Primis Financial Corp. 10-K

Item 8. Financial Statements and Supplementary Data ​ 58 Table of Contents ​ ​ ​ REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ​ ​ To the 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, 2022 and 2021, the related consolidated statements of income and comprehensive income (loss), changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America. We did not audit the financial statements of Southern Trust Mortgage, LLC (“STM”) 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 consolidated financial statements for the year ended December 31, 2020 reported income from discontinued operations $8.4 million, or approximately 36% of the Company’s net income. 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 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, 2022, 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 15, 2023, expressed an unqualified opinion thereon . Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. 59 Table of Contents Critical Audit Matters The critical audit matters communicated below are matters arising from the current-period audit of the consolidated financial statements that were communicated or required to be communicated to the Audit Committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Allowance for Credit Losses The Company’s allowance for credit losses (ACL) on loans held for investment was $34.5 million as of December 31, 2022. The determination of the ACL has been identified by the Company as a critical accounting policy. The ACL is measured on a collective basis when similar loan risk characteristics exist, and by individually evaluating loans that do not share similar risk characteristics. As further described in Notes 1 and 4 to the consolidated financial statements, the Company measures the ACL using a combination of probability of default (PD), probability of attrition (PA), loss given default (LGD), and exposure at default (EAD), calculated based on the application of historical loss experience, and adjusted for a reasonable and supportable forecast. Estimates are qualitatively adjusted for risk factors that are not considered within the quantitative modeling process. Estimating an appropriate 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, 2022 included the determination of a reasonable and supportable forecast and the impact of qualitative factors. We identified the Company’s estimate of the ACL as a critical audit matter. The principal considerations for that determination were the degree of subjectivity and judgment required to audit management’s identification of reasonable and supportable forecasts and the identification and measurement of the qualitative factors. The primary procedures we performed to address this critical audit matter included the following: ● We evaluated the design and tested the operating effectiveness of controls relating to management’s determination of the ACL, including controls over: o Completeness and accuracy of inputs into the model used to determine the ACL; o The determination of a reasonable and supportable forecast, and; o The 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 tested the mathematical accuracy of the ACL, including the mathematical application of the qualitative adjustments on the loan segments. ​ 60 Table of Contents Goodwill Impairment Assessment The Company has recorded goodwill of $104.6 million as of December 31, 2022. The determination of the annual goodwill impairment assessment has been identified by the Company as a critical accounting policy. As further described in Notes 1 and 8 to the consolidated financial statements, goodwill is tested for impairment at least annually at the reporting unit level, occurring as of September 30th every year, or more frequently if events or circumstances warrant. The Company engaged a third-party valuation specialist in performing its quantitative impairment analysis, which included a combination of valuation approaches to determine the fair value of the Bank reporting unit. These valuation approaches required certain assumptions such as the discount rate, economic conditions impacting interest and growth rates, the control premium, and a relative weighting given to the fair value derived by each of the valuation approaches used. We identified the Company’s quantitative goodwill impairment assessment for the Bank reporting unit, as of September 30, as a critical audit matter. The principal considerations for that determination were the degree of subjectivity and judgment required to audit management’s goodwill impairment assessment. Specifically, evaluating the valuation approaches selected and key assumptions used by management in performing its assessment, such as the selection of comparable publicly-traded companies and control premium utilized in the valuation approaches. The primary procedures we performed to address this critical audit matter included the following: ● We evaluated the design and tested the operating effectiveness of controls related to management’s goodwill impairment assessment including controls over management’s review of the quantitative analysis performed on the Bank reporting unit, including the key assumptions used to determine the fair value of the Bank reporting unit. ● We tested key financial data used within the valuation approaches by agreeing key inputs to internal and external sources. ● We evaluated, with the assistance of our internal valuation specialists, appropriateness of valuation approaches selected by management, the selection of a control premium and of comparable publicly-traded companies, and the overall reasonableness of the estimated fair value of the Bank reporting unit. /s/ FORVIS, LLP (Formerly, Dixon Hughes Goodman LLP) We have served as the Company’s auditor since 2013. Greenville, North Carolina March 15, 2023 ​ ​ ​ ​ 61 Table of Contents ​ ​ REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ​ To the Shareholders and the Board of Directors Primis Financial Corp. ​ ​ Opinion on the Internal Control over Financial Reporting We have audited Primis Financial Corp.’s (the “Company”) internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework: (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework: (2013) issued by COSO. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of December 31, 2022 and 2021, and for each of the years in the three-year period ended December 31, 2022, and our report dated March 15, 2023, 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, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. As described in management’s report on internal control over financial reporting, the scope of management’s assessment of internal control over financial reporting as of December 31, 2022, has excluded Primis Mortgage Company (“Primis Mortgage,” formerly named SeaTrust Mortgage Company) acquired on May 31, 2022. We have also excluded Primis Mortgage from the scope of our audit of internal control over financial reporting. Primis Mortgage represented one percent of consolidated total assets as of December 31, 2022 and four percent of consolidated revenues for the year then ended. Definitions and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of reliable financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting 62 Table of Contents principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate. /s/ FORVIS, LLP (Formerly, Dixon Hughes Goodman LLP) Greenville, North Carolina March 15, 2023 ​ ​ 63 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 64 Table of Contents PRIMIS FINANCIAL CORP. CONSOLIDATED BALANCE SHEETS (dollars in thousands, except per share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, December 31, ​ ​ 2022 ​ 2021 ASSETS ​ ​ ​ ​ ​ ​ Cash and cash equivalents: ​ ​ Cash and due from financial institutions ​ $ 6,868 $ 8,380 Interest-bearing deposits in other financial institutions ​ 70,991 ​ 521,787 Total cash and cash equivalents ​ 77,859 ​ 530,167 ​ ​ ​ ​ ​ ​ ​ Securities available-for-sale, at fair value ​ 236,315 ​ 271,332 ​ ​ ​ ​ ​ ​ ​ Securities held-to-maturity, at amortized cost (fair value of $ 12,449 and $ 23,364 , respectively) ​ 13,520 ​ 22,940 ​ ​ ​ ​ ​ ​ ​ Loans held for sale, at fair value ​ ​ 27,626 ​ ​ — ​ ​ ​ ​ ​ ​ ​ Loans held for investment ​ 2,948,836 ​ 2,339,986 Less: allowance for credit losses ​ ( 34,544 ) ​ ( 29,105 ) Net loans ​ 2,914,292 ​ 2,310,881 ​ ​ ​ ​ ​ ​ ​ Stock in Federal Reserve Bank (FRB) and Federal Home Loan Bank (FHLB) ​ 25,815 ​ 15,521 Bank premises and equipment, net ​ 25,257 ​ 30,410 Assets held for sale ​ ​ 3,115 ​ ​ — Operating lease right-of-use assets ​ ​ 5,335 ​ ​ 5,866 Goodwill ​ 104,609 ​ 101,954 Intangible assets, net ​ 3,254 ​ 4,462 Bank-owned life insurance ​ 67,201 ​ 66,724 Other real estate owned ​ — ​ 1,163 Deferred tax assets, net ​ 18,289 ​ 9,571 Other assets ​ 49,050 ​ 36,362 Total assets ​ $ 3,571,537 $ 3,407,353 ​ ​ ​ ​ ​ ​ ​ LIABILITIES AND STOCKHOLDERS' EQUITY ​ ​ Noninterest-bearing demand deposits ​ $ 582,556 $ 530,282 Interest-bearing deposits: ​ ​ ​ NOW accounts ​ 617,687 ​ 849,738 Money market accounts ​ 811,365 ​ 799,759 Savings accounts ​ 245,713 ​ 222,862 Time deposits ​ 465,057 ​ 360,575 Total interest-bearing deposits ​ 2,139,822 ​ 2,232,934 Total deposits ​ 2,722,378 ​ 2,763,216 ​ ​ ​ ​ ​ ​ ​ Securities sold under agreements to repurchase - short term ​ 6,445 ​ 9,962 FHLB advances ​ 325,000 ​ 100,000 Junior subordinated debt - long term ​ 9,781 ​ 9,731 Senior subordinated notes - long term ​ 85,531 ​ 85,297 Operating lease liabilities ​ ​ 5,767 ​ ​ 6,498 Other liabilities ​ 22,232 ​ 20,768 Total liabilities ​ 3,177,134 ​ 2,995,472 ​ ​ ​ ​ ​ ​ ​ Commitments and contingencies (See Note 15) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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; 24,680,097 and 24,574,619 shares issued and outstanding at December 31, 2022 and December 31, 2021, respectively ​ 246 ​ 245 Additional paid in capital ​ 312,722 ​ 311,127 Retained earnings ​ 107,285 ​ 99,397 Accumulated other comprehensive income (loss) ​ ( 25,850 ) ​ 1,112 Total stockholders' equity ​ 394,403 ​ 411,881 Total liabilities and stockholders' equity ​ $ 3,571,537 $ 3,407,353 ​ See accompanying notes to consolidated financial statements. ​ ​ 65 Table of Contents PRIMIS FINANCIAL CORP. CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS) (dollars in thousands, except per share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended December 31, ​ 2022 2021 2020 Interest and dividend income: ​ ​ ​ Interest and fees on loans ​ ​ $ 117,867 ​ $ 107,021 ​ $ 111,647 Interest and dividends on taxable securities ​ ​ 5,552 ​ 3,977 ​ 4,244 Interest and dividends on tax exempt securities ​ ​ 412 ​ 463 ​ 486 Interest and dividends on other earning assets ​ ​ 2,243 ​ 1,782 ​ 1,402 Total interest and dividend income ​ ​ 126,074 ​ 113,243 ​ 117,779 Interest expense: ​ ​ ​ ​ Interest on deposits ​ ​ 13,281 ​ 13,112 ​ 20,332 Interest on other borrowings ​ ​ 8,306 ​ 5,928 ​ 5,807 Total interest expense ​ ​ 21,587 ​ 19,040 ​ 26,139 Net interest income ​ ​ 104,487 ​ 94,203 ​ 91,640 Provision for (recovery of) credit losses ​ ​ 11,271 ​ ( 5,801 ) ​ 19,450 Net interest income after provision for (recovery of) credit losses ​ ​ 93,216 ​ 100,004 ​ 72,190 Noninterest income: ​ ​ ​ ​ Account maintenance and deposit service fees ​ ​ 5,745 ​ 7,309 ​ 6,520 Income from bank-owned life insurance ​ ​ 1,994 ​ 1,687 ​ 1,559 Gain on debt extinguishment ​ ​ — ​ 573 ​ — Mortgage banking income ​ ​ 5,054 ​ — ​ — Gain on sale of other investment ​ ​ ​ 4,144 ​ ​ — ​ ​ — Credit enhancement income ​ ​ ​ 3,042 ​ ​ — ​ ​ — Realized losses on sales of investment securities ​ ​ — ​ — ​ ( 620 ) Other noninterest income ​ ​ 1,349 ​ 1,566 ​ 7,203 Total noninterest income ​ ​ 21,328 ​ 11,135 ​ 14,662 Noninterest expenses: ​ ​ ​ ​ Salaries and benefits ​ ​ 49,005 ​ 36,741 ​ 36,675 Occupancy expenses ​ ​ 5,628 ​ 5,956 ​ 6,142 Furniture and equipment expenses ​ ​ 5,231 ​ 3,622 ​ 2,725 Amortization of intangible assets ​ ​ 1,325 ​ 1,364 ​ 1,364 Virginia franchise tax expense ​ ​ 3,254 ​ 2,899 ​ 2,457 Data processing expense ​ ​ 6,013 ​ 3,850 ​ 3,178 Marketing expense ​ ​ ​ 3,067 ​ ​ 1,726 ​ ​ 1,770 Telephone and communication expense ​ ​ 1,433 ​ 1,790 ​ 1,497 Net loss on other real estate owned ​ ​ 72 ​ 87 ​ 960 Loss on bank premises and equipment and assets held for sale ​ ​ ​ 684 ​ ​ — ​ ​ — Professional fees ​ ​ 4,787 ​ 5,467 ​ ​ 4,726 Credit enhancement costs ​ ​ ​ 1,369 ​ ​ — ​ ​ — Other operating expenses ​ ​ 10,400 ​ 7,898 ​ 6,246 Total noninterest expenses ​ ​ 92,268 ​ 71,400 ​ 67,740 Income from continuing operations before income taxes ​ ​ 22,276 ​ 39,739 ​ 19,112 Income tax expense ​ ​ 4,535 ​ 8,721 ​ 4,228 Income from continuing operations ​ ​ ​ 17,741 ​ ​ 31,018 ​ ​ 14,884 Income from discontinued operation before income taxes ​ ​ ​ — ​ 294 ​ ​ 10,789 Income tax expense ​ ​ ​ — ​ 64 ​ ​ 2,386 Income from discontinued operation ​ ​ ​ — ​ ​ 230 ​ ​ 8,403 Net income ​ ​ $ 17,741 ​ $ 31,248 ​ $ 23,287 Other comprehensive income (loss): ​ ​ ​ ​ ​ Unrealized gain (loss) on available-for-sale securities ​ ​ $ ( 34,129 ) ​ $ ( 3,193 ) ​ $ 2,789 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 Net unrealized gain (loss) ​ ​ ( 34,129 ) ​ ( 3,042 ) ​ 3,421 Tax (benefit) expense ​ ​ ( 7,167 ) ​ ( 669 ) ​ 719 Other comprehensive income (loss) ​ ​ ( 26,962 ) ​ ( 2,373 ) ​ 2,702 Comprehensive income (loss) ​ ​ $ ( 9,221 ) ​ $ 28,875 ​ $ 25,989 Earnings per share from continuing operations, basic ​ ​ $ 0.72 ​ $ 1.27 ​ $ 0.61 Earnings per share from discontinued operation, basic ​ ​ $ 0.00 ​ $ 0.01 ​ $ 0.35 Earnings per share from continuing operations, diluted ​ ​ $ 0.72 ​ $ 1.26 ​ $ 0.61 Earnings per share from discontinued operation, diluted ​ ​ $ 0.00 ​ $ 0.01 ​ $ 0.35 ​ See accompanying notes to consolidated financial statements. ​ 66 Table of Contents PRIMIS FINANCIAL CORP. