Henrico-based Primis Bank is closing eight of its 32 branches. (BizSense file photo)
Correction/Clarification: An earlier version of this story stated that Primis Bank’s cost-saving measures would in part help counteract the costs of an employee fraud it recently discovered. The two are unrelated.
A Henrico-based bank is slashing its branch count and employee headcount to cut expenses while also disclosing a long-running fraud perpetrated by one of its loan officers.
Primis Bank, which keeps its headquarters in Innsbrook, said last week it plans to close eight of its 32 branches in Virginia by the end of October, in addition to laying off around three dozen employees.
The cuts are expected to save the $3.8 billion publicly traded bank approximately $9.4 million annually and are aimed at keeping costs under control in the face of tightened margins between the interest it pays out in deposits and brings in from loans.
The cost savings also come as the bank disclosed a $2.5 million hit from a loan scam at the hands of a longtime employee.
Primis, according to its second quarter earnings report released last week, said it discovered the fraud late in the quarter.
“The employee, for a period of more than 10 years, would combine expertly crafted but fraudulent documentation and the willing participation of external parties to make or renew loans,” the company said in its earnings release.
It said the employee hadn’t been regularly originating new loans or renewing existing loans in the last three years, but that the “lender’s activities since have centered on servicing the loans with proceeds from the past extensions.”
The company said it is working with counsel, an insurance broker and a third-party forensic auditor to investigate the matter and that it expects to recover the $2.5 million in related losses through insurance policies.
Dennis Zember
Dennis Zember, Primis’s CEO, addressed the fraud in the company’s earnings release last week.
“While the accounting impact from the fraud this quarter is to capital instead of earnings, the situation is unfortunate and frustrating, though isolated and insurable. Given that the fraud was uncovered late in the quarter, we are in the process of our forensic investigation to support the insurance claim to be filed, but expect future recoveries from the claim,” Zember said in the prepared statement.
CFO Matthew Switzer also gave a bit more detail of the fraud on Primis’s call with analysts last week.
“We’re very confident that this was a one-off issue,” Switzer said. “There’s a rogue employee, he’d been conducting this for quite a while, taking advantage of his knowledge of policies and procedures and controls and basically leveraging relationships and his tenure at the bank to avoid a lot of those and get around them.”
Switzer and Zember said the bank in recent years had put in place new policies related to loans that helped unknowingly bring the scam to an end.
“He had built a house of cards that he was able to manage under the previous policies and kind of how things were structured, but with those changes that Dennis talked about, it made it untenable for him to keep all the balls in the air, and that’s how it all fell apart,” Switzer said.
In an interview with BizSense this week, Zember said the loan officer in question had worked for the bank and its predecessors, Sonabank and EVB, for more than 20 years.
“He’s been doing it for many, many years,” Zember said of the loan scam. “Given that it’s a legal thing, at this point I really can’t say much.”
The bank did not identify the employee and it’s unclear whether the person has been charged by state or federal law enforcement.
As for the branch closures, the bank would not specify the exact locations of the branches that are on the chopping block. Zember said only that the branches are spread across Primis’s footprint in the Richmond region, Northern Neck and Middle Peninsula, and Northern Virginia.
The bank will have 24 branches after the closures, which are expected to occur Oct. 31.
Zember said the bank is closing branches where there is some proximity to other Primis locations and those where traffic was slower than others.
He said some of the closures are also in areas where the bank has had success with its V1BE mobile branch delivery service.
“It’s an app that does every single thing you can do in a branch: a new debit card, to bring you $5,000 in cash, pick up deposits, a notary,” Zember said. “Order it and we’ll come to you to conduct the transaction at your house, at your office or in a gas station parking lot.”
He said the service, which uses a fleet of on-demand drivers, was rolled out about a year ago and has more than 1,000 users and it’s adding around 100 new users a month. The most use is seen in the Greater Washington, D.C., market and Richmond area.
Primis reported a second quarter loss of $188,000, compared to $5 million in profit in the same period last year.
The second quarter results included approximately $1.5 million of severance and other charges related to its expense reduction initiatives.
The bank had $3.13 billion in loans at quarter’s end, up from $3 billion in the first quarter and up from $2.59 billion in the second quarter of 2022.
Its deposits as of June 30 were $3.31 billion, up from $2.68 billion a year ago but down from $3.66 billion at year-end 2022.
“Everybody is fighting for deposit customers and fighting deposit rates,” Zember said.
Stock of Primis parent company Primis Financial, which is headquartered in Northern Virginia, trades on Nasdaq as FRST. Its shares closed Tuesday at $9.56 apiece, up half a percentage point, but down nearly 19 percent for the year and 34 percent since inception.
Henrico-based Primis Bank is closing eight of its 32 branches. (BizSense file photo)
Correction/Clarification: An earlier version of this story stated that Primis Bank’s cost-saving measures would in part help counteract the costs of an employee fraud it recently discovered. The two are unrelated.
A Henrico-based bank is slashing its branch count and employee headcount to cut expenses while also disclosing a long-running fraud perpetrated by one of its loan officers.
