HUNTINGTON, W.Va., Feb. 9, 2021 /PRNewswire/ -- PREMIER FINANCIAL
BANCORP, INC. (PREMIER), (NASDAQ/GMS: PFBI), a
$1.9 billion financial holding
company with two community bank subsidiaries, announced its
financial results for the fourth quarter of 2020, as well as the
2020 calendar year. Premier realized net income of
$22,438,000 ($1.52 per diluted share) during the year ending
December 31, 2020, a $1.76 million, or 7.3%, decrease from the
$24,196,000 ($1.64 per diluted share) reported for the year
ending December 31, 2019. The
decrease in net income in 2020 is largely due to decreases in
interest income and non-interest income, coupled with an increase
in the provision for loan losses and a slight increase in
non-interest expense. These changes that negatively affected
net income more than offset decreases in interest expense and
income tax expense. A majority of these changes were largely
in response to changes in the economy related to the novel corona
virus of 2019 ("COVID-19"), whether as a result of governmental
stimulus to depositors and borrowers, Federal Reserve Board of
Governors' changes in interest rate policy to stimulate the economy
and/or customer behavior in response to government guidelines aimed
to minimize the spread of COVID-19, as more fully explained
throughout this analysis below.
President and CEO Robert W.
Walker commented, "We are pleased with our results for the
year 2020, especially as we continue to navigate all of the
societal and economic changes related to curbing the spread of the
COVID-19 virus. In spite of significant changes in the
interest rate environment during 2020, our net interest income for
the year ended $757,000, or 1.1%
higher than the net interest income we reported in 2019. We
also held the line on non-interest expenses, which increased by
only $141,000, or 0.3%, in 2020 even
as our balance sheet grew by 9.3%, or $164.8
million. Nevertheless, net income results are down in
2020, primarily due to a $2,200,000
million, or 176%, increase in loan loss provision expense
largely attributed to potential COVID-19 related loan losses, as
well as a $1.1 million, or 23.4%,
decrease in non-interest income from service charges and fees on
deposit accounts. We believe we have been prudent by adding
approximately $2,500,000 to our
qualitative credit risk analysis of the loan portfolio for
potential COVID-19 related loan losses during the calendar year
2020, even as our other loan credit risk measurements are
improving. The path ahead is still uncertain for most
businesses, including ours. As lenders, we are carefully
monitoring our borrowers' performance and will respond accordingly
as we learn about their ability to continue to meet their debt
obligations. Our non-interest income was down as deposit
customers kept close tabs on their personal finances and were less
likely to overdraft their deposit accounts with us. As an
essential business, we took steps to modify our normal business
operations to include keeping branches open with appropriate
'social distancing' measures; utilizing permitted guidance provided
by federal and state banking supervisory regulators to assist
borrowers to avoid defaulting on their loans; and robustly
participating in the U.S. Treasury's and Small Business
Administration's Payroll Protection Program ("PPP"). In 2020,
Premier generated $116 million of new
loans to small and medium sized businesses via the PPP program and
has been assisting our borrowers with their applications for PPP
loan forgiveness. Through the end of the year, nearly half of
our PPP loan balances have been forgiven by the Small Business
Administration."
For the quarter ended December 31,
2020, Premier realized net income of $5,940,000 (40
cents per diluted share), a 0.8% increase over the
$5,894,000 (40
cents per diluted share) of net income reported for the
fourth quarter of 2019. The $46,000, or 0.8%, increase in net income during
the fourth quarter of 2020 is largely due to a $900,000, or 5.4%, increase in net interest
income, a $446,000, or 3.9%, decrease
in non-interest expense and a $90,000
decrease in income tax expense. These improvements in net
income were substantially offset by a $1,160,000 increase in the provision for loan
losses and a $230,000, or 9.8%,
decrease in non-interest income when compared to the fourth
quarter of 2019.
Net interest income for the quarter ended December 31, 2020 totaled $17.533 million, up $900,000, or 5.4%, from the $16.633 million of net interest income earned in
the fourth quarter of 2019, as interest expense savings exceeded a
decrease in interest income. Interest income decreased by
$402,000, or 2.1%, in the fourth
quarter of 2020 when compared to the fourth quarter of 2019,
largely due to a $425,000, or 17.5%
decrease in interest income on investment securities and a
$362,000, or 92.8%, decrease in
interest income on interest-bearing bank balances and federal funds
sold. Partially offsetting these decreases, interest income
on loans increased by $385,000, or
2.4%, as more fully explained below. Interest income on
interest-bearing bank balances and federal funds sold decreased in
the fourth quarter of 2020 when compared to the same quarter of
2019 due to the significant decreases in the earning yields on
these balances. Although the combined average balances
for the quarter increased from $97.7
million during the fourth quarter of 2019 to $113.4 million during the fourth quarter of 2020,
the earning yields dropped significantly in response to the Federal
Reserve Board of Governors' policy decision to drop the targeted
federal funds rate to a range of 0.00% to 0.25% on March 16, 2020. The actions taken by the
Federal Reserve Board of Governors to reduce short-term interest
rates reduced Premier's earning yield on these highly liquid funds
to an average of 0.10% during the fourth quarter of 2020 compared
to an average yield of 1.58% during the same quarter of 2019.
