FAIR VALUE

3 Months Ended

Mar. 31, 2022

Fair Value Disclosures [Abstract]

FAIR VALUE

4.      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 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.

Assets 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)	March 31, 2022		(Level 1)		(Level 2)		(Level 3)
Available-for-sale securities
Residential government-sponsored mortgage-backed securities	$	120,750	$	—	$	120,750	$	—
Obligations of states and political subdivisions		33,036		—		33,036		—
Corporate securities		16,123		—		16,123		—
Collateralized loan obligations		4,978		—		4,978		—
Residential government-sponsored collateralized mortgage obligations		22,568		—		22,568		—
Government-sponsored agency securities		16,253		—		16,253		—
Agency commercial mortgage-backed securities		50,115		—		50,115		—
SBA pool securities		7,803		—		7,803		—
Total	$	271,626	$	—	$	271,626	$	—

			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)
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	$	271,332	$	—	$	271,332	$	—

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%.

Other Real Estate Owned (“OREO”)

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 March 31, 2022 and December 31, 2021. Fair value is classified as Level 3 in the fair value hierarchy. OREO is further evaluated quarterly for any additional impairment. At March 31, 2022 and December 31, 2021, the total amount of OREO was $1.0 million 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)	March 31, 2022		(Level 1)		(Level 2)		(Level 3)
Collateral dependent loans	$	30,868	$	—	$	—	$	30,868
Other real estate owned:
Construction and land development		266		—		—		266
Residential 1-4 family		775		—		—		775

			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:

		March 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	$	298,230	$	298,230	$	530,167	$	530,167
Securities available-for-sale	Level 2		271,626		271,626		271,332		271,332
Securities held-to-maturity	Level 2		16,138		15,927		22,940		23,364
Stock in Federal Reserve Bank and Federal Home Loan Bank	Level 2		11,927		11,927		15,521		15,521
Net loans	Level 3		2,364,290		2,320,024		2,310,881		2,278,456
Financial liabilities:
Demand deposits and NOW accounts	Level 2	$	1,289,917	$	1,289,917	$	1,380,020	$	1,380,020
Money market and savings accounts	Level 2		1,056,871		1,056,871		1,022,621		1,022,621
Time deposits	Level 3		339,456		340,949		360,575		362,902
Securities sold under agreements to repurchase	Level 1		11,231		11,231		9,962		9,962
FHLB advances	Level 1		—		—		100,000		100,000
Junior subordinated debt	Level 2		9,743		10,692		9,731		10,367
Senior subordinated notes	Level 2		85,356		89,522		85,297		91,141

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.