Primis Bank, which keeps its headquarters in Innsbrook, said last week it plans to close eight of its 32 branches in Virginia by the end of October, in addition to laying off around three dozen employees.
The cuts are expected to save the $3.8 billion publicly traded bank approximately $9.4 million annually and are aimed at keeping costs under control in the face of tightened margins between the interest it pays out in deposits and brings in from loans.
The cost savings also come as the bank disclosed a $2.5 million hit from a loan scam at the hands of a longtime employee.
Primis, according to its second quarter earnings report released last week, said it discovered the fraud late in the quarter.
“The employee, for a period of more than 10 years, would combine expertly crafted but fraudulent documentation and the willing participation of external parties to make or renew loans,” the company said in its earnings release.
It said the employee hadn’t been regularly originating new loans or renewing existing loans in the last three years, but that the “lender’s activities since have centered on servicing the loans with proceeds from the past extensions.”
The company said it is working with counsel, an insurance broker and a third-party forensic auditor to investigate the matter and that it expects to recover the $2.5 million in related losses through insurance policies.
Dennis Zember
Dennis Zember, Primis’s CEO, addressed the fraud in the company’s earnings release last week.
“While the accounting impact from the fraud this quarter is to capital instead of earnings, the situation is unfortunate and frustrating, though isolated and insurable. Given that the fraud was uncovered late in the quarter, we are in the process of our forensic investigation to support the insurance claim to be filed, but expect future recoveries from the claim,” Zember said in the prepared statement.
CFO Matthew Switzer also gave a bit more detail of the fraud on Primis’s call with analysts last week.
“We’re very confident that this was a one-off issue,” Switzer said. “There’s a rogue employee, he’d been conducting this for quite a while, taking advantage of his knowledge of policies and procedures and controls and basically leveraging relationships and his tenure at the bank to avoid a lot of those and get around them.”
Switzer and Zember said the bank in recent years had put in place new policies related to loans that helped unknowingly bring the scam to an end.
“He had built a house of cards that he was able to manage under the previous policies and kind of how things were structured, but with those changes that Dennis talked about, it made it untenable for him to keep all the balls in the air, and that’s how it all fell apart,” Switzer said.
In an interview with BizSense this week, Zember said the loan officer in question had worked for the bank and its predecessors, Sonabank and EVB, for more than 20 years.
“He’s been doing it for many, many years,” Zember said of the loan scam. “Given that it’s a legal thing, at this point I really can’t say much.”
The bank did not identify the employee and it’s unclear whether the person has been charged by state or federal law enforcement.
As for the branch closures, the bank would not specify the exact locations of the branches that are on the chopping block. Zember said only that the branches are spread across Primis’s footprint in the Richmond region, Northern Neck and Middle Peninsula, and Northern Virginia.
The bank will have 24 branches after the closures, which are expected to occur Oct. 31.
Zember said the bank is closing branches where there is some proximity to other Primis locations and those where traffic was slower than others.
He said some of the closures are also in areas where the bank has had success with its V1BE mobile branch delivery service.
“It’s an app that does every single thing you can do in a branch: a new debit card, to bring you $5,000 in cash, pick up deposits, a notary,” Zember said. “Order it and we’ll come to you to conduct the transaction at your house, at your office or in a gas station parking lot.”
He said the service, which uses a fleet of on-demand drivers, was rolled out about a year ago and has more than 1,000 users and it’s adding around 100 new users a month. The most use is seen in the Greater Washington, D.C., market and Richmond area.
Primis reported a second quarter loss of $188,000, compared to $5 million in profit in the same period last year.
The second quarter results included approximately $1.5 million of severance and other charges related to its expense reduction initiatives.
The bank had $3.13 billion in loans at quarter’s end, up from $3 billion in the first quarter and up from $2.59 billion in the second quarter of 2022.
Its deposits as of June 30 were $3.31 billion, up from $2.68 billion a year ago but down from $3.66 billion at year-end 2022.
“Everybody is fighting for deposit customers and fighting deposit rates,” Zember said.
Stock of Primis parent company Primis Financial, which is headquartered in Northern Virginia, trades on Nasdaq as FRST. Its shares closed Tuesday at $9.56 apiece, up half a percentage point, but down nearly 19 percent for the year and 34 percent since inception.
“The company said it is working with counsel, an insurance broker and a third-party forensic auditor to investigate the matter” and it is a legal “thing” but how about confirming that the fraud has been reported to the FDIC and the FBI for criminal investigation?
Yes. I’d like to learn more about this as well, hopefully a follow up story?
I’ve just opened an account with Primis in Surry, VA. I sure hope this branch isn’t closing I don’t have transportation and it’s the only local bank in the area
Gwendolyn,
If you have their V1be app, they will come to you usually under 30 minutes.. For anything. They come get your money, bring you money.. Anything.
I am in DC and use it all the time to get cash. I’ve also used V1be when I lost my debit card at a commanders game- They brought me a new one in 20 minutes.
They also pay for your ATM fees, so every ATM in America is technically your atm.. You don’t even need their branches.