Premier Financial (PFC) 10-K/A 2020 FY Annual report (amended)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K/A

(Mark One)

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2020

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 0-26850

PREMIER FINANCIAL CORP.

(Exact name of registrant as specified in its charter)

OHIO	34-1803915
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
601 Clinton Street, Defiance, Ohio	43512
(Address of principal executive offices)	(Zip code)

Registrant’s telephone number, including area code: (419) 782-5015

Securities registered pursuant to Section 12(b) of the Act:

Common Stock, Par Value $0.01 Per Share	PFC	The NASDAQ Stock Market
(Title of Class)	(Trading Symbol)	(Name of each exchange on which registered)

Securities registered pursuant to Section 12(g) of the Act:

None

(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.

Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☒ Non accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The aggregate market value of the voting stock held by non-affiliates of the registrant computed by reference to the closing price of such stock as of June 30, 2020, was approximately $648.8 million.

As of March 4, 2021, there were issued and outstanding 37,273,303 shares of the registrant’s common stock.

Documents Incorporated by Reference

Part III of this Form 10-K incorporates by reference certain information from the registrant’s definitive Proxy Statement for the 2021 Annual Meeting of the registrant’s shareholders.

EXPLANATORY NOTE

This Amendment No. 1 (this "Amendment") amends the Annual Report on Form 10-K for the year ended December 31, 2020 (the "Form 10-K"), as filed with the Securities and Exchange Commission on March 12, 2021, and is being filed solely to correct administrative errors in 1) The Report of Independent Registered Public Accounting Firm under Item 8 of the Form 10-K to include the disclosure of auditor tenure and correctly identify the city and state from which the report was issued, and 2) the consent of CROWE LLP attached as Exhibit 23.1 to the Form 10-K to correctly identify the city and state from which the consent was issued.  These changes to the originally filed version of CROWE LLP's report and  consent do not affect CROWE’s opinion on the Company's consolidated financial statements included in the original Form 10-K and this Amendment.

Only Item 8, as amended in its entirety, and a corrected Exhibit 23.1 are included in this Amendment.  Except as described above and with respect to the exhibits referenced below, this Amendment does not otherwise amend, update or change any other information or disclosure contained in the original Form 10-K.  This Amendment speaks only as of the date of the original Form 10-K and does not reflect any events that may have occurred subsequent to the date of the original Form 10-K.  Accordingly, this Amendment should be read in conjunction with our filings made with the Securities and Exchange Commission subsequent to the filing of the Original Filing, including any amendments to those filings.

This Amendment includes currently-dated certifications by our Principal Executive Officer and Principal Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 as exhibits 31.1, 31.2, 32.1 and 32.2 hereto, as well as a Power of Attorney as exhibit 24.1 in addition to the corrected Exhibit 23.1 as referenced above.  Accordingly, Part IV, Item 15 of the Form 10-K is amended to reflect the filing of these exhibits.  

Item 8.Financial Statements and Supplementary Data

Management’s Report on Internal Control Over Financial Reporting

The management of Premier Financial Corp. is responsible for establishing and maintaining adequate internal control over financial reporting.  Internal control over financial reporting is defined in  Rule 13a-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of our principal executive and principal financial officers and effected by the Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles and includes those policies and procedures that:

1. Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

2. Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

3. Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.

Based on our evaluation under the framework in the 2013 Internal Control – Integrated Framework, management concluded that our internal control over financial reporting was effective as of December 31, 2020.

Crowe LLP, the independent registered public accounting firm that audited the consolidated financial statements of the Company included in this Annual Report on Form 10-K, has issued a report on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2020. The report, which expresses an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2020, is included in this Item 8.

/s/ Gary M. Small	/s/ Paul Nungester
Gary M. Small	Paul Nungester
Chief Executive Officer	Executive Vice President and
	Chief Financial Officer

2

Report of Independent Registered Public Accounting Firm

Stockholders and the Board of Directors of Premier Financial Corp.

Defiance, Ohio

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated statements of financial condition of Premier Financial Corp. (the "Company") as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2020, and the related notes (collectively referred to as the "financial statements"). We also have audited the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework: (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.  Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework: (2013) issued by COSO.

