Primis Financial (FRST) risk factors, FY2024 10-K

Other

1. 01We are subject to risks related to our concentration of construction and land development and commercial real estate loans
2. 02We have a meaningful amount of consumer loans that are unsecured and if the borrower defaults on the loan we have no recourse to collateral in which to recover any potential losses
3. 03A portion of our consumer loan portfolio is originated and serviced by a third-party and includes a credit enhancement from that third-party which may not be realizable and the inability to utilize it could be detrimental to our financial condition and results of operations
4. 04A significant amount of our loans are secured by real estate and any declines in real estate values in our primary markets could be detrimental to our financial condition and results of operations
5. 05If our nonperforming assets increase, our earnings will suffer
6. 06If our allowance for credit losses is not adequate to cover actual loan losses, our earnings will decrease
7. 07the allowance for credit losses could cause our earnings to decrease. Due to the relatively unseasoned nature of portions of our loan portfolio, we may experience an increase in delinquencies and losses as these loans continue to mature
8. 08We are subject to credit quality risks and our credit policies may not be sufficient to avoid losses
9. 09Our mortgage revenue is cyclical and is sensitive to the level of interest rates, changes in economic conditions, decreased economic activity, and slowdowns in the housing market, any of which could adversely impact our profits

Market Risks

1. 10Our business is subject to interest rate risk and variations in interest rates may negatively affect our financial performance
2. 11Unstable global economic conditions may have serious adverse consequences on our business, financial condition, and operations
3. 12Declines in asset values may result in impairment charges and adversely affect the value of our investment securities, financial performance and capital
4. 13We may be unable to sell loans at the estimated market price utilized to record them in held for sale
5. 14Our stock price can be volatile
6. 15The trading volume in our common stock is less than that of other larger financial services companies
7. 16Inflation could negatively impact our business, our profitability and our stock price
8. 17ESG and DEI risks could adversely affect our reputation and shareholder, employee, client, and third party relationships and may negatively affect our stock price

Operational Risks

1. 18Our business strategy includes strategic growth, and our financial condition and results of operations could be negatively affected if we fail to grow or fail to manage our growth effectively
2. 19We must respond to rapid technological changes and these changes may be more difficult or expensive than anticipated
3. 20New lines of business, products or services and technological advancements may subject us to additional risks
4. 21The development and use of artificial intelligence (AI) presents risks and challenges that may adversely impact our business
5. 22We may not be able to successfully integrate our acquisitions or to realize the anticipated benefits of them
6. 23all of which could divert resources from regular banking operations. Additionally, general market and economic conditions or governmental actions affecting the financial industry generally may inhibit our successful merger integrations
7. 24The carrying value of goodwill and other intangible assets may be adversely affected
8. 25We rely on third-party vendors to provide key components of our business infrastructure
9. 26We face significant cyber and data security risk that could result in the disclosure of sensitive, confidential and/or nonpublic personal information, adversely affect our business or reputation and expose us to significant liabilities
10. 27Our business is susceptible to fraud
11. 28We are dependent on key personnel and the loss of one or more of those key personnel could impair our relationship with our customers and adversely affect our business
12. 29Deposit insurance premiums levied against banks may increase if the number of bank failures increase or the cost of resolving failed banks increases
13. 30Liquidity risk could impair our ability to fund operations and jeopardize our financial condition, results of operations and cash flows
14. 31Additionally, we could be impacted by current or future negative perceptions and expectations about the prospects for the financial services industry which could worsen over time and result in downward pressure on, and continued or accelerated volatility of, bank securities
15. 32Future growth or operating results may require us to raise additional capital, but that capital may not be available, be available on unfavorable terms or may be dilutive
16. 33We may issue a new series of preferred stock or debt securities, which would be senior to our common stock and may cause the market price of our common stock to decline
17. 34We currently intend to pay dividends on our common stock; however, our future ability to pay dividends is subject to restrictions
18. 35that bank holding companies should not maintain a level of cash dividends that undermines the bank holding company’s ability to serve as a source of strength to its banking subsidiaries

Regulatory Risks

1. 36We are heavily regulated by federal and state agencies; changes in laws and regulations or failures to comply with such laws and regulations may adversely affect our operations and our financial results
2. 37As further described above under Supervision and Regulation—Capital Requirements, Primis and the Bank each are subject to various regulatory capital requirements administered by the FRB
3. 38We are subject to commercial real estate lending guidance issued by the federal banking regulators that impacts our operations and capital requirements
4. 39Changes in accounting standards or assumptions in applying accounting policies could adversely affect us

Financial Reporting Risks

1. 40Failure to maintain an effective system of disclosure controls and procedures could have a material adverse effect on our business, results of operations and financial condition and could impact the price of our common stock