANGIBLE ASSETS

Goodwill

Primis has recorded $101.9 million of goodwill at December 31, 2021 and 2020. Goodwill is primarily related to the acquisition of other banks.

Goodwill is evaluated for impairment on an annual basis or more frequently if events or circumstances warrant. Our annual assessment occurs during the third calendar quarter. For the 2021 assessment, we performed a qualitative assessment to determine if it was more likely than not that the fair value of our single reporting unit is less than its carrying amount. We concluded that the fair value of our single reporting unit exceeded its carrying amount and that it was not necessary to perform the quantitative impairment test pursuant to ASC 350-20. Our qualitative assessment considered many factors including, but not limited to, our actual and projected operating performance and profitability, as well as consideration of recent bank merger and acquisition transaction metrics. No impairment was indicated in 2021, 2020 or 2019.

Intangible Assets

Intangible assets were as follows at year end (in thousands):

​

​

​

​

​

​

​

​

​

​

​

​

December 31, 2021

​

    

Gross Carrying

    

Accumulated

    

Net Carrying

​

​

Value

​

Amortization

​

Value

Amortizable core deposit intangibles

​

$

17,503

​

$

(13,041)

​

$

4,462

​

​

​

​

​

​

​

​

​

​

​

​

​

December 31, 2020

​

    

Gross Carrying

    

Accumulated

    

Net Carrying

​

​

Value

​

Amortization

​

Value

Amortizable core deposit intangibles

​

$

17,503

​

$

(11,677)

​

$

5,826

​

97

Table of Contents

Estimated amortization expense of intangibles for the years ended December 31 were as follows (in thousands):

​

​

​

​

2022

    

$

1,325

2023

​

 

1,269

2024

​

 

1,266

2025

​

 

602

Total

​

$

4,462

​

​

8.          DEPOSITS

The aggregate amount of time deposits in denominations of $250 thousand or more at December 31, 2021 and 2020 was $128.0 million and $165.7 million, respectively.

At December 31, 2021, the scheduled maturities of time deposits are as follows (in thousands):

​

​

​

​

2022

    

$

285,223

2023

​

 

52,475

2024

​

 

14,060

2025

​

 

4,317

2026

​

 

4,500

Total

​

$

360,575

​

The following table sets forth the maturities of certificates of deposit of $250 thousand and over as of December 31, 2021 (in thousands):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Within

    

3 to 6

    

6 to 12

    

Over 12

    

 

​

3 Months

​

Months

​

Months

​

Months

​

Total

$

20,968

​

$

28,249

​

$

51,850

​

$

26,893

​

$

127,960

​

    For our deposit agreements with certain customers, we hold the collateral in a segregated custodial account. We are required to maintain adequate collateral levels. In the event the collateral fair value falls below stipulated levels, we will pledge additional securities. We closely monitor collateral levels to ensure adequate levels are maintained, while mitigating the potential risk of over-collateralization.

9.         SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE AND OTHER BORROWINGS

Other borrowings can consist of FHLB convertible advances, FHLB of Atlanta overnight advances, FHLB advances maturing within one year, federal funds purchased 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, 2021 and 2020 was $10.0 million and $16.0 million, respectively.

At December 31, 2021 and 2020, we have pledged callable agency securities, residential government-sponsored mortgage-backed securities and collateralized mortgage obligations with a carrying value of $21.7 million and $31.1 million, respectively, to customers who require collateral for overnight repurchase agreements and deposits.

98

Table of Contents

Other borrowings consist of the following (in thousands):

​

​

​

​

​

​

​

​

​

​

December 31, 

​

​

    

2021

    

2020

    

​

​

​

​

​

​

​

​

FHLB collateral advances maturing 3/1/2030

 

$

100,000

 

$

100,000

​

Securities sold under agreements to repurchase

 

 

9,962

 

 

16,065

​

Total

 

$

109,962

 

$

116,065

​

​

​

​

​

​

​

​

​

Weighted average interest rate at year end

 

​

3.55

%  

​

3.55

%  

​

    Our FHLB convertible advances of $100.0 million was called on March 1, 2022.

Each FHLB advance is payable at its maturity date, with a prepayment penalty for fixed rate advances paid off earlier than maturity. Residential 1-4 family mortgage loans in the amount of approximately $382.7 million and $390.7 million were pledged as collateral for FHLB advances as of December 31, 2021 and 2020, respectively. HELOCs in the amount of approximately $28.3 million and $37.2 million were pledged as collateral for FHLB advances at December 31, 2021 and 2020, respectively. Commercial mortgage loans in the amount of approximately $155.4 million and $189.0 million were pledged as collateral for FHLB advances as of December 31, 2021 and 2020, respectively. Investment securities in the amount of $3.5 million and $6.4 million were pledged as collateral for FHLB advances at December 31, 2021 and 2020, respectively. At December 31, 2021, Primis Bank had available collateral to borrow an additional $763.2 million from the FHLB.

10.         JUNIOR SUBORDINATED DEBT AND SENIOR SUBORDINATED NOTES

In 2017, the Company assumed $10.3 million of trust preferred securities that were issued on September 17, 2003 and placed through a trust in a pooled underwriting totaling approximately $650 million. The trust issuer invested the total proceeds from the sale of the trust preferred securities in Floating Rate Junior Subordinated Deferrable Interest Debentures. At December 31, 2021 and 2020, there was $10.3 million outstanding, net of approximately $600 thousand of debt issuance costs. These securities pay cumulative cash distributions quarterly at a variable rate per annum, reset quarterly, equal to the three-month LIBOR plus 2.95%. As of December 31, 2021 and 2020, the interest rate was 3.17% and 3.18%, respectively. The dividends paid to holders of these securities, which are recorded as interest expense, are deductible for income tax purposes.

​

The trust preferred securities may be included in Tier 1 capital for regulatory capital adequacy determination purposes up to 25% of Tier 1 capital after its inclusion. At December 31, 2021, all of the trust preferred securities qualified as Tier 1 capital.

On January 20, 2017, Primis completed the sale of $27.0 million of its fixed-to-floating rate senior Subordinated Notes due 2027. These notes initially beared interest at 5.875% per annum until January 31, 2022; interest is currently payable at an annual floating rate equal to three-month LIBOR plus a spread of 3.95% until maturity or early redemption. At December 31, 2021, all of these notes qualified as Tier 2 capital.

In 2017, the Company assumed a Senior Subordinated Note Purchase Agreement, dated April 22, 2015, entered into with certain institutional accredited investors, pursuant to which $20.0 million in aggregate principal amount of its 6.50% Fixed-to-Floating Rate Subordinated Notes due 2025 was sold to the investors. On February 1, 2021, the Company redeemed all of these notes.

On August 25, 2020, Primis completed the sale of $60.0 million of its fixed-to-floating rate Subordinated Notes due 2030. These notes will bear interest at an initial rate of 5.40% per annum, payable semi-annually in arrears on March 1 and September 1 of each year, commencing on March 1, 2021. From and including September 1, 2025 to, but excluding the maturity date or the date of earlier redemption (the “floating rate period”), the interest rate will reset quarterly to an annual interest rate equal to the Benchmark rate, which is expected to be three-month Term Secured Overnight Financing Rate, plus 531 basis points, for each quarterly interest period during the floating rate period, payable quarterly in arrears

99

Table of Contents

on March 1, June 1, September 1, and December 1 of each year, commencing on December 1, 2025. Notwithstanding the foregoing, in the event that the Benchmark rate is less than zero, the Benchmark rate shall be deemed to be zero. At December 31, 2021, all of these notes qualified as Tier 2 capital.

​

At December 31, 2021 and 2020, the remaining unamortized debt issuance costs related to the senior Subordinated Notes totaled $1.7 million and $1.9 million, respectively.

11.         INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting and income tax purposes. Net deferred tax assets at December 31, 2021 and 2020 consist primarily of the following (in thousands):

​

​

​

​

​

​

​

​

​

    

2021

    

2020

Deferred tax assets:

 

​

  

 

​

  

Allowance for credit losses

​

$

6,522

​

$

8,028

Unearned loan fees and other

​

 

1,581

​

 

2,583

Other real estate owned write-downs

​

 

450

​

 

567

Lease liability

​

​

1,407

​

​

1,779

Federal AMT credit carryforward

​

 

—

​

 

1,137

Federal low income housing credit carryforward

​

 

424

​

 

444

Deferred compensation

​

 

1,684

​

 

1,734

Depreciation

​

​

—

​

​

274

Other

​

 

921

​

 

1,012

Total deferred tax assets

​

 

12,989

​

 

17,558

Deferred tax liabilities:

​

 

  

​

 

  

Right-of-use assets

​

​

1,315

​

​

1,576

Net unrealized gain on investment securities available-for-sale

​

​

247

​

​

916

Purchase accounting

​

​

930

​

​

420

Depreciation

​

 

926

​

 

—

Total deferred tax liabilities

​

 

3,418

​

 

2,912

Net deferred tax assets

​

$

9,571

​

$

14,646

​

No valuation allowance was deemed necessary on deferred tax assets in 2021 or 2020. Management believes that the realization of the deferred tax assets is more likely than not based on the expectation that Primis will generate the necessary taxable income in future periods.

We have no unrecognized tax benefits and do not anticipate any increase in unrecognized tax benefits during the next twelve months. Should the accrual of any interest or penalties relative to unrecognized tax benefits be necessary, it is our policy to record such accruals in our income tax accounts; no such accruals existed as of December 31, 2021, 2020 or 2019. Primis and its subsidiaries file a consolidated U.S. federal income tax return, and Primis files a Virginia state income tax return. Primis Bank files a Maryland and an Arkansas state income tax return. These returns are subject to examination by taxing authorities for all years after 2017.

100

Table of Contents

The provision for income taxes consists of the following for the years ended December 31, 2021, 2020 and 2019 (in thousands):

​

​

​

​

​

​

​

​

​

​

​

    

2021

    

2020

    

2019

Current tax expense

 

​

  

 

​

  

 

​

  

Federal

​

$

2,504

​

$

5,319

​

$

4,197

State

​

 

163

​

 

320

​

 

218

Total current tax expense

​

 

2,667

​

 

5,639

​

 

4,415

​

​

​

​

​

​

​

​

​

​

Deferred tax expense (benefit)

​

 

  

​

 

  

​

 

  

Federal

​

 

5,937

​

​

(1,294)

​

​

1,406

State

​

 

117

​

​

(117)

​

​

71

Total deferred tax expense (benefit)

​

 

6,054

​

 

(1,411)

​

 

1,477

Total income tax expense from continuing operations

​

​

8,721

​

​

4,228

​

​

5,892

Total income tax expense from discontinued operation

​

​

64

​

​

2,386

​

​

185

Total income tax expense

​

$

8,785

​

$

6,614

​

$

6,077

​

The income tax expense differed from the amount of income tax determined by applying the U.S. Federal income tax rate of 21% to pretax income for the years ended December 31, 2021, 2020 and 2019 due to the following (in thousands):

​

​

​

​

​

​

​

​

​

​

​

    

2021

    

2020

    

2019

Computed expected tax expense at statutory rate

​

$

8,345

​

$

4,022

​

$

7,991

Increase (decrease) in tax expense resulting from:

​

 

​

​

 

​

​

 

​

Remeasurement of deferred tax assets and liabilities

​

​

442

​

​

(31)

​

​

(1,659)

Low income housing tax credits, net of amortization

​

​

39

​

​

225

​

​

(255)

Income from bank-owned life insurance

​

 

(354)

​

​

(327)

​

​

(357)

State taxes, net

​

​

242

​

​

200

​

​

241

Other, net

​

 

7

​

​

139

​

​

(69)

Total income tax expense from continuing operations

​

 

8,721

​

 

4,228

​

 

5,892

Total income tax expense from discontinued operation

​

 

64

​

 

2,386

​

 

185

Total income tax expense

​

$

8,785

​

$

6,614

​

$

6,077

​

   ​

During 2021, the Company remeasured the beginning of year allowance for credit losses deferred tax asset by $0.4 million, net, to reflect an adjustment in the 2020 adoption of ASU 2016-13. During 2019, the Company completed its formal assessment of the Section 382 limitation and rebooked $1.2 million deferred tax asset stemming from a $5.5 million acquired net operating loss carryforward that was written off in the fourth quarter of 2018. Additionally, the Company remeasured the depreciation deferred tax liability by $0.6 million, net, to reflect a 2018 adjustment to the assets held for sale not previously included.    

​

12.         EMPLOYEE BENEFITS

Primis has a 401(k) plan that allows employees to make pre-tax contributions for retirement. The 401(k) plan provides for discretionary matching contributions by Primis. Expense for 2021, 2020 and 2019 was $995 thousand, $795 thousand and $704 thousand, respectively.

The Bank maintains a deferred compensation plan in the form of Supplemental Executive Retirement Plan (“SERP”) for four (4) former executives. Under the plan, the Bank pays each participant, or their beneficiary, compensation deferred plus accrued interest for a period of 15 to 17 years after their retirement or age 62 depending on the terms and conditions of each plan. A liability is accrued for the obligations under these plans.

The expense incurred for the deferred compensation plans in 2021, 2020 and 2019 was $361 thousand, $1.3 million and $1.2 million, respectively. The deferred compensation plan liability was $7.8 million and $8.0 million as of December 31, 2021 and 2020, respectively.

101

Table of Contents

13.         STOCK-BASED COMPENSATION

At the June 21, 2017 Annual Meeting of Stockholders of Primis (formerly Southern National), the 2017 Equity Compensation Plan (the “2017 Plan”) was approved as recommended by the Board of Directors. The 2017 Plan replaced the 2010 Plan and has a maximum number of 750,000 shares reserved for issuance. The purpose of the 2017 Plan is to promote the success of the Company by providing greater incentives to employees, non-employee directors, consultants and advisors to associate their personal interests with the long-term financial success of the Company, including its subsidiaries, and with growth in stockholder value, consistent with the Company’s risk management practices.

​

A summary of stock option activity for 2021 follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

    

​

    

​

​

    

Weighted

    

 

​

​

​

​

​

Weighted

​

Average 

​

Aggregate

​

​

​

​

Average

​

Remaining

​

Intrinsic

​

​

​

​

Exercise

​

Contractual

​

Value

​

​

Shares

​

Price

​

Term

​

(in thousands)

Options outstanding, beginning of period

 

450,800

​

$

10.50

 

3.8

​

$

727

Forfeited

 

(1,500)

​

​

11.99

 

  

 

​

  

Expired

​

(6,500)

​

​

11.14

​

​

​

​

​

Exercised

 

(159,000)

​

​

9.60

 

​

 

​

  

Options outstanding, end of period

 

283,800

​

$

10.98

 

2.2

​

$

1,153

​

​

​

​

​

​

​

​

​

​

​

Exercisable at end of period

 

283,800

​

$

10.98

 

2.2

​

$

1,153

​

Stock-based compensation expense associated with stock options was zero, $188 thousand and $62 thousand for the years ended December 31, 2021, 2020 and 2019, respectively. As of December 31, 2021, we do not have any unrecognized compensation expense associated with the stock options.

A summary of time vested restricted stock awards for 2021 follows:

​

​

​

​

​

​

​

​

​

​

​

    

​

    

Weighted

    

Weighted

    

​

​

​

​

Average

​

Average 

​

​

​

​

​

Grant-Date

​

Remaining

​

​

​

​

​

Fair Value

​

Contractual

​

​

​

Shares

​

Per Share

​

Term

​

Unvested restricted stock outstanding, beginning of period

 

96,300

​

$

14.17

 

3.8

 

Granted

 

55,250

​

​

14.96

 

  

 

Vested

 

(46,300)

​

​

15.05

 

  

 

Forfeited

 

(7,200)

​

​

12.11

 

​

 

Unvested restricted stock outstanding, end of period

 

98,050

​

$

14.58

 

3.3

​

​

Stock-based compensation expense for time vested restricted stock awards totaled $747 thousand, $1.4 million and $370 thousand for the years ended December 31, 2021, 2020 and 2019, respectively. As of December 31, 2021, unrecognized compensation expense associated with restricted stock awards was $1.1 million, which is expected to be recognized over a weighted average period of 3.3 years.

​

​

102

Table of Contents

A summary of performance-based restricted stock units (the “Units”) for 2021 follows:

​

​

​

​

​

​

​

​

​

​

    

​

    

​

Weighted

    

Weighted

​

​

​

​

​

Average

​

Average 

​

​

​

​

​

Grant-Date

​

Remaining

​

​

​

​

​

Fair Value

​

Contractual

​

​

Shares

​

​

Per Share

​

Term

Unvested Units outstanding, beginning of period

 

—

​

$

—

 

—

Granted

 

59,335

​

​

15.00

 

  

Vested

 

—

​

​

—

 

  

Forfeited

 

—

​

​

—

 

​

Unvested Units outstanding, end of period

 

59,335

​

$

15.00

 

4.0

​

During 2021, the Company issued 59,335 non-transferrable Units convertible, on a one-on-one basis, into shares of stock to eligible employees, granted pursuant to and subject to the provisions of the 2017 Plan.

These Units are subject to service and performance conditions. These Units vest based on the achievement of both conditions. Achievement of the performance condition will be determined at the end of the five-year performance period (the “Performance Period”) by evaluating the: 1) Company’s adjusted earnings per share compound annual growth measured for the Performance Period and 2) performance factor achieved. Payouts between performance levels will be determined based on straight line interpolation.

At December 31, 2021, there were 59,335 of these Units unvested and outstanding. The Company did not recognize any stock-based compensation expense associated with these Units for the year ended December 31, 2021 because it is not probable that these Units will vest. The grant date fair value of these Units was $15.00 per Unit. The potential unrecognized compensation expense associated with these Units is $1.3 million at December 31, 2021.

​

14.         FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

Financial Instruments with off-balance sheet risk

Primis is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, standby letters of credit and guarantees of credit card accounts. These instruments involve elements of credit and funding risk in excess of the amount recognized in the consolidated balance sheet. 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 $13.1 million and $15.9 million as of December 31, 2021 and 2020, respectively.

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

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

The allowance for credit losses on off-balance-sheet credit exposures is a liability account, calculated in accordance with ASC 326, representing expected credit losses over the contractual period for which we are exposed to credit risk resulting from a contractual obligation to extend credit. No allowance is recognized if we have the unconditional right to cancel the obligation. Off-balance-sheet credit exposures primarily consist of amounts available under outstanding lines of credit and letters of credit detailed above. For the period of exposure, the estimate of expected credit losses considers both the likelihood that funding will occur and the amount expected to be funded over the estimated remaining life of the commitment or other off-balance-sheet exposure. The likelihood and expected amount of funding are based on historical

103

Table of Contents

utilization rates. The amount of the allowance represents management's best estimate of expected credit losses on commitments expected to be funded over the contractual life of the commitment. Estimating credit losses on amounts expected to be funded uses the same methodology as described for loans in Note 3 - Loans and Allowance, as if such commitments were funded.

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

​

​

​

​

​

​

​

​

​

    

2021

    

2020

Balance as of January 1

​

$

740

​

$

—

Impact of adopting ASU 2016-13

​

 

—

​

 

360

Credit loss expense

​

 

237

​

 

380

Balance as of December 31

​

$

977

​

$

740

​

Commitments

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

At December 31, 2021 and 2020, we had unfunded lines of credit and undisbursed construction loan funds totaling $411.0 million and $355.3 million, respectively. Virtually all of our unfunded lines of credit and undisbursed construction loan funds are variable rate.

Primis also had commitments on the subscription agreements entered into for the investments in non-marketable equity securities of $3.5 million at December 31, 2021.

​

104

Table of Contents

15.         EARNINGS PER SHARE

The following is a reconciliation of the denominators of the basic and diluted EPS computations for 2021, 2020 and 2019 (amounts in thousands, except per share data):

​

​

​

​

​

​

​

​

​

​

    

​

​

    

Weighted

    

 

​

​

​

​

​

​

Average

​

 

​

​

​

Income 

​

Shares

​

Per Share

​

​

(Numerator)

​

(Denominator)

​

Amount

For the year ended December 31, 2021

​

 

  

 

  

​

 

  

Basic EPS from continuing operations

​

$

31,018

 

24,438

​

$

1.27

Effect of dilutive stock options and unvested restricted stock

​

 

—

 

163

​

 

(0.01)

Diluted EPS from continuing operations

​

$

31,018

 

24,601

​

$

1.26

​

​

​

​

​

​

​

​

​

Basic EPS from discontinued operation

​

$

230

 

24,438

​

$

0.01

Effect of dilutive stock options and unvested restricted stock

​

 

—

 

163

​

 

—

Diluted EPS from discontinued operation

​

$

230

 

24,601

​

$

0.01

​

​

​

​

​

​

​

​

​

For the year ended December 31, 2020

​

 

  

 

  

​

 

  

Basic EPS from continuing operations

​

$

14,884

 

24,239

​

$

0.61

Effect of dilutive stock options and unvested restricted stock

​

 

—

 

124

​

 

—

Diluted EPS from continuing operations

​

$

14,884

 

24,363

​

$

0.61

​

​

​

​

​

​

​

​

​

Basic EPS from discontinued operation

​

$

8,403

 

24,239

​

$

0.35

Effect of dilutive stock options and unvested restricted stock

​

 

—

 

124

​

 

—

Diluted EPS from discontinued operation

​

$

8,403

 

24,363

​

$

0.35

​

​

​

​

​

​

​

​

​

For the year ended December 31, 2019

​

 

  

 

  

​

 

  

Basic EPS from continuing operations

​

$

32,161

 

24,050

​

$

1.34

Effect of dilutive stock options and unvested restricted stock

​

 

—

 

275

​

 

(0.02)

Diluted EPS from continuing operations

​

$

32,161

 

24,325

​

$

1.32

​

​

​

​

​

​

​

​

​

Basic EPS from discontinued operation

​

$

1,006

 

24,050

​

$

0.04

Effect of dilutive stock options and unvested restricted stock

​

 

—

 

275

​

 

—

Diluted EPS from discontinued operation

​

$

1,006

 

24,325

​

$

0.04

​

    The Company did not have any anti-dilutive options as of December 31, 2021 and 2019 and had 226,300 anti-dilutive options as of December 31, 2020.  

​

16.         REGULATORY MATTERS

Primis Financial Corp. and its subsidiary 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. At December 31, 2021 and 2020, the most recent regulatory notifications categorized the Bank as well capitalized under regulatory framework for PCA.

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, 2021, that Primis meets all capital adequacy requirements to which it is subject.

105

Table of Contents

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:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Required

​

​

​

​

 

​

​

​

​

​

​

​

​

For Capital

​

To Be Categorized as

​

​

​

Actual

​

Adequacy Purposes 

​

Well Capitalized (1)

​

​

    

Amount

    

Ratio

    

Amount

    

Ratio

    

Amount

    

Ratio

​

December 31, 2021

 

​

  

 

  

 

​

  

 

  

 

​

  

 

  

​

Primis Financial Corp.

 

​

  

 

  

 

​

  

 

  

 

​

  

 

  

​

Leverage ratio

​

$

314,353

 

9.41

%  

$

133,664

 

4.00

%  

​

n/a

 

n/a

​

Common equity tier 1 capital ratio

​

​

304,353

 

13.09

%  

​

104,598

 

4.50

%  

​

n/a

 

n/a

​

Tier 1 risk-based capital ratio

​

 

314,353

 

13.52

%  

 

139,464

 

6.00

%  

​

n/a

 

n/a

​

Total risk-based capital ratio

​

 

430,421

 

18.52

%  

 

185,952

 

8.00

%  

​

n/a

 

n/a

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Primis Bank

​

 

​

 

​

​

 

​

 

​

​

​

​

 

​

​

Leverage ratio

​

$

372,076

 

11.14

%  

$

137,890

 

4.00

%  

$

114,973

​

5.00

%

Common equity tier 1 capital ratio

​

​

372,076

​

16.18

%  

​

103,476

 

4.50

%  

​

149,465

​

6.50

%

Tier 1 risk-based capital ratio

​

 

372,076

 

16.18

%  

 

137,968

 

6.00

%  

 

183,957

​

8.00

%

Total risk-based capital ratio

​

 

400,836

 

17.43

%  

 

183,957

 

8.00

%  

 

229,947

​

10.00

%

​

​

 

​

 

​

​

 

​

 

​

​

 

​

​

​

​

December 31, 2020

​

 

​

 

​

​

 

​

 

​

​

 

​

​

​

​

Primis Bank

​

 

​

 

​

​

 

​

 

​

​

​

​

 

​

​

Leverage ratio

​

$

334,540

 

11.25

%  

$

124,046

 

4.00

%  

$

105,642

​

5.00

%

Common equity tier 1 capital ratio

​

​

334,540

​

15.83

%  

​

95,078

 

4.50

%  

​

137,334

​

6.50

%

Tier 1 risk-based capital ratio

​

 

334,540

 

15.83

%  

 

126,770

 

6.00

%  

 

169,027

​

8.00

%

Total risk-based capital ratio

​

 

361,073

 

17.09

%  

 

169,027

 

8.00

%  

 

211,284

​

10.00

%

​

​

 

  

 

  

​

 

  

 

  

​

 

  

​

​

​

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

    Primis Financial Corp. and Primis Bank are required to meet minimum capital requirements set forth by regulatory authorities. 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 capital conservation buffer of 9.43% at December 31, 2021, which exceeded the 2.50% minimum requirement below which the regulators may impose limits on distributions. Primis Financial Corp. was not subject to various regulatory capital requirements administered by the federal banking agencies in 2020 as Primis did not meet the asset-sized threshold requirement in 2020.

​

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

​

106

Table of Contents

17.         PARENT COMPANY FINANCIAL INFORMATION

Condensed financial information of Primis Financial Corp. follows (in thousands):

​

CONDENSED BALANCE SHEETS

DECEMBER 31,

​

​

​

​

​

​

​

​

​

    

2021

    

2020

ASSETS

 

​

  

 

​

  

Cash

​

$

23,517

​

$

59,318

Investment in subsidiary

​

 

479,855

​

 

446,116

Preferred investment in mortgage company

​

​

3,064

​

​

—

Investments in non-marketable equity securities

​

​

430

​

​

—

Other assets

​

 

2,681

​

 

2,060

Total assets

​

$

509,547

​

$

507,494

​

​

​

​

​

​

​

LIABILITIES AND STOCKHOLDERS' EQUITY

​

 

  

​

 

  

Liabilities:

​

 

  

​

 

  

Junior subordinated debt - long term

​

$

9,731

​

$

9,682

Senior subordinated notes - long term

​

 

85,297

​

 

105,647

Other liabilities

​

 

2,638

​

 

1,611

Total liabilities

​

 

97,666

​

 

116,940

Stockholders' equity:

​

 

  

​

 

  

Common stock

​

 

245

​

 

243

Additional paid in capital

​

 

311,127

​

 

308,870

Retained earnings

​

 

99,397

​

 

77,956

Accumulated other comprehensive income

​

 

1,112

​

 

3,485

Total stockholders' equity

​

 

411,881

​

 

390,554

Total liabilities and stockholders' equity

​

$

509,547

​

$

507,494

​

​

​

CONDENSED STATEMENTS OF INCOME

FOR THE YEARS ENDED DECEMBER 31,

​

​

​

​

​

​

​

​

​

​

​

​

    

2021

    

2020

    

2019

Income:

 

​

  

 

​

  

 

​

  

Cash dividends received from bank subsidiary

​

$

—

​

$

2,500

​

$

13,300

Gain on debt extinguishment

​

 

573

​

 

—

​

 

—

Total income

​

 

573

​

 

2,500

​

 

13,300

Expenses:

​

 

  

​

 

  

​

 

  

Interest on junior subordinated debt

​

 

355

​

 

426

​

 

589

Interest on senior subordinated notes

​

 

5,127

​

 

3,909

​

 

2,847

Other operating expenses

​

 

1,236

​

 

841

​

 

726

Total expenses

​

 

6,718

​

 

5,176

​

 

4,162

Income (loss) before income tax benefit and equity in undistributed net income of subsidiaries

​

 

(6,145)

​

 

(2,676)

​

 

9,138

Income tax benefit

​

 

(1,280)

​

 

(1,084)

​

 

(862)

Equity in undistributed net income of subsidiaries

​

 

36,113

​

 

24,879

​

 

23,167

Net income

​

$

31,248

​

$

23,287

​

$

33,167

​

​

107

Table of Contents

​

​

​

CONDENSED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31,

​

​

​

​

​

​

​

​

​

​

​

​

    

2021

    

2020

    

2019

Operating activities:

 

​

  

 

​

  

 

​

  

Net income

​

$

31,248

​

$

23,287

​

$

33,167

Adjustments to reconcile net income to net cash and cash equivalents (used in) provided by operating activities:

​

 

​

​

 

​

​

 

​

Equity in undistributed net income of subsidiaries

​

 

(36,113)

​

 

(27,379)

​

 

(36,467)

Gain on debt extinguishment

​

​

(573)

​

​

—

​

​

—

Other, net

​

 

1,426

​

 

8,766

​

 

(666)

Net cash and cash equivalents provided by (used in) in operating activities

​

 

(4,012)

​

 

4,674

​

 

(3,966)

Investing activities:

​

 

  

​

 

  

​

 

  

Increase in preferred investment in mortgage company

​

 

(3,064)

​

 

—

​

 

—

Increase in non-marketable equity securities investments

​

​

(430)

​

​

—

​

​

—

Dividend from subsidiaries

​

 

—

​

 

2,500

​

 

13,300

Net cash and cash equivalents provided by (used in) investing activities

​

 

(3,494)

​

 

2,500

​

 

13,300

Financing activities:

​

 

  

​

 

  

​

 

  

Issuance of subordinated notes, net of cost

​

 

—

​

 

58,600

​

 

—

Extinguishment of subordinated debt

​

​

(20,000)

​

​

—

​

​

—

Proceeds from exercised stock options

​

 

1,526

​

 

574

​

 

670

Repurchase of restricted stock

​

 

(14)

​

 

—

​

 

—

Cash dividends paid on common stock

​

 

(9,807)

​

 

(9,737)

​

 

(8,690)

Net cash and cash equivalents provided by (used in) financing activities

​

 

(28,295)

​

 

49,437

​

 

(8,020)

Net change in cash and cash equivalents

​

 

(35,801)

​

 

56,611

​

 

1,314

Cash and cash equivalents at beginning of period

​

 

59,318

​

 

2,707

​

 

1,393

Cash and cash equivalents at end of period

​

$

23,517

​

$

59,318

​

$

2,707

​

​

​

18.         ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following is a summary of the accumulated other comprehensive income (loss) balances, net of tax (in thousands):

​

​

​

​

​

​

​

​

​

​

​

    

Balance at

    

Current Period

    

Balance at

​

​

December 31, 2020

​

Change

​

December 31, 2021

Unrealized gain (loss) on investment securities available-for-sale

​

$

3,485

​

$

(2,373)

​

$

1,112

Total

​

$

3,485

​

$

(2,373)

​

$

1,112

​

​

​

​

108

Table of Contents

19.         RELATED PARTY TRANSACTIONS

Prior to December 31, 2021, STM was a related party of the Company. The Company continues to have a financial relationship with STM but STM is no longer a related party. The following table summarizes the changes in the loan amount outstanding with STM during the periods indicated, during which STM was considered a related party (in thousands):

​

​

​

​

​

​

​

​

​

    

2021

    

2020

Balance at January 1,

​

$

30,771

​

$

26,760

Principal advances

​

 

373,151

​

 

441,044

Principal paid

​

 

(366,443)

​

 

(437,033)

Transfers (out) of related party status

​

 

(37,479)

​

 

—

Balance at December 31, 

​

$

—

​

$

30,771

​

We purchased loans in an aggregate amount of $30.8 million and $80.6 million during 2021 and 2020, respectively, from STM.