Change in Accounting Principle

As discussed in Note 2 to the financial statements, the Corporation has changed its method of accounting for credit losses effective January 1, 2020 due to the adoption of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification No. 326, Financial Instruments - Credit Losses (“ASC 326”). The Corporation adopted the new credit loss standard using the modified retrospective method such that prior period amounts are not adjusted and continue to be reported in accordance with previously applicable generally accepted accounting principles. The adoption of the new credit loss standard and its subsequent application is also related to a critical audit matter communicated below.

Basis for Opinions

The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting.  Our responsibility is to express an opinion on the Company’s financial statements and an opinion on the Company’s internal control over financial reporting based on our audits.  We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.  Our audits also included performing such other procedures as we considered necessary in the circumstances.  We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.  A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

3

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.  

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Allowance for Credit Losses

As described in Notes 2 and 7 to the financial statements, the Company adopted ASC 326, Financial Instruments – Credit Losses, as of January 1, 2020, which, among other things, required that the Company recognize expected credit losses over the contractual lives of financial assets carried at amortized cost, including loan receivables, utilizing the Current Expected Credit Losses (“CECL”) methodology. See also the explanatory paragraph above. The allowance for credit losses (“ACL”) was $82,079,000 at December 31, 2020, and consists of two components: a specific reserve based on an analysis of individually evaluated loans, and a general reserve which represents currently anticipated credit losses of the homogeneous loans (“general reserve”).  The general reserve consists of both quantitative and qualitative components and comprises the majority of the ACL.  The calculation of the general reserve of the ACL involves significant estimates and subjective assumptions which require a high degree of judgment.

As described in Notes 2 and 7, the quantitative component is determined using a discounted cash flow (“DCF”) methodology for certain portfolio segments and a probability of default/loss given default (“PD/LGD”) methodology for others.  Both methodologies require the projection of future loan repayments and estimated loan losses, based on assumptions which consider and are impacted by reasonable and supportable forecasts.  Changes in these assumptions can have a material impact on estimated loan losses.  Qualitative adjustments are applied to the quantitative component to adjust for the current environment and include consideration of subjective factors such as the impact that levels of, and trends in loan delinquencies, changes in risk selection and underwriting standards and national and local economic trends and conditions will have on expected lifetime loan losses.  

The ACL was identified by us as a critical audit matter because of the extent of auditor judgment applied and significant audit effort to evaluate the significant subjective judgements and complex computations made by management, including the need to assign more experienced auditors to address these matters.

The primary procedures we performed to address this critical audit matter included:

• Testing the design and operating effectiveness of controls over the inputs and assumptions used to estimate the quantitative and qualitative components, including controls addressing:

o Management’s review of the inputs and assumptions used in the DCF and PD/LGD loss estimation models including their development and deployment into the models which compute the quantitative component of the general reserve.

o Management’s review of the completeness and accuracy of data inputs used as the basis for the allowance allocations resulting from the qualitative factors.

o Management’s review of the mathematical accuracy of the allowance calculation.

• Substantively testing management’s process, including evaluating their judgments and assumptions which included:

o Evaluation of the completeness and accuracy of data inputs used as a basis for the quantitative and qualitative components.

o Evaluation of the reasonableness of management’s judgments related to the qualitative and quantitative assessment of the data used in the determination of the qualitative factors and the resulting allocation to the allowance.  Among other procedures, our evaluation considered, evidence from internal and external sources, loan portfolio performance and whether such assumptions were applied consistently from period to period.

o Analytically evaluating the qualitative factors for directional consistency, testing for reasonableness, and obtaining evidence for significant changes.

o Testing the mathematical accuracy of the allowance calculation, including the application of the computed quantitative and qualitative factors to the loan portfolios. 

Accounting for Significant Business Acquisition – Acquired Loans and Core Deposit Intangible

4

As more fully described in Notes 1 and 3, during 2020, the Company completed the acquisition of United Community Financial Corp. for stock and cash consideration totaling approximately $527,443,000. Accounting for an acquisition requires management to make significant judgements and assumptions to estimate the fair value of assets acquired, including the fair values of loans and core deposit intangibles, and liabilities assumed.  

We identified the Company’s recording of its acquisition of United Community Financial Corp. as a critical audit matter because it involved especially subjective auditor judgment and specialized skills when evaluating management’s judgments with respect to the valuation of acquired loans and intangible assets, the majority of which was a core deposit intangible, and were initially recorded at $2,340,701,000 and $33,014,000 respectively. The primary procedures performed to address this critical audit matter included:

• Testing the effectiveness of management’s review controls over the accuracy of data, the appropriateness of assumptions and the estimated fair values reported by the Company engaged valuation specialists for acquired loans and core deposit intangible assets.

