8-K/A: Primis Financial Corp. Amends 8-K to Correct Q4 2024 Financial Results

Primis Financial Corp. files an amended 8-K to correct financial information in its Q4 2024 earnings release and investor presentation due to increased reserves and fraud losses in a third-party originated consumer loan portfolio, and reclassification of certain life premium finance loans.

Summary

• Primis Financial Corp. amended its original Form 8-K filing to correct financial results for the fourth quarter of 2024.
• The corrections were due to an increase in reserves for a credit valued by a third party after December 31, 2024, and for a third-party originated consumer loan portfolio.
• The company also increased expenses related to fraud losses in the third-party originated consumer portfolio.
• Additionally, certain life premium finance loans were reclassified to held for sale as of December 31, 2024, and subsequently sold after year-end.
• The amended report includes a revised earnings release and investor presentation to reflect these changes.
• The company reported a net loss available to common shareholders of $23.3 million, or $0.94 loss per share, for the quarter ended December 31, 2024, compared to a net loss of $8.2 million, or $0.33 loss per share, for the same quarter in 2023.
• For the full year 2024, the net loss available to common shareholders was $16.2 million, or $0.66 loss per share, compared to a loss of $7.8 million, or $0.32 per share, in 2023.
• The company's strategic moves in Q4 2024 included moving the majority of the consumer loan book to held for sale with substantial marks and selling the Life Premium Finance business.
• Primis Mortgage had approximately $800 million of production in 2024 and anticipates $1.25 billion in 2025.
• Panacea Financial's loans outstanding were up 11% from the third quarter of 2024 to $434 million, funded by $92 million of deposits.
• The company ceased originating new loans under the Consumer Program effective January 31, 2025, and moved a large portion of the portfolio to loans held for sale, resulting in additional provision expense and charge-offs of $20.0 million in Q4 2024.
• The Board of Directors declared a dividend of $0.10 per share payable on February 26, 2025, to shareholders of record on February 12, 2025.

Sentiment

Score: 4

Explanation: The document presents a mixed sentiment. While there are positives such as growth in specific business lines and strategic repositioning, the overall financial results are negative due to losses and increased expenses. The forward-looking statements offer some optimism, but the corrections to previously reported information raise concerns.

Positives

• Primis Mortgage experienced growth, reaching approximately $800 million of production in 2024 and poised to reach approximately $1.25 billion of production in 2025.
• Panacea Financial's growth accelerated, with loans outstanding up 11% from the third quarter of 2024 to $434 million.
• The core bank finished 2024 with $2.2 billion of customer deposits.
• The Bank's proprietary V1BE service directly supports approximately $200 million of checking accounts and is driving growth in new relationships focused on commercial and consumer checking accounts.
• The Bank's loan pipeline ended 2024 at approximately $119 million with 88% of that amount representing new customers to the Bank versus $51 million and 21%, respectively, at the end of 2023.
• The company is focusing its national lending strategies on mortgage warehouse lending and a new partnership with a national builder leveraging the Bank's existing construction-to-perm loan product.
• The Bank recently gained preferred lender status with a national builder by leveraging its one-time-close construction-to-permanent mortgage product.

Negatives

• The company reported a net loss available to common shareholders of $23.3 million, or $0.94 loss per share, for the quarter ended December 31, 2024.
• For the full year 2024, the net loss available to common shareholders was $16.2 million, or $0.66 loss per share.
• The company made the decision to cease originating new loans under the Consumer Program effective January 31, 2025, and moved a large portion of the portfolio to loans held for sale, resulting in additional provision expense and charge-offs of $20.0 million in Q4 2024.
• Net interest income decreased approximately $1.9 million, or 7%, to $26.1 million during the fourth quarter of 2024 compared to the third quarter of 2024.
• Noninterest expense was $37.4 million for the fourth quarter of 2024, compared to $31.0 million for the third quarter of 2024.

Risks

• The company's ability to implement its various strategic and growth initiatives is a risk.
• Competitive pressures among financial institutions increasing significantly could impact results.
• Changes in applicable laws, rules, or regulations could pose a risk.
• Credit risk associated with lending activities is a factor.
• The impact of current and future economic and market conditions could affect performance.
• Adverse results from current or future litigation, regulatory examinations or other legal and/or regulatory actions are a risk.
• Potential impacts of adverse developments in the banking industry highlighted by high-profile bank failures could affect the company.
• Increased cybersecurity risks could pose a threat.
• Fraud or misconduct by internal or external actors is a risk.
• Acts of God or of war or other conflicts, acts of terrorism, pandemics or other catastrophic events may affect general economic conditions.

Future Outlook

The company expects to deliver attractive operating results by clearing the consumer loan noise and focusing on profitable strategies. They anticipate scalability in their business lines and operating leverage from their digital platform. The company projects core operating expense burden to be between $21 million and $22 million per quarter for 2025.

Management Comments

• Dennis J. Zember, Jr., President and Chief Executive Officer of Primis commented, 'In the fourth quarter of 2024, we made several moves that were costly, but should better position the Company to maximize its strategic value.'
• Mr. Zember commented, 'The Companys strategies are profitable and remarkably scalable given our size.'

Industry Context

The document highlights Primis's efforts to navigate a challenging environment for financial institutions, including competitive pressures, changing regulations, and economic uncertainty. The company's focus on digital banking and niche markets like healthcare finance reflects a broader trend in the industry towards specialization and technological innovation.

Comparison to Industry Standards

• The core bank's cost of deposits of 1.87% at 2024 year-end is lower than most of its larger regional bank competitors and up to 100 basis points lower than equal sized peers in the greater Washington, D.C. region.
• Primis Mortgage's volume per loan officer approximately $1 million in 2024, over twice the level of 2022.
• Panacea Financial is the number one ranked Bank for doctors on Google and banks approximately 6,000 professionals and practices nationwide with a goal of reaching 10,000 customers by the end of 2025.

Stakeholder Impact

• Shareholders are impacted by the corrected financial results and the reported losses.
• Employees may be affected by the strategic repositioning and changes in business lines.
• Customers may benefit from the company's focus on technology and new products.
• The company's financial performance could impact its relationships with suppliers and creditors.

Next Steps

• The company will continue to focus on its core community bank and national lending strategies.
• Primis Mortgage will aim to increase production to $1.25 billion in 2025.
• Panacea Financial will continue to develop its technology products and services.
• The company will launch a unique affinity brand in March 2025 to drive deposit growth.
• The company will work to reprice lower yielding assets with $351 million of loans repricing in 2025 and $300 million repricing in 2026.

Key Dates

Keywords

financial results, earnings, Primis Financial, Q4 2024, mortgage, Panacea Financial, consumer loans, deposits, losses, reserves