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Premier Financial Bancorp, Inc. Reports Third Quarter 2017 Earnings

HUNTINGTON, W. Va., Nov. 2, 2017 /PRNewswire/ -- PREMIER FINANCIAL BANCORP, INC. (PREMIER), (NASDAQ/GMS: PFBI), a $1.5 billion bank holding company with two bank subsidiaries, announced its financial results for the third quarter of 2017. Premier realized net income of $3,467,000 (32 cents per diluted share) during the quarter ended September 30, 2017, a 9.6% increase from the $3,164,000 of net income reported for the third quarter of 2016. The increase in net income during the third quarter of 2017 is largely due to increases in interest income and non-interest income as well as decreases in interest expense and non-interest expense. These items more than offset an increase in the provision for loan losses during the third quarter of 2017. On a diluted per share basis, Premier earned $0.32 during the third quarter of 2017 compared to $0.30 per share earned during the third quarter of 2016. For the first nine months of 2017 Premier realized net income of $11,050,000 ($1.03 per diluted share) compared to $8,767,000 ($0.83 per diluted share) earned during the first nine months of 2016.

President and CEO Robert W. Walker commented, "We are pleased with another strong quarterly earnings performance. Year-to-date net income in 2017 has increased by $2,283,000, or 26.0%, and year-to-date earnings per diluted share has increased by 24.1%, to $1.03 per diluted share. Our net interest margin improved to 4.05% in the third quarter of 2017, up from 3.91% in the same quarter of 2016. Our efforts to reduce operating costs continue as non-interest expenses have decreased by $683,000, or 6.4%, in the third quarter of 2017 and by $993,000, or 3.2%, for the year-to-date compared to 2016. We continue to work through our non-performing assets and have increased our specific reserves on some impaired loans. However, since the end of 2016 total non-accrual loans have decreased by $1.6 million, or 6.3%, accruing loans 90+ days past due have decreased by $369,000, or 18.5%, and other real estate owned ("OREO") has decreased by $1.2 million, or 9.5%. Our regulatory capital ratios remain strong as our equity-to-asset ratios improve from our positive earnings performance year-to-date."

Net interest income for the quarter ended September 30, 2017 totaled $14.031 million, up $315,000, or 2.3%, from the $13.716 million of net interest income earned in the third quarter of 2016. Interest income in 2017 increased by $269,000, or 1.8%, largely due to a $122,000, or 8.9%, increase in interest income on investment securities. Interest income on loans in the third quarter of 2017 increased $94,000, or 0.7%, compared to the interest income on loans earned during the same quarter of 2016. Interest income on loans in the third quarter of the prior year included approximately $142,000 of income recognized from deferred interest and discounts recognized on loans that paid off during the quarter compared to no interest income of this kind recognized during the third quarter of 2017. Otherwise, interest income on loans increased by $236,000, or 1.8%, in the third quarter of 2017, largely due to a higher average balance of loans outstanding during the quarter. Interest income on investment securities in the third quarter of 2017 increased by $122,000, or 8.9%, largely due to a higher average yield on the investment portfolio, although on a lower average balance of investments outstanding during the quarter. Interest income from interest-bearing bank balances and federal funds sold increased by $53,000, or 43%, largely due to an increase in the yield on these balances in 2017 on a lower average balance outstanding during the quarter.

Complementing the increase in interest income in the third quarter of 2017 was a $46,000, or 4.0%, decrease in interest expense. Interest expense on deposits decreased by $11,000, or 1.1%, in the third quarter of 2017, primarily due to a lower average of interest-bearing deposits outstanding during the quarter. Interest expense on repurchase agreements in the third quarter of 2017 decreased by $3,000, or 30.0%, due to both a decrease in the average rate paid on these agreements as well as a lower average balance outstanding during the quarter. Interest expense on borrowings in the third quarter of 2017 decreased by $43,000, or 38.7%, largely due to a decrease in outstanding borrowings, including the full repayment of bank based FHLB borrowings during 2016. Partially offsetting the decrease in interest expense on borrowings was an $11,000, or 17.5%, increase in interest expense on Premier's subordinated debt, largely due to an increase in the variable interest rate paid in 2017.