• Substantively testing the completeness and accuracy of data provided to Company engaged valuation specialists.

• With the assistance of our valuation specialists, substantively testing the reasonableness of the loan and core deposit intangible fair value estimates by independently developing assumptions, performing shadow calculations and comparing the results to the fair value estimates prepared by Company engaged valuations specialists.

We have served as the Company's auditor since 2005.

/s/ Crowe LLP

Crowe LLP

Grand Rapids, Michigan

March 12, 2021

5

Premier Financial Corp.

Consolidated Statements of Financial Condition

(Dollars in Thousands, except per share data)

	December 31
	2020		2019
Assets
Cash and cash equivalents:
Cash and amounts due from depository institutions	$	79,593	$	46,254
Federal funds sold		79,673		85,000
		159,266		131,254
Securities available-for-sale, carried at fair value		736,654		283,448
Equity securities		1,090		—
		737,744		283,448
Loans held for sale, at fair value at December 31, 2020		221,616		18,008
Loans receivable, net of allowance for credit losses of $82,079 and $31,243 at December 31, 2020 and 2019, respectively		5,409,161		2,746,321
Mortgage servicing rights		13,153		10,267
Accrued interest receivable		25,434		10,244
Federal Home Loan Bank (FHLB) stock		16,026		11,915
Bank owned life insurance		144,784		75,544
Premises and equipment		58,665		39,563
Real estate and other assets held for sale (OREO)		343		100
Goodwill		317,948		100,069
Core deposit and other intangibles		30,337		3,772
Other assets		77,257		38,487
Total assets	$	7,211,734	$	3,468,992

continued

6

Premier Financial Corp

Consolidated Statements of Financial Condition (continued)

(Dollars in Thousands, except per share data)

	December 31
	2020			2019
Liabilities and stockholders’ equity
Liabilities:
Deposits:
Noninterest-bearing	$	1,597,262		$	630,359
Interest-bearing		4,450,579			2,239,966
Total		6,047,841			2,870,325
Advances from the Federal Home Loan Bank		—			85,063
Securities sold under agreements to repurchase		—			2,999
Subordinated debentures		84,860			36,083
Advance payments by borrowers		21,748			5,491
Reserve for credit losses - unfunded commitments		5,350			571
Other liabilities		69,659			42,293
Total liabilities		6,229,458			3,042,825
Commitments and Contingent Liabilities (Note 6)
Stockholders’ equity:
Preferred stock, $.01 par value per share: 37,000 shares authorized; 0 shares issued		—			—
Preferred stock, $.01 par value per share: 4,963,000 shares authorized; 0 shares    issued		—			—
Common stock, $.01 par value per share: 50,000,000 shares authorized;    43,297,260 and 25,371,086 shares issued and 37,291,480 and 19,729,886    shares outstanding, respectively		306			127
Additional paid-in capital		689,390			161,955
Accumulated other comprehensive income, net of tax of $3,988 and $1,221, respectively		15,004			4,595
Retained earnings		356,414			329,175
Treasury stock, at cost, 6,005,780 and 5,641,200 shares respectively		(78,838	)		(69,685	)
Total stockholders’ equity		982,276			426,167
Total liabilities and stockholders’ equity	$	7,211,734		$	3,468,992

See accompanying notes

7

PREMIER FINANCIAL CORP.

Consolidated Statements of Income

(Dollar Amounts in Thousands, except per share data)