Similarly, interest income on investment securities in the fourth
quarter of 2020 decreased by $425,000, or 17.5%, when compared to the fourth
quarter of 2019. While the average balance of investments
increased by $57.3 million in the
fourth quarter of 2020 when compared to the same quarter of 2019,
the average yield earned decreased to 1.88% in 2020 from 2.59% in
2019.
Interest income on loans increased by $385,000, or 2.4%, in the fourth quarter of 2020
when compared to the fourth quarter of 2019. Included in the
comparison is approximately $165,000
of interest income that was realized from deferred interest and
discounts recognized on loans that paid-off or paid-down during the
fourth quarter of 2020 compared to $208,000 of interest income of this kind
recognized during the fourth quarter of 2019. The loan
payments in 2019 and 2020 included both non-accrual loans and
performing loans that were once on non-accrual status.
Excluding the $43,000 higher level of
recognition in 2019, interest income on loans would have otherwise
increased by $428,000 in the fourth
quarter of 2020 when compared to the same quarter of 2019.
The increase is a result of $1,942,000 of interest income and fees on loans
recognized during the fourth quarter of 2020 from Premier's SBA PPP
loan portfolio. Fees paid to the lender by the SBA are
recognized in interest income over the life of the PPP loan.
Any remainder of the fee is recognized immediately when the PPP
loan is forgiven and the SBA provides the funds to pay off the
loan. Without Premier's participation in the PPP loan
program, interest income on loans would have decreased by
approximately $1,514,000, largely due
to a decrease in the average yield on the remaining loan portfolio
from 5.51% in the fourth quarter of 2019 to 5.09% in the fourth
quarter of 2020, on a lower average balance of loans outstanding
during the quarter. Premier's participation in the SBA's PPP
loan program resulted in $115,990,000
of new loans during the second and third quarters of 2020.
Primarily as a result of forgiveness payments, these loans
increased the fourth quarter average loans outstanding by
approximately $89,468,000 and
increased interest income on loans during the fourth quarter of
2020 by approximately $1,942,000,
which resulted in an average yield on these loans of 8.62%.
Without Premier's participation in the SBA PPP loan program,
average loans outstanding during the fourth quarter of 2020 would
have decreased by $20,621,000, or
1.8%, when compared to the average loans outstanding during the
fourth quarter of 2019.
More than offsetting the decrease in interest income in the
fourth quarter of 2020 was a $1,302,000, or 52.8%, decrease in interest
expense, driven by a decrease in interest expense on
deposits. Interest expense on deposits decreased by
$1,217,000, or 52.8% in the fourth
quarter of 2020, largely due to decreases in the average rate paid
on certificates of deposit, savings deposits, and NOW and money
market deposits during the fourth quarter of 2020 compared to the
same quarter in 2019. Further interest expense savings were
realized due to decreases in the average balance of higher-costing
certificates of deposit during the fourth quarter of 2020 compared
to the same quarter in 2019. Nevertheless, average
interest-bearing deposit balances increased by $34.4 million, or 3.1%, in the fourth quarter of
2020 compared to the same quarter of 2019. The average
interest rate paid on interest-bearing deposits decreased by 45
basis points from 0.83% during the fourth quarter of 2019 to 0.38%
during the fourth quarter of 2020. Decreases in short-term
rates resulting from actions by the Federal Reserve Board of
Governors to reduce the targeted federal funds rate, plus an inflow
of funds from direct stimulus payments from the U.S. Treasury to
deposit account holders during 2020, have resulted in a decrease in
the competition for bank deposit rates. As a result, the
average interest rate paid on highly liquid NOW and money market
deposits decreased by 17 basis points and the average rate paid on
savings deposits decreased by 11 basis points in the fourth quarter
of 2020 when compared to the fourth quarter of 2019. Even
with these resulting decreases in the average rate paid on
transaction based deposits, the average outstanding balance of
transaction based deposits increased, with less than 10% of the
increase coming from the acquisition of the First National Bank of
Jackson ("Jackson") on October
25, 2019. NOW and money market deposit account
balances averaged $509.203 million in
the fourth quarter of 2020, a $78.278
million increase over the average outstanding balances
during the fourth quarter of 2019. Similarly, savings deposit
account balances averaged $297.590
million in the fourth quarter of 2020, a $42.995 million increase over the average
outstanding balances during the fourth quarter of 2019. Even
with the increases in their average balances, interest expense
savings on interest-bearing transaction deposit accounts equaled
$232,000 of the $1,217,000 decrease in interest expense on
interest-bearing deposits, largely as a result of rate reductions
on NOW, money market and savings deposit accounts.
The remaining $985,000 decrease in
interest expense on deposit accounts came from a decrease in
average outstanding certificates of deposits and a decrease in the
average rates paid during the fourth quarter of 2020 when compared
to the fourth quarter of 2019. Certificates of deposit
decreased on average by approximately $86.825 million, or 20.6%. As certificates
mature, depositors are either seeking higher deposit rates from
other competitive depository institutions or are transferring their
balances to more liquid interest-bearing deposit accounts such as
NOW, money market and savings deposits as a means to keep immediate
access to their funds during the uncertainty of employment or
economic conditions. Interest expense savings are also the
result of a decrease in the average rate paid on certificates of
deposit, from a 1.77% average rate paid during the fourth quarter
of 2019 to 1.06% paid during the fourth quarter of 2020.
