EXHIBIT 99.1
NEWS FOR IMMEDIATE RELEASE | CONTACT: | BRIEN M. CHASE, CFO |
JULY 30, 2020 | 304-525-1600 |
PREMIER FINANCIAL BANCORP, INC.
REPORTS SECOND QUARTER 2020 EARNINGS
PREMIER FINANCIAL BANCORP, INC. (PREMIER), HUNTINGTON, WEST VIRGINIA (NASDAQ/GMS-PFBI), a $1.9 billion financial holding company with two community bank subsidiaries, announced its financial results for the second quarter of 2020. Premier realized net income of $5,506,000 (37 cents per diluted share) during the quarter ended June 30, 2020, a 6.0% decrease from the $5,859,000 of net income reported for the second quarter of 2019. The decrease in net income in the second quarter of 2020 is largely due to a decrease in interest income on investments and other liquid assets, a decrease in non-interest income, and an increase in provision for loan losses, all of which more than offset a decrease in interest expense and an increase in interest income on loans. A majority of these changes were largely in response to changes in the economy related to the novel corona virus (“COVID-19”), whether such changes were 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. On a diluted per share basis, Premier earned $0.37 during the second quarter of 2020 compared to $0.40 per share earned during the second quarter of 2019.
For the first half of 2020 Premier realized net income of $10,874,000 (74 cents per diluted share), a 9.6% decrease from the $12,035,000 (82 cents per diluted share) earned during the first half of 2019. The decrease in net income in the first six months of 2020 is largely due to decreases in interest income and non-interest income, coupled with an increase in the provision for loan losses and an increase in non-interest expense. These changes that negatively affected net income more than offset decreases in interest expense and income tax expense. The provision for loan losses increased by $700,000, or 78.7%, in the first six months of 2020, largely to provide for the $1,650,000 of estimated additional credit risk in the loan portfolio related to consequences of the national economic shutdown aimed to moderate the spread of COVID-19. The annualized returns on average common shareholders’ equity and average assets were approximately 8.72% and 1.19% for the six months ended June 30, 2020, compared to 10.70% and 1.41% for the same period in 2019.
President and CEO Robert W. Walker commented, “We are pleased with our second quarter 2020 results, especially with all of the economic changes as governments worldwide take measures to curb the spread of the COVID-19 virus. I am proud to report that our management and staff team members have risen to the occasion. As an essential business, we haves taken 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”). We believe we have been prudent by adding approximately $1,000,000 in the second quarter alone to our qualitative credit risk analysis of the loan portfolio for potential COVID-19 related loan losses, even as our other loan credit risk measurements are improving. Without this additional provision expense, our company would have reported second quarter 2020 results rivaling the record quarterly results we reported in 2019. The path ahead is 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.”
EXHIBIT 99.1 - Continued
Net interest income for the quarter ended June 30, 2020 totaled $16.809 million, up $154,000, or 0.9%, from the $16.655 million of net interest income earned in the second quarter of 2019, as interest expense savings exceeded a decrease in interest income. Interest income in 2020 decreased by $468,000, or 2.4%, in the second quarter of 2020 when compared to the second quarter of 2019, largely due to a $452,000, or 94.6%, decrease in interest income on interest-bearing bank balances and federal funds sold, and a $205,000, or 8.5%, decrease in interest income on investment securities. These decreases were partially offset by a $189,000, or 1.2%, increase in interest income on loans. Interest income on interest-bearing bank balances and federal funds sold decreased in the second 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 average balance of these increased from $81.7 million during the second quarter of 2019 to $112.5 million during the second quarter of 2020, 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. Similarly, interest income on investment securities in the second quarter of 2020 decreased by $205,000, or 8.5%, when compared to the second quarter of 2019. While the average balance of investments increased by $31.975 million in the second quarter of 2020 when compared to the same quarter of 2019, the average yield earned decreased.