	Years Ended December 31
	2020		2019			2018
Interest Income
Loans	$	225,084	$	130,853		$	114,398
Investment securities:
Taxable		3,509		4,883			4,738
Tax-exempt		7,960		3,300			3,396
Interest-bearing deposits		435		1,395			1,270
FHLB stock dividends		958		653			915
Total interest income		237,946		141,084			124,717
Interest Expense
Deposits		26,918		22,613			13,897
Federal Home Loan Bank advances and other		1,691		1,443			1,261
Subordinated debentures		1,300		1,354			1,281
Securities sold under agreement to repurchase		32		25			23
Total interest expense		29,941		25,435			16,462
Net interest income		208,005		115,649			108,255
Credit loss expense - loans and leases (1)		43,154		2,905			1,176
Credit loss (benefit) expense - unfunded commitments (1)		1,096		(21	)		82
Net interest income after provision for credit losses		163,755		112,765			106,997
Non-interest Income
Service fees and other charges		21,369		14,028			13,100
Mortgage banking income		28,199		9,483			7,077
Insurance commissions		16,788		14,118			14,085
Gain on sale of non-mortgage loans		324		226			317
Gain on sale of securities available for sale		1,464		24			173
Gain on equity securities		90		—			—
Wealth management income		6,159		3,127			2,911
Income from Bank Owned Life Insurance		3,306		2,158			1,767
Other non-interest income		2,985		1,792			(222	)
Total non-interest income		80,684		44,956			39,208
Non-interest Expense
Compensation and benefits		77,213		57,175			52,566
Occupancy		16,320		9,027			8,641
FDIC insurance premium		3,355		484			1,021
Financial institutions tax		4,173		2,194			2,118
Data processing		14,886		8,055			8,555
Acquisition related charges		19,485		1,422			—
Amortization of intangibles		6,449		1,119			1,312
Other non-interest expense		23,289		17,608			15,117
Total non-interest expense		165,170		97,084			89,330
Income before income taxes		79,269		60,637			56,875
Federal income taxes		16,192		11,267			10,626
Net Income	$	63,077	$	49,370		$	46,249
Earnings per common share (Note 4)
Basic	$	1.75	$	2.49		$	2.27
Diluted	$	1.75	$	2.48		$	2.26

(1) Beginning January 1, 2020, calculation is based on current expected loss methodology.  Prior to January 1, 2020, calculation was based on incurred loss methodology.

See accompanying notes

8

PREMIER FINANCIAL CORP.

Consolidated Statements of Comprehensive Income

(Dollar Amounts in Thousands)

	For the Years Ended December 31
	2020			2019			2018
Net income	$	63,077		$	49,370		$	46,249
Change in securities available-for-sale (AFS):
Unrealized holding gains (losses) on available-for-sale securities    arising during the period		14,431			8,754			(3,356	)
Reclassification adjustment for (gains) losses realized in income		(1,464	)		(24	)		(173	)
Net unrealized gains (losses)		12,967			8,730			(3,529	)
Income tax effect		(2,723	)		(1,834	)		742
Net of tax amount		10,244			6,896			(2,787	)
Change in unrealized gain/(loss) on postretirement benefit:
Net gain (loss) on defined benefit postretirement medical    plan realized during the period		195			(310	)		560
Net amortization and deferral		13			14			18
Net gain (loss) activity during the period		208			(296	)		578
Income tax effect		(43	)		143			(203	)
Net of tax amount		165			(153	)		375
Total other comprehensive income  (loss)		10,409			6,743			(2,412	)
Comprehensive income	$	73,486		$	56,113		$	43,837

See accompanying notes

9

PREMIER FINANCIAL CORP.

Consolidated Statements of Changes in Stockholders’ Equity

(Dollar Amounts In Thousands, except number of shares)

	Preferred Stock		Common Stock Shares(1)			Common Stock		Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Treasury Stock			Total Stockholder’s Equity
Balance at December 31, 2017	$	—		20,312,082		$	127	$	160,940		$	217		$	262,900		$	(50,898	)	$	373,286
Net income															46,249						46,249
Other comprehensive loss												(2,412	)								(2,412	)
Adoption of ASU 2018-02												47			(47	)					—
Deferred compensation plan																		636			636
Stock based compensation expense									420												420
Shares issued under stock option plan, net of 8,872 repurchased and retired				38,628					(93	)					(270	)		474			111
Restricted share activity under stock incentive plans net of 17,818 repurchased and retired				48,300					258						(201	)		511			568
Shares issued from direct stock sales				3,542					68									36			104
Shares repurchased				(231,160	)													(6,330	)		(6,330	)
Common stock dividends paid ($0.64 per share)															(13,043	)					(13,043	)
Balance at December 31, 2018	$	—		20,171,392		$	127	$	161,593		$	(2,148	)	$	295,588		$	(55,571	)	$	399,589
Net income															49,370						49,370
Other comprehensive income												6,743									6,743
Deferred compensation plan									(80	)								158			78
Stock based compensation expense									286												286
Shares issued under stock option plan, net of 178 repurchased and retired				19,022					(32	)					(5	)		226			189
Restricted share activity under stock incentive plans net of 27,728 repurchased and retired				51,194					117						(154	)		597			560
Shares issued from direct stock sales				4,255					71									52			123
Shares repurchased				(515,977	)													(15,147	)		(15,147	)
Common stock dividends paid ($0.79 per share)															(15,624	)					(15,624	)
Balance at December 31, 2019	$	—		19,729,886		$	127	$	161,955		$	4,595		$	329,175		$	(69,685	)	$	426,167
Net income															63,077						63,077
Other comprehensive income												10,409									10,409
Adoption of ASC 326															(2,566	)					(2,566	)
Deferred compensation plan				7,524					24									(24	)		—
Stock based compensation expense									2,312												2,312
Capital stock issuance related to acquisition				17,926,174			179		527,132												527,311
Vesting of incentive plans				39,548					(1,864	)								493			(1,371	)
Shares issued under stock option plan, net				11,408					(122	)								122			—
Restricted share issuance				13,349					198						(374	)		176			—
Restricted share forfeitures				(2,265	)				13									(13	)		—
Shares issued from direct stock sales				1,148														18			18
Shares repurchased				(435,292	)													(10,183	)		(10,183	)
Common stock dividends paid ($0.88 per share)															(32,898	)					(32,898	)
Other, net									(258	)								258			—
Balance at December 31, 2020	$	—		37,291,480		$	306	$	689,390		$	15,004		$	356,414		$	(78,838	)	$	982,276