Additional interest expense savings were realized in the fourth
quarter of 2020 from the reduction in outstanding Federal Home Loan
Bank ("FHLB") borrowings. Interest expense on FHLB borrowings
decreased by $47,000 in the fourth
quarter of 2020 when compared to the same quarter of 2019, due to
the payment upon maturity of approximately $8.8 million of FHLB borrowings since the end of
December 2018. The final $3.0
million outstanding FHLB borrowings were repaid upon
maturity in the third quarter of 2020. Average FHLB
borrowings decreased from $6.4
million in the fourth quarter of 2019 to zero in the fourth
quarter of 2020. The average rate paid on FHLB borrowings in
2019 was 2.93%. Also contributing to the decrease in interest
expense during the fourth quarter of 2020 was a $27,000, or 30.7%, decrease in interest expense
on Premier's subordinated debt due to a decrease in the variable
interest rate paid in 2020 compared to the fourth quarter of
2019. The variable interest rate is indexed to the short-term
three-month London Interbank Offered Rate ("LIBOR"), interest rate,
which was lower in the fourth quarter of 2020 in conjunction with
decreases in short-term interest rate policy by the Federal Reserve
Board of Governors. Interest expense on short-term
borrowings, primarily customer repurchase agreements, decreased by
$11,000, or 44.0%, in 2020 when
compared to 2019. The decrease in interest expense was
largely due to a decrease in the average rate paid from 0.47% in
the fourth quarter of 2019 to 0.17% in the fourth quarter of 2020,
although on a $10.849 million higher
average balance.
During the quarter ended December 31,
2020, Premier recorded $1,095,000 of provision for loan losses compared
to a $65,000 negative provision for
loan losses recorded during the same quarter of 2019. The
provision for loan losses recorded during the fourth quarter of
2020 included an estimate of additional identified credit risk in
the loan portfolio due to uncertainty related to future economic
conditions resulting from government actions designed to curb the
spread of the COVID-19 virus ("Potential COVID-19 Losses").
In the fourth quarter, Premier added approximately $389,000 to its qualitative credit risk analysis
of the loan portfolio related to Potential COVID-19 Losses related
to loans originated to various industries believed to be more
susceptible to future credit risk resulting from an economic
slowdown, such as lodging, restaurants, amusement, personal
services and retail stores, as well as loans to non-owner occupied
rental real estate borrowers and religious and civic
organizations. Management also increased the estimate of
Potential COVID-19 Losses on loans where the borrower remains on
either an interest-only payment deferral period or a full principal
and interest payment deferral period. Due to government
intervention efforts to stimulate the economy and maintain personal
and business liquidity, the extent, if any, of the impact of the
economic slowdown on such industries may not be known for quite
some time in the future. The remaining additional provision
expense not related to Potential COVID-19 Losses in the fourth
quarter of 2020 was a result of Premier's normal analyses of the
credit risk identified within the loan portfolio. This
includes approximately $250,000 of
additional risk allocated to impaired loans. The level of
provision expense is determined under Premier's internal analyses
of evaluating credit risk. The amount of future provisions for loan
losses will depend on any future improvement or further
deterioration in the estimated credit risk in the loan portfolio as
well as whether additional payments are received on loans
previously identified as having significant credit risk.
Gross charge-offs of loans increased by $162,000 in the fourth quarter of 2020 when
compared to the same quarter of 2019, while recoveries on loans
previously charged-off increased by $14,000 in the same comparison. However,
total non-performing loans have decreased by $7,959,000, or 40.4%, since year-end 2019,
largely due to a $5,441,000 decrease
in non-accrual loans and a $2,622,000
decrease in accruing restructured loans. The decrease in
accruing restructured loans was largely due to a full payoff
received on a $1,800,000 performing
loan. The decrease in non-accrual loans is largely due to
moving loans to foreclosure and receiving payments on existing
non-accrual loans. These decreases were partially offset by a
$104,000, or 4.7%, increase in
accruing loans past due 90 days or more. Total non-performing
loans were approximately 0.97% of total outstanding loans at
year-end 2020 compared to 1.65% of outstanding loans at year-end
2019.
Net overhead costs (non-interest expenses less non-interest
income) for the quarter ended December 31,
2020 totaled $8.824 million
compared to $9.040 million in the
fourth quarter of 2019. Net overhead costs decreased by
$216,000, or 2.4%, in the fourth
quarter of 2020 when compared to the fourth quarter of 2019,
largely due to a $446,000, or 3.9%,
decrease in non-interest expense partially offset by a $230,000, or 9.8%, decrease in non-interest
income. Total non-interest income decreased by $230,000 in the fourth quarter of 2020 when
compared to the fourth quarter of 2019, largely due to a
$316,000, or 25.7%, decrease in
revenue from service charges and fees on deposit accounts.
Service charges on deposit accounts decreased largely due to a
$279,000, or 29.8%, decrease in
customer overdraft fees. Transaction based deposit account
balances have increased significantly during the fourth quarter of
2020 compared to the same quarter of 2019. As certain sectors
of the economy have been recovering slowly after they were required
to close in an effort to help curb the spread of the COVID-19
virus, deposit customers have reduced transaction activity and
their propensity to overdraft their accounts. Other sources
of non-interest income decreased by $56,000, or 27.6%, in the fourth quarter of 2020,
which include decreases in checkbook sales, commissions on
insurance premiums, and brokerage and annuity commission
income. Partially offsetting these decreases in non-interest
income, electronic banking income increased by $94,000, or 11.1% and secondary market mortgage
income increased by $48,000, or
80.0%. Electronic banking income increased largely due to a
$79,000, or 11.0%, increase in income
from debit card transaction activity resulting from an increase in
electronic payment transactions to facilitate customer purchases
during the fourth quarter of 2020. Secondary market mortgage
income increased, in part due to the lower long-term interest rate
environment, resulting in an increase in home loan refinances as
customers are taking advantage of lowering their long-term fixed
home loan interest rate.
