Business Context and Reporting Period
Company: Primis Financial Corp. (NASDAQ: FRST)
Filing Type: Form 8-K (Current Report)
Date of Report: September 17, 2024
Event: Changes in Registrant's Certifying Accountant (Item 4.01)
On September 17, 2024, Forvis Mazars, LLP ("Forvis") notified Primis Financial Corp. that it will decline to stand for re-appointment as the Company's independent registered public accounting firm for the fiscal year ending December 31, 2024. This decision was ratified by the Audit Committee on September 19, 2024. Forvis will continue to audit the 2023 fiscal year and review interim statements for Q1 2024.
Key Financial Metrics
The filing text does not provide specific values for revenue, profit, cash flow, margins, debt, or liquidity. This report focuses exclusively on the change in accounting firm and related internal control matters.
Material Changes and Reportable Events
There were no "disagreements" between the Company and Forvis regarding accounting principles, financial statement disclosure, or auditing scope. However, the filing discloses "reportable events" related to material weaknesses in internal control over financial reporting expected to be disclosed in forthcoming 10-K filings:
- Fiscal Year 2022: Material weakness regarding the accounting evaluation of a complex agreement with a third-party originator of consumer loans. The process lacked necessary expertise to identify and conclude on complex accounting matters.
- Fiscal Year 2023: Material weaknesses identified in three areas:
- Lack of a formally designed process for evaluating transfers of financial assets (loan transfers).
- Inadequate process for evaluating credit losses on the third-party managed consumer loan portfolio, specifically regarding the review of recent actual loss history versus model inputs.
- Recurring weakness in the accounting evaluation of complex third-party agreements similar to the 2022 issue.
Management Commentary, Risks, and Remediation
Remediation Efforts: Management is actively remediating the identified material weaknesses by:
- Designing and testing new controls for accounting analysis of loan transfer transactions.
- Implementing internal controls to ensure timely review and incorporation of portfolio-specific credit loss trends into allowance calculations.
- Establishing controls to identify complex agreements and ensuring review by individuals with requisite accounting expertise.
Audit Opinion Status: The Company states that the audit report for the year ended December 31, 2022, did not contain an adverse opinion, disclaimer, or qualification. Management believes the forthcoming audit report for the year ended December 31, 2023, will also not contain such adverse opinions or qualifications.
Risks: The primary risk highlighted is the existence of material weaknesses in internal controls over financial reporting, specifically concerning complex loan agreements, loan transfer accounting, and credit loss modeling.
Investor Verification Checklist
- Verify the appointment of a new independent registered public accounting firm for the 2024 fiscal year.
- Review the forthcoming Form 10-K for the year ended December 31, 2023, for full details on the material weaknesses and the effectiveness of remediation efforts.
- Examine the Restated Annual Report on Form 10-K/A for the year ended December 31, 2022, regarding the restatement of previously issued interim financial statements.
- Assess the impact of the material weaknesses on the reliability of future financial reporting, particularly regarding the third-party managed consumer loan portfolio.