(1) Share data has been adjusted to reflect a 2-for-1 stock split on July 12, 2018.

See accompanying notes

10

PREMIER FINANCIAL CORP.

Consolidated Statements of Cash Flows

(Dollar Amounts in Thousands)

	Years Ended December 31
	2020			2019			2018
Operating Activities
Net income	$	63,077		$	49,370		$	46,249
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses		44,250			2,905			1,176
Depreciation		6,512			4,231			3,688
Net amortization of premium and discounts on loans, securities, deposits and debt    obligations		(5,157	)		730			861
Amortization of mortgage servicing rights, net of impairment charges/recoveries		15,456			2,043			1,209
Amortization of intangibles		6,449			1,119			1,312
Gain on sale of loans		(36,683	)		(7,932	)		(4,819	)
Loss on sale or disposals or write-downs of property, plant and equipment		—			10			13
(Gain) loss on sale or write-down of OREO and other assets held for sale		(10	)		180			581
(Gain) on sale of available for sale securities		(1,464	)		(24	)		(173	)
Unrealized gain on equity securities		(90	)		—			—
Change in deferred taxes		(9,781	)		(419	)		881
Proceeds from sale of loans held for sale		847,141			302,554			212,688
Origination of loans held for sale		(967,861	)		(308,434	)		(205,884	)
Stock  option expense		2,312			286			420
Restricted stock vesting		(1,371	)		560			568
Excess tax benefit (expense) on stock compensation plans		—			(108	)		(154	)
Income from bank owned life insurance		(3,306	)		(2,158	)		(1,767	)
Changes in:
Accrued interest receivable and other assets		(14,729	)		(6,916	)		(2,878	)
Other liabilities		(363	)		1,688			(916	)
Net cash provided by operating activities		(55,618	)		39,685			53,055
Investing Activities
Proceeds from maturities, calls and paydowns of held-to-maturity securities		—			120			122
Proceeds from maturities, calls and paydowns of available-for-sale securities		124,731			49,104			32,620
Proceeds from sale of available-for-sale securities		52,420			2,667			5,503
Proceeds from sale of OREO		1,081			1,262			887
Proceeds from sale of office properties and equipment		—			—			14
Purchases of available-for-sale securities		(362,426	)		(33,463	)		(76,647	)
Purchases of equity securities		(1,000	)		—			—
Purchases of office properties and equipment		(5,361	)		(3,134	)		(4,168	)
Investment in bank owned life insurance		—			(6,600	)		—
Proceeds from bank owned life insurance death benefit		—			874			337
Proceeds from sale of bank owned life insurance		—			—			17,689
Proceeds from FHLB stock redemption		8,642			2,302			1,775
Net cash received (paid) in acquisitions		52,448			(1,600	)		—
Proceeds from sale of non-mortgage loans		5,241			21,239			28,729
Net increase in loans receivable		(417,630	)		(258,119	)		(219,885	)
Net cash used in investing activities		(541,854	)		(225,348	)		(213,024	)
Financing Activities
Net increase in deposits		1,098,867			249,443			183,037
Net increase advance payments by borrowers		(10,035	)		1,839			727
Net change in Federal Home Loan Bank advances and PPPLF		(466,063	)		(126	)		910
Proceeds from subordinated debentures		48,777			—			—
Decrease in securities sold under repurchase agreements		(2,999	)		(2,742	)		(20,278	)
Cash dividends paid on common stock		(32,898	)		(15,624	)		(13,043	)
Net cash paid for repurchase of common stock		(10,183	)		(15,147	)		(6,330	)
Proceeds from exercise of stock options		—			189			111
Proceeds from direct treasury stock sales		18			123			104
Net cash  provided by financing activities		625,484			217,955			145,238
Increase (decrease) in cash and cash equivalents		28,012			32,292			(14,731	)
Cash and cash equivalents at beginning of period		131,254			98,962			113,693
Cash and cash equivalents at end of period	$	159,266		$	131,254		$	98,962
Supplemental cash flow information:
Interest paid	$	30,536		$	25,348		$	16,198
Income taxes paid		32,390			11,200			7,950
Transfer from other liability to equity		—			—			636
Transfers from held to maturity securities to available for sale securities		—			404			—
Transfers from loans to other real estate owned and other assets held for sale		192			337			1,141
Initial recognition of right-of-use asset		10,106			8,808			—
Initial recognition of lease liability		10,254			9,339			—
Initial recognition ASU 326		2,566			—			—