Non-interest expense decreased by $446,000, or 3.9% in the fourth quarter of 2020
compared to the fourth quarter of 2019. Increases in
operating costs include a $215,000,
or 14.4%, increase in outside data processing costs, a $216,000, or 90%, increase in taxes not on
income, a $133,000 increase in FDIC
insurance premiums, a $49,000, or
52.1%, increase in loan collection expenses and a $28,000, or 16.1%, increase in professional
fees. The $215,000 increase in
outside data processing costs includes a $72,000, or 21.5%, increase in internet and
mobile banking charges, as banking by electronic means becomes more
and more popular among Premier's customer base, and a $122,000 increase in data line costs as Premier
is migrating to a more robust data line network across its branch
network. The $133,000 increase
in FDIC insurance premiums is largely a result of utilizing FDIC
based community bank assessment credits to eliminate the fourth
quarter 2019 premium. Such credits were fully utilized in the
first half of 2020 and no credits were available to offset the
fourth quarter 2020 premium. The increase in taxes not on
income is largely due to an increase in the Kentucky Franchise Tax
assessment base in 2020. This tax is set to be replaced in
2021 by a Kentucky net income tax
newly applicable to the banking industry.
These increases in non-interest expenses were more than offset
by a $334,000, or 6.1%, decrease in
staff costs, a $220,000, or 13.2%,
decrease in occupancy and equipment expenses, a $378,000, or 44.0%, decrease in OREO expenses and
writedowns, and a $163,000 decrease
in other operating expenses when compared to the fourth quarter of
2019. The decrease in staff costs is partially due to reduced
staffing hours at some of Premier's branch locations, staff savings
from the closure of two branches during the fourth quarter of 2020
and $183,000 of savings in medical
insurance premiums from a one month payment furlough in the fourth
quarter of 2020. Occupancy and equipment expense decreased,
in part, due to a $265,000 decrease
in facility costs, largely from a $300,000 increase in the gain on the sale of a
branch facility in the fourth quarter of 2020 compared to the
fourth quarter of 2019. The decrease in OREO expenses and
writedowns includes $802,000 of
property writedowns, net of $71,000
in realized gains on the sale of OREO, in the fourth quarter of
2019 compared to only $321,000 of
property writedowns and losses on the sale of OREO in the fourth
quarter of 2020. The $163,000
decrease in other operating expenses includes $92,000 of conversion related expenses incurred
in the fourth quarter of 2019 to convert the Jackson branches to
Premier's operating system.
Net interest income for the year ended December 31, 2020 totaled $67.658 million, an increase of $757,000, or 1.1%, from the $66.901 million of net interest income earned
during 2019, as interest expense savings exceeded a decrease
in interest income. Total interest income in 2020 decreased
by $2,107,000, or 2.8%, largely due
to decreases in interest income on interest-bearing bank balances
and federal funds sold and interest income on investments.
Interest income from interest-bearing bank balances and federal
funds sold decreased by $1,396,000,
or 80.6%, largely due to the significant decreases in the earning
yields on these balances. Although the average balance for
the year increased from $81.2 million
during 2019 to $96.8 million during
2020, the earning yields dropped significantly in response to the
Federal Reserve Board of Governors' policy decision to drop the
targeted federal funds rate to a range of 0.00% to 0.25% on
March 16, 2020. The actions
taken by the Federal Reserve Board of Governors to reduce
short-term interest rates reduced Premier's earning yield on these
highly liquid funds to an average of 0.35% during 2020 compared to
an average yield of 2.13% during 2019. Similarly, interest
income on investment securities in 2020 decreased by $608,000, or 6.3%, when compared to 2019.
While the average balance of investments increased by $47.4 million in 2020 when compared to 2019, the
average yield earned decreased to 2.21% in 2020 from 2.64% in
2019.
Interest income on loans decreased by $103,000, or 1.6%, in 2020. Included in the
comparison is approximately $1,060,000 of interest income that was realized
from deferred interest and discounts recognized on loans that
paid-off or paid-down during 2020 compared to $1,828,000 of interest income of this kind
recognized during 2019. The loan payments in 2019 and 2020
included both non-accrual loans and performing loans that were once
on non-accrual status. As a result of the $768,000 higher level of recognition in 2019,
interest income on loans would have otherwise increased by
$665,000 in 2020 when compared to
2019. This increase includes approximately $1,415,000 of interest income on loans acquired
from the acquisition of Jackson on
October 25, 2019. Interest
income on these loans is included in Premier's loan interest income
only from the date of acquisition in October
2019 and therefore no interest income from these loans is
included in the first three quarters of 2019. Excluding the
loan interest income earned on the Jackson loans and the decrease in deferred
interest and discounts recognized on loans, interest income on
loans decreased by $750,000, or 1.2%,
in 2020 when compared to 2019. The decrease is largely due to
a decrease in the average yield on the remaining loan portfolio
from 5.65% in 2019 to 5.27% in 2020. As stated above,
Premier's participation in the SBA's PPP loan program resulted in
$115,990,000 of new loans during the
second and third quarters of 2020. These loans increased the
average loans outstanding in 2020 by approximately $72,424,000 and increased interest income on
loans during 2020 by approximately $3,922,000, which resulted in an average yield on
these loans of 5.42%. Without Premier's participation in the
SBA PPP loan program, and excluding the average loans from the
Jackson acquisition, average loans
outstanding during 2020 would have decreased by $19,828,000, or 1.7%, when compared to the
average loans outstanding during 2019.