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020 (dollars in thousands, except per share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ Other ​ ​ ​ ​ Common Stock ​ Paid in ​ Retained ​ Comprehensive ​ ​ ​ Shares Amount Capital Earnings Income (Loss) Total Balance - December 31, 2019 ​ ​ 24,181,534 ​ $ 241 ​ $ 306,755 ​ $ 69,462 ​ $ 783 ​ $ 377,241 Impact of adoption of ASU 2016-13 ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 5,056 ) ​ ​ — ​ ​ ( 5,056 ) Adjusted beginning balance ​ ​ 24,181,534 ​ ​ 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 ) Issuances of common stock ​ ​ 93,250 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Shares retired to unallocated ​ ​ ( 8,672 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Stock Option exercises ​ ​ — ​ 1 ​ 708 ​ — ​ — ​ 709 Restricted stock granted ​ ​ 102,500 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Vesting of restricted stock ​ ​ — ​ ​ 1 ​ ​ ( 1 ) ​ ​ — ​ ​ — ​ ​ — Repurchase of restricted stock ​ ​ — ​ ​ — ​ ​ ( 135 ) ​ ​ — ​ ​ — ​ ​ ( 135 ) Stock-based compensation expense ​ ​ — ​ — ​ 1,543 ​ — ​ — ​ 1,543 Balance - December 31, 2020 ​ ​ 24,368,612 ​ $ 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 ) Issuances of common stock ​ ​ 159,000 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Shares retired to unallocated ​ ​ ( 1,043 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Stock Option exercises ​ ​ — ​ 2 ​ 1,524 ​ — ​ — ​ 1,526 Restricted stock granted ​ ​ 55,250 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Restricted stock forfeited ​ ​ ( 7,200 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Repurchase of restricted stock ​ ​ — ​ ​ — ​ ​ ( 14 ) ​ ​ — ​ ​ — ​ ​ ( 14 ) Stock-based compensation expense ​ ​ — ​ — ​ 747 ​ — ​ — ​ 747 Balance - December 31, 2021 ​ ​ 24,574,619 ​ $ 245 ​ $ 311,127 ​ $ 99,397 ​ $ 1,112 ​ $ 411,881 Net income ​ ​ — ​ — ​ — ​ 17,741 ​ — ​ 17,741 Changes in other comprehensive loss on investment securities (net of tax benefit, $ 7,167 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 26,962 ) ​ ​ ( 26,962 ) Dividends on common stock ($ 0.40 per share) ​ ​ — ​ — ​ — ​ ( 9,853 ) ​ — ​ ( 9,853 ) Issuances of common stock ​ ​ 60,000 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Shares retired to unallocated ​ ​ ( 780 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Stock option exercises ​ ​ — ​ 1 ​ 571 ​ — ​ — ​ 572 Restricted stock granted ​ ​ 1,500 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Restricted stock forfeited ​ ​ ( 2,400 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Repurchase of restricted stock ​ ​ — ​ ​ — ​ ​ ( 11 ) ​ ​ — ​ ​ — ​ ​ ( 11 ) Stock-based compensation expense ​ ​ — ​ — ​ 395 ​ — ​ — ​ 395 Shares issued in lieu of cash bonus ​ ​ 47,158 ​ ​ — ​ ​ 640 ​ ​ — ​ ​ — ​ ​ 640 Balance - December 31, 2022 ​ ​ 24,680,097 ​ $ 246 ​ $ 312,722 ​ $ 107,285 ​ $ ( 25,850 ) ​ $ 394,403 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ See accompanying notes to consolidated financial statements. ​ ​ ​ 67 Table of Contents PRIMIS FINANCIAL CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ 2022 2021 2020 Operating activities: ​ ​ ​ Net income from continuing operations ​ $ 17,741 ​ $ 31,018 ​ $ 14,884 Adjustments to reconcile net income from continuing operations to net cash and cash equivalents provided by operating activities: ​ ​ ​ Depreciation and amortization ​ 7,433 ​ 8,040 ​ 8,194 Net amortization (accretion) of premiums and discounts ​ 480 ​ ( 1,989 ) ​ ( 4,346 ) Provision for (recovery of) for credit losses ​ 11,271 ​ ( 5,801 ) ​ 19,450 Origination of loans held for sale ​ ​ ( 175,613 ) ​ ​ — ​ ​ — Proceeds from sale of loans held for sale ​ ​ 169,189 ​ ​ — ​ ​ — Net gains on mortgage banking ​ ​ ( 5,054 ) ​ ​ — ​ ​ — Loss on bank premises and equipment and assets held for sale ​ ​ 684 ​ ​ — ​ ​ — Earnings on bank-owned life insurance ​ ( 1,542 ) ​ ( 1,681 ) ​ ( 1,559 ) Gain on bank-owned life insurance death benefit ​ ​ ( 452 ) ​ ​ ( 6 ) ​ ​ — Stock-based compensation expense ​ 395 ​ 747 ​ 1,543 Loss on sales of investment securities ​ — ​ — ​ 620 Loss on other real estate owned ​ 72 ​ 87 ​ 960 Gain on debt extinguishment ​ ​ — ​ ​ ( 573 ) ​ ​ — Gain on sale of other investment ​ ​ ( 4,144 ) ​ ​ — ​ ​ — Credit enhancement income ​ ​ ( 3,042 ) ​ ​ — ​ ​ — Provision (benefit) for deferred income taxes ​ ( 2,214 ) ​ 6,054 ​ ( 1,411 ) Net increase in other assets ​ ( 1,462 ) ​ ( 588 ) ​ ( 11,942 ) Net increase (decrease) in other liabilities ​ ( 637 ) ​ ( 7,620 ) ​ 2,707 Net cash and cash equivalents provided by operating activities from continuing operations ​ ​ 13,105 ​ 27,688 ​ 29,100 Investing activities: ​ ​ ​ Proceeds from sales of securities held-to-maturity ​ ​ — ​ ​ — ​ ​ 1,660 Proceeds from sales of securities available-for-sale ​ — ​ — ​ 1,910 Purchases of securities held-to-maturity ​ — ​ — ​ ( 15,197 ) Purchases of securities available-for-sale ​ ( 37,361 ) ​ ( 160,531 ) ​ ( 38,938 ) Proceeds from paydowns, maturities and calls of securities available-for-sale ​ 36,960 ​ 37,878 ​ 50,068 Proceeds from paydowns, maturities and calls of securities held-to-maturity ​ 9,338 ​ 17,652 ​ 44,738 Net (increase) decrease of FRB and FHLB stock ​ ​ ( 10,294 ) ​ ​ 1,406 ​ ​ 905 Net (increase) decrease in loans ​ ( 613,791 ) ​ 109,375 ​ ( 251,000 ) Proceeds from bank-owned life insurance death benefit ​ ​ 586 ​ ​ 371 ​ ​ — Proceeds from sales of other real estate owned, net of improvements ​ ​ 1,091 ​ ​ 2,014 ​ ​ 2,663 Purchases of bank premises and equipment ​ ( 1,012 ) ​ ( 2,456 ) ​ ( 1,082 ) Proceeds from sale of other investment ​ ​ 3,606 ​ ​ — ​ ​ — Purchases of other investments ​ ​ ( 2,080 ) ​ ​ — ​ ​ — Business acquisition, net of cash acquired ​ ( 4,554 ) ​ — ​ — Net cash and cash equivalents (used in) provided by investing activities from continuing operations ​ ( 617,511 ) ​ 5,709 ​ ( 204,273 ) Financing activities: ​ ​ ​ Net (decrease) increase in deposits ​ ( 40,838 ) ​ 330,610 ​ 307,888 Cash dividends paid on common stock ​ ( 9,853 ) ​ ( 9,807 ) ​ ( 9,737 ) Proceeds from exercised stock options ​ 572 ​ 1,526 ​ 709 Repurchase of restricted stock ​ ​ ( 11 ) ​ ​ ( 14 ) ​ ​ ( 135 ) Issuance of subordinated notes, net of cost ​ — ​ — ​ 58,600 Extinguishment of senior subordinated notes ​ — ​ ( 20,000 ) ​ — Repayment of FHLB advances, long-term ​ ​ ( 100,000 ) ​ ​ — ​ ​ — Proceeds from short-term FHLB advances, net of repayments ​ ​ 325,000 ​ ​ — ​ ​ — Repayment of short-term borrowings acquired ​ ​ ( 19,254 ) ​ ​ — ​ ( 21,640 ) Increase (decrease) in securities sold under agreements to repurchase ​ ( 3,518 ) ​ ( 6,103 ) ​ 3,182 Net cash and cash equivalents provided by financing activities from continuing operations ​ 152,098 ​ 296,212 ​ 338,867 Net change in cash and cash equivalents from continuing operations ​ ( 452,308 ) ​ 329,609 ​ 163,694 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash flows provided from discontinued operation: ​ ​ ​ ​ ​ ​ ​ ​ ​ Net cash and cash equivalents used in operating activities ​ ​ — ​ ​ ( 373 ) ​ ​ ( 2,593 ) 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 Net change in cash and cash equivalents ​ ​ ( 452,308 ) ​ ​ 333,982 ​ ​ 164,257 Cash and cash equivalents at beginning of period ​ 530,167 ​ 196,185 ​ 31,928 Cash and cash equivalents at end of period ​ $ 77,859 ​ $ 530,167 ​ $ 196,185 Supplemental disclosure of cash flow information ​ ​ ​ Cash payments for: ​ ​ ​ Interest ​ $ 20,190 ​ $ 20,234 ​ $ 27,988 Income taxes ​ $ 3,046 ​ $ 6,151 ​ $ 7,693 Supplemental schedule of noncash investing and financing activities: ​ ​ ​ ​ ​ ​ Bank premises transferred to held for sale ​ $ 3,667 ​ $ — ​ $ — Shares issued in lieu of cash bonus ​ $ 640 ​ $ — ​ $ — Proceeds from sale of other investment included in other assets ​ $ 538 ​ $ — ​ $ — Proceeds from bank-owned life insurance death benefit included in other assets ​ $ 931 ​ $ — ​ $ — Transfer from loans to other real estate owned ​ $ — ​ $ 186 ​ $ 477 Notes receivable from discontinued operation, included in loans ​ $ — ​ $ 8,500 ​ $ — Fair value of assets and liabilities from acquisition: ​ ​ ​ ​ ​ ​ Fair value of tangible assets acquired ​ $ 21,947 ​ $ — ​ $ — Other intangible assets acquired ​ ​ 2,790 ​ ​ — ​ ​ — Fair value of liabilities assumed ​ ​ ( 20,183 ) ​ ​ — ​ ​ — Total merger consideration, net of $ 2,446 of cash acquired ​ $ 4,554 ​ $ — ​ $ — ​ ​ See accompanying notes to consolidated financial statements. ​ 68 Table of Contents 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES Primis Financial Corp. (“Primis,” “we,” “us,” “our” or the “Company”) is the bank holding company for Primis Bank (“Primis Bank” or the “Bank”), a Virginia state-chartered bank which commenced operations on April 14, 2005. Primis Bank provides a range of financial services to individuals and small and medium-sized businesses. At December 31, 2022, Primis Bank had thirty-two full-service branches in Virginia and Maryland and also provided 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. In 2022, Primis successfully launched its new digital bank platform that includes an all-new mobile banking application that provides quick and seamless banking experience all from within the app. Also in the fourth quarter of 2021, Primis launched its new V1BE service, a 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 2021, V1BE was piloted in the Richmond market but now covers the majority of our footprint including the greater Washington, D.C. region. With V1BE, Primis is able to support any market and grow customer relationships without the need for a large branch presence. 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. We determine whether we have a controlling financial interest in an entity by first evaluating whether the entity is a voting interest entity or a variable interest entity (“VIE”) under accounting principles generally accepted in the United States. Voting interest entities are entities in which the total equity investment at risk is sufficient to enable the entity to finance itself independently and provides the equity holders with the obligation to absorb losses, the right to receive residual returns and the right to make decisions about the entity’s activities. We consolidate voting interest entities in which we have all, or at least a majority of, the voting interest. As defined in applicable accounting standards, VIEs are entities that lack one or more of the characteristics of a voting interest entity. A controlling financial interest in a VIE is present when an enterprise has both the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and an obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. The enterprise with a controlling financial interest, known as the primary beneficiary, consolidates the VIE. The Company has investments in VIE’s for which we are not the primary beneficiary and, as such, their accounts are not included in our consolidated financial statements. On April 28, 2022, Primis Bank entered into a definitive agreement to acquire 100 % of the issued and outstanding capital stock of SeaTrust Mortgage Company (“SeaTrust”), a North Carolina corporation. On May 31, 2022, Primis Bank completed the acquisition (the “Acquisition”) of 100 % of the outstanding capital stock of SeaTrust from Community First Bank, Inc. (the “Seller”) pursuant to the Stock Purchase Agreement, dated as of April 28, 2022 (the “Purchase Agreement”) by and among the Bank, Seller, and SeaTrust. As a result, SeaTrust became a wholly owned subsidiary of Primis Bank on May 31, 2022. Following the closing of the Acquisition, on June 1, 2022, the Bank changed the name of SeaTrust to Primis Mortgage Company (“Primis Mortgage”). At the time of acquisition, Primis Mortgage originated mortgages primarily in 69 Table of Contents North and South Carolina, Florida and Tennessee from eight offices but has since expanded its ability to originate mortgages to the majority of the U.S. Pursuant to the Purchase Agreement, the Bank paid an aggregate purchase price of $ 7.0 million in cash to Seller at closing and assumed $ 19.3 million of SeaTrust’s indebtedness under certain warehouse lending facilities. Discontinued Operation Primis Bank 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, and STM was considered an unconsolidated affiliate of the Company. On September 23, 2021, Primis Bank 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 the assumption of a promissory note in the amount of $ 8.5 million. The transaction closed on December 31, 2021. Upon closing, STM continued 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, 2022 but no longer has a position on STM’s board of directors and STM no longer represents a reportable operating segment of the Company. Operating Segments The Company, through its Bank subsidiary, provides a broad range of financial services. While the Company’s chief operating decision makers monitor the revenue streams of the various financial products and services, operations are managed and financial performance is evaluated on an organization-wide basis. Management has determined that the Company has two reportable operating segments: Primis Mortgage and Primis Bank, as discussed in Note 18 – Segment Information. 