During the quarter ended September 30, 2017, Premier recorded $891,000 of provision for loan losses compared to $312,000 of provision for loan losses recorded during the same quarter of 2016. The provision for loan losses recorded during the third quarter of 2017 was to provide for an increase in specific reserves on impaired loans and to provide for the $17.4 million, or 1.7%, increase in loans outstanding since June 30, 2017. Specific reserves on impaired loans increased from $1,203,000 at the end of the second quarter of 2017 to $1,598,000 at the end of the third quarter of 2017, largely due to an increase in specific reserves placed on a real estate renovation loan and a non-owner occupied commercial real estate loan. 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 $33,000 in the third quarter of 2017 when compared to the same quarter of 2016, while recoveries on loans previously charged-off increased by $59,000 in the same comparison. Also during the quarter ended September 30, 2017, non-accrual loans increased by $3.7 million since June 30, 2017, while accruing loans 90+ days past due decreased by $529,000. Both non-accrual loans and accruing loans 90+ days past due have decreased since year-end 2016.

Net overhead costs (non-interest expenses less non-interest income) for the quarter ended September 30, 2017 totaled $7.748 million compared to $8.546 million in the third quarter of 2016, as a $683,000, or 6.4%, decrease in non-interest expenses was complemented by a $115,000, or 5.6%, increase in non-interest income. Non-interest income increased by $115,000 in the third quarter of 2017 when compared to the third quarter of 2016, largely due to a $105,000, or 10.2%, increase in service charges on deposit accounts and a $20,000, or 2.5%, increase in electronic banking income. Secondary market mortgage income also increased by $3,000, or 4.7%. Partially offsetting these increases, other sources of non-interest income decreased by $13,000, or 7.4%, when compared to the third quarter of 2016. Non-interest expenses decreased by $683,000 in the third quarter of 2017 when compared to the third quarter of 2016, largely due to a $419,000, or 54.8%, decrease in expenses on other real estate owned ("OREO"), a $124,000, or 7.6%, decrease in occupancy and equipment expenses and a $119,000, or 42.8%, decrease in FDIC insurance expense. OREO expenses were lower in the third quarter of 2017 due to a higher amount of OREO writedowns and losses on the sale of OREO in 2016 compared to the third quarter of 2017. The decrease in occupancy and equipment expenses in the third quarter of 2017 is largely due to lower amounts spent on building repairs and utility costs, and a lower level of depreciation expense on information technology equipment. Other decreases in non-interest expenses include a $57,000, or 1.2%, decrease in staff costs, a $26,000, or 9.4%, decrease in amortization of intangible assets, and a $44,000 decrease in other operating expenses. These decreases in operating costs were partially offset by a $44,000, or 3.4%, increase in data processing costs, a $29,000, or 17.4%, increase in professional fees, and a $33,000, or 21.2%, increase in taxes not based on income when compared to the second quarter of 2016.

Total assets as of September 30, 2017 were down $3.5 million, or 0.2%, from the $1.496 billion of total assets at year-end 2016. Liquid assets, such as cash and due from banks, interest bearing bank balances and federal funds sold, decreased by $29.3 million, as funds were used to fund loans or satisfy deposit withdrawals. Investment securities increased by $596,000, or 0.2%, since year-end 2016, while total loans outstanding increased by $30.5 million, or 3.0%. Other real estate owned decreased by $1.2 million, or 9.5%, as writedowns and sales of properties exceeded additions attributable to new foreclosures. Other assets decreased by $1.8 million, largely due to depreciation expense recorded on premises and equipment and changes in deferred taxes related to the increase in the market value of the investment portfolio, while goodwill and other intangible assets decreased by $768,000 due to core deposit intangible amortization. Total deposits decreased by $10.0 million, or 0.8% since year-end 2016, including a $14.5 million decrease in savings deposits, and a $14.6 million decrease in time deposits since year-end 2016. Partially offsetting these decreases, interest bearing transaction deposits have increased by $10.7 million, or 4.5%, and non-interest bearing demand deposits have increased by $8.3 million, or 2.6%, since year-end 2016. Customer repurchase agreements increased by $1.3 million, or 5.4% since year-end 2016. Other borrowings decreased by $2.9 million, or 32.3%, since year-end 2016 due to scheduled principal payments plus additional principal payments on Premier's existing borrowings. However, the subordinated debentures assumed by Premier as part of its acquisition of First National Bankshares Corporation ("Bankshares") in January 2016 increased by $25,000 due to the accretion of purchase accounting fair value adjustments applied to the $6.186 million of Bankshares subordinated debentures.