More than offsetting the decrease in interest income in 2020 was
a $2,864,000, or 29.6%, decrease in
interest expense, driven by a decrease in interest expense on
deposits. Interest expense on deposits decreased by
$2,618,000, or 29.1% in 2020, largely
due to decreases in the average rate paid on certificates of
deposit, savings deposits, and NOW and money market deposits during
2020 compared to 2019. Further interest expense savings were
realized due to decreases in the average balance of higher-costing
certificates of deposit during 2020 compared to 2019.
Nevertheless, average interest-bearing deposit balances increased
by $62.9 million, or 5.9%, in 2020
compared to 2019, largely due to the acquisition of Jackson in the fourth quarter of 2019.
The average interest rate paid on interest-bearing deposits
decreased by 27 basis points from 0.84% during 2019 to 0.57% during
2020. Decreases in short-term rates resulting from actions by
the Federal Reserve Board of Governors to reduce the targeted
federal funds rate, plus an inflow of funds from direct stimulus
payments from the U.S. Treasury to deposit account holders during
2020, have resulted in a decrease in the competition for bank
deposit rates. As a result, the average interest rate paid on
highly liquid NOW and money market deposits decreased by 15 basis
points, the average rate paid on savings deposits decreased by 12
basis points and the average rate paid on certificates of deposit
decreased by 32 basis points in 2020 when compared to 2019.
Even with these resulting decreases in the average rate paid on
deposits, the average outstanding balance of deposits increased by
$62.9 million, with only
approximately $56.1 million of the
increase coming from the acquisition of Jackson.
Approximately $1,851,000 of the
decrease in interest expense on deposit accounts came from a
decrease in average outstanding certificates of deposits and a
decrease in the average rates paid during 2020 when compared to
2019. Certificates of deposit decreased on average by
approximately $38.230 million, or
9.4%. Yet, even when factoring in the approximately
$28.931 million increase in average
certificate of deposit balances from the two Jackson branches in
the full year of 2020 but only in the fourth quarter of 2019,
average certificate of deposit balances in Premier's other branch
locations decreased by $67.161
million or 16.4% in 2020, when compared to 2019.
Additional interest expense savings were realized in 2020 from
the reduction in outstanding Federal Home Loan Bank ("FHLB")
borrowings. Interest expense on FHLB borrowings decreased by
$134,000 in 2020 when compared to
2019, due to the payment upon maturity of approximately
$8.8 million of FHLB borrowings since
the end of December 2018. The final $3.0 million outstanding FHLB borrowings were
repaid upon maturity in the third quarter of 2020. Also
contributing to the decrease in interest expense during 2020 was an
$85,000, or 23.0%, decrease in
interest expense on Premier's subordinated debt due to a decrease
in the variable interest rate paid in 2020 compared to 2019.
Interest expense on other borrowings by the parent company
decreased by $31,000 due to the full
repayment of parent only borrowing prior to the end of June 2019 resulting in no interest expense on
these borrowings in 2020. Interest expense on short-term
borrowings, primarily customer repurchase agreements, increased by
$4,000, or 5.7%, in 2020 when
compared to 2019, largely due to a higher average balance
outstanding, partially offset by a lower average rate paid during
2020.
Reducing Premier's increase in net interest income in 2020
was an increase in the annual provision for loan losses.
During 2020, Premier recorded $3,450,000 of provision for loan losses compared
to $1,250,000 of provision for loan
losses recorded in 2019. The provision for loan losses
recorded during 2020 was largely to provide for an estimate of
additional identified credit risk in the loan portfolio due to
uncertainty related to Potential COVID-19 Losses. In 2020,
Premier added approximately $2,500,000 to its qualitative credit risk
analysis of the loan portfolio related to Potential COVID-19 Losses
related to loans originated to various industries believed to be
more susceptible to future credit risk resulting from an economic
slowdown such as lodging, restaurants, amusement, personal services
and retail stores, as well as loans to non-owner occupied rental
real estate borrowers and religious and civic organizations.
Management also increased the estimate of Potential COVID-19 Losses
on loans where the borrower remains on either an interest-only
payment deferral period or a full principal and interest payment
deferral period. Due to government intervention efforts to
stimulate the economy and maintain personal and business liquidity,
the extent, if any, of the impact of the economic slowdown on such
industries may not be known for quite some time in the
future. The remaining provision not related to Potential
COVID-19 Losses in 2020 was a result of Premier's normal analyses
of the credit risk identified within the loan portfolio. This
includes additional risk related to increases in non-owner occupied
loans and other loans outstanding during the year, which were
offset by reductions in estimated credit risk within the loan
portfolio resulting from decreases in higher risk loans, such as
commercial and industrial loans, construction and land development
loans and consumer loans. Other indications of improving
portfolio credit risk that occurred during 2020 include decreases
in loans classified as Special Mention and Substandard, and
improvements in past due ratios. Specific reserves on
impaired loans decreased from $3,102,000 at the end of 2019, net of
$2,322,000 of specific reserves on
impaired loans charged-off in 2020, to $999,000 at the end of 2020. Total
individually impaired loans decreased from $12.2 million at the end of 2019 to $5.1 million at the end of 2020.The level of
provision expense is determined under Premier's internal analyses
of evaluating credit risk. The amount of future provisions for loan
losses will depend on any future improvement or further
deterioration in the estimated credit risk in the loan portfolio as
well as whether additional payments are received on loans
previously identified as having significant credit risk.
