Primis Financial Corp (NASDAQ:FRST), a commercial bank holding company, announced on Thursday that its previously issued financial statements for the year ended December 31, 2022, should not be relied upon. The company identified errors in the accounting methodology for a portfolio of consumer loans serviced by a third party.
The McLean, Virginia-based bank, following discussions with its independent auditor Forvis Mazars, LLP, will amend its financials to correct an error in the application of U.S. GAAP. The adjustments include deferring interest income on certain consumer loans until the end of promotional periods, derecognizing credit enhancement income, and discontinuing recording of certain items within net interest income and noninterest expense.
Primis Financial Corp will also treat an agreement with the third-party servicer as a derivative under accounting standards, establishing a derivative asset or liability on its balance sheet. These changes will be reflected in the restated financial statements and the upcoming annual report for the fiscal year ended December 31, 2023.
The discovery of these errors has prompted a reevaluation of the company's internal controls over financial reporting, revealing a material weakness as of December 31, 2022. Consequently, the effectiveness of the company's internal control over financial reporting and its disclosure controls and procedures as of that date are no longer considered effective.
In other recent news, Primis Financial Corp. has been grappling with Nasdaq delinquency due to late financial filings. The company has received a notice from Nasdaq highlighting non-compliance with Listing Rule 5250(c)(1) due to the delayed submission of its quarterly report for the quarter ended June 30, 2024, and previous reports.
Primis Financial cited the need for a restatement of certain financial statements as the cause for the delay and has been granted an extension until September 30, 2024, to file the overdue reports.
On a positive note, Primis Financial reported a strong Q2 performance, with earnings reaching $7.8 million. This is a significant improvement from the net loss of $311,000 in the same period last year. The company's total loans hit $835 million and total deposits neared $1 billion across all business lines.
Analyst Matthew Switzer expects future expenses to hover around the mid-$19 million range. Primis Financial is also planning to deconsolidate PFH, a move expected to enhance tangible book value and capital ratios.
InvestingPro Insights
As Primis Financial Corp (NASDAQ:FRST) navigates through its financial restatement, insights from InvestingPro provide a clearer picture of the company's current financial health and market position. With a market capitalization of $276.44 million, Primis Financial Corp has maintained a price-to-earnings (P/E) ratio of 13.11 over the last twelve months as of Q4 2023, suggesting a valuation that may appeal to certain investors. The company has also shown resilience in its revenue growth, boasting a 19.1% increase in the same period.
InvestingPro Tips indicate that analysts have revised their earnings upwards for the upcoming period and predict that the company will be profitable this year, which could be a sign of a turnaround despite the recent accounting issues. Additionally, Primis Financial Corp has a track record of maintaining dividend payments, with a current dividend yield of 3.54%, which has been consistent for 13 consecutive years. This could be of particular interest to income-focused investors.
For more detailed analysis and additional InvestingPro Tips on Primis Financial Corp, visit: https://www.investing.com/pro/FRST. There are 6 more tips available that could provide deeper insights into the company's performance and potential investment opportunities.
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