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, fair value of investment securities, credit impairment of investment securities, mortgage banking derivatives, credit enhancement, 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 70 Table of Contents 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 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 other 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 is adjusted 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 is carried at cost, classified as a restricted security, and periodically evaluated for impairment based on ultimate recovery of the par value. Both cash and stock dividends are reported as income. Loans Held for Sale ​ Loans held for sale are originated and held until sold to permanent investors. The Company has elected to carry these loans at fair value on a recurring basis in accordance with the fair value option under FASB ASC 825, Financial Instruments . The fair value is determined by utilizing quoted prices from dealers in such securities. Gains and losses on loan sales are recorded in mortgage banking income and direct loan origination costs are included in noninterest expense in the consolidated statements of income and comprehensive income (loss). ​ Loans Primis purchases mortgage loans from mortgage loans originators, including the Bank’s wholly-owned subsidiary Primis Mortgage Company. 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. 71 Table of Contents 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 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. Commercial loans also include Life Premium Finance loans. These loans are utilized to pay the annual premiums due on the whole or universal life policy. The Life Premium Finance loans are fully secured by the cash value of the policy and personal liquid assets of the borrower or guarantor. 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. 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. Other consumer loans also include Life Premium Finance loans and Panacea consumer loans comprising of 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. The risk of loss on consumer loans is elevated as the collateral securing these loans, if any, may 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 (“ACL”) 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 72 Table of Contents 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. Allowance for Credit Losses 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 3 – 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 73 Table of Contents information regarding our policies and methodology used to estimate the allowance for credit losses on loans is presented in Note 4 – 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 15 – Financial Instruments with Off-Balance-Sheet Risks. ​ Third Party Loan Originations Primis Bank entered into a Loan Origination Agreement with a third party on July 7, 2021 under which the third party will source and service certain loans to be originated by Primis. The Bank will periodically remit payment to third party for the funding of program loans deemed originated and allocated to the Bank. The Bank will retain all interest on each originated loan such that the Bank achieves a margin equal to the lower bound of the Federal Funds Rate plus 5.00 % per annum. This rate is periodically adjusted on the last day of each calendar quarter. All interest received above this amount will be paid to the third party to cover the finder’s fee, servicing cost and credit enhancement. The third party will establish and maintain at the Bank a waterfall reserve account (“the Reserve Account”) to serve as collateral for balances owed to Primis under the program. Interest Income: Contractual interest due from the borrower is recorded under the Bank’s loan interest income. Fees: The arrangement with third party is designed such that Primis retains all contractual interest received from the originated loans and in turn pays fees to the third party that are, in substance, designed to cover the following costs: ● Loan originations: No deferral is necessary as the fee is not paid at the inception of the loan, but is paid over time. Consistent with other loan origination costs, the expense is recognized through loan interest income. ● Credit enhancement: Credit enhancement is purchased on a standalone basis and the cost of the instrument is recognized over the life of the loan as noninterest expense. ● Servicing costs: Costs paid to the third party to service loans that are held for investment are charged as noninterest expenses as they are incurred. Allowance for Credit Losses: The credit enhancement is entered into separate and apart from the agreement with the borrower to extend credit. The Bank estimates an allowance for credit losses on these loans without consideration of the Reserve Account. The timing and amount of charge-offs do not contemplate the Reserve Account. Charge-offs are recognized through the allowance for credit losses in accordance with regulatory guidance and the Bank’s policy. Recoveries received from the borrower are recognized as recoveries, consistent with the Bank’s policy. With respect to recoveries received from the third party under the credit enhancement, the Bank recognizes a recovery asset through noninterest income and at the same time the Bank recognizes expected credit losses, using assumptions consistent with the loss estimate and giving additional consideration to the third party’s ability and willingness to absorb credit losses and to continue to fund the Reserve Account. As recoveries are received from the third party, the recovery receivable is reduced. 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 74 Table of Contents 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. If the transfer does not satisfy the aforementioned control criteria, the transaction is recorded as a secured borrowing with the transferred loans remaining on the Company’s consolidated balance sheet and proceeds recognized as a liability. 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 . Assets Held for Sale ​ The Company classifies its assets as held for sale in accordance with FASB ASC 360, Property, Plant, and Equipment . When assets are identified as held for sale, the Company discontinues depreciating (amortizing) the assets and estimates the fair value, net of selling costs, of such assets. Assets held for sale is recorded at the lower of the net carrying amount of the assets or the estimated net fair value. If the estimated net fair value of the assets held for sale is less than the net carrying amount of the assets, an impairment charge is recorded in the condensed consolidated statements of income. ​ The Company assesses the net fair value of assets held for sale each reporting period the assets remain classified as held for sale. Subsequent changes, if any, in the net fair value of the assets held for sale that require an adjustment to the carrying amount are recorded in the condensed consolidated statements of income, unless the adjustment causes the carrying amount of the assets to exceed the net carrying amount upon initial classification as held for sale. ​ If circumstances arise that the Company previously considered unlikely and, as a result, the Company decides not to sell assets previously classified as held for sale, they are reclassified to another classification. Assets that are reclassified are measured at the lower of (a) their carrying amount before they were classified as held for sale, adjusted for any depreciation (amortization) expense that would have been recognized had the assets remained in their previous classification, or (b) their fair value at the date of the subsequent decision not to sell. ​ 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 The Company follows ASC 350, Goodwill and Other Intangible Assets , which prescribes the accounting for goodwill and intangible assets subsequent to initial recognition. Goodwill resulting from business combinations is generally 75 Table of Contents 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 consolidated balance sheet. The Company performs the analysis annually on September 30 of each year at the reporting unit level whereby the Company compares the estimated fair value of the reporting unit to its carrying value. In the second quarter of 2022, the Company added a second reporting unit with the acquisition of Primis Mortgage. If the estimated fair value of a reporting unit exceeds its carrying value, goodwill is not considered impaired. The Company engaged a third-party valuation specialist to assist management in performing its annual goodwill impairment analysis on our Bank reporting unit. The Company also performed a qualitative analysis on our Primis Mortgage reporting unit as of December 31, 2022. To determine the fair value of the Bank reporting unit, the Company utilizes a combination of three or four valuation approaches: the comparable transactions approach, the control premium approach, the public market peers control premium approach, and the discounted cash flow approach. The comparable transactions approach is based on pricing ratios recently paid in the sale or merger of comparable banking franchises; the control premium approach is based on the Company’s trading price, adjusted for holding company assets and an industry based control premium; the public market peers control premium approach is based on market pricing ratios of public banking companies adjusted for an industry based control premium; and the discounted cash flow approach considers the earnings and cash flows that a hypothetical acquirer could realize in an acquisition of the Bank reporting unit. Assumptions that are used as part of these calculations include: the selection of comparable publicly-traded companies and selection of market comparable acquisition transactions. In addition, other assumptions include the discount rate, economic conditions, which impact the assumptions related to interest and growth rates, the control premium associated with the reporting unit and a relative weight given to the valuations derived by the valuation methods. Other intangible assets consist of core deposit intangible assets arising from whole-bank and branch acquisitions and other intangibles from Primis Mortgage acquisition 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 on a straight-line basis over the requisite service period for the entire award. Compensation cost for restricted stock unit awards that contain performance conditions 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. 76 Table of Contents 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. Amortization is 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, 2022 and 2021, the Company had gross cloud computing arrangements of $ 11.5 million and $ 5.8 million, respectively, and accumulated amortization of $ 1.1 million and $ 0.1 million, respectively. 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. Mortgage Banking Derivatives and Financial Instruments Derivative assets and liabilities are recorded at fair value. Mortgage loan commitments known as interest rate lock commitments that relate to the origination of a mortgage that will be held for sale upon funding are considered derivative instruments under the derivatives accounting guidance FASB ASC 815, Derivatives and Hedging . Loan commitments that are classified as derivatives are recognized at fair value on the consolidated balance sheets in other assets and other liabilities with changes in their fair values recorded in mortgage banking income in the consolidated statements of income. To-be-announced mortgage-backed securities trades (“TBA”) is a contract to buy or sell mortgage-backed securities on a specific date while the underlying mortgages are not announced until just prior to settlement. These TBA trades provide an economic hedge against the effect of changes in interest rates resulting from interest rate lock commitments. TBAs are accounted for under the derivatives accounting guidance FASB ASC 815, Derivatives and Hedging when either of the following conditions exist: (i) when settlement of the TBA trade is not expected to occur at the next regular settlement date (which is typically the next month) or (ii) a mechanism exists to settle the contract on a net basis. As a result, these instruments are recorded at fair value on the consolidated balance sheets as other assets and other liabilities with changes in their fair values recorded in mortgage banking income in the consolidated statements of income. The fair value of the TBA trades is based on the gain or loss that would occur if the Company were to pair-off the trade at the measurement date. Forward loan sale commitments are commitments to sell individual mortgage loans using both best efforts and mandatory delivery at a fixed price to an investor at a future date. Forward loan sale commitments that are mandatory delivery are accounted for as derivatives and carried at fair value, determined as the amount that would be necessary to settle the derivative financial instrument at the balance sheet date. Forward loan sale commitments that are best efforts are not derivatives but can be and have been accounted for at fair value, determined in a similar manner to those that are mandatory delivery. Forward loan sale commitments are recorded on the consolidated balance sheets as other assets and other liabilities with changes in their fair values recorded in mortgage banking income in the consolidated statements of income. 