During the year, officers, directors, principal shareholders, and their affiliates (related parties) were customers of and had transactions with the Company. Loan activity to related parties is as follows (in thousands):

​

​

​

​

​

​

​

    

    

2021

Balance at January 1,

​

​

$

22,709

Principal advances

​

​

 

21,021

Principal paid

​

​

 

(5,250)

Transfers in (out) of related party status

​

​

 

2,115

Balance at December 31, 

​

​

$

40,595

​

Primis has also entered into deposit transactions with its related parties including STM. The aggregate amount of these deposit accounts were $22.4 million (not including STM) and $25.2 million (including STM) as of December 31, 2021 and 2020, respectively.

​

​

20.         LOW INCOME HOUSING TAX CREDITS

The general purpose of housing equity funds is to encourage and assist participants in investing in low-income residential rental properties located in the Commonwealth of Virginia, develop and implement strategies to maintain projects as low-income housing, deliver Federal Low Income Housing Credits to investors, allocate tax losses and other possible tax benefits to investors, and to preserve and protect project assets. The investments in these funds were recorded as other assets on the consolidated balance sheets and were carried at $4.2 million and $5.1 million at December 31, 2021 and 2020, respectively. These investments and related tax benefits have expected terms through 2034, with the majority maturing by 2027. Tax credits, net of amortization recognized related to these investments during the years ended December 31, 2021 and 2020 were $(39) thousand and $(225) thousand, respectively. Total projected tax credits to be received for 2021 are $446 thousand, which is based on the most recent quarterly estimates received from the funds. Additional capital calls expected for the funds totaled $0.4 million and $2.9 million at December 31, 2021 and 2020, respectively, and are accrued for in other liabilities on the consolidated balance sheets.

​

​

21. SUBSEQUENT EVENT

​

On January 27, 2022, Primis’ board of directors approved the plan of branch closings and consolidation. The Company anticipates seven branch consolidations and three branch closings throughout 2022. The Company cannot estimate the potential financial impact of the plan of branch closings and consolidation.

​

109

Table of Contents

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures. As of the end of the period covered by this Annual Report on Form 10-K, under the supervision and with the participation of management, including our chief executive officer and chief financial officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d -15(e) under the Securities Exchange Act of 1934) utilizing the framework established in “Internal Control – Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based upon that evaluation, our chief executive officer and chief financial officer have concluded that these controls and procedures are effective as of the end of the period covered by this Annual Report on Form 10-K.

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

(b) Management’s Report on Internal Control Over Financial Reporting. Management of Primis Financial Corp. is responsible for establishing and maintaining adequate internal control over financial reporting for Primis Financial Corp. (“we” and “our”), as that term is defined in Exchange Act Rules 13a-15(f). Primis Financial Corp. conducted an evaluation of the effectiveness of our internal control over Primis’ financial reporting as of December 31, 2021 based on the framework in “Internal Control-Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that evaluation, we concluded that our internal control over financial reporting is effective as of December 31, 2021.

Dixon Hughes Goodman LLP, an independent registered public accounting firm, has audited the consolidated financial statements included in this Annual Report on Form 10-K and has issued a report on the effectiveness of our internal control over financial reporting, which report is included in "Part II - Item 8. Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.

(c) Changes in Internal Control over Financial Reporting. There have been no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

​

Item 9B. Other Information

None.

​

110

Table of Contents

PART III

Item 10. Directors, Executive Officers and Corporate Governance

The information under the captions "Election of Directors,” "Continuing Directors and Executive Officers," "Corporate Governance — Committees of the Board of Directors— Audit Committee,” "Corporate Governance —  Director Nominations Process" and "Corporate Governance — Code of Ethics" in Primis Financial Corp.’s definitive Proxy Statement for its 2022 Annual Meeting of Shareholders, to be filed with the SEC within 120 days after December 31, 2021 pursuant to Regulation 14A under the Exchange Act (the "2022 Proxy Statement"), is incorporated herein by reference in response to this item.

Item 11. Executive Compensation

The information under the captions "Executive Compensation and Other Matters," "Director Compensation" and "Compensation Committee Report on Executive Compensation" in the 2022 Proxy Statement is incorporated herein by reference in response to this item.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters

The information under the caption "Beneficial Ownership of Common Stock by Management of the Company and Principal Stockholders" in the 2022 Proxy Statement is incorporated herein by reference in response to this item.

The information required by this Item concerning securities authorized for issuance under equity compensation plans is incorporated herein by reference to Part II, Item 5 of this Annual Report on Form 10-K.

Item 13. Certain Relationships, Related Transactions and Director Independence

The information under the captions "Corporate Governance — Director Independence" and "Certain Relationships and Related Party Transactions" in the 2022 Proxy Statement is incorporated herein by reference in response to this item.

Item 14. Principal Accounting Fees and Services

The Independent Registered Public Accounting Firm is Dixon Hughes Goodman LLP (PCAOB Firm ID No. 57) located in Greenville, North Carolina. The information under the caption "Fees and Services of Independent Registered Public Accounting Firm" in the 2022 Proxy Statement is incorporated herein by reference in response to this item.

​

111

Table of Contents

PART IV

Item 15. Exhibits and Financial Statement Schedules

The following documents are filed as part of this report:

(a)(1)     Financial Statements

The following consolidated financial statements and reports of independent registered public accounting firm are in Part II, Item 8:

Reports of Independent Registered Public Accounting Firm

Consolidated Balance Sheets - December 31, 2021 and 2020

Consolidated Statements of Income and Comprehensive Income - Years ended December 31, 2021, 2020 and 2019

Consolidated Statements of Changes in Stockholders’ Equity - Years ended December 31, 2021, 2020 and 2019

Consolidated Statements of Cash Flows -Years ended December 31, 2021, 2020 and 2019

Notes to Consolidated Financial Statements

(a)(2)     Financial Statement Schedules

All schedules are omitted since they are not required, are not applicable, or the required information is shown in the consolidated financial statements or notes thereto.

(a)(3)     Exhibits

The following are filed or furnished, as noted below, as part of this Annual Report on Form 10-K and this list includes the Exhibit Index.

​

​

​

​

Exhibit No.

    

Description

​

​

​

3.1

​

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

3.2

​

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

3.3

​

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

3.4

​

Certificate of Amendment to the Articles of Incorporation dated March 31, 2021 (incorporated herein by reference to Exhibit 3.1 to Primis Financial Corp.’s Current Report on Form 8-K filed on March 31, 2021)

112

Table of Contents

​

​

​

Exhibit No.

    

Description

3.5

​

Amended and Restated Bylaws (incorporated herein by reference to Exhibit 3.2 to Primis Financial Corp.’s Current Report on Form 8-K filed on March 31, 2021)

4.1

​

Specimen Stock Certificate of Southern National (incorporated herein by reference to Exhibit 4.1 to Primis Financial Corp.’s (formerly Southern National’s) Registration Statement on Form S-1 (Registration No. 333-136285))

4.2

​

Form of Warrant Agreement (incorporated herein by reference to Exhibit 4.2 to Primis Financial Corp.’s (formerly Southern National’s) Registration Statement on Form S-1 (Registration No. 333-136285))

4.3

​

Form of Amendment to Warrant Agreement (incorporated herein by reference to Exhibit 4.3 to Primis Financial Corp.’s (formerly Southern National’s) Registration Statement on Form S-1 (Registration No. 333-136285))

4.4

​

Form of 5.875% Fixed-to-Floating Rate Subordinated Notes due January 31, 2027 (incorporated herein by reference to Exhibit 10.1 to Primis Financial Corp.’s (formerly Southern National’s) Current Report on Form 8-K filed on January 24, 2017)

4.5*

​

Description of Registrant’s Securities

Certain instruments relating to long-term debt as to which the total amount of securities authorized there under does not exceed 10% of the total assets of Primis Financial Corp. (formerly Southern National Bancorp of Virginia, Inc.) have been omitted in accordance with Item 601(b)(4)(iii) of Regulation S-K. The registrant will furnish a copy of any such instrument to the Securities and Exchange Commission upon its request.

4.6

​

Subordinated Indenture, dated as of August 25, 2020, between Primis Financial Corp. (formerly Southern National Bancorp of Virginia, Inc.) and Wilmington Trust, National Association (incorporated herein by reference to Exhibit 4.1 to Primis Financial Corp.’s (formerly Southern National’s) Current Report on Form 8-K filed on August 25, 2020)

4.7

​

First Supplemental Indenture, dated as of August 25, 2020, between Primis Financial Corp. (formerly Southern National Bancorp of Virginia, Inc.) and Wilmington Trust, National Association (incorporated herein by reference to Exhibit 4.2 to Primis Financial Corp.’s (formerly Southern National’s) Current Report on Form 8-K filed on August 25, 2020)

4.8

​

Form of 5.40% Fixed-to-Floating Rate Subordinated Notes due 2030 (included in Exhibit 4.7)

10.1+

​

Form of Primis Financial Corp. (formerly Southern National Bancorp of Virginia, Inc.) Incentive Stock Option Agreement (incorporated herein by reference to Exhibit 10.3 to Primis Financial Corp.’s (formerly Southern National’s) Registration Statement on Form S-1/A filed on October 29, 2009 (Registration No. 333-162467))

10.2+

​

Primis Financial Corp. (formerly Southern National Bancorp of Virginia, Inc.) 2010 Stock Awards and Incentive Plan (incorporated herein by reference to Exhibit 4.2 to Primis Financial Corp.’s (formerly Southern National’s) Registration Statement on Form S-8 (Registration No. 333-166511))

10.3+

​

Primis Financial Corp. (formerly Southern National Bancorp of Virginia, Inc.) 2017 Equity Compensation Plan (incorporated herein by reference to Appendix A of Primis Financial Corp.’s (formerly Southern National’s) Definitive Proxy Statement on Schedule 14A filed with the Securities and Exchange Commission on May 11, 2017)

113

Table of Contents

​

​

​

Exhibit No.

    

Description

10.4+

​

Form of Primis Financial Corp. (formerly Southern National Bancorp of Virginia, Inc.) Incentive Stock Option Agreement (incorporated herein by reference to Exhibit 4.3 to Primis Financial Corp.’s (formerly Southern National’s) Registration Statement on Form S-8 (Registration No. 333-166511))

10.5+

​

Primis Financial Corp. (formerly Southern National Bancorp of Virginia, Inc.) Supplemental Executive Retirement Plan (incorporated herein by reference to Exhibit 10.9 to Primis Financial Corp.’s (formerly Southern National’s) Current Report on Form 8-K filed on June 26, 2017)

10.6+

​

Primis Financial Corp. (formerly Southern National Bancorp of Virginia, Inc.) Executive Severance Plan (incorporated herein by reference to Exhibit 10.10 to Primis Financial Corp.’s (formerly Southern National’s) Current Report on Form 8-K filed on June 26, 2017)

10.7+

​

Form of Subordinated Note Purchase Agreement, dated January 20, 2017 (incorporated herein by reference to Exhibit 10.1 to Primis Financial Corp.’s (formerly Southern National’s) Current Report on Form 8-K filed on January 24, 2017)

10.8+

​

Employment Agreement, dated as of February 28, 2019, by and between George C. Sheflett and Primis Financial Corp. (formerly Southern National Bancorp of Virginia, Inc.) (incorporated herein by reference to Exhibit 10.1 to Primis Financial Corp.’s (formerly Southern National’s) Quarterly Report on Form 10-Q filed on May 9, 2019)

10.9+

​

Employment Agreement, dated as of February 20, 2020, by and between Dennis J. Zember, Jr. and Primis Financial Corp. (formerly Southern National Bancorp of Virginia, Inc.) (incorporated herein by reference to Exhibit 10.2 to Primis Financial Corp.’s (formerly Southern National’s) Quarterly Report on Form 10-Q filed on May 8, 2020)

10.10+

​

Executive Employment Agreement, dated as of April 29, 2020, by and between Stephen B. Weber and Primis Financial Corp. (formerly Southern National) (incorporated herein by reference to Exhibit 10.1 to Primis Financial Corp.’s Quarterly Report on Form 10-Q filed on May 10, 2021)

10.11+

​

Change in Control Severance Agreement, dated as of June 1, 2020, by and between Mike Tyler and Primis Financial Corp. (formerly Southern National) (incorporated herein by reference to Exhibit 10.2 to Primis Financial Corp.’s Quarterly Report on Form 10-Q filed on May 10, 2021)

10.12+

​

Executive Employment Agreement, dated as of January 10, 2021, by and between Matthew Switzer and Primis Financial Corp. (formerly Southern National) (incorporated herein by reference to Exhibit 10.3 to Primis Financial Corp.’s Quarterly Report on Form 10-Q filed on May 10, 2021)

10.13+*

​

Executive Employment Agreement, dated as of June 16, 2021, by and between Tyler Stafford and Primis Financial Corp.

10.14+*

​

Executive Employment Agreement, dated as of September 13, 2021, by and between Ann-Stanton C. Gore and Primis Financial Corp.

21.0*

​

Subsidiaries of the Registrant

23.1*

​

Consent of Dixon Hughes Goodman LLP

23.2*

​

Consent of Richey, May & Co., LLP

31.1*

​

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

114

Table of Contents

​

​

​

Exhibit No.

    

Description

31.2*

​

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

32.1**

​

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

99.1**

​

Financial Statements of Southern Trust Mortgage, LLC as of and for the year ended December 31, 2021 (unaudited) and Financial Statements of Southern Trust Mortgage, LLC as of and for the years ended December 31, 2020 and 2019 together with Report of Independent Registered Public Accounting Firm thereon as of and for the years ended December 31, 2020 and 2019; a former mortgage affiliate of the Company.

​

101

​

The following materials from Primis Financial Corp.’s Annual Report on Form 10-K for the year ended December 31, 2021, formatted in Extensible Business Reporting Language (Inline XBRL), filed herewith: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income and Comprehensive Income, (iii) Consolidated Statements of Changes in Stockholders’ Equity, (iv) Consolidated Statements of Cash Flows, and (v) Notes to Consolidated Financial Statements.

104

​

The cover page from Primis Financial Corp’s Annual Report on Form 10-K for the year ended December 31, 2021, formatted in Inline XBRL.

+     Management contract or compensatory plan or arrangement

*     Filed herewith

**   Furnished herewith

​

Item 16. - Form 10-K Summary

None.

​

115

Table of Contents

​

Primis Financial Corp. will furnish, upon written request, a copy of any exhibit listed above upon the payment of a reasonable fee covering the expense of furnishing the copy. Requests should be directed to:

Matthew Switzer, Executive Vice President and Chief Financial Officer

Primis Financial Corp.

10900 Nuckols Road, Suite 325

Glen Allen, Virginia 23060

​

116

Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Primis Financial Corp.

​

​

​

​

By:

/s/ Dennis J. Zember, Jr.

    

Date: March 14, 2022

​

Dennis J. Zember, Jr.

​

​

​

President and Chief Executive Officer

​

​

​

​

​

​

​

​

​

By:

/s/ Matthew Switzer

​

Date: March 14, 2022

​

Matthew Switzer

​

​

​

Executive Vice President and Chief Financial Officer

​

​

​

​

​

​

​

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Date: March 14, 2022

​

​

Signature

    

​

​

Title

​

​

​

/s/ Dennis J. Zember, Jr.

​

President and Chief Executive Officer, Director

Dennis J. Zember, Jr.

​

​

​

​

​

/s/ John F. Biagas

​

Director

John F. Biagas

​

​

​

​

​

/s/ Robert Y. Clagett

​

Director

Robert Y. Clagett

​

​

​

​

​

/s/ W. Rand Cook

​

Director

W. Rand Cook

​

​

​

​

​

/s/ Deborah Diaz

​

Director

Deborah Diaz

​

​

​

​

​

/s/ F. L. Garrett, III

​

Director

F. L. Garrett, III

​

​

​

​

​

/s/ Eric A. Johnson

​

Director

Eric A. Johnson

​

​

​

​

​

/s/ Charles A. Kabbash

​

Director

Charles A. Kabbash

​

​

​

​

​

/s/ Dr. Allen R. Jones Jr.

​

Director

Dr. Allen R. Jones Jr.

​

​

​

​

​

/s/ John M. Eggemeyer

​

Director

John M. Eggemeyer

​

​

​

​

​

​

​

​

117

​

Exhibit 4.5

​

DESCRIPTION OF THE REGISTRANT’S SECURITIES REGISTERED

PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934

​

As of March 4, 2022, Primis Financial Corp. (“PRIMIS”) has one class of securities, our common stock, registered under Section 12 of the Securities Exchange Act of 1934, as amended.

​

DESCRIPTION OF COMMON STOCK

The following description of the terms and provisions of our common stock is qualified in its entirety by reference to our amended Articles of Incorporation, Amended and Restated Bylaws or Virginia law applicable to us. For a more thorough understanding of the terms of our capital stock, you should refer to our amended Articles of Incorporation and Amended and Restated Bylaws, which are included as exhibits to this Annual Report on Form 10-K.

General

We are authorized to issue 50,000,000 shares of capital stock of which 45,000,000 are shares of common stock and 5,000,000 are shares of preferred stock, par value $0.01 per share. As of March 4, 2022, there were 24,575,835 shares of common stock outstanding held by 1,238 holders of record and no shares of preferred stock issued and outstanding.

Common Stock

General.   Each share of PRIMIS common stock has the same relative rights as, and is identical in all respects to, each other share of PRIMIS common stock. PRIMIS’ common stock is traded on the NASDAQ Global Market under the symbol “FRST”

Dividends.   PRIMIS’ shareholders are entitled to receive dividends or distributions that its board of directors may declare out of funds legally available for those payments. The payment of distributions by PRIMIS is subject to the restrictions of Virginia law applicable to the declaration of distributions by a corporation. A Virginia corporation generally may not authorize and make distributions if, after giving effect to the distribution, it would be unable to meet its debts as they become due in the usual course of business or if the corporation’s total assets would be less than the sum of its total liabilities plus the amount that would be needed, if it were dissolved at that time, to satisfy the preferential rights of shareholders whose rights are superior to the rights of those receiving the distribution. In addition, the payment of distributions to shareholders is subject to any prior rights of outstanding preferred stock.

As a bank holding company, PRIMIS’ ability to pay dividends is affected by the ability of Primis Bank, its bank subsidiary, to pay dividends to the holding company. The ability of Primis Bank, as well as PRIMIS, to pay dividends in the future is, and could be further, influenced by bank regulatory requirements and capital guidelines.

Liquidation Rights.   In the event of any liquidation, dissolution or winding up of PRIMIS, the holders of shares of its common stock will be entitled to receive, after payment of all debts and liabilities of PRIMIS and after satisfaction of all liquidation preferences applicable to any preferred stock, all remaining assets of PRIMIS available for distribution in cash or in kind.

Voting Rights.   The holders of PRIMIS common stock are entitled to one vote per share and, in general, a majority of votes cast with respect to a matter is sufficient to authorize action upon routine matters. Holders of PRIMIS common stock are not entitled to cumulative voting rights. Directors are

elected by a plurality of the votes cast, and shareholders do not have the right to cumulate their votes in the election of directors.

Directors and Classes of Directors.   PRIMIS’ board of directors is divided into three classes with directors serving staggered three-year terms. Any newly created directorships or any decrease in directorships are apportioned among the classes as evenly as possible. Under PRIMIS’ articles of incorporation, directors may be removed for cause upon the affirmative vote of not less than 75% of the outstanding shares entitled to vote generally in an election of directors. Cause for removal exists only if a director whose removal is proposed has been either declared incompetent by an order of a court, convicted of a felony or of an offense punishable by imprisonment for a term of more than one year, or deemed liable by a court for gross negligence or misconduct in the performance of such director’s duties to PRIMIS.

No Preemptive Rights; Redemption and Assessment.   Holders of shares of PRIMIS will not be entitled to preemptive rights with respect to any shares that may be issued. PRIMIS common stock is not subject to redemption or any sinking fund and the outstanding shares are fully paid and nonassessable.

Anti-Takeover Effects of Certain Provisions in Our Amended Articles of Incorporation and Amended and Restated Bylaws and Virginia Law

Subject to the application of the Virginia Stock Corporation Act (VSCA), the affirmative vote of the holders of more than two thirds of all votes entitled to be cast is generally required with respect to a merger, exchange offer or the sale of all or substantially all of our assets. Under the VSCA and our amended Articles of Incorporation, any action required or permitted to be taken by our shareholders may be taken without a meeting and without a shareholder vote if a written consent is signed by the holders of the shares of outstanding stock having not less than the minimum number of votes that would be necessary to authorize such action at a meeting of shareholders at which all shares entitled to vote on such matter were present and voted.

Virginia law provides for certain restrictions on extraordinary corporate transactions that may discourage the acquisition of control of Virginia corporations. We elected to “opt out” of those protective provisions.

The provisions described below, to the extent applicable, will have the general effect of discouraging, or rendering more difficult, unfriendly takeover or acquisition attempts. Consequently, such provisions would be beneficial to current management in an unfriendly takeover attempt, but could have an adverse effect on shareholders who might wish to participate in such a transaction. However, we believe that such provisions are advantageous to our shareholders in that they will permit management and our shareholders to carefully consider and understand a proposed acquisition, lead to higher offering prices, and require a higher level of shareholder participation in the decision if the transaction is not approved by our board of directors.

Staggered Board and Removal of Directors

One class of our three classes of directors is elected annually. Directors serve for three-year terms. There is no cumulative voting for directors provided for in the amended Articles of Incorporation. As permitted by Virginia law, our amended Articles of Incorporation provide that where a corporation’s directors are elected in classes that a director, or the entire board of directors, only may be removed for cause by the affirmative vote of not less than 75% of the shares entitled to vote generally in an election of directors. The provisions contained in our amended Articles of Incorporation relating to election of directors in staggered three-year classes and the supermajority vote required to remove a director tend to discourage attempts by third parties to acquire us because of the extra time and expense involved and a greater possibility of failure. This also can affect the price that a potential purchaser would be willing to

2

pay for our common stock, thereby reducing the amount a shareholder would receive in, for example, a tender offer for our common stock.

Special Shareholder Meetings

Our amended Articles of Incorporation also restrict the manner in which special meetings may be called. Under the VSCA, a corporation is permitted to provide for calling of special meetings either in its bylaws or articles of incorporation. Our amended Articles of Incorporation specify that special meetings may be called by our Chairman of the Board or President or by the affirmative vote of three-fourths of the board of directors or by holders of record of not less than 40% of our then outstanding voting shares.

Evaluation of Change in Control Offers

Our amended Articles of Incorporation also provide that when evaluating any offer that may result in a change in control of our company, the board of directors may consider, consistent with the exercise of its fiduciary duties and in connection with the exercise of its judgment in determining what is in the best interests of our company and our shareholders, not only the price or other consideration being offered, but also all other relevant factors including, without limitation, the financial and management resources and future prospects of the other party, the possible effect on our business and the business of our subsidiaries and on our employees, customers, suppliers and creditors and those of our subsidiaries, the effects on the ability of our company to fulfill its corporate objectives as a holding company and on the ability of Primis Bank to fulfill its objectives as a bank, and the effects on the communities in which our facilities are located.

Blank Check Preferred Stock

In addition to common stock, our amended Articles of Incorporation permit the board of directors to issue up to 5,000,000 shares of “blank check” preferred stock. Among other things, the board of directors in issuing a series of preferred stock has the power to determine voting powers, if any, of such series. Such issuance of preferred stock having voting rights could dilute the voting and ownership interest of existing shareholders. Such issuance may have the effect of discouraging unilateral attempts by third parties to obtain control of our company, since the issuance of additional shares of capital stock could be used to dilute the voting power of, or increase the cost to, any person seeking to obtain control of us. This may occur by virtue of the fact that the preferred stock may be issued in a series having rights in excess of one vote per share or having the right to vote separately by class respecting some matters.

Transfer Agent and Registrar

​

The transfer agent for PRIMIS’ common stock is Computershare Inc., 250 Royall Street, Canton, Massachusetts 02021.

3

Exhibit 10.13

THIS EXECUTIVE EMPLOYMENT AGREEMENT (this "Agreement") is made and entered as of the 16th day of June, 2021, by and among PRIMIS FINANCIAL CORPORATION, a Virginia corporation (the "Bancorp"), PRIMIS, a Virginia state-chartered bank and wholly owned subsidiary of the Bancorp (the "Bank"; the Bancorp and the Bank are collectively referred to herein as the "Employer''), and TYLER STAFFORD ("Executive").

BACKGROUND

WHEREAS, the expertise and experience of Executive in the financial institutions industry are valuable to the Employer;

WHEREAS, it is in the best interests of the Employer to maintain an experienced and sound executive management team to manage the Employer, further the Employer's overall strategies and protect and enhance shareholder value; and

WHEREAS, the Employer and Executive desire to enter into this Agreement to establish the scope, terms and conditions of Executive's continued employment by the Employer;

NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

​

1.Effective Date. The effective time and date of this Agreement shall be deemed to be 5:00 p.m. on the date of its making first set forth above (the "Effective Date").
2.Employment. Executive is employed as the President of the Division. Executive's responsibilities, duties, prerogatives and authority in such offices shall be those customary for persons holding such offices of institutions in the financial institutions industry, as well as such other duties of an executive, managerial or administrative nature, which are consistent with such offices, as shall be specified and designated from time to time by the Board of Directors of the Bancorp (the "Bancorp Board"). Executive will report directly the Chief Executive Officer of the Bank.
3.Employment Period. Unless earlier terminated in accordance with Section 6 hereof, Executive's employment under this Agreement shall begin as of the Effective Date and shall continue thereafter for a term of two years (the "Employment Period"). Commencing on the second anniversary of the Effective Date, this Agreement and the Employment Period shall automatically renew for successive two (2) year periods unless the Employer or the Executive delivers written notice of non-renewal at least sixty (60) days prior to the expiration of the then current Employment Period. A non-renewal of the Employment Period by the Employer shall not constitute a termination of the Executive's employment without Cause.
4.Extent of Service. During the Employment Period, and excluding any periods of vacation, sick or other leave to which Executive is entitled under this Agreement, Executive agrees to devote all of Executive's business time and efforts to serving the business and affairs of the Employer commensurate with Executive's offices. During the Employment Period, it shall not be a violation of this Agreement for Executive, subject to the requirements of Section 11, to (i) serve on civic or charitable boards or committees or (ii) manage personal investments, so long as such activities do not interfere with the performance of Executive's responsibilities to the Employer or violate the Employer's conflicts of interest or other applicable policies.
5.Compensation and Benefits.
a.Base Salary. During the Employment Period, the Employer will pay to Executive a base salary at the rate of $250,000 per year ("Base Salary''), less normal withholdings, payable in equal monthly or more frequent installments as are customary under the Employer's payroll procedures from time to time. In accordance with the policies and procedures of the Compensation Committee (the "Committee") of the Bancorp Board, the Employer shall review Executive's total compensation at least annually and in its sole discretion may adjust Executive's total compensation from year to year, but during the Employment Period the Employer may not decrease Executive's Base Salary below $250,000; provided, however, that periodic increases in Base Salary, once granted, shall not be subject to revocation. The annual review of
Executive's total compensation will consider, among other things, changes in the cost of living, Executive's own performance and the Bancorp's consolidated performance.
b.Incentive Plans. During the Employment Period, Executive shall be entitled to participate, as determined by the Committee, in all incentive plans of the Employer applicable to senior executives of the Employer generally, including, without limitation, short-term and long-term incentive plans and equity compensation plans that shall be competitive with industry norms taking into consideration the complexity of the Company's strategies, operating performance, geography and other elements deemed appropriate, subject to eligibility requirements and terms and conditions of each such plan; provided, however, that nothing herein shall limit the ability of Employer to amend, modify or terminate any such plans, policies or programs at any time and from time to time.
c.Benefit Plans. During the Employment Period, Executive or Executive's dependents, as the case may be, shall be eligible for participation in all employee benefit plans, practices, policies and programs provided by the Employer applicable to senior executives of the Employer generally (the "Benefit Plans"), subject to eligibility requirements and terms and conditions of each such plan; provided, however, that nothing herein shall limit the ability of Employer to amend, modify or terminate any such benefit plans, policies or programs at any time and from time to time.
d.Expenses. During the Employment Period, Executive shall be entitled to receive prompt reimbursement, in accordance with the policies, practices and procedures of the Employer applicable to senior executives of the Employer generally, for all reasonable and necessary out-of-pocket expenses incurred by Executive in the performance of Executive's duties under this Agreement.
e.Vacation, Sick and Other Leave. During the Employment Period, Executive shall be entitled annually to a minimum of thirty (30) business days of paid vacation and shall be entitled to those number of business days of paid disability, sick and other leave specified in the employment policies of the Employer.
6.Termination of Employment.
a.Cause. The Employer may terminate Executive's employment with the Employer for Cause by providing written Notice of Termination. For purposes of this Agreement, "Cause" shall mean:
i.the material failure of Executive to perform Executive's duties with the Employer, other than any such failure resulting from Disability (as defined below), or to follow the lawful directives of the Bancorp Board, which failure is not cured within ten (10) days following Executive's receipt of written notice from the Bancorp Board specifying such failure;
ii.Executive's engaging in any illegal conduct, gross misconduct, or gross negligence in connection with the Employer's business or relating to Executive's duties hereunder;
iii.Executive's illegal use of controlled substances;
iv.Executive's commission, charge with, indictment for, conviction of, or entry of a plea of nolo contendere or no contest with respect to: (A) any felony, or any misdemeanor involving fraud, dishonesty, moral turpitude, or a breach of trust (including pleading guilty or nolo contendere to a felony or lesser charge which results from plea bargaining), whether or not such felony, crime or lesser offense is connected with the business of the Employer, or (B) any crime connected with the business of the Employer;
v.Executive's commission of or engagement in any act of fraud, misappropriation, theft, embezzlement or an act of comparable dishonesty, whether or not such act was committed in connection with the business of the Employer;
vi.Executive's breach of fiduciary duty or breach of any of the covenants set forth in Section 11 of this Agreement;
vii.Executive's breach of any material term or provision of this Agreement other than the covenants set forth in Section 11 of this Agreement, which breach (if curable) has not been cured within thirty (30) days of receipt of written notice of such breach from the Bancorp Board;
viii.Executive's violation of the Employer's policy against harassment, its equal employment opportunity policy, or the Employer's code of business conduct, or a material violation of any other policy or procedure of the Employer; or
ix.conduct by Executive that results in the permanent removal of Executive from Executive's position as an officer or employee of the Bancorp or the Bank pursuant to a written order by any banking regulatory agency with authority or jurisdiction over the Bancorp or the Bank, as the case may be.
b.Good Reason. Executive may terminate Executive's employment with the Employer for Good Reason. For purposes of this Agreement, "Good Reason" shall mean:
i.a material diminution in Executive's authority, duties or responsibilities;
ii.a material change in the geographic location at which Executive must regularly perform the services to be performed by Executive pursuant to this Agreement (other than a change in such geographic location to an office or other location closer to Executive's home residence); and
iii.any other action or inaction that constitutes a material breach by the Employer of this Agreement; provided, however, that Executive must provide notice to the Employer of the condition Executive contends is Good Reason within 90 days after the initial existence of the condition, and the Employer must have a period of 30 days to remedy the condition. If the condition is not remedied within such 30-day period, then Executive must provide a Notice of Termination as set forth in Section 6(f) within 30 days after the end of the Employer's remedy period.
c.Without Cause. The Employer may terminate Executive's employment without Cause (a "Termination Without Cause").
d.Voluntary Termination. Executive may voluntarily, terminate Executive's employment without Good Reason (a "Voluntary Termination").
e.Death or Disability. Executive's employment with the Employer shall terminate automatically upon Executive's death during the Employment Period. If Executive is incapacitated by accident, sickness or otherwise so as to render Executive mentally or physically incapable of performing fully the services required of Executive under this Agreement (referred to herein as a "Disability") for a period of ninety (90) consecutive days or for an aggregate of one hundred twenty (120) business days during any twelve (12) month period, the Employer may terminate Executive's employment and this Agreement effective immediately after the expiration of either of such periods, upon giving Executive Notice of Termination. Notwithstanding the foregoing provision, if it is determined by the Employer that Executive has a "disability" as defined under the Americans with Disabilities Act, Executive's employment shall not be terminated on the basis of such disability unless it is first determined by the Employer after consultation with Executive that there is no reasonable accommodation which would permit Executive to perform the essential functions of Executive's position without imposing an undue hardship on the Employer.
f.Notice of Termination. Any termination (other than for death) shall be communicated by a Notice of Termination given in accordance with Section 14(i) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice that (i) indicates the specific termination provision  in this  Agreement relied upon, (ii) to the extent applicable,  sets forth in reasonable  detail the facts and circumstances  claimed to provide    a basis for termination of Executive's employment  under  the  provision so indicated  and (iii) if the Termination  Date  (as defined below) is other than the date of receipt of such  notice, specifies the Termination  Date (which date shall  be  not more than 30 days after the giving of such notice, except as otherwise provided in Section 6(e)). The failure to set forth in the Notice of Termination any fact or circumstance which contributes  to a showing  of Disability,  Cause or  Good Reason shall not waive any right of Executive or the Employer hereunder or preclude Executive or the Employer from asserting such fact or  circumstance  in enforcing  Executive's  or  the Employer's  rights hereunder.
g.Termination Date. "Termination Date" means (i) if Executive's employment is terminated by the Employer for Cause or without Cause, the date of Executive's receipt of the Notice of Termination or a later date specified therein, as the case may be, (ii) if Executive's employment is terminated by Executive for Good Reason, the date of the Employer's receipt of the Notice of Termination, (iii) if Executive's employment is terminated by Executive as a Voluntary Termination, the date of the Employer's receipt of the Notice of Termination or a later date specified therein, as the case may be, and (iv) if Executive's employment is terminated by reason of death or Disability, the Termination Date shall be the date of death of Executive or the Disability Effective Date, as the case may be.
7.Obligations of the Employer Upon Termination.
a.Cause: Voluntary Termination. If, during the Employment Period, the Employer shall terminate Executive's employment for Cause or Executive shall terminate Executive's employment by a Voluntary Termination, then Executive shall be entitled to receive the following (collectively, the "Accrued Amounts"):
i.any accrued but unpaid Base Salary and accrued but unused vacation, sick or other leave pay, which shall be paid on the pay date immediately following the Termination Date in accordance with the Employer's customary payroll procedures;
ii.any earned but unpaid cash bonus with respect to any completed fiscal year immediately preceding the Termination Date, which shall be paid on the otherwise applicable payment date; provided, however, that if Executive's employment is terminated by the Employer for Cause, then any such accrued but unpaid cash bonus shall be forfeited;
iii.reimbursement for unreimbursed business expenses properly incurred by Executive, which shall be subject to and paid in accordance with the Employer's expense reimbursement policies, practices and procedures; and
iv.such employee benefits, if any, as to which Executive may be entitled under the Benefit Plans as of the Termination Date.
b.Termination Without Cause or for Good Reason. If, during the Employment Period, the Employer shall terminate Executive's employment without Cause or Executive shall terminate Executive's employment for Good Reason, then Executive shall be entitled to receive the Accrued Amounts and, subject to Executive's execution of a release of claims in favor of the Employer, its subsidiaries and affiliates and their respective officers and directors substantially in the form attached as Exhibit B hereto (the "Release") and such Release becoming effective within 45 days following the Termination Date (such 45-day period, for purposes of this Section 7(b), the "Release Execution Period"), Executive shall also be entitled to receive the following:
i.a lump sum amount equal to two times the sum of (A) Executive's Base Salary and (B) Executive's highest cash bonus earned with respect to any fiscal year within the two most recently completed fiscal years immediately preceding the Termination Date (or if Termination occurs within the first year of the Employment Period, 50% of Base Salary), which amount shall be paid in cash on or before the 60th day after the Termination Date; provided, however, that if the Release Execution Period begins in one taxable year and ends in another taxable year, then payment shall not be made until the beginning of the second taxable year;
ii.a lump sum amount equal to the product of (A) the cash bonus, if any, that Executive would have earned for the fiscal year in which the Termination Date occurs based on the achievement of applicable performance goals for such year and (B) a fraction, the numerator of which is the number of days Executive was employed by the Employer during the year of termination and the denominator of which is the number of days in such year (the "Pro-Rata Bonus"), which amount shall be paid in cash on the date that annual bonuses are paid to senior executives of the Employer generally, but in no event later than two-and-one-half months following the end of the fiscal year in which the Termination Date occurs;
iii.if Executive timely and properly elects continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"), then the Employer shall reimburse Executive for the monthly COBRA premium paid by Executive for Executive and Executive's dependents until the earliest of: (A) the 18-month anniversary of the Termination Date; (B) the date Executive is no longer eligible to receive COBRA continuation coverage; and (C) the date on which Executive becomes eligible to receive substantially similar coverage from another employer. Such reimbursement shall be paid to Executive on the 15th day of the month immediately following the month in which Executive timely remits the premium payment; and
iv.any issued but unvested restricted stock, stock options, phantom stock or other long-term incentive shall be deemed to be fully vested as of the date of termination.
c.Death or Disability. If Executive's employment is terminated during the Employment Period on account of Executive's death or Disability, Executive (or Executive's estate or beneficiaries, as the case may be) shall be entitled to receive the following: (i) the Accrued Amounts; and (ii) a lump sum amount equal to the Pro-Rata Bonus, if any, that Executive would have earned for the fiscal year in which the Termination Date occurs based on the achievement of applicable performance goals for such year, which amount shall be paid in cash on the date that annual bonuses are paid to senior executives of the Employer generally, but in no event later than two-and­ one-half months following the end of the fiscal year in which the Termination Date occurs. Notwithstanding any other provision contained herein, all payments made in connection with Executive's Disability shall be provided in a manner that is consistent with federal and state law.
8.Non-Exclusivity of Rights. Nothing in this Agreement shall prevent or limit Executive's continuing or future participation in any plan, program, policy or practice provided by the Employer and for which Executive may qualify, nor shall anything herein limit or otherwise affect such rights as Executive may have under any contract or agreement with the Employer, except as expressly provided otherwise in this Agreement. Amounts which are vested benefits or which Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Employer at or subsequent to the Termination Date shall be payable in accordance with such plan, policy, practice or program or such contract or agreement, except as expressly modified by this Agreement.
9.No Mitigation. In no event shall Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Executive under Section 7 of this Agreement.
10.Code Section 280G.
a.Certain Reductions in Agreement Payments. Anything in this Agreement to the contrary notwithstanding, in the event a nationally recognized independent accounting firm designated by the Employer and reasonably acceptable to Executive (the "Accounting Firm") shall determine that receipt of all payments or distributions by the Employer and its affiliates in the nature of compensation to or for Executive's benefit, whether paid or payable pursuant to this Agreement or otherwise (a "Payment"), would subject Executive to the excise tax under Section 4999 of the Code, the Accounting Firm shall determine as required below in this Section 10(a) whether to reduce any of the Payments paid or payable pursuant to this Agreement (the "Agreement Payments") to the Reduced Amount (as defined below). The Agreement Payments shall be reduced to the Reduced Amount only if the Accounting Firm determines that Executive would have a greater Net After-Tax Receipt (as defined below) of aggregate Payments if Executive's Agreement Payments were so reduced. If the Accounting Firm determines that Executive would not have a greater Net After-Tax Receipt of aggregate Payments if Executive's Agreement Payments were so reduced, then Executive shall receive all Agreement Payments to which Executive is entitled.
b.Accounting Firm Determinations. If the Accounting Firm determines that aggregate Agreement Payments should be reduced to the Reduced Amount, then the Employer shall promptly give Executive notice to that effect and a copy of the detailed calculation thereof. All determinations made by the Accounting Firm under this Section 10 shall be binding upon the Employer and Executive and shall be made as soon as reasonably practicable and in no event later than 20 days following the Termination Date. For purposes of reducing the Agreement Payments to the Reduced Amount, only amounts payable under this Agreement (and no other Payments) shall be reduced. The reduction of the amounts payable hereunder, if applicable, shall be made by reducing the payments and benefits under the following sections in the following order: first from Section 7(b)(iii), then from Section 7(b)(ii) and lastly from Section 7(b)(i). All fees and expenses of the Accounting Firm shall be borne solely by the Employer.
c.Overpayments; Underpayments. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that amounts will have been paid or distributed by the Employer to or for the benefit of Executive pursuant to this Agreement which should not have been so paid or distributed (an "Overpayment") or that additional amounts which will have not been paid or distributed by the Employer to or for the benefit of Executive pursuant to this Agreement which should have been so paid or distributed (an "Underpayment''), in each case consistent with the calculation of the Reduced Amount hereunder. In the event that the Accounting Firm, based upon the assertion of a deficiency by the Internal Revenue Service against either the Employer or Executive which the Accounting Firm believes has a high probability of success determines that an Overpayment has been made, Executive shall pay any such Overpayment to the Employer together with interest at the applicable federal rate provided for in Section 7872(t)(2) of the Code; provided, however, that no amount shall be payable by Executive to the Employer if and to the extent such payment would not either reduce the amount on which Executive is subject to tax under Section 1 and Section 4999 of the Code or generate a refund of such taxes. In the event that the Accounting Firm, based upon controlling precedent or other substantial authority, determines that an Underpayment has occurred, any such Underpayment shall be paid promptly (and in no event later than 60 days following the date on which the Underpayment is determined) by the Employer to or for the benefit of Executive together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code.
d.Definitions. The following terms shall have the following meanings for purposes of this Section 10:
i."Reduced Amount" shall mean the greatest amount of Agreement Payments that can be paid that would not result in the imposition of the excise tax under Section 4999 of the Code if the Accounting Firm determines to reduce Agreement Payments pursuant to Section 10(a).
ii."Net After-Tax Receipt" shall mean the present value (as determined in accordance with Sections 280G(b)(2)(A)(ii) and 280G(d)(4) of the Code) of a Payment net of all taxes imposed on Executive with respect thereto under Sections 1 and 4999 of the Code and under applicable state and local laws, determined by applying the highest marginal rate under Section 1 of the Code and under state and local laws which applied to Executive's taxable income for the immediately preceding taxable year, or such other rate(s) as the Accounting Firm determined to be likely to apply to Executive in the relevant taxable year(s).
11.Restrictive Covenants.
a.Acknowledgements. Executive acknowledges that (i) Executive has received good and valuable consideration in exchange for Executive's agreement to be bound by the restrictive covenants in this Section 11 and (ii) the Employer will provide certain benefits to Executive hereunder in reliance on such covenants in view of the unique and essential nature of the services Executive will perform on behalf of the Employer and the irreparable injury that would befall the Employer should Executive breach such covenants. Executive further acknowledges that Executive's services are of a special, unique and extraordinary character and that Executive's position with the Employer will place Executive in a position of confidence and trust with customers and employees of the Employer and its subsidiaries and affiliates and with the Employer's other constituencies and will allow Executive access to Trade Secrets and Confidential Information (each as defined below) concerning the Employer and its subsidiaries and affiliates. Executive further acknowledges that the types and periods of restrictions imposed by the covenants in this Section 11 are fair and reasonable, and that such restrictions will not prevent Executive from earning a livelihood.

Executive and Employer acknowledge that separate License Agreement, dated [insert date of executed version], by and between Bank, Panacea Financial LLC, a Delaware limited liability company, and the other parties thereto (as it may be amended, the “License Agreement”). Executive and Employer further acknowledge and agree that certain terms and conditions of the License Agreement may modify, supplement, and/or conflict with the restrictive covenants in this Section 11. Executive and Employer agree and covenant that (i) the terms and conditions of the License Agreement shall govern and control over the terms and conditions of this Agreement, specifically including, but not limited to, this Section 11, in the event of any conflict, ambiguity, or other question of interpretation, and (ii) the terms and conditions of the License Agreement shall be binding and enforceable against each of the parties hereto, if and as applicable. For the sake of clarity, Executive and Employer further agree and covenant that in the event the License Agreement is restated and/or superseded with subsequent documentation, the purpose and intent of this paragraph shall continue to apply in full force and effect with respect to such restated or superseding document and such restated or superseding document shall govern and control over this Agreement, except and only as expressly set out therein.

b.Covenants. Having acknowledged the foregoing, Executive covenants and agrees with the Employer as follows:
i.While Executive is employed by the Employer and continuing thereafter, and except as otherwise set out in the License Agreement, Executive shall not disclose or use any Confidential Information for any purpose other than as may be necessary and appropriate in the ordinary course of performing Executive's duties to the Employer during the Employment Period. This obligation shall remain in effect for as long as the information or materials in question retain their status as Confidential Information. Executive further agrees that Executive shall fully cooperate with the Employer in maintaining the secrecy of the Confidential Information, to the extent permitted by law. The parties acknowledge and agree that this Agreement is not intended to, and does not, alter either the Employer's rights or Executive's obligations under any state or federal statutory or common law regarding trade secrets and unfair trade practices. Anything herein to the contrary notwithstanding, Executive shall not be restricted from: (A) disclosing information that is required to be disclosed by law, court order or other valid and appropriate legal process; provided, however, that in the event such disclosure is required by law, Executive shall provide the Employer with prompt notice of such requirement so that the Employer may seek an appropriate protective order prior to any such required disclosure by Executive; or (B)
reporting possible violations of federal, state, or local law or regulation to any governmental agency or entity, or from making other disclosures that are protected under the whistleblower provisions of federal, state, or local law or regulation, and Executive shall not need the prior authorization of the Employer to make any such reports or disclosures and shall not be required to notify the Employer that Executive has made such reports or disclosures. In addition, and anything herein to the contrary notwithstanding, Executive is hereby given notice that Executive shall not be criminally or civilly liable under any federal or state trade secret law for: (C) disclosing a trade secret (as defined by 18 U.S.C. § 1839) in confidence to a federal, state, or  local government official, either directly or indirectly, or to an attorney, in either event solely for the purpose of reporting or investigating a suspected  violation of law; or (C) disclosing a trade secret (as defined by 18 U.S.C. § 1839) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.
ii.While Executive is employed by the Employer and for a period of 18 months thereafter, except as otherwise set out in the License Agreement, Executive shall not (except on behalf of or with the prior written consent of the Employer), on Executive's own behalf or in the service or on behalf of others, solicit or attempt to solicit any customer of the Employer or its subsidiaries or affiliates, including, without limitation, actively sought prospective customers, with whom Executive had Material Contact (as defined below) during Executive's employment, for the purpose of engaging in, providing or selling Competitive Services (as defined below).
iii.While Executive is employed by the Employer and for a period of 18 months thereafter, except as otherwise set out in the License Agreement, Executive shall not (except on behalf of or with the prior written consent of the Employer), either directly or indirectly, on Executive's own behalf or in the service or on behalf of others, carry on or engage in Competitive Services for a financial institution headquartered within the Restricted Territory.
iv.While Executive is employed by the Employer and for a period of 18 months thereafter, except as otherwise set out in the License Agreement, Executive shall not (except on behalf of or with the prior written consent of the Employer), on Executive's own behalf or in the service or on behalf of others, solicit or recruit or attempt to solicit or recruit, directly or by assisting others, any employee of the Employer or its subsidiaries or affiliates, whether or not such employee is a full-time employee or a temporary employee of the Employer or its subsidiaries or affiliates, whether or not such employment is pursuant to a written agreement and whether or not such employment is for a determined period or is at will, to cease working for the Employer in order to go to work for a competitor of the Employer.
v.Except as otherwise set out in the License Agreement, Executive agrees that Executive will not retain or destroy (except as set forth below), and will immediately return to the Employer on or prior to the date Executive's employment with the Employer ends, or at any other time the Employer requests such return, any and all property of the Employer that is in Executive's possession or subject to Executive's control, including, but not limited to, donor or customer files and information, papers, drawings, notes, manuals, specifications, designs, devices, code, email, documents, diskettes, CDs, tapes, keys, access cards, credit cards, identification cards, equipment, computers, mobile devices, other electronic media, all other files and documents relating to the Employer and its business (regardless of form, but specifically including all electronic files and data of the Employer), together with all Confidential Information belonging to the Employer or that Executive received from or through Executive's employment with the Employer. Executive will not make, distribute, or retain copies of any such information or property. To the extent that Executive has electronic files or information in Executive's possession or control that belong to the Employer or contain Confidential Information (specifically including but not limited to electronic files or information stored on personal computers, mobile devices, electronic media, or in cloud storage), on or prior to the date Executive's employment with the Employer ends, or at any other time the Employer requests, Executive shall (A) provide the Employer with an electronic copy of all of such files or information (in an electronic format that readily accessible by the Employer); (B) after doing so, delete all such files and information, including all copies and derivatives thereof, from all non-Employer-owned computers, mobile devices, electronic media, cloud storage, and other media, devices, and equipment, such that such files and information are permanently deleted
and irretrievable; and (C) provide a written certification to the Employer that the required deletions have been completed and specifying the files and information deleted and the media source from which they were deleted.
c.Definitions. For purposes of this Section 11, the following terms shall be defined as set forth below:
i."Competitive Services" shall mean the business of providing deposits, money market accounts, certificates of deposit or other typical retail banking deposit-type services or loans on a retail level, to individuals, businesses or non-profit entities in any State in the United States in which Employer has a retail bank branch at the time Executive's employment ceases.
ii."Confidential Information" shall mean data and information: (A) relating to the business of the Employer and its subsidiaries and affiliates, regardless of whether the data or information constitutes a trade secret; (B) disclosed to Executive or of which Executive becomes aware as a consequence of Executive's relationship with the Employer; (C) having value to the Employer; and (D) not generally known to competitors of the Employer. Confidential Information shall include, without limitation, trade secrets (as defined by applicable law), methods of operation, names of customers, price lists, financial information and projections, personnel data and similar information; provided, however, that such term shall not mean data or information that (x) has been voluntarily disclosed to the public by the Employer, except where such public disclosure has been made by Executive without authorization from the Employer, (y) has been independently developed and disclosed by others or (z) has otherwise entered the public domain through lawful means. In addition to data and information relating to the Employer and its subsidiaries and affiliates, "Confidential Information" also includes any and all data and information relating to or concerning a third party that otherwise meets the definition set forth above, that was provided or made available to the Employer or its subsidiaries or affiliates by such third party, and that the Employer and/or its subsidiaries and affiliates have a duty or obligation to keep confidential. This definition shall not limit any definition of "confidential information" or any equivalent term under state or federal law.
iii."Material Contact" as to a customer or prospective customer shall mean (A) having dealings with a customer or prospective customer on behalf of the Employer or its subsidiaries or affiliates; (B) directly coordinating or supervising dealings with a customer or prospective customer on behalf of the Employer or its subsidiaries or affiliates; or (C) obtaining Confidential Information about a customer or prospective customer in the ordinary course of business as a result of Executive's employment with the Employer.
iv."Restricted Territory" shall mean the geographic territory within a 50-mile radius of each of the  Employer's corporate office located  at  6830 Old  Dominion Drive, McLean, VA 22101; provided, however, that if the physical location of such office shall change during the Term, then the Restricted Territory shall mean the geographic territory within a 50-mile radius of the physical location of such office at such time and, in the event of the termination of Executive's employment, the Restricted Territory shall mean the geographic territory within a 50-mile radius of the physical location of such office on the Termination Date.
d.Equitable Remedies. The parties specifically acknowledge and agree that the remedy at law for any breach of the covenants contained in this Section 11 (the "Protective Covenants") will be inadequate, and that in the event Executive breaches, or threatens to breach, any of the Protective Covenants, the Employer shall have the right and remedy, without the necessity of proving actual damage or posting any bond, to enjoin, preliminarily and permanently, Executive from violating or threatening to violate the Protective Covenants and to have the Protective Covenants specifically enforced by any court of competent jurisdiction, it being agreed that any breach or threatened breach of the Protective Covenants would cause irreparable injury to the Employer and that money damages would not provide an adequate remedy to the Employer. Executive understands and agrees that if Executive violates any of the obligations set forth in the Protective Covenants, the period of restriction applicable to each obligation violated shall cease to run during the pendency of any litigation over such violation, provided that such litigation was initiated during the period of restriction. Such rights and remedies shall be in addition to, and not in lieu of, any other rights and remedies available to the Employer at law or in equity. The parties agree that, if the parties become involved in legal action regarding the enforcement of the Protective Covenants, the prevailing party in such action will be entitled, in addition to any other remedy, to recover from the non-prevailing party its or his reasonable costs and attorneys' fees incurred in such action. The
Employer's ability to enforce its rights under the Protective Covenants or applicable law against Executive shall not be impaired in any way by the existence of a claim or cause of action on the part of Executive based on, or arising out of, this Agreement or any other event or transaction.
e.Severability and Modification of Covenants. Executive acknowledges and agrees that each of the Protective Covenants is reasonable and valid in time and scope and in all other respects. The parties agree that it is their intention that the Protective Covenants be enforced in accordance with their terms to the maximum extent permitted by law. Each of the Protective Covenants shall be considered and construed as a separate and independent covenant.  Should any part or provision of any of the Protective Covenants be held invalid, void, or unenforceable, such invalidity, void-ness, or unenforceability shall not render invalid, void, or unenforceable any other part or provision of this Agreement or such Protective Covenant. If any of the provisions of the Protective Covenants should ever be held by a court of competent jurisdiction to exceed the scope permitted by the applicable law, such provision or provisions shall be automatically modified to such lesser scope as such court may deem just and proper for the reasonable protection of the Employer's legitimate business interests and may be enforced by the Employer to that extent in the manner described above and all other provisions of this Agreement shall be valid and enforceable.
12.Executive's Representations. Executive hereby represents to the Employer that the execution and delivery of this Agreement by Executive and the Employer and the performance by Executive of Executive's duties hereunder shall not constitute a breach of, or otherwise contravene, the terms of any employment agreement or other agreement or policy to which Executive is a party or otherwise bound. Executive represents and warrants that Executive is not subject to any employment agreement, nondisclosure agreement, common law nondisclosure obligation, fiduciary duty, noncompetition agreement, restrictive covenant or any other obligation to any former employer or to any other person or entity that conflicts in any way with Executive's ability to be employed by or perform services for the Employer. Executive will not disclose to the Employer or use on its behalf any proprietary or confidential information of any other party required to be kept confidential by Executive. Notwithstanding anything in this paragraph to the contrary, Executive and Employer acknowledge the separate License Agreement and agree that each of the foregoing representations is made by Executive with the qualification of the terms and conditions of the License Agreement and the acknowledgement and acceptance of the same by the parties hereto.
13.Assignment and Successors.
a.Executive. This Agreement is personal to Executive and without the prior written consent of the Employer shall not be assignable by Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by Executive's legal representatives.
b.The Employer. This Agreement shall inure to the benefit of and be binding upon the Employer and its successors and assigns. The Bancorp and the Bank will each require any successor to it (whether direct or indirect, by stock or asset purchase, merger, consolidation or otherwise) or to all or substantially all of its business or assets to assume expressly and agree to perform this Agreement in the same manner and to the same extent it would be required to perform it if no such succession had taken place.
14.Miscellaneous.
a.Waiver. Failure of either party to insist, in one or more instances, on performance by the other in strict accordance with the terms and conditions of this Agreement shall not be deemed a waiver or relinquishment of any right granted in this Agreement or of the future performance of any such term or condition or of any other term or condition of this Agreement, unless such waiver is contained in a writing signed by the party making the waiver.
b.Severability. If any provision or covenant, or any part thereof, of this Agreement should be held by any court to be invalid, illegal or unenforceable, either in whole or in part, such invalidity, illegality or unenforceability shall not affect the validity, legality enforceability of the remaining provisions or covenants, or any part thereof, of this Agreement, all of which shall remain in full force and effect.
c.Entire Agreement. Except as provided herein, specifically including but not limited to the License Agreement, this Agreement contains the entire agreement between the Employer and Executive with respect to the subject matter hereof and from and after the Effective Date supersedes and invalidates all previous employment agreements with Executive. No representations, inducements, promises or agreements, oral or otherwise, which are not embodied herein shall be of any force or effect.
d.Withholdings. Notwithstanding any other provision of this Agreement, the Employer shall withhold from any amounts payable or benefits provided under this Agreement any federal, state and local taxes as shall be required to be withheld pursuant to any applicable law or regulation.
e.Compliance with Section 409A.
i.It is intended that this Agreement shall conform with all applicable Section 409A requirements to the extent Section 409A applies to any provisions of the Agreement. Accordingly, in interpreting, construing or applying any provisions of the Agreement, the same shall be construed in   such manner as shall meet and comply with Section 409A, and in the event of any inconsistency with Section 409A, the same shall be reformed so as to meet the requirements of Section 409A. For purposes of Section 409A, each payment made under this Agreement shall be treated as a separate payment and the right to a series of installment payments under this Agreement is to be treated as a right to a series of separate payments. In no event shall Executive, directly or indirectly, designate the calendar year of payment. Executive acknowledges that the Employer has not made, and does not make, any representation or warranty regarding the treatment of this Agreement or the benefits payable under this Agreement under federal, state or local income tax laws, including, but not limited to, Section 409A or compliance with the requirements thereof Neither Employer nor its directors, officers, employees, or advisers shall be held liable for any taxes, interest, penalties, or other monetary amounts owed by Executive as a result of the application of Section 409A.
ii.Notwithstanding anything in this Agreement to the contrary, to the extent that any amount or benefit that would constitute non-exempt "deferred compensation" for purposes of Section 409A of the Code ("Non-Exempt Deferred Compensation") would otherwise be payable or distributable hereunder, such Non-Exempt Deferred Compensation will not be payable or distributable to Executive by reason of such circumstance unless the circumstances giving rise to such payment event meet any description or definition of "separation from service" in Section 409A of the Code and applicable regulations (without giving effect to any elective provisions that may be available under such definition).
iii.To the extent Executive is a "specified employee" as defined in Section 409A, notwithstanding the timing of payment provided in any other Section of this Agreement, no payment, distribution or benefit under this Agreement that constitutes a distribution of deferred compensation (within the meaning of Section 409A) upon separation from service (within the meaning of Section 409A), after taking into account all available exemptions, that would otherwise be payable, distributable or settled during the six-month period after separation from service, will be made during such six-month period, and any such payment, distribution or benefit will instead be paid, distributed or settled on the first business day after such six-month period; provided, however, that if Executive dies following the Termination Date and prior to the payment, distribution, settlement or provision of any payments, distributions or benefits delayed on account of Section 409A, then such payments, distributions or benefits shall be paid or provided to the personal representative of Executive's estate within 30 days after the date of Executive's death.
f.If Executive is entitled to be paid or reimbursed for any taxable expenses under this Agreement, and such payments or reimbursements are includible in Executive's federal gross taxable income, the amount of such expenses reimbursable in any one calendar year shall not affect the amount reimbursable in any other calendar year, and the reimbursement of an eligible expense must be made no later than December 31 of the year after the year in which the expense was incurred. No right of Executive to reimbursement of expenses under this Agreement shall be subject to liquidation or exchange for another benefit.
g.Clawback Provisions. Notwithstanding any other provisions in this Agreement to the contrary, any bonus, incentive-based, equity-based or other similar compensation paid to Executive pursuant to this Agreement or any other agreement or arrangement with the Employer which is subject to recovery under any law, government regulation or stock exchange listing requirement will be subject to such deductions and clawback as may be required to be made pursuant to such law, government regulation or stock exchange listing requirement (or any policy adopted by the Employer pursuant to any such law, government regulation or stock exchange listing requirement).
h.Governing Law. Except to the extent preempted by federal law, the laws of the State of Virginia shall govern this Agreement in all respects, whether as to its validity, construction, capacity, performance or otherwise.
i.Arbitration. Except for any claim for injunctive relief hereunder or as provided in Section 11 hereof, any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled
by binding arbitration in accordance with the rules and procedures of the American Arbitration Association. The place of arbitration shall be selected by the Employer. The decision of the arbitration panel shall be final and binding upon the parties, and judgment upon the award rendered by the arbitration  panel may be entered  by any court  having jurisdiction. The parties agree that Executive and the Employer shall each bear one-half of the administrative expenses (filing and arbitrator costs) associated with the arbitration, and the prevailing party shall be entitled to reimbursement for the additional costs and expenses, including, without limitation, reasonable attorneys' fees, incurred by such party in connection with any such dispute.
j.Notices. Any notice or other communication required or permitted hereunder shall be in writing and shall be delivered personally, by nationally recognized overnight courier service or sent by certified, registered or express mail, postage prepaid. Any such notice shall be deemed given when so delivered personally, when delivered by nationally recognized overnight courier service or, if mailed, five days after the date of deposit in the United States mail, as follows:

​

To the Employer:

PRIMIS

10900 Nuckols Road

Glen Allen, Virginia 23060

Attention: Board of Directors

To Executive:

At the most recent address on file for Executive with the Employer

​

k.Any party may change the address to which notices, requests, demands and other communications shall be delivered or mailed by giving notice thereof to the other party in the same manner provided herein.
l.Survival. Notwithstanding anything in this Agreement to the contrary, the provisions of Sections 7, 10, 11 and 14(e)-G), the definitions of defined terms used therein and the remaining provisions of this Section 14 (to the extent necessary to effectuate the survival of the foregoing provisions) shall survive the termination of this Agreement and any termination of Executive's employment hereunder.
m.Amendments and Modifications. This Agreement may be amended or modified only by a writing signed by all parties hereto that makes specific reference to this Agreement.