Contrary to these two decreases, interest income on loans increased by $189,000, or 1.2%, in the second quarter of 2020 when compared to the second quarter of 2019. During the second quarter of 2020, approximately $468,000 of interest income was realized from deferred interest and discounts recognized on loans that paid-off or paid-down during the second quarter of 2020 compared to $293,000 of interest income of this kind recognized during the second 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. As a result of the higher level of recognition in 2020, interest income on loans increased by $175,000. Otherwise, interest income on loans increased by $14,000, or 0.1%, in the second quarter of 2020. This increase includes approximately $550,000 of interest income on loans acquired from the acquisition of The First National Bank of Jackson (“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 was included in the second quarter of 2019. Excluding the loan interest income earned on the Jackson loans and the increase in deferred interest and discounts recognized on loans, interest income on loans decreased by $536,000, or 3.4%, in the second quarter of 2020 when compared to the same quarter of 2019, largely due to a decrease in the average yield on the loan portfolio. Premier’s participation in the SBA’s PPP loan program resulted in $114,192,000 of new loans during the second quarter of 2020. These loans increased the second quarter average loans outstanding by approximately $84,136,000 and increased interest income on loans during the second quarter of 2020 by approximately $824,000. Without Premier’s participation in the SBA PPP loan program, and excluding the average loans from the Jackson acquisition, average loans outstanding during the second quarter of 2020 would have decreased by $23,448,000, or 2.0%, when compared to the average loans outstanding during the second quarter of 2019. This decrease in loans and, in particular, the types of loans that decreased, also had an effect on the second quarter 2020 provision for loans losses, as more fully explained below.
EXHIBIT 99.1 - Continued
Additional interest expense savings have been realized in the second quarter of 2020 from the reduction in outstanding Federal Home Loan Bank (“FHLB”) borrowings and other borrowings at the parent company. Interest expense on FHLB borrowings decreased by $25,000, or 52.1%, in the second quarter of 2020 when compared to the same quarter of 2019, largely due to the payment upon maturity of approximately $5.4 million of FHLB borrowings since the end of January 2019. Interest on other borrowings at the parent company decreased by $10,000. This borrowing was fully repaid during the first half of 2019 and therefore no interest expense was recognized on this debt in 2020. Also contributing to the decrease in interest expense during the second quarter of 2020 was a $20,000, or 20.8%, decrease in interest expense on Premier’s subordinated debt due to a decrease in the variable interest rate paid in 2020 compared to the second 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 second quarter of 2020 in conjunction with decreases in short-term interest rate policy by the Federal Reserve Board of Governors. Contrary to these interest expense savings, interest expense on short-term borrowings, primarily customer repurchase agreements, increased by $3,000, or 25.0%, in 2020 when compared to 2019. The additional interest expense was largely due to a $3.716 million higher average balance outstanding during the second quarter of 2020.
EXHIBIT 99.1 - Continued
Gross charge-offs of loans remained unchanged at approximately $109,000 in the second quarters of 2020 and 2019, while recoveries on loans previously charged-off decreased by $22,000 to $51,000 in the second quarter of 2020. During the first six months of 2020, net charge-offs have decreased by $111,000 to $744,000, compared to the same six months of 2019. Also during the first six months of 2020, non-accrual loans decreased by $676,000 since year-end 2019, while accruing loans over 90 days past due decreased by $1,248,000.
Net overhead costs (non-interest expenses less non-interest income) for the quarter ended June 30, 2020 totaled $9.189 million compared to $8.694 million in the second quarter of 2019. Net overhead increased by $495,000, or 5.7%, in the second quarter of 2020 when compared to the second quarter of 2019, largely due to a $457,000, or 19.5%, decrease in non-interest income plus a $38,000, or 0.3%, increase in non-interest expense. Total non-interest income decreased by $457,000 in the second quarter of 2020 when compared to the second quarter of 2019, largely due to a $430,000, or 38.3%, decrease in revenue from service charges and fees on deposit accounts. Service charges on deposit accounts decreased largely due to a $390,000, or 46.1%, decrease in customer overdraft fees. Transaction based deposit account balances have increased significantly during the second quarter of 2020 compared to the same quarter of 2019. The lack of deposit withdrawals resulting from a decline in normal consumer spending habits as non-essential businesses were required to close in an effort to help curb the spread of the COVID-19 virus has reduced transaction activity and the propensity of deposit customers to overdraft their accounts. Other sources of non-interest income decreased by $89,000, or 33.5%, in the second quarter of 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. Partially offsetting these decreases in non-interest income, electronic banking income increased by $10,000, or 1.1% and secondary market mortgage income increased by $52,000, or 158%. Electronic banking income increased only marginally, as increases in income from debit card transaction activity were largely offset by decreases non-customer ATM transaction fees. 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.
EXHIBIT 99.1 - Continued
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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.
EXHIBIT 99.1 - Continued
PREMIER FINANCIAL BANCORP, INC.