Gross charge-offs of loans increased by $2,066,000 in 2020 when compared to year 2019,
while recoveries on loans previously charged-off increased by
$36,000 in 2020.
Net overhead costs (non-interest expenses less non-interest
income) for the calendar year ended December
31, 2020 totaled $35.459
million compared to $34.430
million in the year 2019. Net overhead costs increased
by $1.029 million, or 3.0%, in 2020
when compared to 2019, largely due to an $888,000, or 9.5%, decrease in non-interest
income combined with a minimal $141,000, or 0.3%, increase in non-interest
expense. Total non-interest income decreased by $888,000 in the calendar year 2020 when compared
to 2019, largely due to a $1,090,000,
or 23.4%, decrease in revenue from service charges and fees on
deposit accounts. Service charges on deposit accounts
decreased largely due to a $981,000,
or 27.7%, decrease in customer overdraft fees. Transaction
based deposit account balances have increased significantly during
2020 compared to 2019. As certain sectors of the economy have
been recovering slowly after they were required to close in an
effort to help curb the spread of the COVID-19 virus, deposit
customers have reduced transaction activity and their propensity to
overdraft their accounts. Other sources of non-interest
income decreased by $181,000, or
18.6%, in 2020, which include decreases in checkbook sales,
commissions on insurance premiums, income from Premier's partial
ownership of an insurance agency as well as brokerage and annuity
commission income. These increases were partially offset by a
$184,000, or 5.3%, increase in
electronic banking income and a $199,000, or 93.0%, increase in secondary market
mortgage income. Electronic banking income increased largely
due to a $192,000, or 6.6%, increase
in income from debit card transaction activity resulting from an
increase in electronic payment transactions to facilitate customer
purchases during 2020. Secondary market mortgage income
increased, in part, due to the lower long-term interest rate
environment resulting in an increase in home loan refinances as
customers are taking advantage of lowering their long-term fixed
home loan interest rate.
Non-interest expense increased by $141,000, or 0.3% in 2020 compared to 2019,
largely due to the full year of operations of the two new
Jackson locations, acquired on
October 25, 2019 which increased
direct non-interest expenses by approximately $956,000 in 2020. Overall increases in
operating costs include a $938,000,
or 16.2% increase in outside data processing costs, a $260,000, or 26.7%, increase in taxes not on
income, a $78,000, or 35.0%, increase
in FDIC insurance and a $67,000, or
7.6%, increase in the amortization of intangible assets. The
$938,000 increase in outside data
processing costs includes a $258,000
increase in internet and mobile banking charges, as banking by
electronic means becomes more and more popular among Premier's
customer base, a $94,000 increase in
ATM processing charges, as customers increased ATM activity in
response to COVID-19, and a $410,000
increase in data line costs, as Premier migrated to a more robust
data line network across its branch network. The increase in
FDIC insurance premiums is partially the result of utilizing more
FDIC based community bank assessment credits in 2019 than in 2020
to eliminate FDIC insurance premiums plus an increase in the FDIC
insurance assessment base in 2020, largely due to the growth in
deposits. Such community bank assessment credits were fully
utilized in the first half of 2020 and no credits were available to
offset the third and fourth quarter 2020 premiums.
These increases were substantially offset by a $306,000, or 1.4%, decrease in staff costs, an
$82,000, or 1.2%, decrease in
occupancy and equipment expenses, a $228,000, or 20.2%, decrease in professional
fees, a $497,000, or 32.1%, decrease
in OREO expenses and writedowns, and an $89,000 decrease in other operating expenses when
compared to 2019. The decrease in staff costs is largely due
to reduced staffing hours at some of Premier's branch locations, an
increase in deferred loan costs related to the volume of PPP loans
booked, and savings in medical insurance premiums from a one month
payment furlough in the fourth quarter of 2020. These
savings more than offset $439,000 of
additional staff costs related to the two newly acquired
Jackson branches. Occupancy
and equipment expense decreased, largely due to the gain on the
sale of a branch building in 2020, which more than offset the
$123,000 increase in occupancy and
equipment costs from the Jackson branches and a $109,000 increase in information technology
costs. Professional fees decreased by $228,000, largely due to a decrease in legal fees
and consulting expenses, partially offset by increases in
accounting and audit fees. The decrease in OREO expenses and
writedowns includes $1,169,000 of
property writedowns, net of $191,000
in realized gains on the sale of OREO, in 2019 compared to
$677,000 of property writedowns, net
of $88,000 in realized gains on the
sale of OREO, in 2020.