​

[Signature page follows.]

​

​

​

​

​

​

​

​

​

​

​

​

IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Executive Employment Agreement as of the date first above written.

​

BANCORP

By:/s/ John F. Biagas___________________________

Name:John F. Biagas

Title:Chairman of the Compensation Committee

​

​

BANK

By:/s/ Dennis J. Zember, Jr.___________________________

Name:Dennis J. Zember, Jr.

Title:President and CEO

​

​

EXECUTIVE

​

/s/ Tyler Stafford___________________________

Graphic

Tyler Stafford

Exhibit 10.14

THIS EXECUTIVE EMPLOYMENT AGREEMENT (this "Agreement") is made and entered as of the 13th day of September, 2021, by and among Primis Financial Corp., a Virginia corporation (the "Bancorp"), Primis, a Virginia state-chartered bank and wholly owned subsidiary of the Bancorp (the "Bank"; the Bancorp and the Bank are collectively referred to herein as the "Employer''), and Ann-Stanton C. Gore ("Executive").

BACKGROUND

WHEREAS, the expertise and experience of Executive in the financial institutions industry are valuable to the Employer;

WHEREAS, it is in the best interests of the Employer to maintain an experienced and sound executive management team to manage the Employer, further the Employer's overall strategies and protect and enhance shareholder value; and

WHEREAS, the Employer and Executive desire to enter into this Agreement to establish the scope, terms and conditions of Executive's continued employment by the Employer;

NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

​

1.Effective Date. The effective time and date of this Agreement shall be deemed to be 5:00 p.m. on the date of its making first set forth above (the "Effective Date").
2.Employment. Executive is employed as the Chief Marketing Officer of the Bank. Executive's responsibilities, duties, prerogatives and authority in such offices shall be those customary for persons holding such offices of institutions in the financial institutions industry, as well as such other duties of an executive, managerial or administrative nature, which are consistent with such offices, as shall be specified and designated from time to time by the Board of Directors of the Bancorp (the "Bancorp Board"). Executive will report directly to the President and CEO of the Bank.
3.Employment Period. Unless earlier terminated in accordance with Section 6 hereof, Executive's employment under this Agreement shall begin as of the Effective Date and shall continue thereafter for a term of two years (the "Employment Period"). Commencing on the second anniversary of the Effective Date, this Agreement and the Employment Period shall automatically renew for successive two (2) year periods unless the Employer or the Executive delivers written notice of non-renewal at least sixty (60) days prior to the expiration of the then current Employment Period. A non-renewal of the Employment Period by the Employer shall not constitute a termination of the Executive's employment without Cause.
4.Extent of Service. During the Employment Period, and excluding any periods of vacation, sick or other leave to which Executive is entitled under this Agreement, Executive agrees to devote all of Executive's business time and efforts to serving the business and affairs of the Employer commensurate with Executive's offices. During the Employment Period, it shall not be a violation of this Agreement for Executive, subject to the requirements of Section 11, to (i) serve on civic or charitable boards or committees or (ii) manage personal investments, so long as such activities do not interfere with the performance of Executive's responsibilities to the Employer or violate the Employer's conflicts of interest or other applicable policies.
5.Compensation and Benefits.
a.Base Salary. During the Employment Period, the Employer will pay to Executive a base salary at the rate of $225,000.00 per year ("Base Salary''), less normal withholdings, payable in equal monthly or more frequent installments as are customary under the Employer's payroll procedures from time to time. In accordance with the policies and procedures of the Compensation Committee (the "Committee") of the Bancorp Board, the Employer shall review Executive's total compensation at least annually and in its sole discretion may adjust Executive's total compensation from year to year, but during the Employment Period the Employer may not decrease Executive's Base Salary below $225,000.00; provided, however, that periodic increases in Base Salary, once granted, shall not be subject to revocation. The annual review
of Executive's total compensation will consider, among other things, changes in the cost of living, Executive's own performance and the Bancorp's consolidated performance.
b.Incentive Plans. During the Employment Period, Executive shall be entitled to participate, as determined by the Committee, in all incentive plans of the Employer applicable to senior executives of the Employer generally, including, without limitation, short-term and long-term incentive plans and equity compensation plans that shall be competitive with industry norms taking into consideration the complexity of the Company's strategies, operating performance, geography and other elements deemed appropriate, subject to eligibility requirements and terms and conditions of each such plan; provided, however, that nothing herein shall limit the ability of Employer to amend, modify or terminate any such plans, policies or programs at any time and from time to time.
c.Benefit Plans. During the Employment Period, Executive or Executive's dependents, as the case may be, shall be eligible for participation in all employee benefit plans, practices, policies and programs provided by the Employer applicable to senior executives of the Employer generally (the "Benefit Plans"), subject to eligibility requirements and terms and conditions of each such plan; provided, however, that nothing herein shall limit the ability of Employer to amend, modify or terminate any such benefit plans, policies or programs at any time and from time to time.
d.Expenses. During the Employment Period, Executive shall be entitled to receive prompt reimbursement, in accordance with the policies, practices and procedures of the Employer applicable to senior executives of the Employer generally, for all reasonable and necessary out-of-pocket expenses incurred by Executive in the performance of Executive's duties under this Agreement.  Also including dues for country club memberships and civic organizations in which Executive is or shall become a member, not to exceed $20,000 in the aggregate per calendar year.
e.Vacation, Sick and Other Leave. During the Employment Period, Executive shall be entitled annually to a minimum of thirty (30) business days of paid vacation and shall be entitled to those number of business days of paid disability, sick and other leave specified in the employment policies of the Employer.
6.Termination of Employment.
a.Cause. The Employer may terminate Executive's employment with the Employer for Cause by providing written Notice of Termination. For purposes of this Agreement, "Cause" shall mean:
i.the material failure of Executive to perform Executive's duties with the Employer, other than any such failure resulting from Disability (as defined below), or to follow the lawful directives of the Bancorp Board, which failure is not cured within ten (10) days following Executive's receipt of written notice from the Bancorp Board specifying such failure;
ii.Executive's engaging in any illegal conduct, gross misconduct, or gross negligence in connection with the Employer's business or relating to Executive's duties hereunder;
iii.Executive's illegal use of controlled substances;
iv.Executive's commission, charge with, indictment for, conviction of, or entry of a plea of nolo contendere or no contest with respect to: (A) any felony, or any misdemeanor involving fraud, dishonesty, moral turpitude, or a breach of trust (including pleading guilty or nolo contendere to a felony or lesser charge which results from plea bargaining), whether or not such felony, crime or lesser offense is connected with the business of the Employer, or (B) any crime connected with the business of the Employer;
v.Executive's commission of or engagement in any act of fraud, misappropriation, theft, embezzlement or an act of comparable dishonesty, whether or not such act was committed in connection with the business of the Employer;
vi.Executive's breach of fiduciary duty or breach of any of the covenants set forth in Section 11 of this Agreement;
vii.Executive's breach of any material term or provision of this Agreement other than the covenants set forth in Section 11 of this Agreement, which breach (if curable) has not been cured within thirty (30) days of receipt of written notice of such breach from the Bancorp Board;
viii.Executive's violation of the Employer's policy against harassment, its equal employment opportunity policy, or the Employer's code of business conduct, or a material violation of any other policy or procedure of the Employer; or
ix.conduct by Executive that results in the permanent removal of Executive from Executive's position as an officer or employee of the Bancorp or the Bank pursuant to a written order by
any banking regulatory agency with authority or jurisdiction over the Bancorp or the Bank, as the case may be.
b.Good Reason. Executive may terminate Executive's employment with the Employer for Good Reason. For purposes of this Agreement, "Good Reason" shall mean:
i.a material diminution in Executive's authority, duties or responsibilities;
ii.a material change in the geographic location at which Executive must regularly perform the services to be performed by Executive pursuant to this Agreement (other than a change in such geographic location to an office or other location closer to Executive's home residence); and
iii.any other action or inaction that constitutes a material breach by the Employer of this Agreement; provided, however, that Executive must provide notice to the Employer of the condition Executive contends is Good Reason within 90 days after the initial existence of the condition, and the Employer must have a period of 30 days to remedy the condition. If the condition is not remedied within such 30-day period, then Executive must provide a Notice of Termination as set forth in Section 6(f) within 30 days after the end of the Employer's remedy period.
c.Without Cause. The Employer may terminate Executive's employment without Cause (a "Termination Without Cause").
d.Voluntary Termination. Executive may voluntarily, terminate Executive's employment without Good Reason (a "Voluntary Termination").
e.Death or Disability. Executive's employment with the Employer shall terminate automatically upon Executive's death during the Employment Period. If Executive is incapacitated by accident, sickness or otherwise so as to render Executive mentally or physically incapable of performing fully the services required of Executive under this Agreement (referred to herein as a "Disability") for a period of ninety (90) consecutive days or for an aggregate of one hundred twenty (120) business days during any twelve (12) month period, the Employer may terminate Executive's employment and this Agreement effective immediately after the expiration of either of such periods, upon giving Executive Notice of Termination. Notwithstanding the foregoing provision, if it is determined by the Employer that Executive has a "disability" as defined under the Americans with Disabilities Act, Executive's employment shall not be terminated on the basis of such disability unless it is first determined by the Employer after consultation with Executive that there is no reasonable accommodation which would permit Executive to perform the essential functions of Executive's position without imposing an undue hardship on the Employer.
f.Notice of Termination. Any termination (other than for death) shall be communicated by a Notice of Termination given in accordance with Section 14(i) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice that (i) indicates the specific termination provision  in this  Agreement relied upon, (ii) to the extent applicable,  sets forth in reasonable  detail the facts and circumstances  claimed to provide    a basis for termination of Executive's employment  under  the  provision so indicated  and (iii) if the Termination  Date  (as defined below) is other than the date of receipt of such  notice, specifies the Termination  Date (which date shall  be  not more than 30 days after the giving of such notice, except as otherwise provided in Section 6(e)). The failure to set forth in the Notice of Termination any fact or circumstance which contributes  to a showing  of Disability,  Cause or  Good Reason shall not waive any right of Executive or the Employer hereunder or preclude Executive or the Employer from asserting such fact or  circumstance  in enforcing  Executive's  or  the Employer's  rights hereunder.
g.Termination Date. "Termination Date" means (i) if Executive's employment is terminated by the Employer for Cause or without Cause, the date of Executive's receipt of the Notice of Termination or a later date specified therein, as the case may be, (ii) if Executive's employment is terminated by Executive for Good Reason, the date of the Employer's receipt of the Notice of Termination, (iii) if Executive's employment is terminated by Executive as a Voluntary Termination, the date of the Employer's receipt of the Notice of Termination or a later date specified therein, as the case may be, and (iv) if Executive's employment is terminated by reason of death or Disability, the Termination Date shall be the date of death of Executive or the Disability Effective Date, as the case may be.
7.Obligations of the Employer Upon Termination.
a.Cause: Voluntary Termination. If, during the Employment Period, the Employer shall terminate Executive's employment for Cause or Executive shall terminate Executive's employment by a Voluntary
Termination, then Executive shall be entitled to receive the following (collectively, the "Accrued Amounts"):
i.any accrued but unpaid Base Salary and accrued but unused vacation, sick or other leave pay, which shall be paid on the pay date immediately following the Termination Date in accordance with the Employer's customary payroll procedures;
ii.any earned but unpaid cash bonus with respect to any completed fiscal year immediately preceding the Termination Date, which shall be paid on the otherwise applicable payment date; provided, however, that if Executive's employment is terminated by the Employer for Cause, then any such accrued but unpaid cash bonus shall be forfeited;
iii.reimbursement for unreimbursed business expenses properly incurred by Executive, which shall be subject to and paid in accordance with the Employer's expense reimbursement policies, practices and procedures; and
iv.such employee benefits, if any, as to which Executive may be entitled under the Benefit Plans as of the Termination Date.
b.Termination Without Cause or for Good Reason. If, during the Employment Period, the Employer shall terminate Executive's employment without Cause or Executive shall terminate Executive's employment for Good Reason, then Executive shall be entitled to receive the Accrued Amounts and, subject to Executive's execution of a release of claims in favor of the Employer, its subsidiaries and affiliates and their respective officers and directors substantially in the form attached as Exhibit B hereto (the "Release") and such Release becoming effective within 45 days following the Termination Date (such 45-day period, for purposes of this Section 7(b), the "Release Execution Period"), Executive shall also be entitled to receive the following:
i.a lump sum amount equal to two times the sum of (A) Executive's Base Salary and (B) Executive's highest cash bonus earned with respect to any fiscal year within the two most recently completed fiscal years immediately preceding the Termination Date (or if Termination occurs within the first year of the Employment Period, 50% of Base Salary), which amount shall be paid in cash on or before the 60th day after the Termination Date; provided, however, that if the Release Execution Period begins in one taxable year and ends in another taxable year, then payment shall not be made until the beginning of the second taxable year;
ii.a lump sum amount equal to the product of (A) the cash bonus, if any, that Executive would have earned for the fiscal year in which the Termination Date occurs based on the achievement of applicable performance goals for such year and (B) a fraction, the numerator of which is the number of days Executive was employed by the Employer during the year of termination and the denominator of which is the number of days in such year (the "Pro-Rata Bonus"), which amount shall be paid in cash on the date that annual bonuses are paid to senior executives of the Employer generally, but in no event later than two-and-one-half months following the end of the fiscal year in which the Termination Date occurs;
iii.if Executive timely and properly elects continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"), then the Employer shall reimburse Executive for the monthly COBRA premium paid by Executive for Executive and Executive's dependents until the earliest of: (A) the 18-month anniversary of the Termination Date; (B) the date Executive is no longer eligible to receive COBRA continuation coverage; and (C) the date on which Executive becomes eligible to receive substantially similar coverage from another employer. Such reimbursement shall be paid to Executive on the 15th day of the month immediately following the month in which Executive timely remits the premium payment; and
iv.any issued but unvested restricted stock, stock options, phantom stock or other long-term incentive shall be deemed to be fully vested as of the date of termination.
c.Death or Disability. If Executive's employment is terminated during the Employment Period on account of Executive's death or Disability, Executive (or Executive's estate or beneficiaries, as the case may be) shall be entitled to receive the following: (i) the Accrued Amounts; and (ii) a lump sum amount equal to the Pro-Rata Bonus, if any, that Executive would have earned for the fiscal year in which the Termination Date occurs based on the achievement of applicable performance goals for such year, which amount shall be paid in cash on the date that annual bonuses are paid to senior executives of the Employer generally, but in no event later than two-and­ one-half months following the end of the fiscal year in which the Termination Date occurs. Notwithstanding any other provision contained herein, all payments made in
connection with Executive's Disability shall be provided in a manner that is consistent with federal and state law.
8.Non-Exclusivity of Rights. Nothing in this Agreement shall prevent or limit Executive's continuing or future participation in any plan, program, policy or practice provided by the Employer and for which Executive may qualify, nor shall anything herein limit or otherwise affect such rights as Executive may have under any contract or agreement with the Employer, except as expressly provided otherwise in this Agreement. Amounts which are vested benefits or which Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Employer at or subsequent to the Termination Date shall be payable in accordance with such plan, policy, practice or program or such contract or agreement, except as expressly modified by this Agreement.
9.No Mitigation. In no event shall Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Executive under Section 7 of this Agreement.
10.Code Section 280G.
a.Certain Reductions in Agreement Payments. Anything in this Agreement to the contrary notwithstanding, in the event a nationally recognized independent accounting firm designated by the Employer and reasonably acceptable to Executive (the "Accounting Firm") shall determine that receipt of all payments or distributions by the Employer and its affiliates in the nature of compensation to or for Executive's benefit, whether paid or payable pursuant to this Agreement or otherwise (a "Payment"), would subject Executive to the excise tax under Section 4999 of the Code, the Accounting Firm shall determine as required below in this Section 10(a) whether to reduce any of the Payments paid or payable pursuant to this Agreement (the "Agreement Payments") to the Reduced Amount (as defined below). The Agreement Payments shall be reduced to the Reduced Amount only if the Accounting Firm determines that Executive would have a greater Net After-Tax Receipt (as defined below) of aggregate Payments if Executive's Agreement Payments were so reduced. If the Accounting Firm determines that Executive would not have a greater Net After-Tax Receipt of aggregate Payments if Executive's Agreement Payments were so reduced, then Executive shall receive all Agreement Payments to which Executive is entitled.
b.Accounting Firm Determinations. If the Accounting Firm determines that aggregate Agreement Payments should be reduced to the Reduced Amount, then the Employer shall promptly give Executive notice to that effect and a copy of the detailed calculation thereof. All determinations made by the Accounting Firm under this Section 10 shall be binding upon the Employer and Executive and shall be made as soon as reasonably practicable and in no event later than 20 days following the Termination Date. For purposes of reducing the Agreement Payments to the Reduced Amount, only amounts payable under this Agreement (and no other Payments) shall be reduced. The reduction of the amounts payable hereunder, if applicable, shall be made by reducing the payments and benefits under the following sections in the following order: first from Section 7(b)(iii), then from Section 7(b)(ii) and lastly from Section 7(b)(i). All fees and expenses of the Accounting Firm shall be borne solely by the Employer.
c.Overpayments; Underpayments. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that amounts will have been paid or distributed by the Employer to or for the benefit of Executive pursuant to this Agreement which should not have been so paid or distributed (an "Overpayment") or that additional amounts which will have not been paid or distributed by the Employer to or for the benefit of Executive pursuant to this Agreement which should have been so paid or distributed (an "Underpayment''), in each case consistent with the calculation of the Reduced Amount hereunder. In the event that the Accounting Firm, based upon the assertion of a deficiency by the Internal Revenue Service against either the Employer or Executive which the Accounting Firm believes has a high probability of success determines that an Overpayment has been made, Executive shall pay any such Overpayment to the Employer together with interest at the applicable federal rate provided for in Section 7872(t)(2) of the Code; provided, however, that no amount shall be payable by Executive to the Employer if and to the extent such payment would not either reduce the amount on which Executive is subject to tax under Section 1 and Section 4999 of the Code or generate a refund of such taxes. In the event that the Accounting Firm, based upon controlling precedent or other substantial authority, determines that an Underpayment has occurred, any such Underpayment shall be paid promptly (and in no event later than 60 days following the date on which the Underpayment is determined) by the Employer to or for the benefit of Executive together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code.
d.Definitions. The following terms shall have the following meanings for purposes of this Section 10:
i."Reduced Amount" shall mean the greatest amount of Agreement Payments that can be paid that would not result in the imposition of the excise tax under Section 4999 of the Code if the Accounting Firm determines to reduce Agreement Payments pursuant to Section 10(a).
ii."Net After-Tax Receipt" shall mean the present value (as determined in accordance with Sections 280G(b)(2)(A)(ii) and 280G(d)(4) of the Code) of a Payment net of all taxes imposed on Executive with respect thereto under Sections 1 and 4999 of the Code and under applicable state and local laws, determined by applying the highest marginal rate under Section 1 of the Code and under state and local laws which applied to Executive's taxable income for the immediately preceding taxable year, or such other rate(s) as the Accounting Firm determined to be likely to apply to Executive in the relevant taxable year(s).
11.Restrictive Covenants.
a.Executive Acknowledgements. Executive acknowledges that (i) Executive has received good and valuable consideration in exchange for Executive's agreement to be bound by the restrictive covenants in this Section 11 and (ii) the Employer will provide certain benefits to Executive hereunder in reliance on such covenants in view of the unique and essential nature of the services Executive will perform on behalf of the Employer and the irreparable injury that would befall the Employer should Executive breach such covenants. Executive further acknowledges that Executive's services are of a special, unique and extraordinary character and that Executive's position with the Employer will place Executive in a position of confidence and trust with customers and employees of the Employer and its subsidiaries and affiliates and with the Employer's other constituencies and will allow Executive access to Trade Secrets and Confidential Information (each as defined below) concerning the Employer and its subsidiaries and affiliates. Executive further acknowledges that the types and periods of restrictions imposed by the covenants in this Section 11 are fair and reasonable, and that such restrictions will not prevent Executive from earning a livelihood.
b.Covenants. Having acknowledged the foregoing, Executive covenants and agrees with the Employer as follows:
i.While Executive is employed by the Employer and continuing thereafter, Executive shall not disclose or use any Confidential Information for any purpose other than as may be necessary and appropriate in the ordinary course of performing Executive's duties to the Employer during the Employment Period. This obligation shall remain in effect for as long as the information or materials in question retain their status as Confidential Information. Executive further agrees that Executive shall fully cooperate with the Employer in maintaining the secrecy of the Confidential Information, to the extent permitted by law. The parties acknowledge and agree that this Agreement is not intended to, and does not, alter either the Employer's rights or Executive's obligations under any state or federal statutory or common law regarding trade secrets and unfair trade practices. Anything herein to the contrary notwithstanding, Executive shall not be restricted from: (A) disclosing information that is required to be disclosed by law, court order or other valid and appropriate legal process; provided, however, that in the event such disclosure is required by law, Executive shall provide the Employer with prompt notice of such requirement so that the Employer may seek an appropriate protective order prior to any such required disclosure by Executive; or (B) reporting possible violations of federal, state, or local law or regulation to any governmental agency or entity, or from making other disclosures that are protected under the whistleblower provisions of federal, state, or local law or regulation, and Executive shall not need the prior authorization of the Employer to make any such reports or disclosures and shall not be required to notify the Employer that Executive has made such reports or disclosures. In addition, and anything herein to the contrary notwithstanding, Executive is hereby given notice that Executive shall not be criminally or civilly liable under any federal or state trade secret law for: (C) disclosing a trade secret (as defined by 18 U.S.C. § 1839) in confidence to a federal, state, or  local government official, either directly or indirectly, or to an attorney, in either event solely for the purpose of reporting or investigating a suspected  violation of law; or (C) disclosing a trade secret (as defined by 18 U.S.C. § 1839) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.
ii.While Executive is employed by the Employer and for a period of 18 months thereafter, Executive shall not (except on behalf of or with the prior written consent of the Employer), on Executive's own behalf or in the service or on behalf of others, solicit or attempt to solicit any
customer of the Employer or its subsidiaries or affiliates, including, without limitation, actively sought prospective customers, with whom Executive had Material Contact (as defined below) during Executive's employment, for the purpose of engaging in, providing or selling Competitive Services (as defined below).
iii.While Executive is employed by the Employer and for a period of 18 months thereafter, Executive shall not (except on behalf of or with the prior written consent of the Employer), either directly or indirectly, on Executive's own behalf or in the service or on behalf of others, carry on or engage in Competitive Services for a financial institution headquartered within the Restricted Territory.
iv.While Executive is employed by the Employer and for a period of 18 months thereafter, Executive shall not (except on behalf of or with the prior written consent of the Employer), on Executive's own behalf or in the service or on behalf of others, solicit or recruit or attempt to solicit or recruit, directly or by assisting others, any employee of the Employer or its subsidiaries or affiliates, whether or not such employee is a full-time employee or a temporary employee of the Employer or its subsidiaries or affiliates, whether or not such employment is pursuant to a written agreement and whether or not such employment is for a determined period or is at will, to cease working for the Employer in order to go to work for a competitor of the Employer.
v.Executive agrees that Executive will not retain or destroy (except as set forth below), and will immediately return to the Employer on or prior to the date Executive's employment with the Employer ends, or at any other time the Employer requests such return, any and all property of the Employer that is in Executive's possession or subject to Executive's control, including, but not limited to, donor or customer files and information, papers, drawings, notes, manuals, specifications, designs, devices, code, email, documents, diskettes, CDs, tapes, keys, access cards, credit cards, identification cards, equipment, computers, mobile devices, other electronic media, all other files and documents relating to the Employer and its business (regardless of form, but specifically including all electronic files and data of the Employer), together with all Confidential Information belonging to the Employer or that Executive received from or through Executive's employment with the Employer. Executive will not make, distribute, or retain copies of any such information or property. To the extent that Executive has electronic files or information in Executive's possession or control that belong to the Employer or contain Confidential Information (specifically including but not limited to electronic files or information stored on personal computers, mobile devices, electronic media, or in cloud storage), on or prior to the date Executive's employment with the Employer ends, or at any other time the Employer requests, Executive shall (A) provide the Employer with an electronic copy of all of such files or information (in an electronic format that readily accessible by the Employer); (B) after doing so, delete all such files and information, including all copies and derivatives thereof, from all non-Employer-owned computers, mobile devices, electronic media, cloud storage, and other media, devices, and equipment, such that such files and information are permanently deleted and irretrievable; and (C) provide a written certification to the Employer that the required deletions have been completed and specifying the files and information deleted and the media source from which they were deleted.
c.Definitions. For purposes of this Section 11, the following terms shall be defined as set forth below:
i."Competitive Services" shall mean the business of providing deposits, money market accounts, certificates of deposit or other typical retail banking deposit-type services or loans on a retail level, to individuals, businesses or non-profit entities in any State in the United States in which Employer has a retail bank branch at the time Executive's employment ceases.
ii."Confidential Information" shall mean data and information: (A) relating to the business of the Employer and its subsidiaries and affiliates, regardless of whether the data or information constitutes a trade secret; (B) disclosed to Executive or of which Executive becomes aware as a consequence of Executive's relationship with the Employer; (C) having value to the Employer; and (D) not generally known to competitors of the Employer. Confidential Information shall include, without limitation, trade secrets (as defined by applicable Jaw), methods of operation, names of customers, price lists, financial information and projections, personnel data and similar information; provided, however, that such term shall not mean data or information that (x) has been voluntarily disclosed to the public by the Employer, except where such public
disclosure has been made by Executive without authorization from the Employer, (y) has been independently developed and disclosed by others or (z) has otherwise entered the public domain through lawful means. In addition to data and information relating to the Employer and its subsidiaries and affiliates, "Confidential Information" also includes any and all data and information relating to or concerning a third party that otherwise meets the definition set forth above, that was provided or made available to the Employer or its subsidiaries or affiliates by such third party, and that the Employer and/or its subsidiaries and affiliates have a duty or obligation to keep confidential. This definition shall not limit any definition of "confidential information" or any equivalent term under state or federal law.
iii."Material Contact" as to a customer or prospective customer shall mean (A) having dealings with a customer or prospective customer on behalf of the Employer or its subsidiaries or affiliates; (B) directly coordinating or supervising dealings with a customer or prospective customer on behalf of the Employer or its subsidiaries or affiliates; or (C) obtaining Confidential Information about a customer or prospective customer in the ordinary course of business as a result of Executive's employment with the Employer.
iv."Restricted Territory" shall mean the geographic territory within a 50-mile radius of each of the  Employer's corporate office located  at  6830 Old  Dominion Drive, McLean, VA 22101; provided, however, that if the physical location of such office shall change during the Term, then the Restricted Territory shall mean the geographic territory within a 50-mile radius of the physical location of such office at such time and, in the event of the termination of Executive's employment, the Restricted Territory shall mean the geographic territory within a 50-mile radius of the physical location of such office on the Termination Date.
d.Equitable Remedies. The parties specifically acknowledge and agree that the remedy at law for any breach of the covenants contained in this Section 11 (the "Protective Covenants") will be inadequate, and that in the event Executive breaches, or threatens to breach, any of the Protective Covenants, the Employer shall have the right and remedy, without the necessity of proving actual damage or posting any bond, to enjoin, preliminarily and permanently, Executive from violating or threatening to violate the Protective Covenants and to have the Protective Covenants specifically enforced by any court of competent jurisdiction, it being agreed that any breach or threatened breach of the Protective Covenants would cause irreparable injury to the Employer and that money damages would not provide an adequate remedy to the Employer. Executive understands and agrees that if Executive violates any of the obligations set forth in the Protective Covenants, the period of restriction applicable to each obligation violated shall cease to run during the pendency of any litigation over such violation, provided that such litigation was initiated during the period of restriction. Such rights and remedies shall be in addition to, and not in lieu of, any other rights and remedies available to the Employer at law or in equity. The parties agree that, if the parties become involved in legal action regarding the enforcement of the Protective Covenants, the prevailing party in such action will be entitled, in addition to any other remedy, to recover from the non-prevailing party its or his reasonable costs and attorneys' fees incurred in such action. The Employer's ability to enforce its rights under the Protective Covenants or applicable law against Executive shall not be impaired in any way by the existence of a claim or cause of action on the part of Executive based on, or arising out of, this Agreement or any other event or transaction.
e.Severability and Modification of Covenants. Executive acknowledges and agrees that each of the Protective Covenants is reasonable and valid in time and scope and in all other respects. The parties agree that it is their intention that the Protective Covenants be enforced in accordance with their terms to the maximum extent permitted by law. Each of the Protective Covenants shall be considered and construed as a separate and independent covenant.  Should any part or provision of any of the Protective Covenants be held invalid, void, or unenforceable, such invalidity, void-ness, or unenforceability shall not render invalid, void, or unenforceable any other part or provision of this Agreement or such Protective Covenant. If any of the provisions of the Protective Covenants should ever be held by a court of competent jurisdiction to exceed the scope permitted by the applicable law, such provision or provisions shall be automatically modified to such lesser scope as such court may deem just and proper for the reasonable protection of the Employer's legitimate business interests and may be enforced by the Employer to that extent in the manner described above and all other provisions of this Agreement shall be valid and enforceable.
12.Executive's Representations. Executive hereby represents to the Employer that the execution and delivery of this Agreement by Executive and the Employer and the performance by Executive of Executive's duties hereunder shall not constitute a breach of, or otherwise contravene, the terms of any employment agreement or other agreement or policy to which Executive is a party or otherwise bound. Executive represents and warrants that Executive is not subject to any employment agreement, nondisclosure agreement, common law nondisclosure obligation, fiduciary duty, noncompetition agreement, restrictive covenant or any other obligation to any former employer or to any other person or entity that conflicts in any way with Executive's ability to be employed by or perform services for the Employer. Executive will not disclose to the Employer or use on its behalf any proprietary or confidential information of any other party required to be kept confidential by Executive.
13.Assignment and Successors.
a.Executive. This Agreement is personal to Executive and without the prior written consent of the Employer shall not be assignable by Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by Executive's legal representatives.
b.The Employer. This Agreement shall inure to the benefit of and be binding upon the Employer and its successors and assigns. The Bancorp and the Bank will each require any successor to it (whether direct or indirect, by stock or asset purchase, merger, consolidation or otherwise) or to all or substantially all of its business or assets to assume expressly and agree to perform this Agreement in the same manner and to the same extent it would be required to perform it if no such succession had taken place.
14.Miscellaneous.
a.Waiver. Failure of either party to insist, in one or more instances, on performance by the other in strict accordance with the terms and conditions of this Agreement shall not be deemed a waiver or relinquishment of any right granted in this Agreement or of the future performance of any such term or condition or of any other term or condition of this Agreement, unless such waiver is contained in a writing signed by the party making the waiver.
b.Severability. If any provision or covenant, or any part thereof, of this Agreement should be held by any court to be invalid, illegal or unenforceable, either in whole or in part, such invalidity, illegality or unenforceability shall not affect the validity, legality enforceability of the remaining provisions or covenants, or any part thereof, of this Agreement, all of which shall remain in full force and effect.
c.Entire Agreement. Except as provided herein, this Agreement contains the entire agreement between the Employer and Executive with respect to the subject matter hereof and from and after the Effective Date supersedes and invalidates all previous employment agreements with Executive. No representations, inducements, promises or agreements, oral or otherwise, which are not embodied herein shall be of any force or effect.
d.Withholdings. Notwithstanding any other provision of this Agreement, the Employer shall withhold from any amounts payable or benefits provided under this Agreement any federal, state and local taxes as shall be required to be withheld pursuant to any applicable law or regulation.
e.Compliance with Section 409A.
i.It is intended that this Agreement shall conform with all applicable Section 409A requirements to the extent Section 409A applies to any provisions of the Agreement. Accordingly, in interpreting, construing or applying any provisions of the Agreement, the same shall be construed in   such manner as shall meet and comply with Section 409A, and in the event of any inconsistency with Section 409A, the same shall be reformed so as to meet the requirements of Section 409A. For purposes of Section 409A, each payment made under this Agreement shall be treated as a separate payment and the right to a series of installment payments under this Agreement is to be treated as a right to a series of separate payments. In no event shall Executive, directly or indirectly, designate the calendar year of payment. Executive acknowledges that the Employer has not made, and does not make, any representation or warranty regarding the treatment of this Agreement or the benefits payable under this Agreement under federal, state or local income tax laws, including, but not limited to, Section 409A or compliance with the requirements thereof Neither Employer nor its directors, officers, employees, or advisers shall be held liable for any taxes, interest, penalties, or other monetary amounts owed by Executive as a result of the application of Section 409A.
ii.Notwithstanding anything in this Agreement to the contrary, to the extent that any amount or benefit that would constitute non-exempt "deferred compensation" for purposes of Section 409A of the Code ("Non-Exempt Deferred Compensation") would otherwise be payable or
distributable hereunder, such Non-Exempt Deferred Compensation will not be payable or distributable to Executive by reason of such circumstance unless the circumstances giving rise to such payment event meet any description or definition of "separation from service" in Section 409A of the Code and applicable regulations (without giving effect to any elective provisions that may be available under such definition).
iii.To the extent Executive is a "specified employee" as defined in Section 409A, notwithstanding the timing of payment provided in any other Section of this Agreement, no payment, distribution or benefit under this Agreement that constitutes a distribution of deferred compensation (within the meaning of Section 409A) upon separation from service (within the meaning of Section 409A), after taking into account all available exemptions, that would otherwise be payable, distributable or settled during the six-month period after separation from service, will be made during such six-month period, and any such payment, distribution or benefit will instead be paid, distributed or settled on the first business day after such six-month period; provided, however, that if Executive dies following the Termination Date and prior to the payment, distribution, settlement or provision of any payments, distributions or benefits delayed on account of Section 409A, then such payments, distributions or benefits shall be paid or provided to the personal representative of Executive's estate within 30 days after the date of Executive's death.
f.If Executive is entitled to be paid or reimbursed for any taxable expenses under this Agreement, and such payments or reimbursements are includible in Executive's federal gross taxable income, the amount of such expenses reimbursable in any one calendar year shall not affect the amount reimbursable in any other calendar year, and the reimbursement of an eligible expense must be made no later than December 31 of the year after the year in which the expense was incurred. No right of Executive to reimbursement of expenses under this Agreement shall be subject to liquidation or exchange for another benefit.
g.Clawback Provisions. Notwithstanding any other provisions in this Agreement to the contrary, any bonus, incentive-based, equity-based or other similar compensation paid to Executive pursuant to this Agreement or any other agreement or arrangement with the Employer which is subject to recovery under any Jaw, government regulation or stock exchange listing requirement will be subject to such deductions and clawback as may be required to be made pursuant to such law, government regulation or stock exchange listing requirement (or any policy adopted by the Employer pursuant to any such law, government regulation or stock exchange listing requirement).
h.Governing Law. Except to the extent preempted by federal law, the laws of the State of Virginia shall govern this Agreement in all respects, whether as to its validity, construction, capacity, performance or otherwise.
i.Arbitration. Except for any claim for injunctive relief hereunder or as provided in Section 11 hereof, any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled by binding arbitration in accordance with the rules and procedures of the American Arbitration Association. The place of arbitration shall be selected by the Employer. The decision of the arbitration panel shall be final and binding upon the parties, and judgment upon the award rendered by the arbitration  panel may be entered  by any court  having jurisdiction. The parties agree that Executive and the Employer shall each bear one-half of the administrative expenses (filing and arbitrator costs) associated with the arbitration, and the prevailing party shall be entitled to reimbursement for the additional costs and expenses, including, without limitation, reasonable attorneys' fees, incurred by such party in connection with any such dispute.
j.Notices. Any notice or other communication required or permitted hereunder shall be in writing and shall be delivered personally, by nationally recognized overnight courier service or sent by certified, registered or express mail, postage prepaid. Any such notice shall be deemed given when so delivered personally, when delivered by nationally recognized overnight courier service or, if mailed, five days after the date of deposit in the United States mail, as follows:

​

To the Employer:

Primis Bank

10900 Nuckols Road, Suite 325

Glen Allen, Virginia 23060

Attention: Board of Directors

To Executive:

At the most recent address on file for Executive with the Employer

​

k.Any party may change the address to which notices, requests, demands and other communications shall be delivered or mailed by giving notice thereof to the other party in the same manner provided herein.
l.Survival. Notwithstanding anything in this Agreement to the contrary, the provisions of Sections 7, 10, 11 and 14(e)-G), the definitions of defined terms used therein and the remaining provisions of this Section 14 (to the extent necessary to effectuate the survival of the foregoing provisions) shall survive the termination of this Agreement and any termination of Executive's employment hereunder.
m.Amendments and Modifications. This Agreement may be amended or modified only by a writing signed by all parties hereto that makes specific reference to this Agreement.

​

[Signature page follows.]

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Executive Employment Agreement as of the date first above written.

​

BANCORP

By:/s/ John F. Biagas___________________________

Name:John F. Biagas

Title:Chairman of the Compensation Committee

​

​

BANK

By:/s/ Dennis J. Zember, Jr.___________________________

Name:Dennis J. Zember, Jr.

Title:President and CEO

​

​

EXECUTIVE

​

/s/ Ann-Stanton C. Gore___________________________

Graphic

Ann-Stanton C. Gore

Exhibit 21.0

​

Subsidiaries of Primis Financial Corp.

​

​

​

​

​

Subsidiary

    

State of Incorporation

​

​

​

Primis Bank

​

Virginia

Eastern Virginia Statutory Trust I

​

Connecticut

​

Exhibit 23.1

​

​

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

​

We consent to the incorporation by reference in the Registration Statements on Forms S-3 and S-8 (Nos. 333-255045, 333-218976, and 333-189730) of Primis Financial Corp. (formerly Southern National Bancorp of Virginia, Inc.) of our reports dated March 14, 2022, with respect to the consolidated financial statements of Primis Financial Corp. and the effectiveness of internal control over financial reporting, included in this Annual Report on Form 10-K for the year ended December 31, 2021.  

​

/s/ Dixon Hughes Goodman LLP

​

Greenville, North Carolina

March 14, 2022

Exhibit 23.2

​

​

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

We consent to the incorporation by reference in the Registration Statements on Forms S-3 and S-8 (No. 333-255045, 333-218976, and 333-189730) of our report dated March 12, 2021, with respect to the financial statements of Southern Trust Mortgage, LLC included in this Annual Report (Form 10-K) for the years ended December 31, 2020 and 2019.  

​

 

/s/ Richey, May and Co., LLP

 

Englewood, Colorado

March 14, 2022

Exhibit 31.1

​

CERTIFICATIONS

​

I, Dennis J. Zember, Jr., certify that:

​

1. I have reviewed this report on Form 10-K of Primis Financial Corp.;

​

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

​

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

​

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

​

a)          Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

​

b)          Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

​

c)          Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

​

d)          Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

​

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

​

a)          All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

​

b)          Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

​

​

Date: March 14, 2022

/s/ Dennis J. Zember, Jr.
Dennis J. Zember, Jr.,
President and Chief Executive Officer

​

Exhibit 31.2

​

CERTIFICATIONS

​

I, Matthew Switzer, certify that:

​

1. I have reviewed this report on Form 10-K of Primis Financial Corp.;

​

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

​

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

​

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

​

a)            Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

​

b)           Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

​

c)            Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

​

d)           Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

​

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

​

a)            All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

​

b)           Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

​

​

Date: March 14, 2022                                          /s/ Matthew Switzer

Matthew Switzer,
Executive Vice President and Chief Financial Officer

Exhibit 32.1

​

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

​

In connection with the Annual Report of Primis Financial Corp. (“Primis”) on Form 10-K for the period ending December 31, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned Chief Executive Officer and Chief Financial Officer of Primis hereby certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that based on their knowledge and belief: 1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and 2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Primis as of and for the periods covered in the Report.

​

/s/ Dennis J. Zember, Jr.

Dennis J. Zember, Jr.

President and Chief Executive Officer

​

/s/ Matthew Switzer

Matthew Switzer

Executive Vice President and Chief Financial Officer

​

March 14, 2022

​

​

UNAUDITED

FINANCIAL STATEMENT FOR

SOUTHERN TRUST MORTGAGE, LLC

FOR THE YEAR ENDED DECEMBER 31, 2021

A picture containing text, clipart Description automatically generated

​

​

​

SOUTHERN TRUST MORTGAGE, LLC
TABLE OF CONTENTS

Page

UNAUDITED FINANCIAL STATEMENTS

Balance Sheet (Unaudited)

1-2

Statement of Operations (Unaudited)

3

Statement of Changes in Members' Equity (Unaudited)

4

Statement of Cash Flows (Unaudited)

5-6

Notes to Financial Statements (Unaudited)

7-29

​

​

​

​

SOUTHERN TRUST MORTGAGE, LLC

BALANCE SHEET (UNAUDITED)

DECEMBER 31, 2021

​

​

​

​

​

CURRENT ASSETS

​

​

​

Cash and cash equivalents

​

$

21,871,805

Restricted cash

​

​

243,081

Escrow cash

​

​

493,210

Mortgage loans held for sale, at fair value

​

​

85,968,910

Accounts receivable and advances

​

​

1,655,391

Derivative assets

​

​

2,481,966

Prepaid expenses and other current assets

​

​

635,094

Total current assets

​

​

113,349,457

​

​

​

​

OTHER ASSETS

​

​

​

Property and equipment, net

​

​

1,330,891

Mortgage servicing rights, net

​

​

31,502

Mortgage loans held for investment, net

​

​

3,683,187

Real estate owned

​

​

32,900

Due from related parties

​

​

353,786

Deposits

​

​

141,564

Total other assets

​

​

5,573,830

​

​

​

​

TOTAL ASSETS

​

$

118,923,287

​

​

​

​

LIABILITIES AND MEMBERS' EQUITY

​

​

​

LIABILITIES

​

​

​

Accounts payable and accrued expenses

​

$

6,421,168

Customer deposits and loan escrows

​

​

2,426,059

Warehouse lines of credit

​

​

80,671,561

Derivative liabilities

​

​

48,773

Related party note payable, current portion

​

​

422,530

Capital lease obligation, current portion

​

​

320,528

Loan indemnification reserve

​

​

566,171

Total current liabilities

​

​

90,876,790

Related party note payable, net of current portion

​

​

8,077,470

Capital lease obligation, net of current portion

​

​

135,321

Total liabilities

​

$

99,089,581

​

​

​

​

COMMITMENTS AND CONTINGENCIES (Note N)

​

​

​

​

​

​

1

SOUTHERN TRUST MORTGAGE, LLC

BALANCE SHEET (UNAUDITED)

DECEMBER 31, 2021

​

​

​

​

​

MEMBERS' EQUITY

​

​

​

Preferred interests, $1 par value; 3,004,656 shares authorized, issued and outstanding

​

$

3,004,656

Common interests, $0.057 par value; 4,981,838 shares authorized, issued and outstanding

​

​

283,600

Retained earnings

​

​

16,545,450

Total members' equity

​

​

19,833,706

TOTAL LIABILITIES AND MEMBERS' EQUITY

​

$

118,923,287

​

​

​

2

SOUTHERN TRUST MORTGAGE, LLC

STATEMENT OF OPERATIONS (UNAUDITED)

FOR THE YEAR ENDED DECEMBER 31, 2021

​

​

​

​

​

REVENUE

​

​

​

Gain on sale of mortgage loans held for sale, net of direct costs of $8,611,420

​

$

80,438,886

Loan origination fees

​

​

9,124,144

Interest income

​

​

3,967,771

Interest expense

​

​

(4,777,612)

Loan servicing fees, net of direct costs of $282,994

​

​

470,364

Gain on sale of mortgage servicing rights

​

​

3,069,467

Gain on extinguishment of debt

​

​

3,698,388

Recovery of loan loss provision

​

​

485,847

Other income

​

​

101,250

Total revenue

​

​

96,578,505

​

​

​

​

EXPENSES

​

​

​

Salaries, commissions and benefits

​

​

71,730,001

Occupancy, equipment and communication

​

​

3,903,012

General and administrative

​

​

6,228,824

Provision for loan losses

​

​

65,799

Depreciation and amortization

​

​

346,056

Loss on disposal of property and equipment

​

​

39,236

Amortization and deletions of mortgage servicing rights

​

​

254,087

Total expenses

​

​

82,567,015

​

​

​

​

NET INCOME

​

$

14,011,490

​

​

​

3

SOUTHERN TRUST MORTGAGE, LLC

STATEMENT OF CHANGES IN MEMBERS' EQUITY (UNAUDITED)

FOR THE YEAR ENDED DECEMBER 31, 2021

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

​

    

​

    

​

    

​

    

Additional

    

​

    

​

​

​

Preferred Interests

​

Common Interests

​

Paid‐In

​

Retained

​

​

​

​

Shares

​

Amount

​

Shares

​

Amount

​

Capital

​

Earnings

​

Totals

Balance, December 31, 2020

​

3,304,656

​

$

3,304,656

​

8,783,212

​

$

500,000

​

$

344,575

​

$

22,268,993

​

$

26,418,224

Repurchase of common and preferred stock

​

(300,000)

​

​

(300,000)

​

(3,801,374)

​

​

(216,400)

​

​

(344,575)

​

​

(9,189,025)

​

​

(10,050,000)

Preferred dividends

​

—

​

​

—

​

—

​

​

—

​

​

—

​

​

(248,119)

​

​

(248,119)

Member distributions

​

—

​

​

—

​

—

​

​

—

​

​

—

​

​

(10,297,889)

​

​

(10,297,889)

Net income

​

—

​

​

—

​

—

​

​

—

​

​

—

​

​

14,011,490

​

​

14,011,490

Balance, December 31, 2021

​

3,304,656

​

$

3,304,656

​

4,981,838

​

$

283,600

​

$

—

​

$

16,545,450

​

$

19,833,706

​

​

​

4

SOUTHERN TRUST MORTGAGE, LLC

STATEMENT OF CASH FLOWS (UNAUDITED)

FOR THE YEAR ENDED DECEMBER 31, 2021

​

​

​

​

​

CASH FLOWS FROM OPERATING ACTIVITIES

    

​

​

​

​

Net income

​

$

14,011,490

Non-cash items-

​

​

​

Recovery for loan losses, net of provision

​

​

(420,048)

Depreciation and amortization

​

​

346,056

Amortization and deletions of mortgage servicing rights

​

​

254,087

Gain on sale of mortgage loans held for sale, net of direct costs

​

​

(80,438,886)

Gain on sale of mortgage servicing rights

​

​

(3,069,467)

Gain on extinguishment of debt

​

​

(3,698,388)

Loss on disposal of property and equipment

​

​

39,236

(Increase) decrease in-

​

​

​

Escrow cash

​

​

175,934

Proceeds from sale and principal payments on mortgage

​

​

​

loans held for sale

​

​

2,543,285,136

Originations and purchases of mortgage loans held for sale

​

​

(2,405,848,127)

Mortgage loans held for investment, net

​

​

(2,905,163)

Accounts receivable and advances

​

​

(218,549)

Derivative assets

​

​

7,717,279

Prepaid expenses and other current assets

​

​

(136,080)

Deposits

​

​

18,422

Due from related parties

​

​

(179,386)

Increase (decrease) in-

​

​

​

Accounts payable and accrued expenses

​

​

(1,036,555)

Customer deposits and loan escrows

​

​

1,278,025

Derivative liabilities

​

​

(2,447,829)

Loan indemnification reserve

​

​

(273,050)

Net cash provided by operating activities

​

​

66,454,137

​

​

​

​

CASH FLOWS FROM INVESTING ACTIVITIES

​

​

​

Purchases of property and equipment

​

​

(463,155)

Proceeds from disposal of property and equipment

​

​

311,603

Proceeds from sale of mortgage servicing rights

​

​

4,530,499

Proceeds from sale of mortgage loans held for investment

​

​

1,237,177

Net cash provided by investing activities

​

$

5,616,124

​

​

​

5

SOUTHERN TRUST MORTGAGE, LLC

STATEMENT OF CASH FLOWS (UNAUDITED)

FOR THE YEAR ENDED DECEMBER 31, 2021

​

​

​

​

​

CASH FLOWS FROM FINANCING ACTIVITIES

    

​

Net repayments under warehouse lines of credit

​

$

(55,415,616)

Repayments under capital lease obligations

​

​

(187,130)

Preferred dividends

​

​

(186,157)

Member distributions

​

​

(10,297,889)

Repurchase of common and preferred stock

​

​

(1,550,000)

Net cash used in financing activities

​

​

(67,636,792)

​

​

​

​

INCREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH

​

$

4,433,469

​

​

​

​

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF YEAR

​

​

17,681,417

​

​

​

​

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, END OF YEAR

​

$

22,114,886

​

​

​

​

SUPPLEMENTAL INFORMATION

​

​

​

Cash paid for interest

​

$

4,940,438

​

​

​

​

Preferred dividends payable

​

$

61,962

​

​

​

​

NON-CASH OPERATING, INVESTING AND FINANCING ACTIVITIES

​

​

​

The Company increased retained mortgage servicing rights in connection with loan sales.

​

$

467,651

​

​

​

​

The Company increased accounts receivable for holdback revenue on the sale of mortgage servicing rights.

​

$

416,000

​

​

​

​

The Company acquired property and equipment with capital lease financing.

​

$

642,979

​

The Company had a repurchase of common and preferred stock totaling $10,050,000 during the year ended December 31, 2021, of which, $8,500,000 was applied as a non-cash related party note payable.

​

​

​

6

SOUTHERN TRUST MORTGAGE, LLC

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

​

A.

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

​

Organization

Southern Trust Mortgage, LLC (the Company) was incorporated in the Commonwealth of Virginia. The Company is primarily engaged in the business of originating, selling and servicing residential mortgage loans through its retail origination channel. The Company maintains its corporate office in Virginia Beach, Virginia, with branch offices in multiple states. The Company is approved as a Title II, non-supervised direct endorsement mortgagee with the United States Department of Housing and Urban Development (HUD). In addition, the Company is an approved issuer with the Government National Mortgage Association (GNMA), as well as an approved seller and servicer with the Federal National Mortgage Association (FNMA) and Federal Home Loan Mortgage Corporation (FHLMC).

​

Basis of Accounting

The financial statements of the Company are prepared on the accrual basis of accounting.

​

Basis of Presentation

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) as codified in the Financial Accounting Standards Board’s (FASB) Accounting Standards Codification (ASC).

​

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

​

Consolidation, Variable Interest Entities

The Company sells mortgage loans to FNMA and FHLMC, which are government-sponsored enterprises. The Company may also issue GNMA securities by pooling eligible mortgage loans through a custodian and assigning rights to the mortgage loans to GNMA. FNMA, FHLMC and GNMA (the Agencies) provide credit enhancements for mortgage loans through certain guarantee provisions. These securitizations involve variable interest entities (VIEs) as the trusts or similar vehicles, by design, that either (1) lack sufficient equity to permit the entity to finance its activities without additional subordinated financial support from other parties, or (2) have equity investors that do not have the ability to make significant decisions relating to the entity’s operations through voting rights, or do not have the obligation to absorb the expected losses, or do not have the right to receive the residual returns of the entities.

​

​

7

SOUTHERN TRUST MORTGAGE, LLC

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

​

A.

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

​

Consolidation, Variable Interest Entities (Continued)

The primary beneficiary of a VIE (i.e., the party that has a controlling financial interest) is required to consolidate the assets and liabilities of the VIE. The primary beneficiary is the party that has both (1) the power to direct the activities of an entity that most significantly impact the VIE’s economic performance; and (2) through its interests in the VIE, the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. The Company may retain the right to service mortgage loans sold or securitized by the Agencies. Due to the significant influence of the Agencies over the VIEs that hold the assets from mortgage loan securitizations, principally through their rights and responsibilities as master servicer, the Company is not the primary beneficiary of the VIEs and therefore the VIEs are not consolidated.

​

The Company performs on-going reassessments of (1) whether entities previously evaluated under the majority voting-interest framework have become VIEs, based on certain events, and therefore become subject to the VIE consolidation framework; and (2) whether changes in the facts and circumstances regarding the Company’s involvement with a VIE cause the Company’s consolidation determination to change.

​

Cash and Cash Equivalents

For cash flow purposes, the Company considers cash and temporary investments with original maturities of three months or less, to be cash and cash equivalents. The Company has diversified its credit risk for cash by maintaining deposits in several financial institutions, which may at times exceed amounts covered by insurance from the Federal Deposit Insurance Corporation. The Company evaluates the creditworthiness of these financial institutions in determining the risk associated with these balances. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk related to cash and cash equivalents.

​

Restricted Cash

The Company maintains certain cash balances that are restricted under warehouse agreements.

​

Mortgage Loans Held for Sale and Revenue Recognition

Mortgage loans held for sale are carried at fair value under the fair value option with changes in fair value recorded in gain on sale of mortgage loans held for sale on the statement of operations. The fair value of mortgage loans held for sale committed to investors is calculated using observable market information such as the investor purchase commitment, assignment of trade or other mandatory delivery commitment prices. The Company bases loans committed to Agency investors based on the Agency’s quoted mortgage backed security (MBS) prices. The fair value of mortgage loans held for sale not committed to investors is based on quoted best execution secondary market prices. If no such quoted price exists, the fair value is determined using quoted prices for a similar asset or assets, such as MBS prices, adjusted for the specific attributes of that loan, which would be used by other market participants.

​

​

8

SOUTHERN TRUST MORTGAGE, LLC

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

​

A.

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

​

Mortgage Loans Held for Sale and Revenue Recognition (Continued)

Gains and losses from the sale of mortgage loans held for sale are recognized based upon the difference between the sales proceeds and carrying value of the related loans upon sale and are recorded in gain on sale of mortgage loans held for sale on the statement of operations. Sales proceeds reflect the cash received from investors through the sale of the loan and servicing release premium. If the related mortgage servicing right (MSR) is sold servicing retained, the MSR addition is recorded in gain on sale of mortgage loans held for sale on the statement of operations. Gain on sale of mortgage loans held for sale also includes the unrealized gains and losses associated with the changes in the fair value of mortgage loans held for sale and the realized and unrealized gains and losses from derivative instruments.

 ​

Mortgage loans held for sale are considered sold when the Company surrenders control over the financial assets. Control is considered to have been surrendered when the transferred assets have been isolated from the Company, beyond the reach of the Company and its creditors; the purchaser obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets; and the Company does not maintain effective control over the transferred assets through either an agreement that both entitles and obligates the Company to repurchase or redeem the transferred assets before their maturity or the ability to unilaterally cause the holder to return specific financial assets. The Company typically considers the above criteria to have been met upon acceptance and receipt of sales proceeds from the purchaser.

​

Mortgage Loans Held for Investment, Net

Mortgage loans held for investment for which management has the intent and ability to hold for the foreseeable future or to maturity are carried at amortized cost reduced by a valuation allowance for estimated credit losses. Mortgage loans transferred from the held for sale category are transferred at the lower of cost or fair value, which becomes the new cost basis in the loans.

​

Real Estate Owned

Real estate owned is initially recorded at the estimated fair value at the date of foreclosure on the delinquent mortgage loans, which becomes the new cost basis in the real estate owned. The fair value of real estate owned is determined, when possible, using observable market data, including recent real estate appraisals and broker price opinions. Costs incurred in managing and maintaining foreclosed real estate and subsequent declines in fair value are charged to operations as incurred and are included in general and administrative on the statement of operations. The Company periodically assesses real estate owned for impairment whenever events or circumstances indicate the carrying amount of the asset may exceed its fair value. If real estate owned is considered impaired, the impairment losses will be recorded on the statement of operations.

​

​

9

SOUTHERN TRUST MORTGAGE, LLC

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

​

A.

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

​

Loan Origination Fees

Loan origination fees represent revenue earned from originating mortgage loans. Loan origination fees generally represent a flat per-loan fee amount based on a percentage of the original principal loan balance and are recognized as revenue at the time the mortgage loans are funded. Loan origination expenses are charged to operations as incurred.

​

Interest Income

Interest income on mortgage loans held for sale is recognized for the period from loan funding to sale based upon the principal balance outstanding and contractual interest rates. Revenue recognition is discontinued when loans become 90 days delinquent, or when, in management’s opinion, the recovery of principal and interest becomes doubtful and the mortgage loans held for sale are put on nonaccrual status.

​

Revenue Recognition

FASB ASC 606, Revenue from Contracts with Customers (ASC 606), establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied. The majority of the Company’s revenue generating transactions are not subject to ASC 606, including revenue generated from financial instruments, such as the Company’s mortgage loans and derivatives, as well as revenue related to the Company’s mortgage servicing activities.

​

Loan Servicing Fees and Expenses

Loan servicing fees represent revenue earned for servicing loans for various investors. Loan servicing fees are based on a contractual percentage of the outstanding unpaid principal balance and are recognized into revenue as the related mortgage payments are received. Loan servicing expenses are charged to operations as incurred.

​

Servicing Advances

Servicing advances represent escrows advanced by the Company on behalf of borrowers and investors to cover delinquent balances for property taxes, insurance premiums and other out-of-pocket costs. Servicing advances are made in accordance with the Company’s servicing agreements and are recoverable upon collection of future borrower payments, sale of loan collateral, reimbursement by investor, or mortgage insurance claims. The Company periodically reviews servicing advances for collectability and establishes a valuation allowance for estimated uncollectible amounts. No allowance has been recorded as of December 31, 2021, as management has determined that all amounts are fully collectible.

​

​

10

SOUTHERN TRUST MORTGAGE, LLC

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

​

A.

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

​

Property and Equipment, Net

Property and equipment is recorded at cost and depreciated or amortized using the straight line method over the estimated useful lives of the assets. The following is a summary of property and equipment at December 31, 2021:

​

    

Useful lives (years)

    

Amounts

Property and equipment, at cost

Equipment

3-7

$

1,206,643

Furniture and fixtures

3-7

970,782

Software

3-5

180,187

Leasehold improvements

(a)

455,894

Total property and equipment, at cost

 

2,813,506

Accumulated depreciation and amortization

Equipment

(957,256)

Furniture and fixtures

(365,601)

Software

(122,075)

Leasehold improvements

(37,683)

Total accumulated depreciation and amortization

 

(1,482,615)

Total property and equipment, net

$

1,330,891

​

(a) Amortized over the shorter of the related lease term or the estimated useful life of the assets.

​

The Company periodically assesses property and equipment for impairment whenever events or circumstances indicate the carrying amount of an asset may exceed its fair value. If property and equipment is considered impaired, the impairment losses will be recorded on the statement of operations. The Company did not recognize any impairment losses during the year ended December 31, 2021.

​

​

11

SOUTHERN TRUST MORTGAGE, LLC

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

​

A.

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

​

Derivative Instruments

The Company holds and issues derivative financial instruments such as interest rate lock commitments (IRLCs) and forward sale commitments. IRLCs are subject to price risk primarily related to fluctuations in market interest rates. To hedge the interest rate risk on mandatory IRLCs, the Company uses forward sale commitments, such as to-be-announced securities or mandatory delivery commitments with investors. Management expects these forward sale commitments to experience changes in fair value opposite to the changes in fair value of the IRLCs, thereby reducing earnings volatility. Forward sale commitments are also used to hedge the interest rate risk on mortgage loans held for sale that are not committed to investors and still subject to price risk. If the mandatory delivery commitments are not fulfilled, the Company pays a pair-off fee. Best effort forward sale commitments are also executed with investors, whereby certain loans are locked with a borrower and simultaneously committed to an investor at a fixed price. If the best effort IRLC does not fund, the Company has no obligation to fulfill the investor commitment.

