What changed in this filing

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Item 1. Business

2023-03-15 compared with 2022-03-14 · 78 added, 70 removed, 416 unchanged (26% of the section changed)

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 Financial Corp.

(“Primis,” “we,” “us,” “our” or the “Company”) is the bank holding company for Primis Bank (“Primis Bank” or the “Bank”), a Virginia state-chartered bank which commenced operations on April 14, 2005.

Primis Bank provides a range of financial services to individuals and small and medium-sized businesses.

As of December 31, 2022, Primis had $3.57 billion in total assets, $2.95 billion in total loans, $2.72 billion in total deposits and $394.4 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.

At December 31, 2022, Primis Bank had thirty-two full-service branches in Virginia and Maryland and also provides services to customers through certain online and mobile applications.

Thirty full-service retail branches are in Virginia and two full-service retail branches are in Maryland.

The Company is headquartered in McLean, Virginia and has administrative offices in Tysons Corner, Virginia and Glen Allen, Virginia and an operations center in Atlee, Virginia.

Our deposits are insured, up to applicable limits, by the Federal Deposit Insurance Corporation (the “FDIC”).

Primis Bank also owns Primis Mortgage Company, a residential mortgage lender.

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.

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Providing employees with resources for personal and professional development;

Providing Primis communities and the people within them purposeful and meaningful Primis financial support and volunteerism.

Providing Primis communities and the people within them purposeful and meaningful 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.

● Utilizing the Primis Management Team’s Strength .

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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’ 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.

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● 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.

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 comprehensive 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.

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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.

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.

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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.

Primis originates residential mortgage loans for its portfolio through Primis Mortgage Company.

Primis also purchases 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

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.

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Panacea Consumer Loans.

Panacea offers several unsecured consumer loan products to include student loan refinancing and PRN loans.

Panacea offers several unsecured consumer loan products to include student loan refinancing and pro re nata (“PRN’) loans.

PRN loans may be utilized by graduating doctors to fund costs as they move into their chosen professions.

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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.

In November 2020, the Company launched the Panacea Financial division, which focuses on providing unique financial products and services for the medical, dental and veterinary communities.

Panacea offers personal loans, student debt refinance and practice loans as well as deposit products nationally.

Panacea has partnerships with fourteen national and state associations.

Additionally, its In-Training Medical/Dental School Loan Refinance product 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, 2022, Panacea had approximately $248.4 million in outstanding loans.

The division has successfully built a nationally-recognized brand and finished 2022 with a growing team of industry-leading commercial bankers experienced in providing financial services to its target communities 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.

The Company launched a division in the fourth quarter of 2021 focused on financing life insurance premiums for high net worth individuals across the United States.

As of December 31, 2022, the Life Premium Finance Division had outstanding balances, net of deferred fees, of $193.8 million.

Outstanding balances on these loans grow over three to five years.

Consequently, the Company expects a sustainable growth rate in the division with each new loan originated.

Primis Mortgage Company.

On May 31, 2022, Primis Bank acquired Primis Mortgage Company (previously SeaTrust Mortgage Company), a regional residential mortgage company headquartered in Wilmington, North Carolina.

Primis Mortgage Company has since expanded to offer residential mortgages in the majority of the U.S.

Residential mortgage loans originated through Primis Mortgage Company are primarily sold in the secondary market for fee income.

As of December 31, 2022, Primis Mortgage originated $294.9 million loans.

Digital Banking

In the fourth quarter of 2021, Primis successfully launched its new digital bank platform to friends and family of the Bank.

In 2022, Primis successfully launched its new digital bank platform.

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.

V1BE was initially piloted in the Richmond market but now covers the majority of our footprint, including the greater Washington, D.C.

With V1BE, Primis is able to support any market and grow customer relationships without the need for a large branch presence.

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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.

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.

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.

The Board of Directors has delegated assignment of individual credit authorities up to $10 million to the Chief Executive Officer and Chief Credit Officer.

For loans less than $2.5 million, we have named Credit Officers and two Specialty Executive Credit Officers, each with extensive industry specific experience with individual credit authority to $4 million.

These individual lending authorities are based on the individual’s technical ability and experience.

All credits over $10 million are reviewed and approved by Executive Loan Committee, as defined in credit policy.

All credit extensions in excess of 60% of the Bank’s legal lending limit are also reviewed and approved by the Board of Directors.

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HUMAN CAPITAL

At Primis, we are committed to ensuing that our employees reach their personal, professional and financial peaks.

At Primis, we are committed to ensuring 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.