Total assets as of December 31,
2020 were up $164.8 million,
or 9.3%, to $1.946 billion from the
$1.781 billion of total assets at
year-end 2019. The increase in total assets since year-end is
largely due to a $115.4 million
increase in liquid assets, such as cash and due from banks,
interest bearing bank balances and federal funds sold, funded by a
$138.0 million, or 9.2%, increase in
total deposits and a $13.4 million,
or 65.6%, increase in customer repurchase agreements. Other
increases in earning assets include a $30.4
million increase in securities available for sale and a
$19.1 million increase in total loans
outstanding. Investment securities increased by $30.4 million, or 7.8%, since year-end 2019, as
$184.3 million of new investment
purchases from available funds and a $7.2
million increase in the market value of the securities
available for sale more than offset $158.4
million of proceeds from maturing investments, principal
paydowns on mortgage backed securities, and securities that were
called during 2020. Total loans outstanding increased by
$19.1 million, or 1.6%, largely due
to Premier's robust participation in the SBA's PPP loan program in
the second and third quarters of 2020, which generated $116.0 million of new loans. During the
fourth quarter of 2020, approximately $54.0
million of these PPP loans were forgiven by the SBA or were
paid off by the borrower leaving approximately $62.0 million of PPP loans outstanding at
December 31, 2020. Without
these loans, Premier's loan portfolio would have decreased by
approximately $42.9 million, or 3.6%,
during 2020, largely due to regular principal payments, loan
payoffs, and transfers of loans to OREO upon foreclosure, partially
offset by internal loan growth. Higher risk categories of
loans such as construction and land loans decreased by
approximately $43.5 million, or
32.0%; consumer loans decreased by $5.0
million, or 17.3%; and commercial and industrial loans
decreased by $15.0 million, or
14.3%. Residential real estate secured loans also decreased
by $11.3 million or 2.9% during
2020. These decreases more than offset a $24.7 million, or 8.1%, increase in non-owner
occupied commercial real estate loans and a $6.3 million, or 21.0%, increase in other
loans. Other real estate owned ("OREO") increased by
$973,000, or 7.9%, largely due to the
foreclosure on one commercial real estate property during the first
quarter of 2020 that increased OREO by $600,000 and another foreclosure on an impaired
multifamily real estate loan in the third quarter of 2020 that
resulted in a $3,708,000 reduction in
non-accrual loans and a $1,500,000
increase in OREO. These and other increases were nearly
offset by $1,416,000 of sales of OREO
and $589,000 of value write-downs on
other OREO properties.
Total deposits increased by $138.0
million, or 9.2%, since year-end 2019. The overall
increase in deposits is largely due to a $119.8 million, or 32.6%, increase in
non-interest bearing deposits, a $79.6
million, or 20.1%, increase in savings and money market
deposits, and a $38.2 million, or
11.9%, increase in interest bearing transaction deposits.
Partially offsetting these increases, certificates of deposit
("CD") balances decreased by $99.6
million, or 23.4%. The decrease in certificate of
deposit balances is not only primarily the result of discontinuing
CD rate specials, but also a significant decrease in traditional CD
rates, as management lowered offering rates in response to
decreases in market short-term and long-term interest rates.
Much of the SBA's PPP loan program proceeds were originally
deposited with Premier's subsidiary banks, giving rise to an
increase in commercial based deposit balances. Furthermore,
government based economic stimulus checks to individuals have
resulted in increases in retail based deposit balances.
Customer repurchase agreements increased by $13.4 million, or 65.6% since year-end
2019. FHLB borrowings decreased by $6.4 million to zero at December 31, 2020, due to payments at maturity on
all of the remaining FHLB advances assumed by Premier as part of
its acquisition of First Bank of Charleston. Premier's
subordinated debentures increased by $39,000 since year-end 2019 due to the accretion
of purchase accounting fair value adjustments applied to the
$6.186 million face value of the
subordinated debentures.
Stockholders' equity of $259.9
million equaled 13.4% of total assets at December 31, 2020, which compares to
stockholders' equity of $240.2
million, or 13.5% of total assets, at December 31, 2019. The increase in
stockholders' equity was largely due to the $22.4 million of net income in the year 2020 and
a $5.7 million, net of tax, increase
in the market value of the investment portfolio available for
sale. These increases in stockholders' equity were partially
offset by the $0.60 per share of cash
dividends declared and paid during the four quarters of
2020.
Certain Statements contained in this news release, including
without limitation statements including the word "believes,"
"anticipates," "intends," "expects" or words of similar import,
constitute "forward-looking statements" within the meaning of
section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Such forward-looking statements involve known and
unknown risks, uncertainties and other factors that may cause the
actual results, performance or achievements of Premier to be
materially different from any future results, performance or
achievements of Premier expressed or implied by such
forward-looking statements. Furthermore, uncertainty related to
future economic conditions resulting from government actions
designed to curb the spread of the COVID-19 virus may affect
Premier's operations more or less than currently estimated.
Such factors include, among others, general economic and business
conditions, changes in business strategy or development plans and
other factors referenced in this press release. Given these
uncertainties, prospective investors are cautioned not to place
undue reliance on such forward-looking statements. Premier
disclaims any obligation to update any such factors or to publicly
announce the results of any revisions to any of the forward-looking
statements contained herein to reflect future events or
developments.