See accompanying notes.

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Notes to the Consolidated Financial Statements

1. Basis of Presentation

On June 19, 2020, First Defiance Financial Corp. changed its name to Premier Financial Corp. (“Premier” or the “Company”).  In connection with the name change, Premier’s stock continued to be traded on the NASDAQ Global Select Market, but under the new ticker PFC.  On this same date, First Federal Bank of the Midwest, a wholly-owned subsidiary of the Company, changed its name to Premier Bank (the “Bank”).

Premier is a financial holding company that conducts business through its wholly-owned subsidiaries, the Bank, First Insurance Group of the Midwest, Inc. (“First Insurance”), First Defiance Risk Management Inc. (“First Defiance Risk Management”), and HSB Capital, LLC (“HSB Capital”). All significant intercompany transactions and balances are eliminated in consolidation.

On January 31, 2020, Premier completed its previously announced acquisition of United Community Financial Corp., an Ohio corporation (“UCFC”), pursuant to the Agreement and Plan of Merger (the “Merger Agreement”), dated as of September 9, 2019, by and between Premier and UCFC. At the effective time of the merger (the “Merger”), UCFC merged with and into Premier, with Premier surviving the Merger.  Simultaneously with the completion of the Merger, Premier converted from a unitary thrift holding company to a bank holding company, making an election to be a financial holding company.

Immediately following the Merger, the Bank acquired UCFC’s wholly-owned bank subsidiary, Home Savings Bank (“Home Savings”).  Immediately prior to the merger of the banks, the Bank converted from a federal thrift into an Ohio state-chartered bank. In addition, immediately following the merger of the banks, UCFC’s wholly-owned insurance subsidiaries, HSB Insurance, LLC, and United American Financial Services, Inc., each merged into First Insurance, with First Insurance surviving the mergers. Premier acquired 2 additional subsidiaries in the Merger, HSB Capital and HSB Insurance, Inc.  HSB Insurance Inc. was dissolved in September 2020.  

The Bank is primarily engaged in community banking. It attracts deposits from the general public through its offices and website, and uses those and other available sources of funds to originate residential real estate loans, commercial real estate loans, commercial loans, home improvement and home equity loans and consumer loans. In addition, the Bank invests in U.S. Treasury and federal government agency obligations, obligations of states and political subdivisions, mortgage-backed securities that are issued by federal agencies, collateralized mortgage obligations (“CMOs”), and corporate bonds. The Bank’s deposits are insured by the Federal Deposit Insurance Corporation (“FDIC”). The Bank is a member of the Federal Home Loan Bank (“FHLB”) System.

HSB Capital was formed as an Ohio limited liability company by UCFC in 2016 for the purpose of providing mezzanine funding for customers of Home Savings. Mezzanine loans are offered by HSB Capital to customers in the Company’s market area and are expected to be repaid from the cash flow from operations of the borrowing businesses.  

First Insurance is an insurance agency that conducts business throughout Premier’s markets.  First Insurance offers property and casualty insurance, life insurance and group health insurance.

