News Column

Premier Financial Bancorp, Inc. Reports Second Quarter 2014 Earnings

August 23, 2014



By a News Reporter-Staff News Editor at Investment Weekly News -- PREMIER FINANCIAL BANCORP, INC. (PREMIER), (NASDAQ/NMS-PFBI), a $1.3 billion bank holding company with two bank subsidiaries, announced its financial results for the second quarter of 2014. Premier realized income of $3,100,000 (34 cents per diluted share) during the quarter ending June 30, 2014, a 0.3% decrease from the $3,109,000 of net income reported for the second quarter of 2013. The slight decrease in income in 2014 is largely due to an increase in non-interest expenses, which more than offset an increase in interest income on loans, a decrease in interest expense and an increase in non-interest income. On a diluted per share basis, Premier earned $0.34 during the second quarter of 2014 compared to $0.35 per share earned during the second quarter of 2013. For the first half of 2014 Premier realized net income of $6,770,000 (75 cents per diluted share) compared to $5,613,000 (63 cents per diluted share) earned during the first half of 2013.

President and CEO Robert W. Walker commented, "We are pleased to welcome the new operations from the Bank of Gassaway that was purchased on April 4, 2014. While our operating expenses were certainly higher due to the inclusion of the Gassaway branch network, we also realized increases in interest income and non-interest income while continuing to save on interest expense when compared to the second quarter of 2013. In the coming months as we continue to assimilate the Gassaway branch network into our own, we believe the profitability of those operations will also increase. We continue to realize opportunities to liquidate troubled assets for reasonable values and are working hard to reduce our non-performing loans outstanding. We also sold a few OREO properties in the second quarter and realized gains on some of those sales."

Net interest income for the quarter ended June 30, 2014 totaled $11.676 million, compared to $11.093 million of net interest income earned during the second quarter of 2013. When compared to the second quarter of 2013, net interest income increased by $583,000, or 5.3%, largely due to a $556,000 increase in interest income on loans and a $94,000 decrease in interest expense paid on deposits. In the second quarter of 2014, interest income on loans included an increase of $1.37 million from the loans acquired from the Gassaway purchase. Partially offsetting this increase was $770,000 of deferred interest and purchase discounts recognized on non-accrual loans liquidated during the second quarter of 2013. When compared to the second quarter of 2013, interest expense on deposits decreased by $94,000, or 8.9%, during the second quarter of 2014. This decrease in interest expense includes $83,000 of additional interest expense on deposits from the Gassaway purchase. Otherwise, interest expense on deposits in the second quarter of 2014 would have decreased by $177,000, or 16.8%, when compared to the second quarter of 2013. Also affecting net interest income in the second quarter of 2014 was a $106,000 decrease in interest income on investments largely due to lower average yields on the investment portfolio, a $22,000 increase in interest income on federal funds sold and interest bearing bank balances, and a $17,000 decrease in interest expense on short- and long-term borrowings.

During the quarter ending June 30, 2014, Premier recorded a $79,000 negative provision for loan losses compared to a $70,000 negative provision for loan losses recorded during the same period of 2013. The $79,000 negative provision recorded in 2014 was largely due to scheduled payments received on impaired loans reducing the level of specific allocations of the allowance for loan losses combined with a reduction in the estimated credit risk in the remaining loan portfolio. The $70,000 negative provision expense recorded in 2013 was largely due to loan recoveries recorded during the quarter and a decrease in estimated credit risk of performing loans within the total loan portfolio, as well as payments received on impaired loans which have reduced the estimated level of credit risk on those loans. The level of provision expense is determined under Premier's internal analyses of evaluating credit risk. The extended decline in economic conditions is still having an impact on borrowers' repayment abilities; however both non-accrual loans and accruing loans 90+ days past due have decreased since year-end 2013. The amount of future provisions for loan losses, either positive or negative, 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 $336,000 in the second quarter of 2014 when compared to the same quarter of 2013, while recoveries of loans previously charged-off increased by $22,000 during the same period comparison.