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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.

Our Intranet houses the “Employee Voice,” which is a vehicle for employees to make suggestions, asks questions or voice opinions regarding the Company’s practices.

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.

We utilize a wide range of recruitment vehicles ranging from college recruitment sites such as “Handshake”, “V3” program to recruit veterans to posting on popular job boards and conducting nationwide profile searches to find diverse and qualified candidates.

Primis realizes that great people know other great people so we also offer a referral bonus to our employees.

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.

We offer three 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.

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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.

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.

The employees volunteered for 125 hours in 2022.

SUPERVISION AND REGULATION

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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”).

Primis is subject to extensive supervision and regulation by the Federal Reserve 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.

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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.

The overall effect of such laws is to make it more difficult to acquire a bank holding company or 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.

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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%.

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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.

On October 26, 2022, the SEC adopted final rules to implement Section 954 of the Dodd-Frank Act that require public companies to adopt and disclose a policy for the recovery of incentive-based compensation received by current or former executive officers that is based on erroneously reported financial information in the event of a required accounting restatement.

The rules also require disclosure of the policy, including filing the policy as an exhibit to annual reports on Form 10-K and additional disclosure in the event an accounting restatement is required and recovery is triggered under the policy.

The stock exchanges have up to 90 days after publication of the rules in the Federal Register to submit proposed listing standards to the SEC for approval, and the proposed listing standards must be effective no later than one year after the publication date.

Following the effective date of the new listing standards, public companies will have 60 days to adopt the required clawback policy.

Shareholder Say-On-Pay Votes.

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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

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

These buffer requirements must be met for a bank or bank holding company to 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.

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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%.

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.

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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

dividends by the Bank may also be affected by other regulatory requirements and policies, such as the maintenance of adequate capital.

The payment of 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.

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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.

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

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.

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The assessment rate schedule can change from time to time, at the discretion of the FDIC, subject to certain limits.

As of June 30, 2020, the DIF reserve ratio fell to 1.30%, below the statutory minimum of 1.35%.

The FDIC, as required under the Federal Deposit Insurance Act, established a plan on September 15, 2020 to restore the DIF reserve ratio to meet or exceed the statutory minimum of 1.35% within eight years.

On October 18, 2022, the FDIC adopted an amended restoration plan to increase the likelihood that the reserve ratio would be restored to at least 1.35 percent by September 30, 2028.

The FDIC’s amended restoration plan increases the initial base deposit insurance assessment rate schedules uniformly by 2 basis points, beginning in the first quarterly assessment period of 2023.

The FDIC could further increase the deposit insurance assessments for certain insured depository institutions, including the Bank, if the DIF reserve ratio is not restored as projected.

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.

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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.

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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.

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.

On May 5, 2022, the OCC, FRB, and FDIC issued a notice of proposed rulemaking to provide for a coordinated approach to modernize their respective CRA regulations, such that all banks will be subject to the same set of CRA rules.

No final rule has been issued, but the rulemaking may affect the Bank’s CRA compliance obligations in the future.

Consumer Regulation.

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Mortgage Rules.

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.

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, 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.

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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.”

Non-Discrimination Policies.

Primis Bank is also subject to, among other things, the provisions of the Equal Credit Opportunity Act and the Fair Housing Act, both of which prohibit discrimination based on race or color, religion, national origin, sex, and familial status in any aspect of a consumer or commercial credit or residential real estate transaction.

The Department of Justice, and the federal bank regulatory agencies have issued an Interagency Policy Statement on Discrimination in Lending that provides guidance to financial institutions in determining whether discrimination exists,

how the agencies will respond to lending discrimination, and what steps lenders might take to prevent discriminatory lending practices.

The DOJ has increased its efforts to prosecute what it regards as violations of the ECOA and FHA.

On March 15, 2022, Congress enacted the Adjustable Interest Rate (LIBOR) Act (the “LIBOR Act”) to address references to LIBOR in contracts that (i) are governed by U.S.

(ii) will not mature before June 30, 2023;

and (iii) lack fallback provisions providing for a clearly defined and practicable replacement for LIBOR.

On December 16, 2022, the FRB adopted a final rule to implement the LIBOR Act by identifying benchmark rates based on SOFR (Secured Overnight Financing Rate) that will replace LIBOR in certain financial contracts after June 30, 2023.

The final rule identifies replacement benchmark rates based on SOFR to replace overnight, one-month, three-month, six-month, and 12-month LIBOR in contracts subject to the LIBOR Act.

Audit Reports .

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business