77 Table of Contents 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. 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, 2022 and 2021. Restrictions on Cash No regulatory reserve or clearing requirements with the FRB were needed at December 31, 2022 and 2021. 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, restricted stock awards, 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. 78 Table of Contents Comprehensive Income (Loss) Comprehensive income (loss) consists of net income and other comprehensive income (loss). Other comprehensive income (loss) 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. Recent Accounting Pronouncements In March 2022, Financial Accounting Standards Board (“FASB”) issued Accounting Standards Codification (“ASC”) 2022-02, Troubled Debt Restructurings and Vintage Disclosures . This ASU eliminates the accounting guidance on troubled debt restructurings (TDRs) for creditors in ASC 310-40 and amends the guidance on “vintage disclosures” to require disclosure of current-period gross write-offs by year of origination. The ASU also updates the requirements related to accounting for credit losses under FASB ASC 326 and adds enhanced disclosures for creditors with respect to loan refinancing and restructurings for borrowers experiencing financial difficulty. ASU 2022-02 was effective for annual periods beginning after December 15, 2022, including interim periods within those annual periods. Early adoption was permitted. The Company adopted the guidance in the first quarter of 2023 and does not believe that this standard will have a material impact on the Company’s consolidated financial statements and disclosures. ​ ​ ​ ​ 79 Table of Contents 2. BUSINESS COMBINATION On April 28, 2022, Primis Bank entered into a definitive agreement to acquire 100 % of the issued and outstanding capital stock of SeaTrust. On May 31, 2022, Primis Bank completed the acquisition of 100 % of the outstanding capital stock of SeaTrust from the Seller, pursuant to the Purchase Agreement. As a result, SeaTrust became a wholly owned subsidiary of Primis Bank on May 31, 2022. Pursuant to the Purchase Agreement, the Bank paid an aggregate purchase price of $ 7.0 million in cash to Seller at closing and assumed $ 19.3 million of SeaTrust’s indebtedness under certain warehouse lending facilities. Following the closing of the Acquisition, on June 1, 2022, the Bank changed the name of SeaTrust to Primis Mortgage Company. In connection with the SeaTrust acquisition, the following table details the consideration paid, the initial estimated fair value of identifiable assets acquired and liabilities assumed as of the date of the acquisition, the subsequent adjustments to estimates, the final valuation of the fair value of identifiable assets acquired and liabilities assumed as of the date of the acquisition, and the resulting goodwill recorded (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Original Adjustments Final (dollars in thousands) ​ Estimates ​ to Estimates ​ Valuation Consideration paid: ​ ​ ​ Cash $ 7,000 $ — ​ $ 7,000 Value of consideration $ 7,000 $ — ​ $ 7,000 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Assets acquired: ​ ​ ​ Cash and due from banks ​ $ 2,446 ​ $ — ​ $ 2,446 Mortgage loans held for sale ​ ​ 20,452 ​ — ​ 20,452 Premises and equipment, net ​ 124 ​ — ​ 124 Leases right-of-use asset ​ ​ 28 ​ ​ — ​ ​ 28 Derivative assets ​ ​ 1,224 ​ ​ — ​ ​ 1,224 Other intangibles ​ ​ — ​ ​ 135 ​ ​ 135 Deferred tax asset, net ​ ​ 26 ​ ​ — ​ ​ 26 Other assets ​ 93 ​ — ​ 93 Total assets ​ 24,393 ​ 135 ​ 24,528 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Liabilities assumed: ​ ​ ​ Short term borrowings ​ 19,254 ​ — ​ 19,254 Leases liability ​ ​ 27 ​ ​ — ​ ​ 27 Other liabilities ​ 902 ​ — ​ 902 Total liabilities ​ 20,183 ​ — ​ 20,183 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net identifiable assets acquired ​ $ 4,210 ​ $ 135 ​ $ 4,345 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Goodwill resulting from acquisition ​ ​ ​ $ 2,655 ​ The table below illustrates the unaudited pro forma revenue and net income of the combined entities had the acquisition taken place on January 1, 2020. The unaudited combined pro forma revenue and net income combines the historical results of SeaTrust with the Company's consolidated statements of operations for the periods listed below and, while no material adjustments were made for the estimated effect of certain fair value adjustments and other acquisition-related activity, they are not indicative of what would have occurred had the acquisition actually taken place on January 1, 2020. The pro forma financial information does not include the impact of possible business model changes, nor does it consider any potential impacts of current market conditions or revenues, expense efficiencies or other factors. ​ 80 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, (dollars in thousands) ​ 2022 ​ 2021 ​ 2020 Total revenues ​ $ 152,370 ​ $ 134,684 ​ $ 137,204 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 17,787 ​ $ 31,829 ​ $ 23,636 ​ Included in the Company’s consolidated statements of income for the twelve months ended December 31, 2022 is $ 5.1 million of mortgage banking income related to Primis Mortgage since its acquisition on May 31, 2022. ​ The Company incurred merger expenses of $ 0.4 million for the year ended December 31, 2022 related to the acquisition. ​ ​ 3. 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, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential government-sponsored mortgage-backed securities ​ $ 119,371 ​ $ 1 ​ $ ( 16,491 ) ​ $ 102,881 Obligations of states and political subdivisions ​ 34,103 ​ 2 ​ ( 4,927 ) ​ 29,178 Corporate securities ​ 16,000 ​ — ​ ( 1,172 ) ​ 14,828 Collateralized loan obligations ​ 5,022 ​ — ​ ( 146 ) ​ 4,876 Residential government-sponsored collateralized mortgage obligations ​ 28,643 ​ — ​ ( 2,048 ) ​ 26,595 Government-sponsored agency securities ​ 17,719 ​ — ​ ( 3,103 ) ​ 14,616 Agency commercial mortgage-backed securities ​ 42,180 ​ ​ — ​ ​ ( 4,763 ) ​ 37,417 SBA pool securities ​ 5,998 ​ 13 ​ ( 87 ) ​ 5,924 Total ​ $ 269,036 ​ $ 16 ​ $ ( 32,737 ) ​ $ 236,315 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 ​ 81 Table of Contents ​ 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, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential government-sponsored mortgage-backed securities ​ $ 10,522 ​ $ — ​ $ ( 1,007 ) ​ $ — ​ $ 9,515 Obligations of states and political subdivisions ​ 2,721 ​ 3 ​ ( 46 ) ​ — ​ 2,678 Residential government-sponsored collateralized mortgage obligations ​ 277 ​ — ​ ( 21 ) ​ — ​ 256 Total ​ $ 13,520 ​ $ 3 ​ $ ( 1,074 ) ​ $ — ​ $ 12,449 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 ​ ​ During 2022, 2021 and 2020, $ 37.4 million, $ 160.5 million and $ 38.9 million, respectively, of available-for-sale investment securities were purchased. No held-to-maturity investments were purchased in 2022 and 2021. During 2020, $ 15.2 million of held-to-maturity investments were purchased. No investment securities were sold during 2022 and 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 amortized cost and fair value of available-for-sale and held-to-maturity investment securities as of December 31, 2022, 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 ​ $ 1,500 ​ $ 1,484 ​ $ — ​ ​ — Due in one to five years ​ ​ 10,018 ​ ​ 9,100 ​ ​ 867 ​ ​ 865 Due in five to ten years ​ 29,200 ​ 25,909 ​ 1,519 ​ ​ 1,477 Due after ten years ​ 32,126 ​ 27,005 ​ 335 ​ ​ 336 Residential government-sponsored mortgage-backed securities ​ 119,371 ​ 102,881 ​ 10,522 ​ 9,515 Residential government-sponsored collateralized mortgage obligations ​ 28,643 ​ 26,595 ​ 277 ​ 256 Agency commercial mortgage-backed securities ​ 42,180 ​ 37,417 ​ — ​ — SBA pool securities ​ 5,998 ​ 5,924 ​ — ​ — Total ​ $ 269,036 ​ $ 236,315 ​ $ 13,520 ​ $ 12,449 ​ Investment securities with a carrying amount of approximately $ 99.4 million and $ 180.7 million at December 31, 2022 and 2021, 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 82 Table of Contents 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, 2022, Primis did not have any allowance for credit losses on held-to-maturity securities. The unrealized losses related to investment securities available-for-sale identified as of December 31, 2022 or 2021, relate to changes in interest rates relative to when the investment securities were purchased, and do not indicate credit-related impairment. Primis performs quantitative analysis and if needed, a qualitative analysis in this determination. As a result, none of the securities were deemed to require an allowance for credit losses. Primis has the ability and intent to retain these securities for a period of time sufficient to recover all unrealized losses. ​ ​ 83 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, 2022 and 2021 by duration of time in a loss position (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Less than 12 months ​ 12 Months or More ​ Total December 31, 2022 Fair Unrealized Fair Unrealized Fair Unrealized Available-for-Sale ​ value ​ Losses ​ value ​ Losses ​ value ​ Losses Residential government-sponsored mortgage-backed securities ​ $ 23,484 ​ $ ( 2,268 ) ​ $ 79,283 ​ $ ( 14,223 ) ​ $ 102,767 ​ $ ( 16,491 ) Obligations of states and political subdivisions ​ ​ 10,026 ​ ​ ( 388 ) ​ ​ 17,609 ​ ​ ( 4,539 ) ​ ​ 27,635 ​ ​ ( 4,927 ) Corporate securities ​ ​ 14,828 ​ ​ ( 1,172 ) ​ ​ — ​ ​ — ​ ​ 14,828 ​ ​ ( 1,172 ) Collateralized loan obligations ​ ​ — ​ ​ — ​ ​ 4,876 ​ ​ ( 146 ) ​ ​ 4,876 ​ ​ ( 146 ) Residential government-sponsored collateralized mortgage obligations ​ ​ 22,343 ​ ​ ( 1,375 ) ​ ​ 4,252 ​ ​ ( 673 ) ​ ​ 26,595 ​ ​ ( 2,048 ) Government-sponsored agency securities ​ 1,484 ​ ( 16 ) ​ 13,132 ​ ( 3,087 ) ​ 14,616 ​ ( 3,103 ) Agency commercial mortgage-backed securities ​ 13,031 ​ ( 371 ) ​ 24,386 ​ ( 4,392 ) ​ 37,417 ​ ( 4,763 ) SBA pool securities ​ 529 ​ ( 38 ) ​ 3,243 ​ ( 49 ) ​ 3,772 ​ ( 87 ) Total ​ $ 85,725 ​ $ ( 5,628 ) ​ $ 146,781 ​ $ ( 27,109 ) ​ $ 232,506 ​ $ ( 32,737 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Less than 12 months ​ 12 Months or More ​ Total December 31, 2022 Fair Unrecognized Fair Unrecognized Fair Unrecognized Held-to-Maturity ​ value ​ Losses ​ value ​ Losses ​ value ​ Losses Residential government-sponsored mortgage-backed securities ​ $ 9,457 ​ $ ( 1,002 ) ​ $ 58 ​ $ ( 5 ) ​ $ 9,515 ​ $ ( 1,007 ) Obligations of states and political subdivisions ​ 1,255 ​ ( 46 ) ​ — ​ — ​ 1,255 ​ ( 46 ) Residential government-sponsored collateralized mortgage obligations ​ 75 ​ ( 4 ) ​ 181 ​ ( 17 ) ​ 256 ​ ( 21 ) Total ​ $ 10,787 ​ $ ( 1,052 ) ​ $ 239 ​ $ ( 22 ) ​ $ 11,026 ​ $ ( 1,074 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 ) ​ ​ 84 Table of Contents ​ Changes in accumulated other comprehensive income (loss) by component for the years ended December 31, 2022, 2021 and 2020 are shown in the tables below. All amounts are net of tax (in thousands). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized Holding ​ ​ ​ ​ ​ ​ ​ ​ Gains (Losses) on ​ Held-to-Maturity ​ ​ ​ For the year ended December 31, 2022 Available-for-Sale Securities Total Beginning balance ​ $ 1,112 ​ $ — ​ $ 1,112 Current period other comprehensive income (loss) ​ ( 26,962 ) ​ — ​ ( 26,962 ) Ending balance ​ $ ( 25,850 ) ​ $ — ​ $ ( 25,850 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 (loss) ​ 2,693 ​ 9 ​ 2,702 Ending balance ​ $ 3,636 ​ $ ( 151 ) ​ $ 3,485 ​ ​ ​ ​ 85 Table of Contents 4. LOANS AND ALLOWANCE FOR CREDIT LOSSES The following table summarizes the composition of our loan portfolio as of December 31, 2022 and 2021 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 December 31, 2021 Loans held for sale ​ $ 27,626 ​ $ — Loans held for investment ​ ​ ​ ​ ​ ​ Loans secured by real estate: ​ ​ ​ ​ Commercial real estate - owner occupied ​ $ 459,866 ​ $ 387,703 Commercial real estate - non-owner occupied ​ 579,733 ​ 588,000 Secured by farmland ​ 7,116 ​ 8,612 Construction and land development ​ 148,690 ​ 121,444 Residential 1-4 family ​ 609,694 ​ 547,560 Multi-family residential ​ 140,321 ​ 164,071 Home equity lines of credit ​ 65,152 ​ 73,846 Total real estate loans ​ 2,010,572 ​ 1,891,236 ​ ​ ​ ​ ​ ​ ​ Commercial loans ​ 521,794 ​ 301,980 Paycheck Protection Program loans ​ ​ 4,564 ​ ​ 77,319 Consumer loans ​ 405,278 ​ 60,996 Total Non-PCD loans ​ 2,942,208 ​ 2,331,531 PCD loans ​ ​ 6,628 ​ ​ 8,455 Total loans held for investment ​ $ 2,948,836 ​ $ 2,339,986 ​ ​ ​ ​ ​ ​ ​ ​ 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 expected 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 $ 13.8 million and $ 10.8 million at December 31, 2022 and 2021, respectively, and is included in other assets in the consolidated balance sheets. Nonaccrual 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 nonaccrual 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 nonaccrual 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 nonaccrual 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 nonaccrual 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. ​ 86 Table of Contents The following tables present the aging of the recorded investment in past due loans by class of loans held for investment as of December 31, 2022 and 2021 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 30 - 59 60 - 89 90 ​ ​ ​ ​ ​ ​ ​ ​ Days ​ Days ​ Days ​ Total ​ Loans Not ​ Total December 31, 2022 ​ Past Due ​ Past Due ​ or More ​ Past Due ​ Past Due ​ Loans Commercial real estate - owner occupied ​ $ 55 ​ $ — ​ $ — ​ $ 55 ​ $ 459,811 ​ $ 459,866 Commercial real estate - non-owner occupied ​ 290 ​ 169 ​ ​ 19,641 ​ 20,100 ​ 559,633 ​ 579,733 Secured by farmland ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 7,116 ​ ​ 7,116 Construction and land development ​ 46 ​ ​ — ​ ​ — ​ ​ 46 ​ ​ 148,644 ​ 148,690 Residential 1-4 family ​ 2,180 ​ ​ 410 ​ ​ 304 ​ ​ 2,894 ​ ​ 606,800 ​ 609,694 Multi- family residential ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 140,321 ​ ​ 140,321 Home equity lines of credit ​ 431 ​ ​ 96 ​ 249 ​ ​ 776 ​ ​ 64,376 ​ 65,152 Commercial loans ​ ​ 39 ​ ​ — ​ ​ 2,956 ​ ​ 2,995 ​ ​ 518,799 ​ ​ 521,794 Paycheck Protection Program loans ​ ​ 16 ​ ​ 15 ​ ​ 3,360 ​ ​ 3,391 ​ ​ 1,173 ​ ​ 4,564 Consumer loans ​ 2,079 ​ ​ 1,421 ​ ​ 200 ​ 3,700 ​ 401,578 ​ 405,278 Total Non-PCD loans ​ ​ 5,136 ​ ​ 2,111 ​ ​ 26,710 ​ ​ 33,957 ​ ​ 2,908,251 ​ ​ 2,942,208 PCD loans ​ ​ — ​ ​ — ​ ​ 1,328 ​ ​ 1,328 ​ ​ 5,300 ​ ​ 6,628 Total ​ $ 5,136 ​ $ 2,111 ​ $ 28,038 ​ $ 35,285 ​ $ 2,913,551 ​ $ 2,948,836 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 ​ ​ ​ 87 Table of Contents ​ The amortized cost, by class, of loans and leases on nonaccrual status at December 31, 2022 and 2021, were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 90 ​ Less Than Total Nonaccrual With ​ ​ Days ​ ​ 90 Days ​ Nonaccrual ​ No Credit December 31, 2022 ​ or More ​ ​ Past Due ​ Loans (1) ​ Loss Allowance (2) Commercial real estate - owner occupied ​ $ — ​ $ 509 ​ $ 509 ​ $ 509 Commercial real estate - non-owner occupied ​ 19,641 ​ — ​ 19,641 ​ 19,641 Secured by farmland ​ ​ — ​ ​ 713 ​ ​ 713 ​ ​ 713 Construction and land development ​ — ​ 29 ​ 29 ​ 29 Residential 1-4 family ​ 304 ​ 8,995 ​ 9,299 ​ 9,299 Home equity lines of credit ​ ​ 249 ​ ​ 301 ​ ​ 550 ​ ​ 550 Commercial loans ​ 2,956 ​ 121 ​ 3,077 ​ 121 Paycheck Protection Program loans ​ ​ — ​ ​ 4 ​ ​ 4 ​ ​ 4 Consumer loans ​ 200 ​ 134 ​ 334 ​ 299 Total Non-PCD loans ​ ​ 23,350 ​ ​ 10,806 ​ ​ 34,156 ​ ​ 31,165 PCD loans ​ ​ 1,328 ​ ​ — ​ ​ 1,328 ​ ​ 1,328 Total ​ $ 24,678 ​ $ 10,806 ​ $ 35,484 ​ $ 32,493 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 90 ​ Less Than Total Nonaccrual With ​ ​ Days ​ ​ 90 Days ​ Nonaccrual ​ No Credit December 31, 2021 ​ or More ​ ​ Past Due ​ Loans (1) ​ Loss Allowance (2) Commercial real estate - owner occupied ​ $ — ​ $ 842 ​ $ 842 ​ $ 842 Secured by farmland ​ ​ — ​ ​ 836 ​ ​ 836 ​ ​ 836 Construction and land development ​ 4,575 ​ 34 ​ 4,609 ​ 4,609 Residential 1-4 family ​ 137 ​ 411 ​ 548 ​ 548 Multi- family residential ​ ​ — ​ ​ 4,301 ​ ​ 4,301 ​ ​ 4,301 Home equity lines of credit ​ ​ 171 ​ ​ 253 ​ ​ 424 ​ ​ 424 Commercial loans ​ 1,246 ​ 476 ​ 1,722 ​ 745 Consumer loans ​ 2 ​ 16 ​ 18 ​ 10 Total Non-PCD loans ​ ​ 6,131 ​ ​ 7,169 ​ ​ 13,300 ​ ​ 12,315 PCD loans ​ ​ — ​ ​ 1,729 ​ ​ 1,729 ​ ​ — Total ​ $ 6,131 ​ $ 8,898 ​ $ 15,029 ​ $ 12,315 (1) Nonaccrual loans include SBA guaranteed amounts totaling $ 0.6 million and $ 1.1 million at December 31, 2022 and 2021, respectively. (2) Nonaccrual loans with no credit loss allowance include SBA guaranteed amounts totaling $ 0.6 million and $ 1.1 million at December 31, 2022 and 2021, respectively. ​ There were $ 3.4 million and $ 0.3 million of Paycheck Protection Program (“PPP”) loans greater than 90 days past due and still accruing at December 31, 2022 and 2021, respectively. 88 Table of Contents ​ The following table presents nonaccrual loans as of December 31, 2022 by class and year of origination (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Revolving ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Revolving ​ Converted ​ ​ ​ ​ ​ 2022 ​ 2021 ​ 2020 ​ 2019 2018 ​ Prior ​ Loans ​ To Term Total Commercial real estate - owner occupied ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 509 ​ $ — ​ $ — ​ $ 509 Commercial real estate - non-owner occupied ​ — ​ — ​ ​ ​ — ​ 13,066 ​ 6,575 ​ — ​ — ​ 19,641 Secured by farmland ​ ​ — ​ ​ — ​ ​ — ​ ​ 6 ​ ​ — ​ ​ 707 ​ ​ — ​ ​ — ​ ​ 713 Construction and land development ​ — ​ — ​ — ​ — ​ — ​ 29 ​ — ​ — ​ 29 Residential 1-4 family ​ ​ 285 ​ — ​ ​ — ​ ​ 8,099 ​ ​ — ​ ​ 672 ​ ​ — ​ ​ 243 ​ ​ 9,299 Multi- family residential ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Home equity lines of credit ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 53 ​ ​ 476 ​ ​ 21 ​ ​ 550 Commercial loans ​ — ​ — ​ 5 ​ — ​ — ​ 1,482 ​ 1,590 ​ — ​ 3,077 Paycheck Protection Program loans ​ — ​ 4 ​ — ​ — ​ — ​ — ​ — ​ — ​ 4 Consumer loans ​ ​ 46 ​ 288 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 334 Total non-PCD nonaccruals ​ ​ 331 ​ ​ 292 ​ ​ 5 ​ ​ 8,105 ​ ​ 13,066 ​ ​ 10,027 ​ ​ 2,066 ​ ​ 264 ​ ​ 34,156 PCD loans ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 1,328 ​ ​ — ​ ​ — ​ ​ 1,328 Total nonaccrual loans ​ $ 331 ​ $ 292 ​ $ 5 ​ $ 8,105 ​ $ 13,066 ​ $ 11,355 ​ $ 2,066 ​ $ 264 ​ $ 35,484 ​ Interest received on nonaccrual loans was $ 1.2 million and $ 0.5 million for the years ended December 31, 2022 and 2021, respectively. 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, 2022, there were eighteen TDR loans outstanding in the amount of $ 3.6 million primarily due to the economic impact of COVID-19 on certain of the Bank’s borrowers. There have been no defaults of TDRs modified during the past twelve months. 89 Table of Contents 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, 2022 or 2021. 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. ​ ​ 90 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, 2022 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Revolving ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Revolving ​ Converted ​ ​ ​ ​ ​ 2022 ​ 2021 ​ 2020 ​ 2019 2018 ​ Prior ​ Loans ​ To Term Total Commercial real estate - owner occupied ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ $ 116,545 ​ $ 58,202 ​ $ 19,178 ​ $ 21,985 ​ $ 27,397 ​ $ 202,484 ​ $ 3,389 ​ $ 6,740 ​ $ 455,920 Special Mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 988 ​ ​ — ​ ​ — ​ ​ 988 Substandard ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 2,958 ​ ​ — ​ ​ — ​ ​ 2,958 Doubtful ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ $ 116,545 ​ $ 58,202 ​ $ 19,178 ​ $ 21,985 ​ $ 27,397 ​ $ 206,430 ​ $ 3,389 ​ $ 6,740 ​ $ 459,866 Weighted average risk grade ​ ​ 3.25 ​ ​ 3.45 ​ ​ 3.38 ​ ​ 3.27 ​ ​ 3.43 ​ ​ 3.50 ​ ​ 3.52 ​ ​ 3.96 ​ ​ 3.42 Commercial real estate - nonowner occupied ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ $ 28,128 ​ $ 126,291 ​ $ 44,696 ​ $ 41,631 ​ $ 55,702 ​ $ 228,735 ​ $ 4,173 ​ $ 3,065 ​ $ 532,421 Special Mention ​ ​ — ​ ​ — ​ ​ 1,566 ​ ​ — ​ ​ 926 ​ ​ 24,580 ​ ​ — ​ ​ 601 ​ ​ 27,673 Substandard ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 13,066 ​ ​ 6,573 ​ ​ — ​ ​ — ​ ​ 19,639 Doubtful ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ $ 28,128 ​ $ 126,291 ​ $ 46,262 ​ $ 41,631 ​ $ 69,694 ​ $ 259,888 ​ $ 4,173 ​ $ 3,666 ​ $ 579,733 Weighted average risk grade ​ ​ 3.36 ​ ​ 3.16 ​ ​ 3.82 ​ ​ 3.95 ​ ​ 4.01 ​ ​ 3.82 ​ ​ 2.87 ​ ​ 3.33 ​ ​ 3.68 Secured by farmland ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ $ 141 ​ $ 16 ​ $ 110 ​ $ — ​ $ — ​ $ 3,425 ​ $ 1,697 ​ $ 85 ​ $ 5,474 Special Mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 649 ​ ​ — ​ ​ 112 ​ ​ 761 Substandard ​ ​ — ​ ​ — ​ ​ — ​ ​ 6 ​ ​ — ​ ​ 875 ​ ​ — ​ ​ — ​ ​ 881 Doubtful ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ $ 141 ​ $ 16 ​ $ 110 ​ $ 6 ​ $ — ​ $ 4,949 ​ $ 1,697 ​ $ 197 ​ $ 7,116 Weighted average risk grade ​ ​ 4.00 ​ ​ 4.00 ​ ​ 4.00 ​ ​ 6.00 ​ ​ N/A ​ ​ 4.20 ​ ​ 3.98 ​ ​ 3.70 ​ ​ 4.13 Construction and land development ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ $ 44,253 ​ $ 73,226 ​ $ 847 ​ $ 3,006 ​ $ 6,937 ​ $ 19,553 ​ $ 822 ​ $ 17 ​ $ 148,661 Special Mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Substandard ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 29 ​ ​ — ​ ​ — ​ ​ 29 Doubtful ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ $ 44,253 ​ $ 73,226 ​ $ 847 ​ $ 3,006 ​ $ 6,937 ​ $ 19,582 ​ $ 822 ​ $ 17 ​ $ 148,690 Weighted average risk grade ​ ​ 3.21 ​ ​ 3.06 ​ ​ 3.60 ​ ​ 3.42 ​ ​ 3.17 ​ ​ 3.69 ​ ​ 3.36 ​ ​ 4.00 ​ ​ 3.20 Residential 1-4 family ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ $ 152,178 ​ $ 157,233 ​ $ 43,812 ​ $ 61,268 ​ $ 40,707 ​ $ 138,782 ​ $ 1,837 ​ $ 3,437 ​ $ 599,254 Special Mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 30 ​ ​ — ​ ​ — ​ ​ 30 Substandard ​ ​ 285 ​ ​ — ​ ​ — ​ ​ 8,099 ​ ​ — ​ ​ 1,310 ​ ​ — ​ ​ 716 ​ ​ 10,410 Doubtful ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ $ 152,463 ​ $ 157,233 ​ $ 43,812 ​ $ 69,367 ​ $ 40,707 ​ $ 140,122 ​ $ 1,837 ​ $ 4,153 ​ $ 609,694 Weighted average risk grade ​ ​ 3.09 ​ ​ 3.04 ​ ​ 3.07 ​ ​ 3.41 ​ ​ 3.13 ​ ​ 3.23 ​ ​ 3.92 ​ ​ 3.54 ​ ​ 3.15 Multi- family residential ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ $ 9,953 ​ $ 21,927 ​ $ 18,338 ​ $ 7,064 ​ $ 1,804 ​ $ 75,370 ​ $ 4,192 ​ $ 676 ​ $ 139,324 Special Mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Substandard ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 702 ​ ​ — ​ ​ 295 ​ ​ 997 Doubtful ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ $ 9,953 ​ $ 21,927 ​ $ 18,338 ​ $ 7,064 ​ $ 1,804 ​ $ 76,072 ​ $ 4,192 ​ $ 971 ​ $ 140,321 Weighted average risk grade ​ ​ 3.58 ​ ​ 3.00 ​ ​ 3.90 ​ ​ 3.00 ​ ​ 3.21 ​ ​ 3.31 ​ ​ 4.00 ​ ​ 4.61 ​ ​ 3.37 Home equity lines of credit ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ $ 463 ​ $ 431 ​ $ 52 ​ $ 63 ​ $ 230 ​ $ 4,093 ​ $ 58,312 ​ $ 957 ​ $ 64,601 Special Mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Substandard ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 54 ​ ​ 476 ​ ​ 21 ​ ​ 551 Doubtful ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ $ 463 ​ $ 431 ​ $ 52 ​ $ 63 ​ $ 230 ​ $ 4,147 ​ $ 58,788 ​ $ 978 ​ $ 65,152 Weighted average risk grade ​ ​ 3.00 ​ ​ 3.00 ​ ​ 3.00 ​ ​ 3.00 ​ ​ 3.00 ​ ​ 3.94 ​ ​ 3.05 ​ ​ 3.89 ​ ​ 3.12 Commercial loans ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ $ 295,459 ​ $ 59,642 ​ $ 7,332 ​ $ 6,658 ​ $ 9,228 ​ $ 20,883 ​ $ 100,407 ​ $ 17,381 ​ $ 516,990 Special Mention ​ ​ — ​ ​ 396 ​ ​ 64 ​ ​ 74 ​ ​ — ​ ​ — ​ ​ 519 ​ ​ 388 ​ ​ 1,441 Substandard ​ ​ — ​ ​ — ​ ​ 5 ​ ​ 90 ​ ​ — ​ ​ 1,678 ​ ​ 1,590 ​ ​ — ​ ​ 3,363 Doubtful ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ $ 295,459 ​ $ 60,038 ​ $ 7,401 ​ $ 6,822 ​ $ 9,228 ​ $ 22,561 ​ $ 102,516 ​ $ 17,769 ​ $ 521,794 Weighted average risk grade ​ ​ 3.14 ​ ​ 3.41 ​ ​ 3.38 ​ ​ 3.90 ​ ​ 3.42 ​ ​ 3.70 ​ ​ 3.47 ​ ​ 3.33 ​ ​ 3.29 Paycheck Protection Program loans ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ $ — ​ $ 2,119 ​ $ 2,435 ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 4,554 Special Mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Substandard ​ ​ — ​ ​ 10 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 10 Doubtful ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ $ — ​ $ 2,129 ​ $ 2,435 ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 4,564 Weighted average risk grade ​ ​ N/A ​ ​ 2.02 ​ ​ 2.00 ​ ​ N/A ​ ​ N/A ​ ​ N/A ​ ​ N/A ​ ​ N/A ​ ​ 2.01 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 91 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Revolving ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Revolving ​ Converted ​ ​ ​ ​ ​ 2022 ​ 2021 ​ 2020 ​ 2019 2018 ​ Prior ​ Loans ​ To Term Total Consumer loans ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ $ 365,842 ​ $ 29,184 ​ $ 1,493 ​ $ 340 ​ $ 534 ​ $ 4,319 ​ $ 2,918 ​ $ — ​ $ 404,630 Special Mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 65 ​ ​ — ​ ​ — ​ ​ 65 Substandard ​ ​ 70 ​ ​ 513 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 583 Doubtful ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ $ 365,912 ​ $ 29,697 ​ $ 1,493 ​ $ 340 ​ $ 534 ​ $ 4,384 ​ $ 2,918 ​ $ — ​ $ 405,278 Weighted average risk grade ​ ​ 3.24 ​ ​ 3.74 ​ ​ 3.99 ​ ​ 3.98 ​ ​ 4.00 ​ ​ 4.02 ​ ​ 3.81 ​ ​ N/A ​ ​ 3.30 PCD ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 3,692 ​ $ — ​ $ — ​ $ 3,692 Special Mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 1,320 ​ ​ — ​ ​ — ​ ​ 1,320 Substandard ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 1,616 ​ ​ — ​ ​ — ​ ​ 1,616 Doubtful ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 6,628 ​ $ — ​ $ — ​ $ 6,628 Weighted average risk grade ​ ​ N/A ​ ​ N/A ​ ​ N/A ​ ​ N/A ​ ​ N/A ​ ​ 4.54 ​ ​ N/A ​ ​ N/A ​ ​ 4.54 Total ​ $ 1,013,317 ​ $ 529,190 ​ $ 139,928 ​ $ 150,284 ​ $ 156,531 ​ $ 744,763 ​ $ 180,332 ​ $ 34,491 ​ $ 2,948,836 Weighted average risk grade ​ ​ 3.20 ​ ​ 3.19 ​ ​ 3.48 ​ ​ 3.54 ​ ​ 3.60 ​ ​ 3.57 ​ ​ 3.35 ​ ​ 3.53 ​ ​ 3.36 ​ ​ 92 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 ​ ​ 3.92 ​ ​ 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 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 93 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 2022 and 2021were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, 2022 ​ ​ For the year ended December 31, 2021 Commercial real estate - owner occupied ​ $ — ​ ​ $ 298 Commercial real estate - non-owner occupied ​ ​ 3,065 ​ ​ ​ 601 Secured by farmland ​ ​ 198 ​ ​ ​ — Residential 1-4 family ​ ​ 1,492 ​ ​ ​ 1,706 Multi- family residential ​ ​ 676 ​ ​ ​ 302 Home equity lines of credit ​ ​ 832 ​ ​ ​ — Commercial loans ​ 13,309 ​ ​ 561 Total loans ​ $ 19,572 ​ ​ $ 3,468 ​ The amount of foreclosed residential real estate property held at December 31, 2022 and 2021 was zero and $ 0.9 million, respectively. The recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure was $ 0.1 million and zero at December 31, 2022 and 2021, 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. In calculating the allowance for credit losses, most loans are segmented into pools based upon similar characteristics and risk profiles. For allowance modeling purposes, our loan pools include but not limited to (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, (ii) probability of attrition, (iii) loss given default and (iv) exposure at default. Internal data is supplemented by, but not replaced by, peer data when required, primarily to determine the probability of default input. The various pool-specific inputs may be adjusted for current macroeconomic assumptions. 