​

The Company considers various factors and strategies in determining what portion of the IRLCs and uncommitted mortgage loans held for sale to economically hedge. FASB ASC 815-25, Derivatives and Hedging, requires that all derivative instruments be recognized as assets or liabilities on the balance sheet at their fair value. Changes in the fair value of the derivative instruments and gains and losses resulting from pairing-out of forward sale commitments are recognized in gain on sale of mortgage loans held for sale on the statement of operations in the period in which they occur. The Company accounts for all derivative instruments as free-standing derivative instruments and does not designate any for hedge accounting.

​

Mortgage Servicing Rights and Revenue Recognition

FASB ASC 860-50, Transfers and Servicing, requires that MSRs be initially recorded at fair value at the time the underlying loans are sold. To determine the fair value of the MSR created, the Company uses a valuation model, along with currently available market information including rate sheets from aggregators, that calculates the net present value of future cash flows. The valuation model incorporates assumptions that market participants would use in estimating future net servicing revenue, including the estimated discount rate, estimated prepayment speeds, the cost of servicing, estimated delinquencies, contractual service fees, ancillary income and late fees, float value, the inflation rate, and default rates. The credit quality and stated interest rates of the forward loans underlying the MSRs affects the assumptions used in the cash flow models. MSRs are not actively traded in open markets; accordingly, considerable judgment is required to estimate their fair value, and changes in these estimates could materially change the estimated fair value. The Company receives a monthly fixed servicing fee based on the outstanding principal balances of the mortgage loans, which is collected from investors.

​

​

12

SOUTHERN TRUST MORTGAGE, LLC

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

​

A.

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

​

Mortgage Servicing Rights and Revenue Recognition (Continued)

After initially recording the MSRs at fair value, the Company subsequently amortizes the MSRs over the estimated economic life of the related mortgage loans in proportion to the estimated future net servicing revenue. The net capitalized cost of MSRs is periodically evaluated to determine if the amortized cost of MSRs is in excess of their estimated fair value. For this purpose, the Company stratifies its MSRs based on loan term, interest rate and product type, with estimates of remaining loan lives and prepayment rates being incorporated into the model. When impairment is identified due to the MSR asset’s amortized book value exceeding its fair value, management records a valuation allowance. Valuation allowances are recorded as a reduction to the MSRs on the balance sheet.

​

Any impairment of the amortized cost of MSRs is assessed based on their fair value at each reporting date using estimated prepayment speeds of the underlying mortgage loans serviced and stratification based on risk characteristics of the underlying loans (predominantly interest rates). As interest rates decrease, mortgage refinancing activity may increase, resulting in higher prepayment speeds of the loans underlying MSRs, which may result in a reduction of the MSRs’ fair value. Such fair value adjustment may require an additional valuation allowance being charged to earnings, to the extent that the amortized cost of the MSR exceeds the estimated fair value from stratification. Conversely, as mortgage interest rates rise, prepayment speeds are usually slower and the value of the MSR asset generally increases, requiring less valuation allowance. If it is later determined that all or a portion of the temporary impairment no longer exists for a stratification, the valuation allowance is reduced through a recovery to earnings. An other-than-temporary impairment (i.e. recoverability is considered remote when considering interest rates and loan pay-off activity) is recognized as a write-down of the MSR asset and the related valuation allowance. A direct write-down permanently reduces the carrying value of the MSR asset and valuation allowance, precluding subsequent recoveries.

​

The key unobservable inputs used in determining the fair value of MSRs when they are initially recorded are as follows for the year ended December 31, 2021:

​

    

Inputs

Discount rates

11.00% - 11.42%

Annual prepayment speeds

11.67% - 21.40%

Average cost of servicing

$85

​

Sale of Mortgage Servicing Rights

A transfer of servicing rights related to loans previously sold qualifies as a sale at the date on which title passes, if substantially all risks and rewards of ownership have irrevocably passed to the transferee and any protection provisions retained by the transferor are minor and can be reasonably estimated. In addition, if a sale is recognized and only minor protection provisions exist, a liability should be accrued for the estimated obligation associated with those provisions.

​

​

13

SOUTHERN TRUST MORTGAGE, LLC

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

​

A.

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

​

Loan Indemnification Reserve

Loans sold to investors by the Company and which met investor and Agency underwriting guidelines at the time of sale may be subject to repurchase in the event of specific default by the borrower or subsequent discovery that underwriting standards were not met. The Company may, upon mutual agreement, indemnify the investor against future losses on such loans. The Company has established a reserve for potential losses related to these representations and warranties. In assessing the adequacy of the reserve, management evaluates various factors including actual write-offs during the period, historical loss experience, known delinquent and other problem loans, and economic trends and conditions in the industry. Actual losses incurred are reflected as write-offs against the loan indemnification reserve.

​

The activity in the loan indemnification reserve for mortgage loans held for sale is as follows for the year ended December 31, 2021:

​

   

Amounts

Balance, beginning of year

$

1,325,068

Recovery of loan losses

(485,847)

Loans written-off, net of recoveries

(273,050)

Balance, end of year

$

566,171

​

Because of the uncertainty in the various estimates underlying the loan indemnification reserve, there is a range of losses in excess of the recorded loan indemnification reserve that is reasonably possible. The estimate of the range of possible loss for representations and warranties does not represent a probable loss and is based on current available information, significant judgment, and a number of assumptions that are subject to change.

​

Valuation Allowance on Mortgage Loans Held for Investment, Net

The Company periodically evaluates the carrying value of mortgage loans held for investment in excess of fair value and establishes a valuation allowance for potential losses. In assessing the adequacy of the valuation allowance, management evaluates various factors on a loan level basis, including the probability of not being able to collect payments based on the contractual terms of the mortgage, the estimated fair value of the underlying collateral and probable losses inherent to the loan portfolio. Additions to and recovery of the valuation allowance are reflected in the provision for loan losses on the statement of operations.

​

​

14

SOUTHERN TRUST MORTGAGE, LLC

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

​

A.

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

​

Valuation Allowance on Mortgage Loans Held for Investment, Net (Continued)

The activity in the valuation allowance for mortgage loans held for investment, net is as follows for the year ended December 31, 2021:

​

   

Amounts

Balance, beginning of year

$

89,435

Provision for loan losses

65,799

Loans written-off, net of recoveries

(66,962)

Balance, end of year

$

88,272

​

Because of the uncertainty in the various estimates underlying the valuation allowance, there is a range of losses in excess of the recorded valuation allowance that is reasonably possible. The estimate of the range of possible loss does not represent a probable loss and is based on current available information, significant judgment and a number of assumptions that are subject to change.

​

Escrow and Fiduciary Funds

The Company maintains segregated bank accounts for escrow balances in trust for investors for mortgagors. The balances of these accounts amounted to $6,755 at December 31, 2021, and are excluded from the balance sheet.

​

Advertising and Marketing

Advertising and marketing is expensed as incurred and amounted to $1,720,731 for the year ended December 31, 2021, and is included in general and administrative on the statement of operations.

​

Income Taxes

The Company has elected to be taxed as a partnership under the Internal Revenue Code. Accordingly, no federal income tax provision and state income taxes, to the extent possible, have been recorded in the financial statements, as all items of income and expense generated by the Company are reported on the members’ income tax returns. The Company has no federal or state tax examinations in process as of December 31, 2021.

​

Risks and Uncertainties

In the normal course of business, companies in the mortgage banking industry encounter certain economic and regulatory risks. Economic risks include interest rate risk and credit risk. The Company is subject to interest rate risk to the extent that in a rising interest rate environment, the Company may experience a decrease in loan production, as well as decreases in the value of mortgage loans held for sale not committed to investors and commitments to originate loans, which may negatively impact the Company’s operations. Credit risk is the risk of default that may result from the borrowers’ inability or unwillingness to make contractually required payments during the period in which loans are being held for sale or serviced by the Company.

​

​

15

SOUTHERN TRUST MORTGAGE, LLC

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

​

A.

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

​

Risks and Uncertainties (Continued)

The Company sells loans to investors without recourse. As such, the investors have assumed the risk of loss or default by the borrower. However, the Company is usually required by these investors to make certain standard representations and warranties relating to credit information, loan documentation and collateral. To the extent that the Company does not comply with such representations, or there are early payment defaults, the Company may be required to repurchase the loans or indemnify these investors for any losses from borrower defaults. In addition, if loans pay-off within a specified time frame, the Company may be required to refund a portion of the sales proceeds to the investors.

​

The Company’s business requires substantial cash to support its operating activities. As a result, the Company is dependent on its warehouse lines of credit, and other financing facilities in order to finance its continued operations. If the Company’s principal lenders decided to terminate or not to renew any of these financing facilities with the Company, the loss of borrowing capacity could have a material adverse impact on the Company’s financial statements unless the Company found a suitable alternative source.

​

The global outbreak of COVID-19 has disrupted economic markets, and the prolonged economic impact is uncertain. The operational and financial performance of the Company depends on future developments, including the duration and spread of the outbreak, and such uncertainty may have an adverse impact on the Company’s financial performance.

​

B.

MORTGAGE LOANS HELD FOR SALE, AT FAIR VALUE

​

Mortgage loans held for sale are as follows at December 31, 2021:

​

   

Amounts

Mortgage loans held for sale

$

83,462,951

Fair value adjustment

2,505,959

$

85,968,910

​

C.

MORTGAGE LOANS HELD FOR INVESTMENT, NET

​

The following summarizes mortgage loans held for investment, net at December 31, 2021:

​

   

Amounts

Mortgage loans held for investment

$

3,771,459

Valuation allowance

(88,272)

$

3,683,187

​

​

16

SOUTHERN TRUST MORTGAGE, LLC

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

​

D.

ACCOUNTS RECEIVABLE AND ADVANCES

​

The following summarizes accounts receivable and advances at December 31, 2021:

​

   

Amounts

Loan sales receivable

$

304,740

Loan funding receivable

125,659

Due from borrower

128,893

Servicing advances

52,635

MSR co-issue receivable

610,706

MSR sale receivable

416,000

Pair-off receivable

16,758

$

1,655,391

​

The Company periodically evaluates the carrying value of accounts receivable and advance balances with delinquent balances written-off based on specific credit evaluations and circumstances of the debtor. No allowance for doubtful accounts has been established at December 31, 2021, as management has determined that all amounts are fully collectible.

​

E.

DERIVATIVE INSTRUMENTS

​

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

​

The key unobservable inputs used in determining the fair value of IRLCs are as follows for the year ended December 31, 2021:

​

    

Inputs

Average pullthrough rates

88.48% - 90.01%

Average cost to originate

1.24%

​

​

17

SOUTHERN TRUST MORTGAGE, LLC

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

​

E.

DERIVATIVE INSTRUMENTS (Continued)

​

The following summarizes derivative instruments at December 31, 2021:

​

Amounts

Fair

Notional

    

Value

    

Amount

IRLCs:

Mandatory

$

2,318,128

$

103,858,000

(b)

Best efforts

163,838

$

38,531,000

(b)

MBSs

(48,773)

$

121,000,000

Total

$

2,433,193

​

(b) Pullthrough rate adjusted

​

The notional amounts of mortgage loans held for sale not committed to investors amounted to approximately $28,172,000 at December 31, 2021.

​

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

​

F.

MORTGAGE SERVICING RIGHTS

​

The following summarizes the activity of MSRs for the year ended December 31, 2021:

​

   

Amounts

Balance, beginning of year

$

1,694,970

Additions due to loans sold, servicing retained

467,651

Deletions due to sale of MSRs

(1,877,032)

Deletions due to loan payoffs

(121,869)

Amortization expense

(132,218)

Balance, end of year

$

31,502

​

​

18

SOUTHERN TRUST MORTGAGE, LLC

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

​

F.

MORTGAGE SERVICING RIGHTS (Continued)

​

At December 31, 2021, the unpaid principal balance of mortgage loans serviced approximated $1,852,000. Conforming conventional loans serviced by the Company are sold to FNMA and FHLMC on a non-recourse basis, whereby foreclosure losses are generally the responsibility of FNMA and FHLMC, and not the Company. The government loans serviced by the Company are secured through GNMA, whereby the Company is insured against loss by the Federal Housing Administration or partially guaranteed against loss by the Veterans Administration.

​

The key unobservable inputs used in determining the fair value of the Company’s MSRs are as follows at December 31, 2021:

​

    

Inputs

Discount rates

11.42%

Annual prepayment speeds

11.67%

Average cost of servicing

$85

​

The hypothetical effect of an adverse change in these key unobservable inputs would result in a decrease in fair value as follows at December 31, 2021:

​

    

Amounts

Discount rates:

Effect on value - 1% adverse change

$

(1,153)

Effect on value - 2% adverse change

$

(2,224)

Prepayment speeds:

Effect on value - 5% adverse change

$

(585)

Effect on value - 10% adverse change

$

(1,147)

Cost of servicing:

Effect on value - 5% adverse change

$

(136)

Effect on value - 10% adverse change

$

(271)

​

These sensitivities are hypothetical and should be used with caution. As the table demonstrates, the Company’s methodology for estimating the fair value of MSRs is highly sensitive to changes in key unobservable inputs. For example, actual prepayment experience may differ and any difference may have a material effect on MSR fair value. Changes in fair value resulting from changes in inputs generally cannot be extrapolated because the relationship of the change in input to the change in fair value may not be linear. Also, in this table, the effect of a variation in a particular input on the fair value of the MSRs is calculated without changing any other input; in reality, changes in one factor may be associated with changes in another (for example, decreases in market interest rates may indicate higher prepayments; however, this may be partially offset by lower prepayments due to other factors such as a borrower’s diminished opportunity to refinance), which may magnify or counteract the sensitivities. Thus, any measurement of MSR fair value is limited by the conditions existing and inputs made as of a particular point in time. Those inputs may not be appropriate if they are applied to a different point in time.

​

19

SOUTHERN TRUST MORTGAGE, LLC

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

​

F.

MORTGAGE SERVICING RIGHTS (Continued)

​

The following table summarizes the Company’s estimated future MSR amortization expense. These estimates are based on existing asset balances, the current interest rate environment, and prepayment speeds as of December 31, 2021. The actual amortization expense the Company recognizes in any given period may be significantly different depending upon acquisition or sale activities, changes in interest rates, prepayment speeds, market conditions, or circumstances that indicate the carrying amount of an asset may not be recoverable.

​

Year Ending December 31,

    

Amounts

2022

$

7,825

2023

6,163

2024

4,521

2025

3,436

2026

2,571

Thereafter

6,986

$

31,502

​

Sale of Mortgage Servicing Rights

During the year ended December 31, 2021, the Company sold the majority of its MSR portfolio with an unpaid principal balance of approximately $565,502,000 for a net sales price of $4,946,499, which includes the gross sales prices of $5,315,715 less $369,216 for transactional expenses. The Company recognized a gain on sale of $3,069,467 which is recorded in gain on sale of mortgage servicing rights on the statement of operations. In addition, the Company recorded a receivable totaling $416,000, at December 31, 2021, related to the sale, which is due when all of the complete mortgage files have been received by the purchaser. The Company performed temporary sub-servicing activities with respect to the underlying loans through the established transfer date, for which the Company earned a fee and is also entitled to certain other ancillary income amounts.

​

G.

CAPITAL LEASE OBLIGATIONS

​

The Company leases equipment with a capitalized cost of $642,979 and a book value of $620,749 under the capital lease agreement expiring August 2023. The capital lease agreement calls for aggregate monthly payments of $27,168 with interest imputed of 1.75% per annum.

​

The following is a schedule of the future minimum lease payments as of December 31, 2021:

​

Year Ending December 31,

   

Amounts

2022

$

320,528

2023

135,321

$

455,849

​

​

20

SOUTHERN TRUST MORTGAGE, LLC

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

​

H.

WAREHOUSE LINES OF CREDIT AGREEMENTS

​

The Company has the following warehouse lines of credit (WHLOC) agreements with various financial institutions at December 31, 2021:

​

Facility

Restricted

Type

  

Maturity

  

Line Amount

  

Interest Rate

  

Cash

  

Outstanding Balance

WHLOC*

January 2023

$

40,000,000

LIBOR plus
2.25%, with a
floor rate of
3.25%

$

—

$

28,967,766

WHLOC

N/A

$

75,000,000

LIBOR plus
2.90%, with a
floor rate of
3.25%

243,081

24,175,791

WHLOC

August 2022

$

30,000,000

LIBOR plus
2.75% - 3.25%,
with a LIBOR
floor rate of .50%

—

6,267,449

WHLOC

June 2022

$

75,000,000

LIBOR plus
2.65%, with a
floor rate of
3.15%

—

21,260,555

$

243,081

 

$

80,671,561

​

*The WHLOC is with a related party.

​

As of December 31, 2021, the Company had mortgage loans held for sale pledged as collateral under the above WHLOC agreements, with the lines being personally guaranteed by the members. The above agreements also contain covenants which include certain financial requirements, including maintenance of minimum tangible net worth, minimum liquid assets, maximum debt to net worth ratio, positive net income, and minimum fidelity bond and errors and omissions coverage, as defined in the agreements. The Company was in compliance with all significant debt covenants at December 31, 2021. The Company intends to renew the WHLOCs when they mature.

​

21

SOUTHERN TRUST MORTGAGE, LLC

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

​

I.

NOTE PAYABLE

​

In April 2020, the Company was approved by the U.S. Small Business Administration (SBA) under the CARES Act for a Paycheck Protection Program (PPP) loan and received proceeds totaling $3,698,388. Interest was at 1.00% per annum, and the note was due to mature in April 2022. The note had a deferral period of 15 months beginning on the date of the note, during which interest accrued but no payments were due. The outstanding balance under the note payable totaled $3,698,388 at December 31, 2020. The Company applied for forgiveness of the loan in accordance with the terms of the CARES Act. During the year ended December 31, 2021, the loan was forgiven by the SBA and the Company recognized revenue of $3,698,388, which is included in gain on extinguishment of debt on the statement of operations.

​

During the year ended December 31, 2021, the Company entered into a related party note payable to purchase the common membership shares and preferred membership shares of a member, which matures in December 2031. The related party note payable has an original balance of $8,500,000, payable in 40 quarterly installments of principal and interest of $189,094, with a balloon payment of $3,601,289 due in December 2031. The amount outstanding under the related party note payable totaled $8,500,000 at December 31, 2021.

​

Future minimum payments under the note payable are as follows at December 31, 2021:

​

Year Ending December 31,

   

Amounts

2022

$

422,530

2023

438,977

2024

456,177

2025

475,836

2026

495,429

Thereafter

6,211,051

$

8,500,000

​

J.

RELATED PARTY TRANSACTIONS

​

A related party financial institution is a member of the Company with preferred membership shares.

​

During the year ended December 31, 2021, the Company sold 126 loans servicing released with unpaid principal balances of $85,297,329 to the related party financial institution. Premiums received on the loans amounted to $1,560,749, during the year ended December 31, 2021, and are included in gain on sale of mortgage loans held for sale on the statement of operations. The Company also paid origination expenses to the related party financial institution totaling $14,800 during the year ended December 31, 2021, which is included in gain on sale of mortgage loans held for sale, direct costs on the statement of operations.

​

​

22

SOUTHERN TRUST MORTGAGE, LLC

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

​

J.

RELATED PARTY TRANSACTIONS (Continued)

​

The Company has a warehouse line of credit agreement and a note payable agreement with the same related party financial institution (Notes H and I, respectively). Pursuant to which, the Company paid $760,179 in interest expense and other fees during the year ended December 31, 2021, which are included in interest expense on the statement of operations.

​

The Company paid $15,907 in marketing expenses to the related party financial institution during the year ended December 31, 2021, which is included in general and administrative on the statement of operations.

​

The Company issued two notes receivable to an employee totaling $218,000 during the year ended December 31, 2019. The notes receivable bear interest at 5.00% per annum with principal and unpaid interest payable on the fifth anniversary of each note receivable. The Company will forgive 20% of the principal and interest every 12 months after the effective date of each note receivable, provided the employee meets certain conditions related to continued employment and minimum annual loan origination. The notes receivable due from an employee totaled $130,800 at December 31, 2021. The Company has an additional employee receivable due from a member totaling $222,986 at December 31, 2021. Notes receivables due from a member and an employee totaled $353,786 at December 31, 2021, which are included in due from related parties on the balance sheet.

​

K.

COMMON INTERESTS

​

The Company has common shares issued and outstanding with certain members totaling 4,981,838 at December 31, 2021. Common shares with voting rights are held by a member that is an officer of the Company. On the fifteenth day of January, April, June and September, the members with common shares receive distributions in aggregate amounts equal to no less than 40% of the Company’s available cash, as reasonably determined by the Board of Directors, for the fiscal year through the end of the immediately preceding full calendar month less any amounts previously distributed during such fiscal year, in proportion to their respective common shares. The Board of Directors is authorized to make additional distributions from time to time to the members in proportion to their respective common shares. Profits and losses of the Company shall be allocated first to the preferred members and second to the common members.

​

L.

PREFERRED INTERESTS

​

The Company has preferred shares issued and outstanding totaling 3,004,656 at December 31, 2021. Effective January 1, 2022, members with preferred shares are entitled to receive, if and when declared, cash payments at the rate of $0.050 (formerly $0.075) per share per annum, made in equal quarterly installments on the fifteenth day of January, April, July, and October. Such preferred dividend payments are cumulative and totaled $248,119 during the year ended December 31, 2021, with $61,962 recorded in accounts payable and accrued expenses on the balance sheet at December 31, 2021. Holders of preferred membership shares are not entitled to voting rights.

​

23

SOUTHERN TRUST MORTGAGE, LLC

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

​

M.

EMPLOYEE BENEFIT PLAN

​

The Company has a 401(k) qualified retirement plan covering substantially all employees. Employees may contribute amounts subject to certain Internal Revenue Service and plan limitations. The Company may make discretionary matching and non-elective contributions. The Company made no contributions to the plan for the year ended December 31, 2021.

​

N.

COMMITMENTS AND CONTINGENCIES

​

Commitments to Extend Credit

The Company enters into IRLCs with customers who have applied for residential mortgage loans and meet certain credit and underwriting criteria. These commitments expose the Company to market risk if interest rates change and the underlying loan is not economically hedged or committed to an investor. The Company is also exposed to credit loss if the loan is originated and not sold to an investor and the mortgagor does not perform. The collateral upon extension of credit typically consists of a first deed of trust in the mortgagor’s residential property. Commitments to originate loans do not necessarily reflect future cash requirements as some commitments are expected to expire without being drawn upon. Total commitments to originate loans approximated $158,934,000 at December 31, 2021.

​

Regulatory Contingencies

The Company is subject to periodic audits and examinations, both formal and informal in nature, from various federal and state agencies, including those made as part of regulatory oversight of mortgage origination, servicing and financing activities. Such audits and examinations could result in additional actions, penalties or fines by state or federal governmental bodies, regulators or the courts.

​

Operating Leases

The Company leases office space and equipment under various operating lease arrangements, which expire through August 2028. Total rent expense under all operating leases amounted to $2,328,066 for the year ended December 31, 2021, and is included in occupancy, equipment and communication on the statement of operations.

​

Future minimum rental payments under long-term operating leases are as follows at December 31, 2021:

​

Year Ending December 31,

   

Amounts

2022

$

1,672,393

2023

1,143,646

2024

994,083

2025

494,849

2026

414,104

Thereafter

712,104

$

5,431,179

​

​

​

24

SOUTHERN TRUST MORTGAGE, LLC

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

​

N.

COMMITMENTS AND CONTINGENCIES (Continued)

​

Legal

The Company operates in a highly regulated industry and may be involved in various legal and regulatory proceedings, lawsuits and other claims arising in the ordinary course of its business. The amount, if any, of ultimate liability with respect to such matters cannot be determined, but despite the inherent uncertainties of litigation, management currently believes that the ultimate disposition of any such proceedings and exposure will not have, individually or taken together, a material adverse effect on the financial condition, results of operations, or cash flows of the Company. However, actual outcomes may differ from those expected and could have a material effect on the Company’s financial position, results of its operations or cash flows in a future period. The Company accrues for losses when they are probable to occur, and such losses are reasonably estimable. Legal costs are expensed as incurred and are included in general and administrative on the statement of operations.

​

Regulatory Net Worth Requirements

In accordance with the regulatory requirements of HUD, governing non-supervised, direct endorsement mortgagees, the Company is required to maintain a minimum net worth (as defined by HUD) of $2,500,000. At December 31, 2021, the Company exceeded the regulatory net worth requirement.

​

In accordance with the regulatory requirements of GNMA, governing issuers of GNMA securities, the Company is required to maintain a minimum net worth (as defined by GNMA) of $2,727,272. At December 31, 2021, the Company exceeded the regulatory net worth requirement.

​

Self-Insurance Plan

The Company has engaged an insurance company to provided administrative services for the Company’s self-funded insurance plan. The Company pays the qualifying medical claims expense for all participating individuals. The Company has a stop loss policy with the insurance company whereby they are reimbursed for all qualifying medical expenses incurred by individual employees above $1,879,984 in the aggregate. In addition, the Company is reimbursed for all aggregate medical expenses incurred by all participating individuals above $100,000 per the stop loss agreement. The Company has accrued for expenses related to incurred but not reported claims totaling $127,000 for the year ended December 31, 2021, which is included in accounts payable and accrued expenses on the balance sheet.

​

O.

FAIR VALUE MEASUREMENTS

​

FASB ASC 820, Fair Value Measurements and Disclosures (ASC 820), defines fair value as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not assumptions specific to the entity.

​

25

SOUTHERN TRUST MORTGAGE, LLC

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

​

O.

FAIR VALUE MEASUREMENTS (Continued)

​

ASC 820 specifies a hierarchy of valuation techniques based upon whether the inputs to those valuation techniques reflect assumptions other market participants would use based upon the market data obtained from independent sources (observable inputs). In accordance with ASC 820, the following summarizes the fair value hierarchy:

​

Level 1 Inputs – Unadjusted quoted market prices for identical assets and liabilities in an active market that the Company has the ability to access.

​

Level 2 Inputs – Inputs other than the quoted market prices in active markets that are observable either directly or indirectly.

​

Level 3 Inputs – Inputs based on prices or valuation techniques that are both unobservable and significant to the overall fair value measurements.

​

ASC 820 requires the use of observable market data, when available, in making fair value measurements. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurements. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

​

While the Company believes its valuation methods are appropriate and consistent with those used by other market participants, the use of different methods or assumptions to estimate the fair value of certain financial statement items could result in a different estimate of fair value at the reporting date. The significant unobservable inputs used in the fair value measurement may result in significantly different fair value measurements if any of those inputs were to change in isolation. Generally, a change in the assumptions used in the fair value measurement would be accompanied by a directionally opposite change in other assumptions. Those estimated values may differ significantly from the values that would have been used had a readily available market for such items existed, or had such items been liquidated, and those differences could be material to the financial statements.

​

The following is a description of the valuation methodologies used for assets and liabilities measured at fair value. There have been no changes in the methodologies used at December 31, 2021.

​

Mortgage loans held for sale (MLHFS) – The fair value of MLHFS based on Level 2 inputs is determined, when possible, using either quoted secondary-market prices or investor commitments. If no such quoted price exists, the fair value of a loan is determined using quoted prices for a similar asset or assets, adjusted for the specific attributes of that loan, which would be used by other market participants.

​

​

26

SOUTHERN TRUST MORTGAGE, LLC

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

​

O.

FAIR VALUE MEASUREMENTS (Continued)

​

Mortgage loans held for investment – The fair value of mortgage loans held for investment is determined based on observable market information, including pricing from actual market transactions or broker quotations.

​

Derivative instruments – The fair value of IRLCs is based on valuation models incorporating market pricing for instruments with similar characteristics, commonly referred to as best execution pricing, or investor commitment prices for best effort IRLCs. The valuation models used to value the IRLCs have unobservable inputs, such as an estimate of the fair value of the servicing rights expected to be recorded upon sale of the loans, estimated costs to originate the loans, and the pullthrough rate, and are therefore classified as Level 3 within the fair value hierarchy.

​

The fair value of forward sale commitments is based on observable market pricing for similar instruments and are therefore classified as Level 2 within the fair value hierarchy.

​

Mortgage servicing rights – The fair value of MSRs is difficult to determine because MSRs are not actively traded in observable stand-alone markets. The Company uses a discounted cash flow approach to estimate the fair value of MSRs. This approach consists of projecting net servicing cash flows discounted at a rate that management believes market participants would use in their determinations of fair value. The key unobservable inputs used in the estimation of the fair value of MSRs include prepayment speeds, discount rates, default rates, cost to service, contractual servicing fees, escrow earnings and ancillary income.

​

Assets and Liabilities Measured at Fair Value

The following are the major categories of assets and liabilities measured at fair value on a recurring basis as of December 31, 2021:

​

​

Description

  

Level 1

  

Level 2

  

Level 3

  

Total

MLHFS

$

—

$

85,968,910

$

—

$

85,968,910

Derivative instruments

—

(48,773)

2,481,966

2,433,193

Total

$

—

$

85,920,137

$

2,481,966

$

88,402,103

​

The Company does not have any impaired assets or liabilities that are recorded at fair value on a non-recurring basis as of December 31, 2021.

​

​

27

SOUTHERN TRUST MORTGAGE, LLC

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

​

O.

FAIR VALUE MEASUREMENTS (Continued)

​

Assets and Liabilities Measured at Fair Value (Continued)

The following are the changes in fair value of Level 1 and Level 2 assets and liabilities measured at fair value on a recurring basis for the year ended December 31, 2021:

​

Description

   

Amounts

MLHFS

$

(4,016,702)

Derivative instruments

2,447,829

Total

$

(1,568,873)

​

Level 3 Purchases, Issuances and Transfers

The following is a summary of the Company’s purchases, issuances, and transfers of assets, as applicable, which are measured at fair value on a recurring and non-recurring basis using Level 3 inputs during the year ended December 31, 2021:

​

   

MSRs

IRLCs

Issuances (c)

$

467,651

$

46,371,695

Transfers out of Level 3 (d)

$

—

$

83,297,014

​

(c)

Issuances of Level 3 MSRs represent current year additions from mortgage loans sold servicing retained. Issuances of Level 3 IRLCs represent the lock-date fair value of IRLCs issued to borrowers during the year, net of the estimated pullthrough rate and costs to originate.

​

(d)

IRLCs transferred out of Level 3 represent IRLCs that were funded and transferred to mortgage loans held for sale, at fair value.

​

Fair Value of Other Financial Instruments

Due to their short-term nature, the carrying value of cash and cash equivalents, restricted cash, escrow cash, short-term receivables, due from related parties, short-term payables, related party note payable, capital lease obligations, and warehouse lines of credit approximate their fair value at December 31, 2021.

​

P.