Financial Highlights
Dollars in Thousands (except per share data)
For the Quarter Ended | For the Six Months Ended | |||||||||||||||
June 30 | June 30 | June 30 | June 30 | |||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Interest Income | ||||||||||||||||
Loans, including fees | 16,416 | 16,227 | 32,170 | 32,516 | ||||||||||||
Investments and other | 2,222 | 2,879 | 5,112 | 5,654 | ||||||||||||
Total interest income | 18,638 | 19,106 | 37,282 | 38,170 | ||||||||||||
Interest Expense | ||||||||||||||||
Deposits | 1,715 | 2,285 | 3,880 | 4,335 | ||||||||||||
Borrowings and other | 114 | 166 | 251 | 345 | ||||||||||||
Total interest expense | 1,829 | 2,451 | 4,131 | 4,680 | ||||||||||||
Net interest income | 16,809 | 16,655 | 33,151 | 33,490 | ||||||||||||
Provision for loan losses | 590 | 330 | 1,590 | 890 | ||||||||||||
Net interest income after provision | 16,219 | 16,325 | 31,561 | 32,600 | ||||||||||||
Non-interest Income | ||||||||||||||||
Service charges on deposit accounts | 692 | 1,122 | 1,798 | 2,216 | ||||||||||||
Electronic banking income | 937 | 927 | 1,755 | 1,749 | ||||||||||||
Other non-interest income | 261 | 298 | 586 | 558 | ||||||||||||
Total non-interest income | 1,890 | 2,347 | 4,139 | 4,523 | ||||||||||||
Non-Interest Expense | ||||||||||||||||
Salaries and employee benefits | 5,267 | 5,427 | 10,675 | 10,626 | ||||||||||||
Net occupancy and equipment | 1,798 | 1,877 | 3,523 | 3,541 | ||||||||||||
Outside data processing | 1,702 | 1,426 | 3,233 | 2,810 | ||||||||||||
OREO expenses and writedowns, net | 354 | 228 | 422 | 477 | ||||||||||||
Amortization of intangibles | 241 | 223 | 483 | 450 | ||||||||||||
Other non-interest expenses | 1,717 | 1,860 | 3,480 | 3,730 | ||||||||||||
Total non-interest expense | 11,079 | 11,041 | 21,816 | 21,634 | ||||||||||||
Income Before Taxes | 7,030 | 7,631 | 13,884 | 15,489 | ||||||||||||
Income Taxes | 1,524 | 1,772 | 3,010 | 3,454 | ||||||||||||
NET INCOME | 5,506 | 5,859 | 10,874 | 12,035 | ||||||||||||
EARNINGS PER SHARE | 0.38 | 0.40 | 0.74 | 0.82 | ||||||||||||
DILUTED EARNINGS PER SHARE | 0.37 | 0.40 | 0.74 | 0.82 | ||||||||||||
DIVIDENDS PER SHARE | 0.15 | 0.15 | 0.30 | 0.30 | ||||||||||||
Charge-offs | 109 | 109 | 935 | 1,012 | ||||||||||||
Recoveries | 51 | 73 | 191 | 157 | ||||||||||||
Net charge-offs (recoveries) | 58 | 36 | 744 | 855 |
EXHIBIT 99.1 - Continued
Financial Highlights (continued)
Dollars in Thousands (except per share data)
Balances as of | ||||||||
June 30 | December 31 | |||||||
2020 | 2019 | |||||||
ASSETS | ||||||||
Cash and due from banks | 23,724 | 23,091 | ||||||
Interest-bearing bank balances | 101,521 | 66,063 | ||||||
Federal funds sold | 8,365 | 5,902 | ||||||
Securities available for sale | 416,700 | 390,754 | ||||||
Loans (net) | 1,250,614 | 1,181,753 | ||||||
Other real estate owned | 12,267 | 12,242 | ||||||
Other assets | 49,270 | 48,189 | ||||||
Goodwill and other intangible assets | 52,533 | 53,016 | ||||||
TOTAL ASSETS | 1,914,994 | 1,781,010 | ||||||
LIABILITIES & EQUITY | ||||||||
Deposits | 1,608,151 | 1,495,753 | ||||||
Fed funds/repurchase agreements | 27,737 | 20,428 | ||||||
FHLB borrowings | 2,995 | 6,375 | ||||||
Subordinated debentures | 5,455 | 5,436 | ||||||
Other liabilities | 16,661 | 12,777 | ||||||
TOTAL LIABILITIES | 1,660,999 | 1,540,769 | ||||||
Common Stockholders’ Equity | 253,995 | 240,241 | ||||||
TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY | 1,914,994 | 1,781,010 | ||||||
TOTAL BOOK VALUE PER COMMON SHARE | 17.31 | 16.39 | ||||||
Tangible Book Value per Common Share | 13.73 | 12.77 | ||||||
Non-Accrual Loans | 13,761 | 14,437 | ||||||
Loans 90 Days Past Due and Still Accruing | 980 | 2,228 |