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. 94 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. 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. The following tables present details of the allowance for credit losses on loans segregated by loan portfolio segment as of December 31, 2022 and 2021, calculated in accordance with the current expected credit losses (“CECL”) methodology (in thousands). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial Commercial ​ ​ ​ ​ ​ ​ ​ ​ Home ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Real Estate ​ Real Estate ​ ​ ​ Construction ​ ​ ​ ​ ​ ​ ​ Equity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Owner ​ Non-owner ​ Secured by ​ and Land ​ 1-4 Family ​ Multi-Family ​ Lines Of ​ Commercial ​ Consumer ​ PCD ​ ​ December 31, 2022 ​ Occupied ​ Occupied ​ Farmland ​ Development ​ Residential ​ Residential ​ Credit ​ Loans ​ Loans ​ Loans ​ Total Modeled expected credit losses ​ $ 5,297 ​ 6,652 ​ 4 ​ 997 ​ 3,579 ​ 1,814 ​ 310 ​ 5,006 ​ 3,851 ​ — ​ $ 27,510 Q-factor and other qualitative adjustments ​ ​ 261 ​ ​ 495 ​ ​ 21 ​ ​ 376 ​ ​ 512 ​ ​ 387 ​ ​ 19 ​ ​ 654 ​ ​ 2 ​ ​ — ​ ​ 2,727 Specific allocations ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 2,193 ​ ​ 42 ​ ​ 2,072 ​ 4,307 Total ​ $ 5,558 ​ $ 7,147 ​ $ 25 ​ $ 1,373 ​ $ 4,091 ​ $ 2,201 ​ $ 329 ​ $ 7,853 ​ $ 3,895 ​ $ 2,072 ​ $ 34,544 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial Commercial ​ ​ ​ ​ ​ ​ ​ ​ Home ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Real Estate ​ Real Estate ​ ​ ​ Construction ​ ​ ​ ​ ​ ​ ​ 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 ​ 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 ​ As part of management’s ongoing review process and as an annual requirement, during the third quarter of 2022, the Company refreshed and recalibrated the historical loss rates, forecast assumptions, and qualitative factor framework of the CECL model. Management considered the need to qualitatively adjust expected credit losses for information not already captured in the loss estimation process. Qualitative reserve adjustments were driven by key risk indicators, that management tracked on a pool-by-pool basis, which included loan-to-value, borrower debt service coverage exceptions and large concentrations. 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. 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. While the asset range and geography were unchanged from the prior iteration, changes in the Primis portfolio and the portfolios of other institutions resulted in changes to the final peer groups. The most notable changes are in the construction and land development and residential 1-4 family peer groups, each of which displays less risk than the prior year's group. Other segments' groups are mostly consistent. Generally, the updated loss drivers displayed similar default expectations as compared to the prior models. ​ No allowance for credit losses has been recognized for PPP loans as such loans are fully guaranteed by the SBA. 95 Table of Contents Activity in the allowance for credit losses by class of loan for the years ended December 31, 2022 and 2021 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 ​ Year Ended December 31, 2022 Occupied Occupied Farmland Development Residential Residential Credit Loans Loans Loans Total Allowance for credit losses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Beginning balance $ 4,562 $ 9,028 $ 56 $ 998 $ 3,588 $ 3,280 $ 437 $ 4,088 $ 787 $ 2,281 $ 29,105 Provision (recovery) ​ 1,010 ​ 2,644 ​ ( 31 ) ​ 375 ​ 444 ​ ( 1,079 ) ​ ( 97 ) ​ 3,167 ​ 5,047 ​ ( 209 ) ​ 11,271 Charge offs ( 14 ) ( 5,027 ) — — — — ( 14 ) ( 1,040 ) ( 1,974 ) — ( 8,069 ) Recoveries — 502 — — 59 — 3 1,638 35 ​ — 2,237 Ending balance $ 5,558 $ 7,147 $ 25 $ 1,373 $ 4,091 $ 2,201 $ 329 $ 7,853 $ 3,895 $ 2,072 $ 34,544 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 ​ ​ 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. 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, 2022 and 2021 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 December 31, 2021 ​ ​ Loan ​ Specific ​ Loan ​ Specific ​ ​ Balance (1) ​ Allocations ​ Balance (1) ​ Allocations Commercial real estate - owner occupied ​ $ 2,795 ​ $ — ​ $ 3,291 ​ $ — Commercial real estate - non-owner occupied ​ 19,641 ​ — ​ 18,256 ​ — Secured by farmland ​ ​ 525 ​ ​ — ​ ​ 681 ​ ​ — Construction and land development ​ — ​ — ​ 4,575 ​ — Residential 1-4 family ​ ​ 9,636 ​ ​ — ​ ​ 541 ​ ​ — Multi- family residential ​ ​ 996 ​ ​ — ​ ​ 5,378 ​ ​ — Home equity lines of credit ​ ​ 21 ​ ​ — ​ ​ — ​ ​ — Commercial loans ​ 2,979 ​ 2,193 ​ 3,688 ​ 658 Consumer loans ​ ​ 259 ​ ​ 42 ​ ​ 7 ​ ​ 1 Total non-PCD loans ​ ​ 36,852 ​ ​ 2,235 ​ ​ 36,417 ​ ​ 659 PCD loans ​ ​ 6,628 ​ ​ 2,072 ​ ​ 8,455 ​ ​ 2,281 Total loans ​ $ 43,480 ​ $ 4,307 ​ $ 44,872 ​ $ 2,940 (1) Includes SBA guarantees of $ 0.5 million and $ 0.7 million as of December 31, 2022 and 2021, respectively. ​ ​ ​ ​ ​ 96 Table of Contents 5. 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 and Liabilities 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, all of Primis’ available-for-sale debt investment securities are considered to be Level 2 investment securities. Loans Held for Sale The fair value of loans held for sale is determined by obtaining prices at which they could be sold in the principal market at the measurement date and are classified within Level 2 of the fair value hierarchy. The fair value is determined on a recurring basis by utilizing quoted prices from dealers in such securities. ​ Mortgage Banking Derivative and Financial Assets and Liabilities Interest Rate Lock Commitments (“IRLC ”) : The Company determines the value of IRLCs by comparing the market price to the price locked in with the customer, adding fees or points to be collected at closing, subtracting commissions to be paid at closing, and subtracting estimated remaining loan origination costs to the bank based on the processing status of the loan. IRLCs are classified within Level 3 of the valuation hierarchy. Best Efforts Forward Loan Sales Commitments: Best efforts forward loan sales commitments are classified within Level 2 of the valuation hierarchy. Best efforts forward loan sales commitments fix the forward sales price that will be realized upon the sale of mortgage loans into the secondary market. Best efforts forward loan sales commitments are entered into for loans at the time the borrower commitment is made. These best efforts forward loan sales commitments are valued using the committed price to the counterparty against the current market price of the interest rate lock commitment or mortgage loan held for sale. Mandatory Forward Loan Sales Commitments: Fair values for mandatory forward loan sales commitments are based on fair values of the underlying mortgage loans and the probability of such commitments being exercised. Due to the 97 Table of Contents observable inputs used by Primis, best efforts mandatory loan sales commitments are classified within Level 3 of the valuation hierarchy. To-Be-Announced Mortgage-Backed Securities Trades: Fair values for TBA’s are based on the gain or loss that would occur if the Company were to pair-off transaction at the measurement date and are classified within Level 3 of the valuation hierarchy. TBA’s are recorded at fair value on a recurring basis. ​ Assets and liabilities 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, 2022 (Level 1) (Level 2) (Level 3) Assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Available-for-sale securities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential government-sponsored mortgage-backed securities ​ $ 102,881 ​ $ — ​ $ 102,881 ​ $ — Obligations of states and political subdivisions ​ 29,178 ​ — ​ 29,178 ​ — Corporate securities ​ 14,828 ​ — ​ 14,828 ​ — Collateralized loan obligations ​ 4,876 ​ — ​ 4,876 ​ — Residential government-sponsored collateralized mortgage obligations ​ 26,595 ​ — ​ 26,595 ​ — Government-sponsored agency securities ​ 14,616 ​ — ​ 14,616 ​ — Agency commercial mortgage-backed securities ​ 37,417 ​ — ​ 37,417 ​ — SBA pool securities ​ 5,924 ​ — ​ 5,924 ​ — ​ ​ 236,315 ​ — ​ 236,315 ​ — Loans held for sale ​ ​ 27,626 ​ — ​ 27,626 ​ — Mortgage banking financial assets ​ ​ 21 ​ — ​ — ​ 21 Derivative assets ​ ​ 1,410 ​ — ​ 1,386 ​ 24 Total assets ​ $ 265,372 ​ $ — ​ $ 265,327 ​ $ 45 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Mortgage banking financial liabilities ​ $ 4 ​ $ — ​ $ — ​ $ 4 Derivative liabilities ​ ​ 122 ​ ​ — ​ ​ 115 ​ ​ 7 Total liabilities ​ $ 126 ​ $ — ​ $ 115 ​ $ 11 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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) Assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 assets ​ $ 271,332 ​ $ — ​ $ 271,332 ​ $ — ​ ​ 98 Table of Contents 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. ​ Collateral-dependent loans are measured at fair value on a non-recurring basis and are 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 other external factors that may impact the marketability of the collateral. The weighted average discount for estimated selling costs applied was 6 %. Assets Held for Sale Assets held for sale are valued based on third-party appraisals less estimated disposal costs. Primis considers third party appraisals, as well as independent fair value assessments from realtors or persons involved in selling bank premises, furniture and equipment, in determining the fair value of particular properties. Accordingly, the valuation of assets held for sale is subject to significant external and internal judgment. Primis periodically reviews premises, furniture and equipment held for sale to determine if the fair value of the property, less disposal costs, has declined below its recorded book value and records any adjustments accordingly. 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, 2022 and 2021. Fair value is classified as Level 3 in the fair value hierarchy. OREO is further evaluated quarterly for any additional impairment. At December 31, 2022 and 2021, the total amount of OREO was zero and $ 1.2 million, respectively. 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, 2022 (Level 1) (Level 2) (Level 3) Collateral dependent loans ​ $ 47,832 ​ $ — ​ $ — $ 47,832 Assets held for sale ​ ​ 3,115 ​ ​ — ​ ​ — ​ ​ 3,115 ​ 99 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 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, 2022 ​ December 31, 2021 ​ Fair Value Carrying Fair Carrying Fair ​ ​ Hierarchy Level ​ Amount ​ Value ​ Amount ​ Value Financial assets: ​ ​ ​ ​ Cash and cash equivalents Level 1 ​ $ 77,859 ​ $ 77,859 ​ $ 530,167 ​ $ 530,167 Securities available-for-sale Level 2 ​ 236,315 ​ 236,315 ​ 271,332 ​ 271,332 Securities held-to-maturity Level 2 ​ 13,520 ​ 12,449 ​ 22,940 ​ 23,364 Stock in Federal Reserve Bank and Federal Home Loan Bank Level 2 ​ 25,815 ​ 25,815 ​ 15,521 ​ 15,521 Preferred investment in mortgage company Level 2 ​ 3,005 ​ ​ 3,005 ​ ​ 3,005 ​ ​ 3,005 Net loans Level 3 ​ 2,914,292 ​ 2,811,362 ​ 2,310,881 ​ 2,278,456 Loans held for sale Level 2 ​ 27,626 ​ ​ 27,626 ​ ​ — ​ ​ — Accrued interest receivable Level 2 ​ 14,938 ​ 14,938 ​ 11,882 ​ 11,882 Mortgage banking financial assets ​ Level 3 ​ ​ 21 ​ ​ 21 ​ ​ — ​ ​ — Derivative assets Level 2 and 3 ​ 1,410 ​ 1,410 ​ — ​ — Credit enhancement ​ Level 2 ​ ​ 1,504 ​ ​ 1,504 ​ ​ — ​ ​ — Financial liabilities: ​ ​ ​ ​ ​ ​ ​ ​ Demand deposits and NOW accounts Level 2 ​ $ 1,200,243 ​ $ 1,200,243 ​ $ 1,380,020 ​ $ 1,380,020 Money market and savings accounts Level 2 ​ 1,057,078 ​ 1,057,078 ​ 1,022,621 ​ 1,022,621 Time deposits Level 3 ​ 465,057 ​ 462,376 ​ 360,575 ​ 362,902 Securities sold under agreements to repurchase Level 1 ​ 6,445 ​ 6,445 ​ 9,962 ​ 9,962 FHLB advances Level 1 ​ 325,000 ​ 325,000 ​ 100,000 ​ 100,000 Junior subordinated debt Level 2 ​ 9,781 ​ 9,181 ​ 9,731 ​ 10,367 Senior subordinated notes Level 2 ​ 85,531 ​ 84,347 ​ 85,297 ​ 91,141 Accrued interest payable Level 2 ​ 3,261 ​ 3,261 ​ 1,864 ​ 1,864 Mortgage banking financial liabilities ​ Level 3 ​ ​ 4 ​ ​ 4 ​ ​ — ​ ​ — Derivative liabilities Level 2 and 3 ​ 122 ​ 122 ​ — ​ — ​ 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. Fair value of long-term debt is based on current rates for similar financing. 