Stockholders' equity of $183.3 million equaled 12.3% of total assets at September 30, 2017, which compares to stockholders' equity of $174.2 million, or 11.6% of total assets at December 31, 2016. The increase in stockholders' equity was largely due to the $11.1 million of net income in the first nine months of 2017 as well as a $2.4 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 $0.45 per share of common stock dividends declared and paid during the first nine months of 2017.

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. 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 September 30, 2017

PREMIER FINANCIAL BANCORP, INC.

Financial Highlights

Dollars in Thousands (except per share data)



For the
Quarter Ended


For the
Nine-Months Ended


Sept 30


Sept 30


Sept 30


Sept 30


2017


2016


2017


2016

Interest Income

15,134


14,865


46,616


43,741

Interest Expense

1,103


1,149


3,327


3,479

Net Interest Income

14,031


13,716


43,289


40,262

Provision for Loan Losses

891


312


2,033


1,436

Net Interest Income after Provision

13,140


13,404


41,256


38,826

Non-Interest Income

2,177


2,062


6,328


6,064

Non-Interest Expenses

9,925


10,608


30,327


31,320

Income Before Taxes

5,392


4,858


17,257


13,570

Income Taxes

1,925


1,694


6,207


4,803

NET INCOME

3,467


3,164


11,050


8,767









EARNINGS PER SHARE

0.33


0.30


1.04


0.83

DILUTED EARNINGS PER SHARE

0.32


0.30


1.03


0.83

DIVIDENDS PER SHARE

0.15


0.136


0.45


0.408









Charge-offs

336


303


1,102


575

Recoveries

109


50


592


355

Net charge-offs (recoveries)

227


253


510


220









PREMIER FINANCIAL BANCORP, INC.

Financial Highlights (continued)

Dollars in Thousands (except per share data)



Balances as of


September 30


December 31


2017


2016

ASSETS




Cash and Due From Banks

41,831


41,443

Interest Bearing Bank Balances

24,263


58,052

Federal Funds Sold

11,632


7,555

Securities Available for Sale

289,203


288,607

Loans (net)

1,042,965


1,013,987

Other Real Estate Owned

11,458


12,665

Other Assets

32,371


34,164

Goodwill and Other Intangible Assets

38,952


39,720

TOTAL ASSETS

1,492,675


1,496,193





LIABILITIES & EQUITY




Deposits

1,269,384


1,279,386

Fed Funds/Repurchase Agreements

25,116


23,820

Other Borrowings

6,000


8,859

Subordinated Debentures

5,368


5,343

Other Liabilities

3,550


4,601

TOTAL LIABILITIES

1,309,418


1,322,009

Common Stockholders' Equity

183,257


174,184

TOTAL LIABILITIES &

STOCKHOLDERS' EQUITY

1,492,675


1,496,193





TOTAL BOOK VALUE PER COMMON SHARE

17.19


16.37

Tangible Book Value per Common Share

13.54


12.64





Non-Accrual Loans

24,136


25,747

Loans 90 Days Past Due and Still Accruing

1,630


1,999

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SOURCE Premier Financial Bancorp, Inc.