10-K: Primis Financial Corp. Reports Losses for 2024, Cites Consumer Loan Program Challenges

Primis Financial Corp. reports a net loss for 2024, impacted by provisions for credit losses primarily related to its Consumer Program.

Summary

• Primis Financial Corp. reported a net loss attributable to common shareholders of $16.2 million for 2024, compared to a net loss of $7.8 million in 2023.
• The loss per basic and diluted share was $0.66 in 2024, compared to $0.32 in 2023.
• Net interest income increased by 5.6% to $104.2 million.
• The net interest margin increased to 2.86% from 2.68% in the previous year.
• The provision for credit losses significantly increased to $50.6 million, driven by the Consumer Program.
• Total assets decreased by 4.3% to $3.7 billion.
• Total loans held for investment decreased by 10.3% to $2.9 billion.
• Total deposits decreased by 3.0% to $3.2 billion.
• The company sold $392.4 million of Life Premium Finance (LPF) loans and transferred $133.2 million of Consumer Program loans to held for sale.
• The allowance for credit losses to total loans was 1.86% at year-end.
• Nonperforming assets increased to 0.58% of total loans and OREO.
• Book value per share decreased to $14.23.

Sentiment

Score: 4

Explanation: The document presents a mixed picture, with some positive aspects like increased net interest income, but significant negatives like a net loss and increased credit loss provisions. The overall sentiment is slightly negative due to the financial challenges faced by the company.

Positives

• Net interest income increased by 5.6% to $104.2 million.
• Net interest margin increased to 2.86% from 2.68% in the previous year.
• The company realized a $4.7 million gain on the sale of the LPF loan portfolio.
• The company started a mortgage warehousing line of business which had $63.8 million of principal outstanding as of December 31, 2024, which was yielding an average of Secured Overnight Financing Rate (SOFR) plus 340 basis points.

Negatives

• The company experienced a net loss of $16.2 million.
• The provision for credit losses significantly increased to $50.6 million, driven by the Consumer Program.
• Total assets decreased by 4.3% to $3.7 billion.
• Total loans held for investment decreased by 10.3% to $2.9 billion.
• Total deposits decreased by 3.0% to $3.2 billion.
• Nonperforming assets increased to 0.58% of total loans and OREO.
• Book value per share decreased to $14.23.

Risks

• The company faces risks related to its concentration of construction and commercial real estate loans.
• A meaningful amount of consumer loans are unsecured, increasing the risk of losses.
• The company relies on a third-party for a portion of its consumer loan portfolio, which includes a credit enhancement that may not be realizable.
• The company's mortgage revenue is cyclical and sensitive to interest rates and economic conditions.
• The company's geographic concentration makes it vulnerable to local economic conditions and external events.
• The company faces cyber and data security risks.
• The company is dependent on key personnel.
• Liquidity risk could impair the company's ability to fund operations.
• The company may need to raise additional capital in the future.
• Changes in laws and regulations may adversely affect the company's operations.
• The company is subject to commercial real estate lending guidance that impacts its operations and capital requirements.

Future Outlook

The document contains forward-looking statements and discusses the company's strategy for growth and profitability, but does not provide specific financial guidance for future periods.

Management Comments

• Management believes that the allowance for credit losses as of December 31, 2024 is sufficient to absorb future expected credit losses in our loan portfolio based on our assessment of all known factors affecting the collectability of our loan portfolio.

Industry Context

The document indicates that the banking business is highly competitive and that the company's profitability depends on its ability to compete in its market areas. It also mentions that the company is subject to extensive regulation and supervision under federal and state law.

Comparison to Industry Standards

• The document mentions a peer group of 22 mid-Atlantic U.S. banks ranging in assets from $2.1 billion to $6.3 billion, with median assets of $3.6 billion.
• The peer group was used to review executive officer and director compensation for 2024.
• The document also mentions that the company's cybersecurity program is designed to align with regulatory guidance and industry practices.

Related Party Transactions

• The document discloses loan and deposit transactions with related parties, including officers, directors, and their affiliates.

Stakeholder Impact

• Shareholders are negatively impacted by the net loss and decrease in book value per share.
• Employees may be affected by cost-cutting measures or changes in compensation.
• Customers may experience changes in products and services as the company adjusts its strategy.

Next Steps

• The company intends to sell a majority of its Consumer Program loans.
• The company will continue to optimize its business continuity and disaster recovery plans.
• The company will continue to strengthen its cybersecurity program.

Key Dates

Keywords

financial results, net loss, Primis Financial, Consumer Program, credit losses, loans, deposits, mortgage, capital, risk