MEMBERSHIP INTEREST PURCHASE AGREEMENT

​

During the year ended December 31, 2021, the Company entered into a Membership Interest Purchase Agreement with Primis Bank (the Seller), in which the Company purchased all of the Seller’s Common Membership Shares, and 300,000 Preferred Membership Shares. Prior to the sale, the Seller owned 3,801,374 Common Membership Shares, 3,304,666 Preferred Membership Shares, and 4,890 Voting Units of the issued and outstanding membership interests of the Company. The purchase price for the purchased interest was $10,050,000; consisting of $1,550,000 in cash and a $8,500,000 unsecured promissory note, as referenced in Note I, due to mature in December 2031.

​

​

28

SOUTHERN TRUST MORTGAGE, LLC

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

​

Q.

SUBSEQUENT EVENTS

​

Management has evaluated subsequent events through March 10, 2022, the date on which the financial statements were available to be issued.

​

​

29

​

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AND

FINANCIAL STATEMENTS FOR

SOUTHERN TRUST MORTGAGE, LLC

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

A picture containing text, clipart Description automatically generated

​

​

​

SOUTHERN TRUST MORTGAGE, LLC
TABLE OF CONTENTS

​

​

​

Page

INDEPENDENT AUDITORS’ REPORT

1‐2

​

​

FINANCIAL STATEMENTS

​

Balance Sheets

3

Statements of Operations

4

Statements of Changes in Membersʹ Equity

5

Statements of Cash Flows

6‐7

Notes to Financial Statements

8‐31

​

​

​

​

​

​

​

​

​

​

 | Tax | Advisory

​

A picture containing text, sign Description automatically generated

​

9780 S Meridian Blvd., Suite 500

Englewood, CO 80112

303-721-6131

www.richeymay.com

Assurance | Tax | Advisory

​

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

​

To the Board of Directors
Southern Trust Mortgage, LLC
Virginia Beach, Virginia

​

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Southern Trust Mortgage, LLC (the Company) as of December 31, 2020 and 2019, and the related statements of operations, changes in membersʹ equity, and cash flows for the years then ended, and the related notes (collectively, referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

​

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (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 financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

​

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the 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 financial statements. We believe that our audits provide a reasonable basis for our opinion.

​

​

​

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

​

Critical Audit Matters

Critical audit matters are matters arising from the current period audit of the 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 financial statements and (2) involved our especially challenging, subjective, or complex judgements. We determined that there are no critical audit matters.

​

Richey, May & Co., LLP.

​

We have served as Southern Trust Mortgage, LLC’s auditor since 2014.

​

Text Description automatically generated

​

Englewood, Colorado
March 12, 2021

​

​

​

​

SOUTHERN TRUST MORTGAGE, LLC
BALANCE SHEETS

​

​

​

​

​

​

​

​

​

​

December 31,

ASSETS

    

2020

    

2019

CURRENT ASSETS

​

​

​

​

Cash and cash equivalents

​

$

16,100,165

​

$

6,867,905

Restricted cash

​

​

1,581,252

​

​

360,458

Escrow cash

​

​

669,144

​

​

313,183

Mortgage loans held for sale, at fair value

​

​

143,434,684

​

​

100,223,953

Accounts receivable and advances

​

​

1,020,842

​

​

733,905

Derivative assets

​

​

10,199,245

​

​

1,932,676

Prepaid expenses and other current assets

​

​

499,014

​

​

589,023

Loans eligible for repurchase from GNMA

​

​

2,338,905

​

​

—

Total current assets

​

​

175,843,251

​

​

111,021,103

OTHER ASSETS

​

​

​

​

​

​

Property and equipment, net

​

​

921,652

​

​

784,371

Mortgage servicing rights, net

​

​

1,694,970

​

​

6,750

Mortgage loans held for investment, net

​

​

2,081,000

​

​

3,308,201

Real estate owned

​

​

32,900

​

​

122,900

Due from related parties

​

​

174,400

​

​

393,339

Deposits and other assets

​

​

159,986

​

​

172,645

Total other assets

​

​

5,064,908

​

​

4,788,206

TOTAL ASSETS

​

$

180,908,159

​

$

115,809,309

LIABILITIES AND MEMBERSʹ EQUITY

​

​

​

​

​

​

LIABILITIES

​

​

​

​

​

​

Accounts payable and accrued expenses

​

$

7,395,761

​

$

3,527,203

Customer deposits and loan escrows

​

​

1,148,034

​

​

4,743,419

Warehouse lines of credit

​

​

136,087,177

​

​

92,052,015

Operating line of credit, related party

​

​

—

​

​

3,734,308

Derivative liabilities

​

​

2,496,602

​

​

74,922

Note payable, current portion

​

​

2,051,145

​

​

—

Liability for loans eligible for repurchase from GNMA

​

​

2,338,905

​

​

—

Loan indemnification reserve

​

​

1,325,068

​

​

593,287

Total current liabilities

​

​

152,842,692

​

​

104,725,154

Note payable, net of current portion

​

​

1,647,243

​

​

—

Total liabilities

​

​

154,489,935

​

​

104,725,154

COMMITMENTS AND CONTINGENCIES (Note O)

​

​

​

​

​

​

MEMBERSʹ EQUITY

​

​

​

​

​

​

Preferred interests, $1 par value; 3,304,656 shares authorized, issued and outstanding

​

​

3,304,656

​

​

3,304,656

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Common interests, $0.057 par value; 8,783,212 shares authorized, issued and outstanding

​

​

500,000

​

​

500,000

Additional paid‐in capital

​

​

344,575

​

​

344,575

Retained earnings

​

​

22,268,993

​

​

6,934,924

Total membersʹ equity

​

​

26,418,224

​

​

11,084,155

TOTAL LIABILITIES AND MEMBERSʹ EQUITY

​

$

180,908,159

​

$

115,809,309

​

​

​

The accompanying notes are an integral part of these financial statements.‌3

​

SOUTHERN TRUST MORTGAGE, LLC
STATEMENTS OF OPERATIONS

​

​

​

​

​

​

​

​

​

​

Years Ended December 31,

REVENUE

    

2020

    

2019

Gain on sale of mortgage loans held for sale, net of direct costs of $6,528,911 and $4,918,604 respectively

​

$

107,063,928

​

$

45,726,642

Loan origination fees

​

​

9,341,728

​

​

4,871,817

Interest income

​

​

4,184,292

​

​

3,989,638

Interest expense

​

​

(5,045,267)

​

​

(5,215,135)

Loan servicing fees, net of direct costs of $315,922 and $133,809, respectively

​

​

382,754

​

​

32,235

Gain on sale of mortgage servicing rights

​

​

—

​

​

337,865

Other income

​

​

139,317

​

​

53,595

Total revenue

​

​

116,066,752

​

​

49,796,657

EXPENSES

​

​

​

​

​

​

Salaries, commissions and benefits

​

​

84,080,099

​

​

39,032,347

Occupancy, equipment and communication

​

​

3,519,608

​

​

3,353,159

General and administrative

​

​

4,866,432

​

​

3,895,578

Provision for loan losses

​

​

897,309

​

​

551,322

Depreciation and amortization

​

​

275,692

​

​

224,550

Loss on sale of real estate owned

​

​

31,607

​

​

3,600

Amortization and deletions of mortgage servicing rights

​

​

167,947

​

​

51,590

Total expenses

​

​

93,838,694

​

​

47,112,146

NET INCOME (LOSS)

​

$

22,228,058

​

$

2,684,511

​

​

​

The accompanying notes are an integral part of these financial statements.‌4

​

SOUTHERN TRUST MORTGAGE, LLC
STATEMENTS OF CHANGES IN MEMBERSʹ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2020 and 2019

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

​

    

​

    

​

    

​

    

Additional

    

​

    

​

​

​

Preferred Interests

​

Common Interests

​

Paid‐In

​

Retained

​

​

​

​

Shares

​

Amount

​

Shares

​

Amount

​

Capital

​

Earnings

​

Totals

Balance, December 31, 2018

​

3,304,656

​

$

3,304,656

​

8,783,212

​

$

500,000

​

$

344,575

​

$

4,643,925

​

$

8,793,156

Preferred dividends

​

—

​

​

—

​

—

​

​

—

​

​

—

​

​

(249,312)

​

​

(249,312)

Member distributions

​

—

​

​

—

​

—

​

​

—

​

​

—

​

​

(144,200)

​

​

(144,200)

Net income

​

—

​

​

—

​

—

​

​

—

​

​

—

​

​

2,684,511

​

​

2,684,511

Balance, December 31, 2019

​

3,304,656

​

​

3,304,656

​

8,783,212

​

​

500,000

​

​

344,575

​

​

6,934,924

​

​

11,084,155

Preferred dividends

​

—

​

​

—

​

—

​

​

—

​

​

—

​

​

(247,039)

​

​

(247,039)

Member distributions

​

—

​

​

—

​

—

​

​

—

​

​

—

​

​

(6,646,950)

​

​

(6,646,950)

Net income

​

—

​

​

—

​

—

​

​

—

​

​

—

​

​

22,228,058

​

​

22,228,058

Balance, December 31, 2020

​

3,304,656

​

$

3,304,656

​

8,783,212

​

$

500,000

​

$

344,575

​

$

22,268,993

​

$

26,418,224

​

​

​

The accompanying notes are an integral part of these financial statements.‌5

​

SOUTHERN TRUST MORTGAGE, LLC
STATEMENTS OF CASH FLOWS

​

​

​

​

​

​

​

​

​

​

Years Ended December 31,

​

    

2020

    

2019

CASH FLOWS FROM OPERATING ACTIVITIES

​

​

​

​

​

​

Net income (loss)

​

$

22,228,058

​

$

2,684,511

Non‐cash items‐

​

​

​

​

​

​

Provision for loan losses

​

​

897,309

​

​

551,322

Depreciation and amortization

​

​

275,692

​

​

224,550

Amortization and deletions of mortgage servicing rights

​

​

167,947

​

​

51,590

Gain on sale of mortgage loans held for sale, net of direct costs

​

​

(107,063,928)

​

​

(45,726,642)

Gain on sale of mortgage servicing rights

​

​

—

​

​

(337,865)

Loss on sale of real estate owned

​

​

31,607

​

​

3,600

Loss on sale of mortgage loans held for investment

​

​

7,809

​

​

116,867

(Increase) decrease in‐

​

​

​

​

​

​

Escrow cash

​

​

(355,961)

​

​

(72,972)

Proceeds from sale and principal payments on mortgage loans held for sale

​

​

2,454,696,861

​

​

1,419,984,689

Originations and purchases of mortgage loans held for sale

​

​

(2,392,699,831)

​

​

(1,410,062,230)

Mortgage loans held for investment, net

​

​

(698,356)

​

​

(1,456,528)

Accounts receivable and advances

​

​

(286,937)

​

​

(196,024)

Derivative assets

​

​

(8,266,569)

​

​

(475,733)

Prepaid expenses and other current assets

​

​

90,009

​

​

(208,221)

Deposits and other assets

​

​

12,659

​

​

(8,232)

Due from related parties

​

​

218,939

​

​

46,019

Increase (decrease) in‐

​

​

​

​

​

​

Accounts payable and accrued expenses

​

​

3,906,866

​

​

1,465,591

Customer deposits and loan escrows

​

​

(3,595,385)

​

​

1,438,541

Derivative liabilities

​

​

2,421,680

​

​

(478,516)

Loan indemnification reserve

​

​

(183,882)

​

​

(465,205)

Net cash provided by (used in) operating activities

​

​

(28,195,413)

​

​

(32,920,888)

​

​

​

​

​

​

​

CASH FLOWS FROM INVESTING ACTIVITIES

​

​

​

​

​

​

Purchases of property and equipment

​

​

(412,973)

​

​

(204,349)

Proceeds from sale of mortgage servicing rights

​

​

—

​

​

566,157

Proceeds from sale of real estate owned

​

​

58,393

​

​

—

Proceeds from sale of mortgage loans held for investment

​

​

1,836,102

​

​

1,765,519

Net cash provided by investing activities

​

​

1,481,522

​

​

2,127,327

​

​

​

​

​

​

​

CASH FLOWS FROM FINANCING ACTIVITIES

​

​

​

​

​

​

Net borrowings (repayments) under warehouse lines of credit

​

​

44,035,162

​

​

32,588,987

Net borrowings (repayments) under operating line of credit, related party

​

​

(3,734,308)

​

​

68,204

Borrowings under note payable

​

​

3,698,388

​

​

—

Preferred dividends

​

​

(185,347)

​

​

(187,037)

Member distributions

​

​

(6,646,950)

​

​

(144,200)

Net cash provided by (used in) financing activities

​

​

37,166,945

​

​

32,325,954

​

​

​

The accompanying notes are an integral part of these financial statements.‌6

​

SOUTHERN TRUST MORTGAGE, LLC
STATEMENTS OF CASH FLOWS

​

​

​

​

​

​

​

​

​

​

Years Ended December 31,

​

    

2020

    

2019

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH

​

$

10,453,054

​

$

1,532,393

​

​

​

​

​

​

​

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF YEAR

​

​

7,228,363

​

​

5,695,970

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, END OF YEAR

​

$

17,681,417

​

$

7,228,363

SUPPLEMENTAL INFORMATION

​

​

​

​

​

​

Cash paid for interest

​

$

4,996,763

​

$

5,165,733

​

​

​

​

​

​

​

Preferred dividends payable

​

$

61,692

​

$

62,275

​

​

​

​

​

​

​

NON‐CASH OPERATING AND INVESTING ACTIVITIES

​

​

​

​

​

​

The Company increased retained mortgage servicing rights in connection with loan sales.

​

$

1,856,167

​

$

15,094

​

​

​

​

​

​

​

The Company recognized loans eligible for repurchase from GNMA and the related liability.

​

$

2,338,905

​

$

—

​

The Company made a reclassification between loan indemnification reserve and accounts payable and accrued expenses totaling $100,000 during the year ended December 31, 2020.

The Company sold certain mortgage servicing rights for a sales price of $629,063, which was comprised of cash proceeds of $566,157 and a receivable of $62,906 during the year ended December 31, 2019.

​

​

The accompanying notes are an integral part of these financial statements.‌7

SOUTHERN TRUST MORTGAGE, LLC

NOTES TO FINANCIAL STATEMENTS

​

A.

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

​

Organization

Southern Trust Mortgage, LLC (the Company) was incorporated in the Commonwealth of Virginia. The Company is primarily engaged in the business of originating, selling and servicing residential mortgage loans through its retail origination channel. The Company maintains its corporate office in Virginia Beach, Virginia, with branch offices in multiple states. The Company is approved as a Title II, non-supervised direct endorsement mortgagee with the United States Department of Housing and Urban Development (HUD). In addition, the Company is an approved issuer with the Government National Mortgage Association (GNMA), as well as an approved seller and servicer with the Federal National Mortgage Association (FNMA) and Federal Home Loan Mortgage Corporation (FHLMC).

​

Basis of Accounting

The financial statements of the Company are prepared on the accrual basis of accounting.

​

Basis of Presentation

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) as codified in the Financial Accounting Standards Board’s (FASB) Accounting Standards Codification (ASC).

​

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

​

Consolidation, Variable Interest Entities

The Company sells mortgage loans to FNMA and FHLMC, which are government-sponsored enterprises. The Company may also issue GNMA securities by pooling eligible mortgage loans through a custodian and assigning rights to the mortgage loans to GNMA. FNMA, FHLMC and GNMA (the Agencies) provide credit enhancements for mortgage loans through certain guarantee provisions. These securitizations involve variable interest entities (VIEs) as the trusts or similar vehicles, by design, that either (1) lack sufficient equity to permit the entity to finance its activities without additional subordinated financial support from other parties, or (2) have equity investors that do not have the ability to make significant decisions relating to the entity’s operations through voting rights, or do not have the obligation to absorb the expected losses, or do not have the right to receive the residual returns of the entity.

​

​

8

SOUTHERN TRUST MORTGAGE, LLC

NOTES TO FINANCIAL STATEMENTS

​

A.

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

​

Consolidation, Variable Interest Entities (Continued)

The primary beneficiary of a VIE (i.e., the party that has a controlling financial interest) is required to consolidate the assets and liabilities of the VIE. The primary beneficiary is the party that has both (1) the power to direct the activities of an entity that most significantly impact the VIE’s economic performance; and (2) through its interests in the VIE, the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. The Company may retain the right to service mortgage loans sold or securitized by the Agencies. Due to the significant influence of the Agencies over the VIEs that hold the assets from mortgage loan securitizations, principally through their rights and responsibilities as master servicer, the Company is not the primary beneficiary of the VIEs and therefore the VIEs are not consolidated.

​

The Company performs on-going reassessments of (1) whether entities previously evaluated under the majority voting-interest framework have become VIEs, based on certain events, and therefore become subject to the VIE consolidation framework; and (2) whether changes in the facts and circumstances regarding the Company’s involvement with a VIE cause the Company’s consolidation determination to change.

​

Cash and Cash Equivalents

For cash flow purposes, the Company considers cash and temporary investments with original maturities of three months or less, to be cash and cash equivalents. The Company has diversified its credit risk for cash by maintaining deposits in several financial institutions, which may at times exceed amounts covered by insurance from the Federal Deposit Insurance Corporation. The Company evaluates the creditworthiness of these financial institutions in determining the risk associated with these balances. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk related to cash and cash equivalents.

​

Restricted Cash

The Company maintains certain cash balances that are restricted under warehouse agreements and broker margin accounts associated with its derivative instruments.

​

Mortgage Loans Held for Sale and Revenue Recognition

Mortgage loans held for sale are carried at fair value under the fair value option with changes in fair value recorded in gain on sale of mortgage loans held for sale on the statements of operations. The fair value of mortgage loans held for sale committed to investors is calculated using observable market information such as the investor purchase commitment, assignment of trade or other mandatory delivery commitment prices. The Company bases loans committed to Agency investors based on the Agency’s quoted mortgage backed security (MBS) prices. The fair value of mortgage loans held for sale not committed to investors is based on quoted best execution secondary market prices. If no such quoted price exists, the fair value is determined using quoted prices for a similar asset or assets, such as MBS prices, adjusted for the specific attributes of that loan, which would be used by other market participants.

​

​

9

SOUTHERN TRUST MORTGAGE, LLC

NOTES TO FINANCIAL STATEMENTS

​

A.

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

​

Mortgage Loans Held for Sale and Revenue Recognition (Continued)

Gains and losses from the sale of mortgage loans held for sale are recognized based upon the difference between the sales proceeds and carrying value of the related loans upon sale and are recorded in gain on sale of mortgage loans held for sale on the statements of operations. Sales proceeds reflect the cash received from investors through the sale of the loan and servicing release premium. If the related mortgage servicing right (MSR) is sold servicing retained, the MSR addition is recorded in gain on sale of mortgage loans held for sale on the statements of operations. Gain on sale of mortgage loans held for sale also includes the unrealized gains and losses associated with the changes in the fair value of mortgage loans held for sale and the realized and unrealized gains and losses from derivative instruments.

 ​

Mortgage loans held for sale are considered sold when the Company surrenders control over the financial assets. Control is considered to have been surrendered when the transferred assets have been isolated from the Company, beyond the reach of the Company and its creditors; the purchaser obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets; and the Company does not maintain effective control over the transferred assets through either an agreement that both entitles and obligates the Company to repurchase or redeem the transferred assets before their maturity or the ability to unilaterally cause the holder to return specific assets. The Company typically considers the above criteria to have been met upon acceptance and receipt of sales proceeds from the purchaser.

​

Mortgage Loans Held for Investment, Net

Mortgage loans held for investment for which management has the intent and ability to hold for the foreseeable future or to maturity are carried at amortized cost reduced by a valuation allowance for estimated credit losses. Mortgage loans transferred from the held for sale category are transferred at the lower of cost or fair value, which becomes the new cost basis in the loans.

​

Loan Origination Fees

Loan origination fees represent revenue earned from originating mortgage loans. Loan origination fees generally represent a flat per-loan fee amount based on a percentage of the original principal loan balance and are recognized as revenue at the time the mortgage loans are funded. Loan origination expenses are charged to operations as incurred.

​

Interest Income

Interest income on mortgage loans held for sale is recognized for the period from loan funding to sale based upon the principal balance outstanding and contractual interest rates. Revenue recognition is discontinued when loans become 90 days delinquent, or when, in management’s opinion, the recovery of principal and interest becomes doubtful and the mortgage loans held for sale are put on nonaccrual status.

​

​

10

SOUTHERN TRUST MORTGAGE, LLC

NOTES TO FINANCIAL STATEMENTS

​

A.

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

​

Revenue Recognition

FASB ASC 606, Revenue from Contracts with Customers (ASC 606), establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied. The majority of the Company’s revenue generating transactions are not subject to ASC 606, including revenue generated from financial instruments, such as the Company’s mortgage loans and derivatives, as well as revenue related to the Company’s mortgage servicing activities.

​

Loan Servicing Fees and Expenses

Loan servicing fees represent revenue earned for servicing loans for various investors. Loan servicing fees are based on a contractual percentage of the outstanding unpaid principal balance and are recognized into revenue as the related mortgage payments are received. Loan servicing expenses are charged to operations as incurred.

​

Servicing Advances

Servicing advances represent escrows advanced by the Company on behalf of borrowers and investors to cover delinquent balances for property taxes, insurance premiums and other out-of-pocket costs. Servicing advances are made in accordance with the servicing agreements and are recoverable upon collection of future borrower payments, sale of loan collateral, reimbursement by investor, or mortgage insurance claims. The Company periodically reviews servicing advances for collectability and establishes a valuation allowance for estimated uncollectible amounts. No allowance has been recorded as of December 31, 2020 and 2019, as management has determined that all amounts are fully collectible.

​

​

11

SOUTHERN TRUST MORTGAGE, LLC

NOTES TO FINANCIAL STATEMENTS

​

A.

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

​

Property and Equipment, Net

Property and equipment is recorded at cost and depreciated or amortized using the straight line method over the estimated useful lives of the assets. The following is a summary of property and equipment at December 31:

​

    

Useful lives
(years)

    

2020

    

2019

Property and equipment, at cost

Equipment

3-7

$

1,234,632

$

1,010,207

Furniture and fixtures

3-7

878,603

715,241

Software

3-5

180,187

180,187

Leasehold improvements

(a)

105,065

79,879

Total property and equipment, at cost

2,398,487

1,985,514

Accumulated depreciation and amortization

 

 

Equipment

(801,417)

(608,190)

Furniture and fixtures

(507,803)

(430,232)

Software

(122,075)

(121,747)

Leasehold improvements

(45,540)

(40,974)

Total accumulated depreciation and amortization

 

(1,476,835)

 

(1,201,143)

Total property and equipment, net

$

921,652

$

784,371

​

(a) Amortized over the shorter of the related lease term or the estimated useful life of the assets.

​

The Company periodically assesses property and equipment for impairment whenever events or circumstances indicate the carrying amount of an asset may exceed its fair value. If property and equipment is considered impaired, the impairment losses will be recorded on the statements of operations. The Company did not recognize any impairment losses during the years ended December 31, 2020 and 2019.

​

​

12

SOUTHERN TRUST MORTGAGE, LLC

NOTES TO FINANCIAL STATEMENTS

​

A.

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

​

Derivative Instruments

The Company holds and issues derivative financial instruments such as interest rate lock commitments (IRLCs) and forward sale commitments. IRLCs are subject to price risk primarily related to fluctuations in market interest rates. To hedge the interest rate risk on mandatory IRLCs, the Company uses forward sale commitments, such as to-be-announced securities or mandatory delivery commitments with investors. Management expects these forward sale commitments to experience changes in fair value opposite to the changes in fair value of the IRLCs, thereby reducing earnings volatility. Forward sale commitments are also used to hedge the interest rate risk on mortgage loans held for sale that are not committed to investors and still subject to price risk. If the mandatory delivery commitments are not fulfilled, the Company pays a pair-off fee. Best effort forward sale commitments are also executed with investors, whereby certain loans are locked with a borrower and simultaneously committed to an investor at a fixed price. If the best effort IRLC does not fund, the Company has no obligation to fulfill the investor commitment.

​

The Company considers various factors and strategies in determining what portion of the IRLCs and uncommitted mortgage loans held for sale to economically hedge. FASB ASC 815-25, Derivatives and Hedging, requires that all derivative instruments be recognized as assets or liabilities on the balance sheets at their fair value. Changes in the fair value of the derivative instruments and gains and losses resulting from pairing-out of forward sale commitments are recognized in gain on sale of mortgage loans held for sale on the statements of operations in the period in which they occur. The Company accounts for all derivative instruments as free-standing derivative instruments and does not designate any for hedge accounting.

​

Mortgage Servicing Rights and Revenue Recognition

FASB ASC 860-50, Transfers and Servicing, requires that MSRs be initially recorded at fair value at the time the underlying loans are sold. To determine the fair value of the MSR created, the Company uses a valuation model, along with currently available market information including rate sheets from aggregators, that calculates the net present value of future cash flows. The valuation model incorporates assumptions that market participants would use in estimating future net servicing revenue, including the estimated discount rate, estimated prepayment speeds, the cost of servicing, estimated delinquencies, contractual service fees, ancillary income and late fees, float value, the inflation rate, and default rates. The credit quality and stated interest rates of the forward loans underlying the MSRs affects the assumptions used in the cash flow models. MSRs are not actively traded in open markets; accordingly, considerable judgment is required to estimate their fair value, and changes in these estimates could materially change the estimated fair value. The Company receives a monthly fixed servicing fee based on the outstanding principal balances of the mortgage loans, which is collected from investors.

​

​

13

SOUTHERN TRUST MORTGAGE, LLC

NOTES TO FINANCIAL STATEMENTS

​

A.

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

​

Mortgage Servicing Rights and Revenue Recognition (Continued)

After initially recording the MSRs at fair value, the Company subsequently amortizes the MSRs over the estimated economic life of the related mortgage loans in proportion to the estimated future net servicing revenue. The net capitalized cost of MSRs is periodically evaluated to determine if the amortized cost of MSRs is in excess of their estimated fair value. For this purpose, the Company stratifies its MSRs based on loan term, interest rate and product type, with estimates of remaining loan lives and prepayment rates being incorporated into the model. When impairment is identified due to the MSR asset’s amortized book value exceeding its fair value, management records a valuation allowance. Valuation allowances are recorded as a reduction to the MSRs on the balance sheets.

​

Any impairment of the amortized cost of MSRs is assessed based on their fair value at each reporting date using estimated prepayment speeds of the underlying mortgage loans serviced and stratification based on risk characteristics of the underlying loans (predominantly interest rates). As interest rates decrease, mortgage refinancing activity may increase, resulting in higher prepayment speeds of the loans underlying MSRs, which may result in a reduction of the MSRs’ fair value. Such fair value adjustment may require an additional valuation allowance being charged to earnings, to the extent that the amortized cost of the MSR exceeds the estimated fair value from stratification. Conversely, as mortgage interest rates rise, prepayment speeds are usually slower and the value of the MSR asset generally increases, requiring less valuation allowance. If it is later determined that all or a portion of the temporary impairment no longer exists for a stratification, the valuation allowance is reduced through a recovery to earnings. An other-than-temporary impairment (i.e. recoverability is considered remote when considering interest rates and loan pay-off activity) is recognized as a write-down of the MSR asset and the related valuation allowance. A direct write-down permanently reduces the carrying value of the MSR asset and valuation allowance, precluding subsequent recoveries.

​

The key unobservable inputs used in determining the fair value of MSRs when they are initially recorded were as follows for the year ended December 31, 2020:

​

    

Inputs

Discount rates

11.00% - 11.26%

Annual prepayment speeds

15.39% - 21.40%

Average cost of servicing

$85

​

The Company’s MSR portfolio was de minimus at December 31, 2019, therefore, certain disclosures pertaining to 2019 were omitted from the notes to the financial statements.

​

​

14

SOUTHERN TRUST MORTGAGE, LLC

NOTES TO FINANCIAL STATEMENTS

​

A.

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

​

Sale of Mortgage Servicing Rights

A transfer of servicing rights related to loans previously sold qualifies as a sale at the date on which title passes, if substantially all risks and rewards of ownership have irrevocably passed to the transferee and any protection provisions retained by the transferor are minor and can be reasonably estimated. In addition, if a sale is recognized and only minor protection provisions exist, a liability should be accrued for the estimated obligation associated with those provisions.

​

Loans in Forbearance and Eligible for Repurchase from GNMA

When the Company has the unilateral right to repurchase GNMA pool loans it has previously sold (generally loans that are more than 90 days past due) and the Company has determined there is more than a trivial benefit to repurchase the loans, the Company records its right to the loan on its balance sheets as an asset and corresponding liability. The recognition of previously sold mortgage loans does not impact the accounting for the previously recognized MSRs. At December 31, 2020, delinquent or defaulted mortgage loans currently in GNMA pools that the Company has recognized on its balance sheets totaled $2,338,905. The Company had no delinquent or defaulted mortgage loans in GNMA pools at December 31, 2019. Loans with borrowers that have entered into a forbearance plan under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) have an unpaid principal balance of approximately $7,041,000 or 1.36% of the MSR portfolio at December 31, 2020, of which approximately $2,339,000 and 0.45% of the MSR portfolio is greater than 90 days delinquent. There were no actual repurchases of GNMA delinquent or defaulted mortgage loans during the year ended December 31, 2020. The Company repurchased $503,131 of GNMA delinquent or defaulted mortgage loans during the year ended December 31, 2019 with the intention to modify their terms and include the loans in new GNMA pools.

​

Real Estate Owned

Real estate owned is initially recorded at the estimated fair value at the date of foreclosure of the underlying delinquent mortgage loan, which becomes the new cost basis in the real estate owned. The fair value of real estate owned is determined, when possible, using observable market data, including recent real estate appraisals and broker price opinions. Costs incurred in managing and maintaining foreclosed real estate and subsequent declines in fair value are charged to operations as incurred and are included in general and administrative on the statements of operations. The Company periodically assesses real estate owned for impairment whenever events or circumstances indicate the carrying amount of the assets may exceed their fair value. If real estate owned is considered impaired, the impairment losses will be recorded on the statements of operations.

​

​

15

SOUTHERN TRUST MORTGAGE, LLC

NOTES TO FINANCIAL STATEMENTS

​

A.

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

​

Loan Indemnification Reserve

Loans sold to investors by the Company and which met investor and Agency underwriting guidelines at the time of sale may be subject to repurchase in the event of specific default by the borrower or subsequent discovery that underwriting standards were not met. The Company may, upon mutual agreement, indemnify the investor against future losses on such loans. The Company has established a reserve for potential losses related to these representations and warranties. In assessing the adequacy of the reserve, management evaluates various factors including actual write-offs during the period, historical loss experience, known delinquent and other problem loans, and economic trends and conditions in the industry. Actual losses incurred are reflected as write-offs against the loan indemnification reserve.