Net overhead costs (non-interest expenses less non-interest income) for the quarter ending June 30, 2014 totaled $6.931 million compared to $6.228 million in the second quarter of 2013. The $703,000 increase in net overhead when compared to the second quarter of 2013 is largely due to increases in expenses such as staff costs, occupancy and equipment, data processing, supplies, FDIC insurance, and amortization of intangible assets as a result of the inclusion of the operations of Gassaway since its purchase on April 4, 2014. Non-interest income also increased as a result of the Gassaway purchase. Non-interest income increased by $202,000, or 12.8%, in the second quarter of 2014 when compared to the second quarter of 2013, largely due to a $138,000, or 26.7%, increase in electronic banking income and a $52,000, or 6.1%, increase in service charges on deposit accounts. Other increases in non-interest income include a $3,000 increase in secondary market mortgage income and a $9,000 increase in income from other banking services. Non-interest expenses increased by $905,000, or 11.6%, in the second quarter of 2014 compared to the second quarter of 2013. Increases in non-interest expenses include a $1,028,000, or 26.7%, increase in staff costs, a $204,000, or 18.5%, increase in occupancy and equipment expense, a $174,000, or 20.4%, increase in data processing costs, and a $60,000, or 30.0%, increase in FDIC insurance premiums, largely due to the addition of the operations of Gassaway. Other increases in non-interest expenses include a $49,000, or 45.0%, increase in supplies expense, $55,000 of conversion costs, and a $72,000, or 47.4%, increase in the amortization of intangible assets, again largely due to the addition of the operations of Gassaway. These expenses were partially offset by an $80,000, or 27.7%, decrease in professional fees and a $760,000 decrease in expenses on other real estate owned (net of realized gains). In the second quarter of 2014, Premier realized $1,038,000 of gains on the sale of OREO property partially offset by $292,000 of additional write downs on other OREO property and $258,000 of other expenses related to OREO. These compare to $272,000 of net OREO expenses recorded during the second quarter of 2013.

Total assets as of June 30, 2014 were up $171.7 million, or 15.6%, from the $1.1 billion of total assets at year-end 2013. The increase in assets is largely due to the purchase of Gassaway in April 2014 which added approximately $185.5 million in total assets (net of the $20.3 million cash purchase price), $95.1 million in net loans, $184.6 million in total deposits, $38.7 million in investment securities and $41.0 million of liquid assets (net of the $20.3 million cash purchase price.) Since year-end, investment securities have increased by $51.7 million, or 23.7%, largely due to the investment portfolio acquired from Gassaway but also as Premier invested an additional approximately $10.2 million of its liquid assets in debt securities. Total loans outstanding have increased by $92.1 million since year-end, largely due to the $95.1 million of loans from the Gassaway purchase. Total deposits have increased by $165.5 million since year-end, as the $184.6 million in total deposits assumed from the Gassaway purchase have been reduced by approximately $19.0 million of deposit withdrawals during the first six months of 2014.

Shareholders' equity of $153.5 million equaled 12.1% of total assets at June 30, 2014, which compares to shareholders' equity of $146.9 million or 13.4% of total assets at December 31, 2013. While total shareholders' equity increased in the first six months of 2014, the ratio to total assets decreased as a result of the Gassaway acquisition. Per the terms of the acquisition, Premier Bank paid cash to the sellers and no equity was issued by the Company. As a result, total assets increased by approximately $185.5 million with no increase in total shareholders' equity. The increase in shareholders' equity was largely due to the $6.8 million of net income during the first six months of 2014 partially offset by dividends declared on common stock and Premier's Series A Preferred Stock. Also increasing total shareholders' equity at June 30, 2014 was a $2.3 million, net of tax, increase in the market value of the investment portfolio available for sale largely due to a decline in long-term interest rates since year-end 2013.

Keywords for this news article include: Information Technology, Investment and Finance, Premier Financial Bancorp Inc, Information and Data Processing.

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Source: Investment Weekly News


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