Following is a summary of the financial highlights for Premier
as of and for the periods ended December 31,
2020
PREMIER FINANCIAL
BANCORP, INC.
|
Financial
Highlights
|
Dollars in Thousands
(except per share data)
|
|
|
For the
Quarter Ended
|
|
For the
Year Ended
|
|
Dec 31
|
|
Dec 31
|
|
Dec 31
|
|
Dec 31
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Interest
Income
|
|
|
|
|
|
|
|
Loans,
including fees
|
16,668
|
|
16,283
|
|
65,134
|
|
65,237
|
Investments and other
|
2,030
|
|
2,817
|
|
9,337
|
|
11,341
|
Total interest
income
|
18,698
|
|
19,100
|
|
74,471
|
|
76,578
|
Interest
Expense
|
|
|
|
|
|
|
|
Deposits
|
1,090
|
|
2,307
|
|
6,391
|
|
9,009
|
Borrowings and other
|
75
|
|
160
|
|
422
|
|
668
|
Total interest
expense
|
1,165
|
|
2,467
|
|
6,813
|
|
9,677
|
Net
interest income
|
17,533
|
|
16,633
|
|
67,658
|
|
66,901
|
Provision for loan
losses
|
1,095
|
|
(65)
|
|
3,450
|
|
1,250
|
Net
interest income after provision
|
16,438
|
|
16,698
|
|
64,208
|
|
65,651
|
Non-interest
Income
|
|
|
|
|
|
|
|
Service
charges on deposit accounts
|
913
|
|
1,229
|
|
3,571
|
|
4,661
|
Electronic banking income
|
942
|
|
848
|
|
3,672
|
|
3,488
|
Other
non-interest income
|
255
|
|
263
|
|
1,203
|
|
1,185
|
Total non-interest
income
|
2,110
|
|
2,340
|
|
8,446
|
|
9,334
|
Non-Interest
Expense
|
|
|
|
|
|
|
|
Salaries
and employee benefits
|
5,103
|
|
5,437
|
|
21,179
|
|
21,485
|
Net
occupancy and equipment
|
1,448
|
|
1,668
|
|
6,827
|
|
6,909
|
Outside
data processing
|
1,709
|
|
1,494
|
|
6,720
|
|
5,782
|
OREO
expenses and writedowns, net
|
482
|
|
860
|
|
1,053
|
|
1,550
|
Amortization of intangibles
|
228
|
|
212
|
|
952
|
|
885
|
Other
non-interest expenses
|
1,964
|
|
1,709
|
|
7,174
|
|
7,153
|
Total non-interest
expense
|
10,934
|
|
11,380
|
|
43,905
|
|
43,764
|
Income
Before Taxes
|
7,614
|
|
7,658
|
|
28,749
|
|
31,221
|
Income
Taxes
|
1,674
|
|
1,764
|
|
6,311
|
|
7,025
|
NET
INCOME
|
5,940
|
|
5,894
|
|
22,438
|
|
24,196
|
|
|
|
|
|
|
|
|
EARNINGS PER SHARE
|
0.40
|
|
0.40
|
|
1.53
|
|
1.65
|
DILUTED EARNINGS PER SHARE
|
0.40
|
|
0.40
|
|
1.52
|
|
1.64
|
DIVIDENDS PER SHARE
|
0.15
|
|
0.15
|
|
0.60
|
|
0.60
|
|
|
|
|
|
|
|
|
Charge-offs
|
413
|
|
251
|
|
3,782
|
|
1,716
|
Recoveries
|
61
|
|
47
|
|
306
|
|
270
|
Net
charge-offs (recoveries)
|
352
|
|
204
|
|
3,476
|
|
1,446
|
|
|
|
|
|
|
|
|
PREMIER FINANCIAL
BANCORP, INC.
|
Financial Highlights
(continued)
|
Dollars in Thousands
(except per share data)
|
|
|
Balances as
of
|
|
December
31
|
|
December
31
|
|
2020
|
|
2019
|
ASSETS
|
|
|
|
Cash and due from
banks
|
24,961
|
|
23,091
|
Interest-bearing bank
balances
|
174,209
|
|
66,063
|
Federal funds
sold
|
11,306
|
|
5,902
|
Securities available
for sale
|
421,190
|
|
390,754
|
Loans
(net)
|
1,200,862
|
|
1,181,753
|
Other real estate
owned
|
13,215
|
|
12,242
|
Other
assets
|
48,015
|
|
48,189
|
Goodwill and other
intangible assets
|
52,064
|
|
53,016
|
TOTAL
ASSETS
|
1,945,822
|
|
1,781,010
|
|
|
|
|
LIABILITIES &
EQUITY
|
|
|
|
Deposits
|
1,633,740
|
|
1,495,753
|
Fed funds/repurchase
agreements
|
33,827
|
|
20,428
|
FHLB
borrowings
|
-
|
|
6,375
|
Subordinated
debentures
|
5,475
|
|
5,436
|
Other
liabilities
|
12,873
|
|
12,777
|
TOTAL
LIABILITIES
|
1,685,915
|
|
1,540,769
|
Common Stockholders'
Equity
|
259,907
|
|
240,241
|
TOTAL
LIABILITIES &
STOCKHOLDERS'
EQUITY
|
1,945,822
|
|
1,781,010
|
|
|
|
|
TOTAL BOOK VALUE
PER COMMON SHARE
|
17.71
|
|
16.39
|
Tangible Book
Value per Common Share
|
14.16
|
|
12.77
|
|
|
|
|
Non-Accrual
Loans
|
8,996
|
|
14,437
|
Loans 90 Days Past
Due and Still Accruing
|
2,332
|
|
2,228
|
Accruing Troubled
Debt Restructured Loans
|
398
|
|
3,020
|
View original
content:http://www.prnewswire.com/news-releases/premier-financial-bancorp-inc-reports-annual-2020-earnings-301224317.html
SOURCE Premier Financial Bancorp, Inc.