​

The activity in the loan indemnification reserve for mortgage loans held for sale is as follows for the years ended December 31:

​

   

2020

   

2019

Balance, beginning of year

$

593,287

$

532,071

Recovery of loan losses

815,663

526,421

Reclassification of provision

100,000

—

Loans written-off, net of recoveries

(183,882)

(465,205)

Balance, end of year

$

1,325,068

$

593,287

​

Because of the uncertainty in the various estimates underlying the loan indemnification reserve, there is a range of losses in excess of the recorded loan indemnification reserve that is reasonably possible. The estimate of the range of possible loss for representations and warranties does not represent a probable loss and is based on current available information, significant judgment, and a number of assumptions that are subject to change.

​

Valuation Allowance on Mortgage Loans Held for Investment, Net

The Company periodically evaluates the carrying value of mortgage loans held for investment in excess of fair value and establishes a valuation allowance for potential losses. In assessing the adequacy of the valuation allowance, management evaluates various factors on a loan level basis, including the probability of not being able to collect payments based on the contractual terms of the mortgage, the estimated fair value of the underlying collateral and probable losses inherent to the loan portfolio. Additions to and recovery of the valuation allowance are reflected in the provision for loan losses on the statements of operations.

​

​

16

SOUTHERN TRUST MORTGAGE, LLC

NOTES TO FINANCIAL STATEMENTS

​

A.

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

​

Valuation Allowance on Mortgage Loans Held for Investment, Net (Continued)

The activity in the valuation allowance for mortgage loans held for investment is as follows for the years ended December 31:

​

   

2020

    

2019

Balance, beginning of year

$

59,184

$

44,900

Provision for loan losses

81,646

24,901

Loans written-off, net of recoveries

(51,395)

(10,617)

Balance, end of year

$

89,435

$

59,184

​

Because of the uncertainty in the various estimates underlying the valuation allowance, there is a range of losses in excess of the recorded valuation allowance that is reasonably possible. The estimate of the range of possible loss does not represent a probable loss and is based on current available information, significant judgment and a number of assumptions that are subject to change.

​

Escrow and Fiduciary Funds

The Company maintains segregated bank accounts for escrow balances in trust for investors for mortgagors. The balances of these accounts amounted to $2,178,678 and $19,845 at December 31, 2020 and 2019, respectively, and are excluded from the balance sheets.

​

Advertising and Marketing

Advertising and marketing is expensed as incurred and amounted to $1,220,661 and $1,221,637 for the years ended December 31, 2020 and 2019, respectively, and are included in general and administrative on the statements of operations.

​

Income Taxes

The Company has elected to be taxed as a partnership under the Internal Revenue Code. Accordingly, no federal income tax provision and state income taxes, to the extent possible, have been recorded in the financial statements, as all items of income and expense generated by the Company are reported on the members’ income tax returns. The Company has no federal or state tax examinations in process as of December 31, 2020.

​

Risks and Uncertainties

In the normal course of business, companies in the mortgage banking industry encounter certain economic and regulatory risks. Economic risks include interest rate risk and credit risk. The Company is subject to interest rate risk to the extent that in a rising interest rate environment, the Company may experience a decrease in loan production, as well as decreases in the value of mortgage loans held for sale not committed to investors and commitments to originate loans, which may negatively impact the Company’s operations. Credit risk is the risk of default that may result from the borrowers’ inability or unwillingness to make contractually required payments during the period in which loans are being held for sale or serviced by the Company.

​

​

17

SOUTHERN TRUST MORTGAGE, LLC

NOTES TO FINANCIAL STATEMENTS

​

A.

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

​

Risks and Uncertainties (Continued)

The Company sells loans to investors without recourse. As such, the investors have assumed the risk of loss or default by the borrower. However, the Company is usually required by these investors to make certain standard representations and warranties relating to credit information, loan documentation and collateral. To the extent that the Company does not comply with such representations, or there are early payment defaults, the Company may be required to repurchase the loans or indemnify these investors for any losses from borrower defaults. In addition, if loans pay-off within a specified time frame, the Company may be required to refund a portion of the sales proceeds to the investors.

​

The Company’s business requires substantial cash to support its operating activities. As a result, the Company is dependent on its warehouse lines of credit, and other financing facilities in order to finance its continued operations. If the Company’s principal lenders decided to terminate or not to renew any of these financing facilities with the Company, the loss of borrowing capacity could have a material adverse impact on the Company’s financial statements unless the Company found a suitable alternative source.

​

The recent global outbreak of COVID-19 has disrupted economic markets, and the prolonged economic impact is uncertain. The operational and financial performance of the Company depends on future developments, including the duration and spread of the outbreak, and such uncertainty may have an adverse impact on the Company’s financial performance.

​

Recently Issued Accounting Pronouncements

​

Future Adoption of New Accounting Pronouncements

In February 2016, FASB issued Accounting Standards Update (ASU) No. 2016-02, Leases (ASU 2016-02), which requires recognition of right-of-use assets and lease liabilities by lessees for all leases with a term greater than 12 months and to provide enhanced disclosures. ASU 2016-02 is effective for fiscal years beginning after December 15, 2021, with early adoption permitted.

​

Adoption of Recent Accounting Pronouncements

In August 2018, the FASB issued an ASU that further removes, modifies or adds certain disclosure requirements for fair value measurements. The Company adopted the guidance beginning January 1, 2020. The adoption did not have a significant impact on the Company’s financial statements.

​

​

18

SOUTHERN TRUST MORTGAGE, LLC

NOTES TO FINANCIAL STATEMENTS

​

A.

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

​

Recently Issued Accounting Pronouncements (Continued)

​

Adoption of Recent Accounting Pronouncements (Continued)

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, as amended, which amends the guidance for recognizing credit losses on financial instruments measured at amortized cost including receivables. The ASU requires measurement and recognition of expected versus incurred credit losses using a lifetime credit loss measurement approach. Significantly all of the Company’s financial assets are measured at fair value and are therefore not subject to the guidance; however, the Company determined that receivables and GNMA early buyout loans are within the scope of the ASU. GNMA early buyout loans are insured by the FHA or guaranteed by the Department of Veterans Affairs (VA) which limits the Company’s exposure to potential credit-related losses to an immaterial amount. Further, the estimated credit-related losses of the Company’s receivables are also immaterial due to the short-term nature of the assets. Servicing advances are generally expected to be fully reimbursed under the terms of the servicing agreements. The Company adopted the guidance beginning January 1, 2020. The adoption did not have a significant impact on the Company’s financial statements.

​

B.

MORTGAGE LOANS HELD FOR SALE, AT FAIR VALUE

​

Mortgage loans held for sale are as follows at December 31:

​

   

2020

    

2019

Mortgage loans held for sale

$

136,912,023

$

96,137,616

Mortgage loans held for sale (greater than 90 days outstanding)

​

​

—

​

​

669,026

Fair value adjustment

6,522,661

3,417,311

$

143,434,684

$

100,223,953

​

C.

MORTGAGE LOANS HELD FOR INVESTMENT, NET

​

The following summarizes mortgage loans held for investment, net at December 31:

​

   

2020

   

2019

Mortgage loans held for investment

$

2,170,435

$

3,367,385

Valuation allowance

(89,435)

(59,184)

$

2,081,000

$

3,308,201

​

​

​

19

SOUTHERN TRUST MORTGAGE, LLC

NOTES TO FINANCIAL STATEMENTS

​

D.

ACCOUNTS RECEIVABLE AND ADVANCES

​

The following summarizes accounts receivable and advances at December 31:

​

   

2020

    

2019

Loan sales receivable

$

149,347

$

364,407

Due from borrower

43,885

118,483

Servicing advances

99,570

54,888

MSR co-issue receivable

728,040

196,127

$

1,020,842

$

733,905

​

The Company periodically evaluates the carrying value of accounts receivable and advance balances with delinquent balances written-off based on specific credit evaluations and circumstances of the debtor. No allowance for doubtful accounts has been established at December 31, 2020 and 2019, as management has determined that all amounts are fully collectible.

​

The Company issued two notes receivable to an employee totaling $218,000 during the year ended December 31, 2019. The notes receivable bear interest at 5.00% per annum with principal and unpaid interest payable on the fifth anniversary of each note receivable. The Company will forgive 20% of the principal and interest every 12 months after the effective date of each note receivable, provided the employee meets certain conditions related to continued employment and minimum annual loan origination. The notes receivable totaled $174,400 and $218,000 at December 31, 2020 and 2019, respectively, which are included in due from related parties on the balance sheets.

​

E.

DERIVATIVE INSTRUMENTS

​

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

​

​

20

SOUTHERN TRUST MORTGAGE, LLC

NOTES TO FINANCIAL STATEMENTS

​

E.

DERIVATIVE INSTRUMENTS (Continued)

​

The key unobservable inputs used in determining the fair value of IRLCs are as follows for the years ended December 31:

​

    

2020

    

2019

Pullthrough rates

81.92% - 88.35%

86.60% - 88.98%

Average cost to originate

1.20%

1.20%

​

The following summarizes derivative instruments at December 31:

​

​

2020

2019

Fair

Notional

Fair

Notional

  

Value

  

Amount

Value

  

Amount

IRLCs:

Mandatory

$

9,945,416

$

254,186,000

(b)  

$

1,702,564

$

60,814,000

(b)

Best efforts

253,829

$

27,329,000

(b)

230,112

$

25,413,000

(b)

MBSs

(2,496,602)

$

326,000,000

(74,922)

$

71,000,000

Total

$

7,702,643

$

1,857,754

​

(b) Pullthrough rate adjusted

​

The notional amounts of mortgage loans held for sale not committed to investors amounted to approximately $105,819,000 and $17,514,000 at December 31, 2020 and 2019, respectively.

​

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

​

​

21

SOUTHERN TRUST MORTGAGE, LLC

NOTES TO FINANCIAL STATEMENTS

​

F.

MORTGAGE SERVICING RIGHTS

​

The following summarizes the activity of MSRs for the years ended December 31:

​

   

2020

   

2019

Balance, beginning of year

$

6,750

$

303,194

Additions due to loans sold, servicing retained

1,856,167

15,094

Deletions due to sale of MSRs

—

(259,948)

Deletions due to loan payoffs

(17,151)

(19,787)

Amortization expense

(150,796)

(31,803)

Balance, end of year

$

1,694,970

$

6,750

​

At December 31, 2020 and 2019, the unpaid principal balance of mortgage loans serviced approximated $517,842,000 and $4,476,000, respectively. Conforming conventional loans serviced by the Company are sold to FNMA and FHLMC on a non-recourse basis, whereby foreclosure losses are generally the responsibility of FNMA and FHLMC, and not the Company. The government loans serviced by the Company are secured through GNMA, whereby the Company is insured against loss by the Federal Housing Administration or partially guaranteed against loss by the VA.

​

The key unobservable inputs used in determining the fair value of the Company’s MSRs are as follows at December 31, 2020:

​

    

Inputs

Discount rates

11.00% - 11.24%

Annual prepayment speeds

15.52% - 21.40%

Average cost of servicing

$85

​

The hypothetical effect of an adverse change in these key unobservable inputs would result in a decrease in fair value as follows at December 31, 2020:

​

    

Amounts

Discount rates:

Effect on value - 1% adverse change

$

(139,594)

Effect on value - 2% adverse change

$

(270,488)

Prepayment speeds:

Effect on value - 5% adverse change

$

(153,468)

Effect on value - 10% adverse change

$

(299,990)

Cost of servicing:

Effect on value - 5% adverse change

$

(28,738)

Effect on value - 10% adverse change

$

(57,477)

​

​

​

22

SOUTHERN TRUST MORTGAGE, LLC

NOTES TO FINANCIAL STATEMENTS

​

F.

MORTGAGE SERVICING RIGHTS (Continued)

​

These sensitivities are hypothetical and should be used with caution. As the table demonstrates, the Company’s methodology for estimating the fair value of MSRs is highly sensitive to changes in key unobservable inputs. For example, actual prepayment experience may differ and any difference may have a material effect on MSR fair value. Changes in fair value resulting from changes in inputs generally cannot be extrapolated because the relationship of the change in input to the change in fair value may not be linear. Also, in this table, the effect of a variation in a particular input on the fair value of the MSRs is calculated without changing any other input; in reality, changes in one factor may be associated with changes in another (for example, decreases in market interest rates may indicate higher prepayments; however, this may be partially offset by lower prepayments due to other factors such as a borrower’s diminished opportunity to refinance), which may magnify or counteract the sensitivities. Thus, any measurement of MSR fair value is limited by the conditions existing and inputs made as of a particular point in time. Those inputs may not be appropriate if they are applied to a different point in time.

​

Sale of Mortgage Servicing Rights

During the year ended December 31, 2019, the Company sold the majority of its MSR portfolio with an unpaid principal balance of approximately $75,280,000 for a net sales price of $597,813, which includes the gross sales prices of $629,063 less $31,250 for transactional expenses. The Company recognized a gain on sale of $337,865 which is recorded in gain on sale of mortgage servicing rights on the statements of operations. In addition, the Company recorded a receivable totaling $62,906, at December 31, 2019, related to the sale, which is due when all of the complete mortgage files have been received by the purchaser. The Company performed temporary sub-servicing activities with respect to the underlying loans through the established transfer date, for which the Company earned a fee and is also entitled to certain other ancillary income amounts.

​

​

23

SOUTHERN TRUST MORTGAGE, LLC

NOTES TO FINANCIAL STATEMENTS

​

G.

WAREHOUSE LINES OF CREDIT AGREEMENTS

​

The Company has the following warehouse lines of credit (WHLOC) agreements with various financial institutions at December 31:

​

​

​

​

​

​

Facility

  

​

  

​

  

​

​

Restricted

  

Outstanding Balance

  

​

Type

​

Maturity

​

Line Amount

​

Interest Rate

​

Cash

​

2020

​

2019

WHLOC

​

N/A

​

$

10,000,000

​

LIBOR plus
2.75%, with a
floor rate of
3.25

% 

$

100,000

​

$

—

​

$

—

WHLOC*

​

January 2022

​

$

40,000,000

​

LIBOR plus
2.25%, with a
floor rate of
3.25

%

​

—

​

​

30,757,899

​

​

23,007,825

WHLOC

​

N/A

​

$

90,000,000

​

LIBOR plus
2.90%, with a
floor rate of
3.25

%

​

586,643

​

​

58,664,259

​

​

25,123,038

WHLOC

​

August 2021

​

$

50,000,000

​

LIBOR plus
2.75% ‐ 3.25%,
with a LIBOR
floor rate of
1.00

%

​

—

​

​

25,009,964

​

​

14,776,973

WHLOC

​

June 2021

​

$

75,000,000

​

LIBOR plus
2.65%, with a
LIBOR floor
rate of 0.50

%

​

—

​

​

21,655,055

​

​

29,144,179

​

​

​

​

​

​

​

​

​

$

686,643

​

$

136,087,177

​

$

92,052,015

​

*The WHLOC is with a related party.

​

As of December 31, 2020 and 2019, the Company had mortgage loans held for sale pledged as collateral under the above WHLOC agreements, with the lines being personally guaranteed by the members. The above agreements also contain covenants which include certain financial requirements, including maintenance of minimum tangible net worth, minimum liquid assets, maximum debt to net worth ratio, positive net income, and minimum fidelity bond and errors and omissions coverage, as defined in the agreements. The Company was in compliance with all significant debt covenants at December 31, 2020. The Company intends to renew the WHLOCs when they mature.

​

H.

OPERATING LINE OF CREDIT AGREEMENT, RELATED PARTY

​

The Company had a $7 million revolving line of credit agreement with a related party, which matured and was fully repaid in May 2020. The line of credit was payable on demand, bore interest at the Prime rate plus 0.50%, with a floor rate of 3.75%, and was personally guaranteed by a member of the Company. The outstanding balance under the operating line of credit totaled $3,734,308 at December 31, 2019.

​

​

24

SOUTHERN TRUST MORTGAGE, LLC

NOTES TO FINANCIAL STATEMENTS

​

I.

NOTE PAYABLE

​

In April 2020, the Company was approved by the U.S. Small Business Administration (SBA) under the CARES Act for a Paycheck Protection Program (PPP) loan and received proceeds totaling $3,698,388. Interest is at 1.00% per annum and matures in April 2022. The note has a deferral period of 15 months beginning on the date of the note, during which interest accrues but no payments are due. The outstanding balance under the note payable totaled $3,698,388 at December 31, 2020. The Company intends to use the entire PPP loan amount for qualifying expenses and to apply for forgiveness of the loan in accordance with the terms of the CARES Act.

​

Future minimum payments under the note payable are as follows at December 31, 2020:

​

Year Ending December 31,

    

Amounts

2021

$

2,051,145

2022

1,647,243

$

3,698,388

​

J.

RELATED PARTY TRANSACTIONS

​

A related party financial institution is a member of the Company with common membership shares and preferred membership shares.

​

During the years ended December 31, 2020 and 2019, the Company sold 225 and 287 loans, respectively, servicing released with unpaid principal balances of $58,916,783 and $158,200,197, respectively, to the related party financial institution. Premiums received on the loans amounted to $1,096,796 and $2,633,141, during the years ended December 31, 2020 and 2019, respectively, and are included in gain on sale of mortgage loans held for sale on the statements of operations. The Company also paid origination expenses to the related party financial institution totaling $3,100 and $9,603 during the years ended December 31, 2020 and 2019, respectively, which is included in gain on sale of mortgage loans held for sale, direct costs on the statements of operations.

​

The Company has a warehouse line of credit agreement and an operating line of credit agreement with the same related party financial institution (Notes G and H, respectively). Pursuant to which, the Company paid $996,728 and $1,332,480 in interest expense and other fees during the years ended December 31, 2020 and 2019, respectively, which are included in interest expense on the statements of operations.

​

The Company paid $16,371 and $27,154 in marketing expenses to the related party financial institution during the years ended December 31, 2020 and 2019, respectively, which is included in general and administrative on the statements of operations.

​

​

25

SOUTHERN TRUST MORTGAGE, LLC

NOTES TO FINANCIAL STATEMENTS

​

J.

RELATED PARTY TRANSACTIONS (Continued)

​

The Company has receivables due from various employees totaling $174,400 and $393,339 at December 31, 2020 and 2019, respectively, which are included in due from related parties on the balance sheets.

​

K.

COMMON INTERESTS

​

At December 31, 2020 and 2019, the Company has 8,783,212 common shares issued and outstanding with certain members. Common shares with voting rights are held by a member that is an officer of the Company and a financial institution member. On the fifteenth day of January, April, June and September, the members with common shares receive distributions in aggregate amounts equal to no less than 40% of the Company’s available cash, as reasonably determined by the Board of Directors, for the fiscal year through the end of the immediately preceding full calendar month less any amounts previously distributed during such fiscal year, in proportion to their respective common shares. The Board of Directors is authorized to make additional distributions from time to time to the members in proportion to their respective common shares. Profits and losses of the Company shall be allocated first to the preferred members and second to the common members.

​

L.

PREFERRED INTERESTS

​

At December 31, 2020 and 2019, the Company has 3,304,656 preferred shares issued and outstanding. Members with preferred shares are entitled to receive, if and when declared, cash payments at the rate of $0.075 per share per annum, made in equal quarterly installments on the fifteenth day of January, April, July and October. Such preferred dividend payments are cumulative and totaled $247,039 and $249,312 during the years ended December 31, 2020 and 2019, respectively, with $61,692 and $62,275 recorded in accounts payable and accrued expenses on the balance sheets at December 31, 2020 and 2019, respectively. Holders of preferred membership shares are not entitled to voting rights.

​

M.

PROFIT INTEREST UNITS

​

During the year ended December 31, 2020, members transferred 518,210 units to an officer of the Company as common profits interest membership shares (profit interest units). The transfer was based on loan production volume from the preceding year. The profit interest units entitle the officer to participate in future profits, losses, distributions and appreciation of the Company. The profit interest units do not require initial investment and do not have voting rights. During the year ended December 31, 2020, profit interest unit distributions totaled $308,615.

​

N.

EMPLOYEE BENEFIT PLAN

​

The Company has a 401(k) qualified retirement plan covering substantially all employees. Employees may contribute amounts subject to certain Internal Revenue Service and plan limitations. The Company may make discretionary matching and non-elective contributions. The Company made no contributions to the plan for the years ended December 31, 2020 and 2019.

​

​

26

SOUTHERN TRUST MORTGAGE, LLC

NOTES TO FINANCIAL STATEMENTS

​

O.

COMMITMENTS AND CONTINGENCIES

​

Commitments to Extend Credit

The Company enters into IRLCs with customers who have applied for residential mortgage loans and meet certain credit and underwriting criteria. These commitments expose the Company to market risk if interest rates change and the underlying loan is not economically hedged or committed to an investor. The Company is also exposed to credit loss if the loan is originated and not sold to an investor and the mortgagor does not perform. The collateral upon extension of credit typically consists of a first deed of trust in the mortgagor’s residential property. Commitments to originate loans do not necessarily reflect future cash requirements as some commitments are expected to expire without being drawn upon. Total commitments to originate loans approximated $321,058,000 and $97,692,000 at December 31, 2020 and 2019, respectively.

​

Regulatory Contingencies

The Company is subject to periodic audits and examinations, both formal and informal in nature, from various federal and state agencies, including those made as part of regulatory oversight of mortgage origination, servicing and financing activities. Such audits and examinations could result in additional actions, penalties or fines by state or federal governmental bodies, regulators or the courts.

​

Operating Leases

The Company leases office space and equipment under various operating lease arrangements, which expire through May 2025. Total rent expense under all operating leases amounted to $2,477,219 and $2,419,495 for the years ended December 31, 2020 and 2019, respectively, and are included in occupancy, equipment and communication on the statements of operations.

​

Future minimum rental payments under long-term operating leases are as follows at December 31, 2020:

​

​

Year Ending December 31,

 

Amounts

2021

​

$

1,634,130

2022

​

​

941,993

2023

​

​

583,258

2024

​

​

408,689

2025

​

​

90,844

​

​

$

3,658,914

​

​

27

SOUTHERN TRUST MORTGAGE, LLC

NOTES TO FINANCIAL STATEMENTS

​

O.

COMMITMENTS AND CONTINGENCIES (Continued)

​

Legal

The Company operates in a highly regulated industry and may be involved in various legal and regulatory proceedings, lawsuits and other claims arising in the ordinary course of its business. The amount, if any, of ultimate liability with respect to such matters cannot be determined, but despite the inherent uncertainties of litigation, management currently believes that the ultimate disposition of any such proceedings and exposure will not have, individually or taken together, a material adverse effect on the financial condition, results of operations, or cash flows of the Company. However, actual outcomes may differ from those expected and could have a material effect on the Company’s financial position, results of its operations or cash flows in a future period. The Company accrues for losses when they are probable to occur, and such losses are reasonably estimable. Legal costs are expensed as incurred and are included in general and administrative on the statements of operations.

​

Regulatory Net Worth Requirements

In accordance with the regulatory requirements of HUD, governing non-supervised, direct endorsement mortgagees, the Company is required to maintain a minimum net worth (as defined by HUD) of $2,500,000. At December 31, 2020, the Company exceeded the regulatory net worth requirement.

​

In accordance with the regulatory requirements of GNMA, governing issuers of GNMA securities, the Company is required to maintain a minimum net worth (as defined by GNMA) of $4,808,820. At December 31, 2020, the Company exceeded the regulatory net worth requirement.

​

Self-Insurance Plan

The Company has engaged an insurance company to provided administrative services for the Company’s self-funded insurance plan. The Company pays the qualifying medical claims expense for all participating individuals. The Company has a stop loss policy with the insurance company whereby they are reimbursed for all qualifying medical expenses incurred by individual employees above $1,665,736 in the aggregate. In addition, the Company is reimbursed for all aggregate medical expenses incurred by all participating individuals above $100,000 per the stop loss agreement. The Company has accrued for expenses related to incurred but not reported claims totaling $187,000 and $197,000 for the years ended December 31, 2020 and 2019.

​

P.

FAIR VALUE MEASUREMENTS

​

FASB ASC 820, Fair Value Measurements and Disclosures (ASC 820), defines fair value as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not assumptions specific to the entity.

​

​

28

SOUTHERN TRUST MORTGAGE, LLC

NOTES TO FINANCIAL STATEMENTS

​

P.

FAIR VALUE MEASUREMENTS (Continued)

​

ASC 820 specifies a hierarchy of valuation techniques based upon whether the inputs to those valuation techniques reflect assumptions other market participants would use based upon the market data obtained from independent sources (observable inputs). In accordance with ASC 820, the following summarizes the fair value hierarchy:

​

Level 1 Inputs – Unadjusted quoted market prices for identical assets and liabilities in an active market that the Company has the ability to access.

​

Level 2 Inputs – Inputs other than the quoted market prices in active markets that are observable either directly or indirectly.

​

Level 3 Inputs – Inputs based on prices or valuation techniques that are both unobservable and significant to the overall fair value measurements.

​

ASC 820 requires the use of observable market data, when available, in making fair value measurements. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurements. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

​

While the Company believes its valuation methods are appropriate and consistent with those used by other market participants, the use of different methods or assumptions to estimate the fair value of certain financial statement items could result in a different estimate of fair value at the reporting date. The significant unobservable inputs used in the fair value measurement may result in significantly different fair value measurements if any of those inputs were to change in isolation. Generally, a change in the assumptions used in the fair value measurement would be accompanied by a directionally opposite change in other assumptions. Those estimated values may differ significantly from the values that would have been used had a readily available market for such items existed, or had such items been liquidated, and those differences could be material to the financial statements.

​

The following is a description of the valuation methodologies used for assets and liabilities measured at fair value. There have been no changes in the methodologies used at December 31, 2020 and 2019.

​

Mortgage loans held for sale (MLHFS) – The fair value of mortgage loans held for sale based on Level 2 inputs is determined, when possible, using either quoted secondary-market prices or investor commitments. If no such quoted price exists, the fair value of a loan is determined using quoted prices for a similar asset or assets, adjusted for the specific attributes of that loan, which would be used by other market participants.

​

Mortgage loans held for investment – The fair value of mortgage loans held for investment is determined based on observable market information, including pricing from actual market transactions or broker quotations.

​

29

SOUTHERN TRUST MORTGAGE, LLC

NOTES TO FINANCIAL STATEMENTS

​

P.

FAIR VALUE MEASUREMENTS (Continued)

​

Derivative instruments – The fair value of IRLCs is based on valuation models incorporating market pricing for instruments with similar characteristics, commonly referred to as best execution pricing, or investor commitment prices for best effort IRLCs. The valuation models used to value the IRLCs have unobservable inputs, such as an estimate of the fair value of the servicing rights expected to be recorded upon sale of the loans, estimated costs to originate the loans, and pullthrough, and are therefore classified as Level 3 within the fair value hierarchy.

​

The fair value of forward sale commitments is based on observable market pricing for similar instruments and are therefore classified as Level 2 within the fair value hierarchy.

​

Mortgage servicing rights – The fair value of MSRs is difficult to determine because MSRs are not actively traded in observable stand-alone markets. The Company uses a discounted cash flow approach to estimate the fair value of MSRs. This approach consists of projecting net servicing cash flows discounted at a rate that management believes market participants would use in their determinations of fair value. The key unobservable inputs used in the estimation of the fair value of MSRs include prepayment speeds, discount rates, default rates, cost to service, contractual servicing fees, escrow earnings and ancillary income.

​

Real estate owned – Real estate owned is initially recorded at the estimated fair value at the date of foreclosure on the delinquent mortgage loans, which becomes the new cost basis in the real estate owned. The fair value of real estate owned is determined, when possible, using observable market data, including recent real estate appraisals and broker price opinions. Subsequent declines in fair value are credited to a valuation allowance.

​

Assets and Liabilities Measured at Fair Value

The following are the major categories of assets and liabilities measured at fair value on a recurring basis as of December 31, 2020:

​

Description

  

Level 1

  

Level 2

  

Level 3

  

Total

MLHFS

$

—

$

143,434,684

$

—

$

143,434,684

Derivative instruments

—

(2,496,602)

10,199,245

7,702,643

Total

$

—

$

140,938,082

$

10,199,245

$

151,137,327

​

The following are the major categories of assets and liabilities measured at fair value on a recurring basis as of December 31, 2019:

​

Description

  

Level 1

  

Level 2

  

Level 3

  

Total

MLHFS

$

—

$

100,223,953

$

—

$

100,223,953

Derivative instruments

—

(74,922)

1,932,676

1,857,754

Total

$

—

$

100,149,031

$

1,932,676

$

102,081,707

​

The Company does not have any impaired assets or liabilities that are recorded at fair value on a non-recurring basis as of December 31, 2020 and 2019.

​

​

30

SOUTHERN TRUST MORTGAGE, LLC

NOTES TO FINANCIAL STATEMENTS

​

P.

FAIR VALUE MEASUREMENTS (Continued)

​

Assets and Liabilities Measured at Fair Value (Continued)

The following are the changes in fair value of Level 1 and Level 2 assets and liabilities measured at fair value on a recurring basis for the years ended December 31:

​

​

​

Financial Instrument

    

2020

    

2019

Mortgage loans held for sale

​

$

3,105,350 

​

$

1,087,360

Derivative liabilities

​

​

(2,421,680)

​

​

478,516

Total

​

$

683,670 

​

$

1,565,876

​

Level 3 Purchases, Issuances and Transfers

The following is a summary of the Company’s purchases, issuances, and transfers of assets, as applicable, which are measured at fair value on a recurring and non-recurring basis using Level 3 inputs during the year ended December 31, 2020:

​

    

MSRs

    

IRLCs

Issuances (c)

$

1,856,167

$

68,946,475

Transfers out of Level 3 (d)

$

—

$

112,297,249

​

(c)

Issuances of Level 3 MSRs represent current year additions from mortgage loans sold servicing retained. Issuances of Level 3 IRLCs represent the lock-date fair value of IRLCs issued to borrowers during the year, net of the estimated pullthrough rate and costs to originate.

​

(d)

IRLCs transferred out of Level 3 represent IRLCs that were funded and transferred to mortgage loans held for sale, at fair value.

​

Fair Value of Other Financial Instruments

Due to their short-term nature, the carrying value of cash and cash equivalents, restricted cash, escrow cash, short-term receivables, short-term payables, note payable, and warehouse and operating lines of credit approximate their fair value at December 31, 2020.

​

Q.

SUBSEQUENT EVENTS

​

Management has evaluated subsequent events through March 12, 2021, the date on which the financial statements were available to be issued.

31