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. ​ 100 Table of Contents ​ 6. BANK PREMISES AND EQUIPMENT Bank premises and equipment as of December 31, 2022 and 2021 were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 ​ 2021 Land ​ $ 7,112 ​ $ 8,139 Land improvements ​ 1,558 ​ 1,558 Building and improvements ​ 20,475 ​ 23,792 Leasehold improvements ​ 3,033 ​ 3,001 Furniture, fixtures, equipment and software ​ 11,341 ​ 12,182 Construction in progress ​ 139 ​ 12 ​ ​ 43,658 ​ 48,684 Less accumulated depreciation and amortization ​ 18,401 ​ 18,274 Bank premises and equipment, net ​ $ 25,257 ​ $ 30,410 ​ Depreciation and amortization expense related to bank premises and equipment for 2022, 2021 and 2020 was $ 2.5 million, $ 2.4 million and $ 2.0 million, respectively. ​ 7. 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, 2022 and 2021, the Company had operating lease liabilities totaling $ 5.8 million and $ 6.5 million, respectively, and right-of-use assets totaling $ 5.3 million and $ 5.9 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, 2022 and 2021, our net operating lease cost was $ 2.3 million and $ 2.4 million, respectively. These net operating lease costs are reflected in occupancy expenses on our consolidated statements of income and comprehensive income (loss). The following table presents other information related to our operating leases: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended ​ (in thousands except for percent and period data) ​ December 31, 2022 ​ ​ December 31, 2021 ​ Other information: ​ ​ ​ ​ ​ ​ ​ ​ Weighted-average remaining lease term - operating leases, in years ​ ​ 4.9 ​ ​ ​ 4.4 ​ Weighted-average discount rate - operating leases ​ 2.9 % ​ 2.5 % ​ ​ 101 Table of Contents The following table summarizes the maturity of remaining lease liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of (dollars in thousands) ​ December 31, 2022 Lease payments due: ​ ​ ​ 2023 ​ $ 2,106 2024 ​ ​ 1,193 2025 ​ ​ 629 2026 ​ ​ 571 2027 ​ ​ 519 Thereafter ​ 1,203 Total lease payments ​ ​ 6,221 Less: imputed interest ​ ​ ( 454 ) Lease liabilities ​ $ 5,767 ​ As of December 31, 2022, the Company had two operating leases that have not yet commenced that will create additional lease liabilities and right-of-use assets for the Company. ​ ​ 8. GOODWILL AND INTANGIBLE ASSETS Goodwill Primis has recorded $ 104.6 million and $101.9 million of goodwill at December 31, 2022 and 2021, respectively. Goodwill is primarily related to the acquisition of other banks before 2022 and Primis Mortgage in 2022. Goodwill is evaluated for impairment on an annual basis or more frequently if events or circumstances warrant. Our annual assessment occurs as of September 30th every year. For our annual 2022 assessment, we performed a step one quantitative assessment to determine if the fair value of our Bank reporting unit was less than its carrying amount. We concluded that the fair value of our Bank reporting unit exceeded its carrying amount and no impairment was present based on management’s assessment. No impairment was indicated in 2022, 2021 or 2020. We determined that for Primis Mortgage, we did not need a quantitative assessment and performed a qualitative assessment. No impairment was indicated for 2022 for the Primis Mortgage reporting unit. Intangible Assets Intangible assets were as follows at year end (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 ​ Gross Carrying Accumulated Net Carrying ​ ​ Value ​ Amortization ​ Value Amortizable Intangibles ​ $ 17,620 ​ $ ( 14,366 ) ​ $ 3,254 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ Gross Carrying Accumulated Net Carrying ​ ​ Value ​ Amortization ​ Value Amortizable intangibles ​ $ 17,503 ​ $ ( 13,041 ) ​ $ 4,462 ​ ​ 102 Table of Contents Estimated amortization expense of intangibles for the years ended December 31 were as follows (in thousands): ​ ​ ​ ​ 2023 $ 1,296 2024 ​ 1,292 2025 ​ 629 2026 ​ 27 2027 ​ 10 Total ​ $ 3,254 ​ ​ 9. DEPOSITS The aggregate amount of time deposits in denominations of $250 thousand or more at December 31, 2022 and 2021 was $ 125.3 million and $ 128.0 million, respectively. At December 31, 2022, the scheduled maturities of time deposits are as follows (in thousands): ​ ​ ​ ​ 2023 $ 338,326 2024 ​ 108,087 2025 ​ 7,061 2026 ​ 4,049 2027 ​ 7,534 Total ​ $ 465,057 ​ The following table sets forth the maturities of certificates of deposit of $250 thousand and over as of December 31, 2022 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Within 3 to 6 6 to 12 Over 12 ​ 3 Months ​ Months ​ Months ​ Months ​ Total $ 24,971 ​ $ 26,709 ​ $ 32,954 ​ $ 40,709 ​ $ 125,343 ​ 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. 10. 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, 2022 and 2021 was $ 6.5 million and $ 10.0 million, respectively. At December 31, 2022 and 2021, we had pledged callable agency securities, residential government-sponsored mortgage-backed securities and collateralized mortgage obligations with a carrying value of $ 14.2 million and $ 21.7 million, respectively, to customers who require collateral for overnight repurchase agreements and deposits. 103 Table of Contents Other borrowings consist of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2022 2021 ​ ​ ​ ​ ​ ​ ​ ​ FHLB collateral advances maturing 3/1/2030 $ — $ 100,000 ​ Short-term FHLB advances maturing 1/3/2023 ​ ​ 50,000 ​ ​ — ​ Short-term FHLB advances maturing 1/13/2023 ​ ​ 100,000 ​ ​ — ​ Short-term FHLB advances maturing 1/23/2023 ​ ​ 50,000 ​ ​ — ​ Short-term FHLB advances maturing 1/27/2023 ​ ​ 125,000 ​ ​ — ​ Total FHLB advances ​ ​ 325,000 ​ ​ 100,000 ​ Securities sold under agreements to repurchase 6,445 9,962 ​ Total $ 331,445 $ 109,962 ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average interest rate at year end ​ 4.19 % ​ 0.36 % ​ Our FHLB convertible advances of $ 100.0 million were 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 $ 405.2 million and $ 382.7 million were pledged as collateral for FHLB advances as of December 31, 2022 and 2021, respectively. HELOCs in the amount of approximately $ 27.4 million and $ 28.3 million were pledged as collateral for FHLB advances at December 31, 2022 and 2021, respectively. Commercial mortgage loans in the amount of approximately $ 169.6 million and $ 155.4 million were pledged as collateral for FHLB advances as of December 31, 2022 and 2021, respectively. Investment securities in the amount of $ 2.3 million and $ 3.5 million were pledged as collateral for FHLB advances at December 31, 2022 and 2021, respectively. At December 31, 2022, Primis Bank had available collateral to borrow an additional $ 437.7 million from the FHLB. 11. 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, 2022 and 2021, there was $ 10.3 million outstanding, net of approximately $ 0.6 million 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, 2022 and 2021, the interest rate was 7.69 % and 3.17 % , 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, 2022, 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 bore 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, 2022, 80 % 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. 104 Table of Contents 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 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, 2022, all of these notes qualified as Tier 2 capital. ​ At December 31, 2022 and 2021, the remaining unamortized debt issuance costs related to the senior Subordinated Notes totaled $ 1.5 million and $ 1.7 million, respectively. 12. 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, 2022 and 2021 consist primarily of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 2021 Deferred tax assets: ​ ​ Allowance for credit losses ​ $ 7,796 ​ $ 6,522 Unearned loan fees and other ​ 1,891 ​ 1,581 Other real estate owned write-downs ​ 38 ​ 450 Lease liability ​ ​ 1,246 ​ ​ 1,407 Net unrealized loss on investment securities available for sale ​ 6,920 ​ — Federal low income housing credit carryforward ​ 485 ​ 424 Deferred compensation ​ 1,596 ​ 1,684 Other ​ 1,348 ​ 921 Total deferred tax assets ​ 21,320 ​ 12,989 Deferred tax liabilities: ​ ​ Right-of-use assets ​ ​ 1,200 ​ ​ 1,315 Net unrealized gain on investment securities available-for-sale ​ ​ — ​ ​ 247 Purchase accounting ​ ​ 917 ​ ​ 930 Depreciation ​ ​ 748 ​ ​ 926 Other ​ 166 ​ — Total deferred tax liabilities ​ 3,031 ​ 3,418 Net deferred tax assets ​ $ 18,289 ​ $ 9,571 ​ No valuation allowance was deemed necessary on deferred tax assets in 2022 or 2021. 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, 2022, 2021 or 2020. 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 2018. 105 Table of Contents The provision for income taxes consists of the following for the years ended December 31, 2022, 2021 and 2020 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 2021 2020 Current tax expense ​ ​ ​ Federal ​ $ 6,434 ​ $ 2,504 ​ $ 5,319 State ​ 315 ​ 163 ​ 320 Total current tax expense ​ 6,749 ​ 2,667 ​ 5,639 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Deferred tax expense (benefit) ​ ​ ​ Federal ​ ( 2,178 ) ​ 5,937 ​ ​ ( 1,294 ) State ​ ( 36 ) ​ 117 ​ ​ ( 117 ) Total deferred tax expense (benefit) ​ ( 2,214 ) ​ 6,054 ​ ( 1,411 ) Total income tax expense from continuing operations ​ ​ 4,535 ​ ​ 8,721 ​ ​ 4,228 Total income tax expense from discontinued operation ​ ​ — ​ ​ 64 ​ ​ 2,386 Total income tax expense ​ $ 4,535 ​ $ 8,785 ​ $ 6,614 ​ 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, 2022, 2021 and 2020 due to the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 2021 2020 Computed expected tax expense at statutory rate ​ $ 4,678 ​ $ 8,345 ​ $ 4,022 Increase (decrease) in tax expense resulting from: ​ ​ ​ ​ ​ ​ Remeasurement of deferred tax assets and liabilities ​ ​ ( 148 ) ​ ​ 442 ​ ​ ( 31 ) Low income housing tax credits, net of amortization ​ ​ 4 ​ ​ 39 ​ ​ 225 Income from bank-owned life insurance ​ ( 419 ) ​ ( 354 ) ​ ​ ( 327 ) State taxes, net ​ ​ — ​ ​ 242 ​ ​ 200 Other, net ​ 420 ​ 7 ​ ​ 139 Total income tax expense from continuing operations ​ 4,535 ​ 8,721 ​ 4,228 Total income tax expense from discontinued operation ​ — ​ 64 ​ 2,386 Total income tax expense ​ $ 4,535 ​ $ 8,785 ​ $ 6,614 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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. ​ 13. 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. The expense for 2022, 2021 and 2020 was $ 1.3 million, $ 1.0 million and $ 0.8 million, respectively. The Bank previously maintained 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 2022, 2021 and 2020 was $ 0.3 million, $ 0.4 million and $ 1.3 million, respectively. The deferred compensation plan liability was $ 7.4 million and $ 7.8 million as of December 31, 2022 and 2021, respectively. 106 Table of Contents 14. STOCK-BASED COMPENSATION The 2017 Equity Compensation Plan (the “2017 Plan”) 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 2022 follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ Weighted ​ Average ​ Aggregate ​ ​ ​ ​ Average ​ Remaining ​ Intrinsic ​ ​ ​ ​ Exercise ​ Contractual ​ Value ​ ​ Shares ​ Price ​ Term ​ (in thousands) Options outstanding, beginning of period 283,800 ​ $ 10.98 2.2 ​ $ 1,153 Expired ​ ( 22,000 ) ​ ​ 10.13 ​ ​ ​ ​ ​ Exercised ( 58,500 ) ​ ​ 9.79 ​ ​ Options outstanding, end of period 203,300 ​ $ 11.41 1.3 ​ $ 102 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Exercisable at end of period 203,300 ​ $ 11.41 1.3 ​ $ 102 ​ Stock-based compensation expense associated with stock options was zero , zero and $ 0.1 million for the years ended December 31, 2022, 2021 and 2020, respectively. As of December 31, 2022, we do no t have any unrecognized compensation expense associated with the stock options. A summary of time vested restricted stock awards for 2022 follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted Weighted ​ ​ ​ ​ Average ​ Average ​ ​ ​ ​ ​ Grant-Date ​ Remaining ​ ​ ​ ​ ​ Fair Value ​ Contractual ​ ​ ​ Shares ​ Per Share ​ Term ​ Unvested restricted stock outstanding, beginning of period 98,050 ​ $ 14.58 3.3 Granted 1,500 ​ ​ 13.85 Vested ( 28,450 ) ​ ​ 14.52 Forfeited ( 2,400 ) ​ ​ 15.38 ​ Unvested restricted stock outstanding, end of period 68,700 ​ $ 14.24 ​ 2.4 ​ ​ Stock-based compensation expense for time vested restricted stock awards totaled $ 0.4 million, $ 0.7 million and $ 1.4 million for the years ended December 31, 2022, 2021 and 2020, respectively. As of December 31, 2022, unrecognized compensation expense associated with restricted stock awards was $ 0.7 million, which is expected to be recognized over a weighted average period of 2.4 years. ​ ​ 107 Table of Contents A summary of performance-based restricted stock units (the “Units”) for 2022 follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted Weighted ​ ​ ​ ​ ​ Average ​ Average ​ ​ ​ ​ ​ Grant-Date ​ Remaining ​ ​ ​ ​ ​ Fair Value ​ Contractual ​ ​ Shares ​ ​ Per Share ​ Term Unvested Units outstanding, beginning of period 59,355 ​ $ 15.00 4.0 Granted 96,105 ​ ​ 11.83 Vested ( 1,500 ) ​ ​ 15.00 Unvested Units outstanding, end of period 153,960 ​ $ 13.02 3.6 ​ During 2022 and 2021, the Company issued 96,105 and 59,355 non-transferrable Units, respectively, 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. The Company did not recognize any stock-based compensation expense associated with these Units during the years ended December 31, 2022 or 2021 because it is not probable that these Units will vest. The grant date fair value of these Units was $ 11.83 and $ 15.00 per Unit for the years ended December 31, 2022 and 2021, respectively. The maximum potential unrecognized compensation expense associated with these Units was $ 3.0 million and $ 1.3 million, at December 31, 2022 and 2021, respectively. ​ 15. 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 $ 10.7 million and $ 13.1 million as of December 31, 2022 and 2021, 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 108 Table of Contents 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 4 - Loans and Allowance for Credit Losses, as if such commitments were funded. The allowance for credit losses on off-balance-sheet credit exposures is reflected in other liabilities in our consolidated balance sheets. The following table details activity in the allowance for credit losses on off-balance-sheet credit exposures: ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 2021 Balance as of January 1 ​ $ 977 ​ $ 740 Credit loss expense ​ 439 ​ 237 Balance as of December 31, ​ $ 1,416 ​ $ 977 ​ 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. We had $ 52.7 million of loan commitments outstanding as of December 31, 2022, all of which contractually expire within thirty years. At December 31, 2022 and 2021, we had unfunded lines of credit and undisbursed construction loan funds totaling $ 540.6 million and $ 411.0 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 $ 3.2 million and $ 3.1 million, at December 31, 2022 and 2021, respectively. ​ 109 Table of Contents 16. EARNINGS PER SHARE The following is a reconciliation of the denominators of the basic and diluted EPS computations for 2022, 2021 and 2020 (amounts in thousands, except per share data): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ ​ Average ​ ​ ​ ​ Income ​ Shares ​ Per Share ​ ​ (Numerator) ​ (Denominator) ​ Amount ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, 2022 ​ ​ Basic EPS from continuing operations ​ $ 17,741 24,561 ​ $ 0.72 Effect of dilutive stock options and unvested restricted stock ​ — 108 ​ — Diluted EPS from continuing operations ​ $ 17,741 24,669 ​ $ 0.72 ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic EPS from discontinued operation ​ $ — 24,561 ​ $ 0.00 Effect of dilutive stock options and unvested restricted stock ​ — 108 ​ — Diluted EPS from discontinued operation ​ $ — 24,669 ​ $ 0.00 ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 ​ The Company did no t have any anti-dilutive options as of December 31, 2022 and 2021 and had 226,300 anti-dilutive options as of December 31, 2020. ​ 17. 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, 2022 and 2021, the most recent regulatory notifications categorized the Bank as well capitalized under regulatory framework for PCA. 110 Table of Contents 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, 2022, that Primis meets all capital adequacy requirements to which it is subject. 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, 2022 ​ ​ ​ ​ Primis Financial Corp. ​ ​ ​ ​ Leverage ratio ​ $ 322,390 9.68 % $ 133,279 4.00 % ​ n/a n/a ​ Common equity tier 1 capital ratio ​ ​ 312,390 10.30 % ​ 136,482 4.50 % ​ n/a n/a ​ Tier 1 risk-based capital ratio ​ 322,390 10.63 % 181,976 6.00 % ​ n/a n/a ​ Total risk-based capital ratio ​ 441,902 14.57 % 242,635 8.00 % ​ n/a n/a ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Primis Bank ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Leverage ratio ​ $ 378,659 11.39 % $ 137,290 4.00 % $ 149,830 ​ 5.00 % Common equity tier 1 capital ratio ​ ​ 378,659 ​ 12.64 % ​ 134,847 4.50 % ​ 194,779 ​ 6.50 % Tier 1 risk-based capital ratio ​ 378,659 12.64 % 179,796 6.00 % 239,728 ​ 8.00 % Total risk-based capital ratio ​ 414,619 13.84 % 239,728 8.00 % 299,660 ​ 10.00 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 % ​ ​ ​ ​ ​ ​ ​ (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 a capital conservation buffer of 5.84 % at December 31, 2022, 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 PCA. ​ 111 Table of Contents 18. SEGMENT INFORMATION The Company's management reporting process measures the performance of its operating segment based on internal operating structure, which is subject to change from time to time. Accordingly, the Company operates two reportable segments for management reporting purposes as discussed below: Primis Bank. This segment specializes in providing financing services to businesses in various industries and deposit-related services to businesses, consumers and other customers. The primary source of revenue for this segment is net interest income and the origination and sale of loans. Primis Mortgage. This segment specializes in originating mortgages in majority of the U.S. The primary source of revenue for this segment is net interest income, noninterest income and the origination of mortgage loans. Prior to the Primis Mortgage acquisition in 2022, we operated as one reportable segment. The following table provides financial information for the Company's segment. The information provided under the caption “Primis Bank” represents operations not considered to be reportable segments and/or general operating expenses of the Company, and includes the parent company and elimination adjustments to reconcile the results of the operating segment to the consolidated financial statements prepared in conformity with GAAP. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of and for the year ended December 31, 2022 ​ Primis Mortgage Primis Bank Consolidated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest income ​ $ 705 ​ $ 125,369 ​ $ 126,074 Interest expense ​ 2 ​ 21,585 ​ 21,587 Net interest income ​ 703 ​ 103,784 ​ 104,487 Provision for loan losses ​ — ​ 11,271 ​ 11,271 Noninterest income ​ 5,055 ​ ​ 16,273 ​ ​ 21,328 Noninterest expense ​ 9,361 ​ ​ 82,907 ​ ​ 92,268 Income before income taxes ​ ( 3,603 ) ​ 25,879 ​ 22,276 Income tax expense (benefit) ​ ( 752 ) ​ ​ 5,287 ​ ​ 4,535 Net income (loss) ​ $ ( 2,851 ) ​ $ 20,592 ​ $ 17,741 Assets ​ $ 31,398 ​ $ 3,540,139 ​ $ 3,571,537 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 112 Table of Contents 19. PARENT COMPANY FINANCIAL INFORMATION Condensed financial information of Primis Financial Corp. follows (in thousands): ​ CONDENSED BALANCE SHEETS DECEMBER 31, ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 2021 ASSETS ​ ​ Cash ​ $ 21,276 ​ $ 23,517 Loans held for investment ​ ​ 2,000 ​ ​ — Investment in subsidiaries ​ 460,982 ​ 479,855 Preferred investment in mortgage company ​ ​ 3,005 ​ ​ 3,064 Investments in non-marketable equity securities ​ ​ 2,319 ​ ​ 430 Other assets ​ 1,637 ​ 2,681 Total assets ​ $ 491,219 ​ $ 509,547 ​ ​ ​ ​ ​ ​ ​ LIABILITIES AND STOCKHOLDERS' EQUITY ​ ​ Liabilities: ​ ​ Junior subordinated debt - long term ​ $ 9,781 ​ $ 9,731 Senior subordinated notes - long term ​ 85,531 ​ 85,297 Other liabilities ​ 1,504 ​ 2,638 Total liabilities ​ 96,816 ​ 97,666 Stockholders' equity: ​ ​ Common stock ​ 246 ​ 245 Additional paid in capital ​ 312,722 ​ 311,127 Retained earnings ​ 107,285 ​ 99,397 Accumulated other comprehensive income (loss) ​ ( 25,850 ) ​ 1,112 Total stockholders' equity ​ 394,403 ​ 411,881 Total liabilities and stockholders' equity ​ $ 491,219 ​ $ 509,547 ​ ​ ​ CONDENSED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 2021 2020 Income: ​ ​ ​ Cash dividends received from bank subsidiary ​ $ 15,000 ​ $ — ​ $ 2,500 Interest income ​ ​ 27 ​ ​ — ​ ​ — Gain on debt extinguishment ​ — ​ 573 ​ — Other investment income ​ ​ 150 ​ ​ — ​ ​ — Total income ​ 15,177 ​ 573 ​ 2,500 Expenses: ​ ​ ​ Interest on junior subordinated debt ​ 536 ​ 355 ​ 426 Interest on senior subordinated notes ​ 5,111 ​ 5,127 ​ 3,909 Other operating expenses ​ 1,227 ​ 1,236 ​ 841 Total expenses ​ 6,874 ​ 6,718 ​ 5,176 Income (loss) before income tax benefit and equity in undistributed net income of subsidiaries ​ 8,303 ​ ( 6,145 ) ​ ( 2,676 ) Income tax benefit ​ ( 1,408 ) ​ ( 1,280 ) ​ ( 1,084 ) Equity in undistributed net income of subsidiaries ​ 8,030 ​ 36,113 ​ 24,879 Net income ​ $ 17,741 ​ $ 31,248 ​ $ 23,287 ​ ​ 113 Table of Contents ​ ​ ​ CONDENSED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 2021 2020 Operating activities: ​ ​ ​ Net income ​ $ 17,741 ​ $ 31,248 ​ $ 23,287 Adjustments to reconcile net income to net cash and cash equivalents (used in) provided by operating activities: ​ ​ ​ ​ ​ ​ Equity in undistributed net income of subsidiaries ​ ( 23,030 ) ​ ( 36,113 ) ​ ( 27,379 ) Gain on debt extinguishment ​ ​ — ​ ​ ( 573 ) ​ ​ — Other, net ​ 1,229 ​ 1,426 ​ 8,766 Net cash and cash equivalents provided by (used in) in operating activities ​ ( 4,060 ) ​ ( 4,012 ) ​ 4,674 Investing activities: ​ ​ ​ Net (increase) decrease in loans ​ ​ ( 2,000 ) ​ ​ — ​ ​ — Increase in preferred investment in mortgage company ​ — ​ ( 3,064 ) ​ — Increase in non-marketable equity securities investments ​ ​ ( 1,889 ) ​ ​ ( 430 ) ​ ​ — Dividend from subsidiaries ​ 15,000 ​ — ​ 2,500 Net cash and cash equivalents provided by (used in) investing activities ​ 11,111 ​ ( 3,494 ) ​ 2,500 Financing activities: ​ ​ ​ Issuance of subordinated notes, net of cost ​ — ​ — ​ 58,600 Extinguishment of subordinated debt ​ ​ — ​ ​ ( 20,000 ) ​ ​ — Proceeds from exercised stock options ​ 572 ​ 1,526 ​ 574 Repurchase of restricted stock ​ ( 11 ) ​ ( 14 ) ​ — Cash dividends paid on common stock ​ ( 9,853 ) ​ ( 9,807 ) ​ ( 9,737 ) Net cash and cash equivalents provided by (used in) financing activities ​ ( 9,292 ) ​ ( 28,295 ) ​ 49,437 Net change in cash and cash equivalents ​ ( 2,241 ) ​ ( 35,801 ) ​ 56,611 Cash and cash equivalents at beginning of period ​ 23,517 ​ 59,318 ​ 2,707 Cash and cash equivalents at end of period ​ $ 21,276 ​ $ 23,517 ​ $ 59,318 ​ ​ ​ ​ 20. RELATED PARTY TRANSACTIONS 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): ​ ​ ​ ​ ​ ​ ​ 2022 Balance at January 1, ​ ​ $ 40,595 Principal advances ​ ​ 6,641 Principal paid ​ ​ ( 4,985 ) Transfers in (out) of related party status ​ ​ ( 14,376 ) Balance at December 31, ​ ​ $ 27,875 ​ Primis has also entered into deposit transactions with its related parties. The aggregate amount of these deposit accounts were $ 15.9 million and $ 22.4 million as of December 31, 2022 and 2021, respectively. ​ ​ 21. VARIABLE INTEREST ENTITIES Variable interests are defined as contractual ownership or other interests in an entity that change with fluctuations in the fair value of an entity's net asset value. The primary beneficiary consolidates the VIE. The primary beneficiary is defined as the enterprise that has both the power to direct the activities of the VIE that most significantly impact the entity's 114 Table of Contents economic performance and the obligation to absorb losses or the right to receive benefits that could be significant to the VIE. Our involvement with VIEs includes our investments in low income housing tax credit funds and non-marketable and other equity securities. 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. Non-Marketable and Other equity investments The Company also has a limited interest in several funds that focus on providing venture capital to new and emerging financial technology companies, which are accounted for as VIEs. Investments held by the Company in these third-party funds do not have controlling or significant variable interests. The above investments meet the criteria of a VIE, however, the Company is not the primary beneficiary of the entities, as it does not have the power to direct the activities that most significantly impact the economic performance of the entities and their accounts are not included in our consolidated financial statements. The Company’s investment in the unconsolidated VIEs were carried as other assets on the consolidated balance sheets. The low income housing tax credit funds were carried at $ 3.4 million and $ 4.2 million at December 31, 2022 and 2021, respectively. Tax credits, net of amortization recognized related to these investments during the years ended December 31, 2022 and 2021 were $( 4 ) thousand and $( 39 ) thousand, respectively. Additional capital calls expected for the funds totaled $ 0.4 million at December 31, 2022 and 2021 and are accrued for in other liabilities on the consolidated balance sheets. The non-marketable and other equity investments were carried at $ 4.4 million and $ 2.1 million at December 31, 2022 and 2021, respectively. We also make commitments on the subscription agreements entered into for the investments in non-marketable equity securities. For additional details, see Note 15 – Financial Instruments with Off-Balance-Sheet Risks. The Company’s maximum exposure to loss from unconsolidated VIEs is the higher of the investment recorded on the Company’s consolidated balance sheets or the commitment on the investment. As of December 31, 2022 and 2021, the maximum exposure to loss for our unconsolidated VIEs was $ 11.0 million and $ 9.4 million, respectively. ​ ​ ​ Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.