First Defiance Risk Management is a wholly-owned insurance company subsidiary of the Company that insures the Company and its subsidiaries against certain risks unique to the operations of the Company and for which insurance may not be currently available or economically feasible in today’s insurance marketplace.  First Defiance Risk Management pools resources with several other similar insurance company subsidiaries of financial institutions to help minimize the risk allocable to each participating insurer.

The COVID-19 pandemic has continued to create extensive disruptions to the global economy and to the lives of individuals throughout the world.  Business and consumer customers of the Bank are experiencing varying degrees of financial distress, which is expected to continue over the coming months and will likely adversely affect their ability to pay interest and principal on their loans.  Further, value of the collateral securing their obligations may decline.  These uncertainties may negatively impact the Statement of Financial Condition, the Statement of Income and the Statement of Cash Flows of the Company.

2. Statement of Accounting Policies

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and actual results could differ.

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Earnings Per Common Share

Basic earnings per common share is computed by dividing net income applicable to common shares (net income less dividend requirements for preferred stock, accretion of preferred stock discount and redemption of preferred stock) by the weighted average number of shares of common stock outstanding during the period. All outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends are considered participating securities for the calculation. Diluted earnings per common share includes the dilutive effect of additional potential common shares issuable under stock options, warrants, restricted stock awards and stock grants. See also Note 4.

Comprehensive Income

Comprehensive income consists of net income and other comprehensive income (loss). Other comprehensive income (loss) includes unrealized gains and losses on available-for-sale securities and the net unrecognized actuarial losses and unrecognized prior service costs associated with the Company’s Defined Benefit Postretirement Medical Plan. All items included in other comprehensive income are reported net of tax. See also Notes 5, 16 and 25 and the Consolidated Statements of Comprehensive Income.

Cash Flows

For purposes of the statement of Cash flows, Premier considers all highly liquid investments with a term of three months or less to be cash equivalents.   Net cash flows are reported for loan and deposit transactions, interest-bearing deposits in other financial institutions and repurchase agreements.

Investment Securities

Securities are classified as held-to-maturity when Premier has the positive intent and ability to hold the securities to maturity and are reported at amortized cost, adjusted for premiums and discounts that are recognized in interest income using the interest method over the period to maturity.   In addition, Premier may purchase equity securities for its portfolio.  Equity securities are a separate category of investments as changes in market value must be run through earnings as a gain (loss) on equity securities.

Securities available‑for‑sale consists of those securities which might be sold prior to maturity due to changes in interest rates, prepayment risks, yield and availability of alternative investments, liquidity needs or other factors. Available-for-sale securities are stated at fair value, with the unrealized gains and losses, net of tax, reported in other comprehensive income (loss) until realized. Realized gains and losses are included in gains (losses) on securities or other-than-temporary impairment losses on securities. Realized gains and losses on securities sold are recognized on the trade date based on the specific identification method.

Interest income includes amortization of purchase premiums and discounts. Premiums and discounts are amortized on the level-yield method without anticipating prepayments, except for mortgage-backed securities where prepayments are expected.  

Quarterly, the Company evaluates if any security has a fair value less than its amortized cost. Once these securities are identified, in order to determine whether a decline in fair value resulted from a credit loss or other factors, the Company performs further analysis as outlined below:

• Review the extent to which the fair value is less than the amortized cost and observe the security’s lowest credit rating as reported by third-party credit ratings companies.

• Any securities that are downgraded by a third party ratings company would be subjected to additional analysis that may include, but is not limited to: changes in market interest rates, changes in securities credit ratings, security type, service area economic factors, financial performance of the issuer/or obligor of the underlying issue and third-party guarantee.

• If the Company determines that a credit loss exists, the credit portion of the allowance will be measured using a DCF analysis using the effective interest rate as of the security’s purchase date. The amount of credit loss the Company records will be limited to the amount by which the amortized cost exceeds the fair value.  As of December 31, 2020, management had determined that no credit loss exists.

FHLB Stock

The Bank is a member of the FHLB system.  Members are required to own a certain amount of stock based on the level of borrowings and other factors.  FHLB stock is carried at cost, classified as a restricted security, and periodically evaluated for impairment based on ultimate recovery of par value.  Both cash and stock dividends are reported as income.  At December 31, 2020 and 2019, the Company held $16.0 million and $11.9 million, respectively, at the FHLB of Cincinnati.

Loans Receivable

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at the principal amount outstanding, net of deferred loan fees and costs, purchase premiums and discounts and the allowance for credit losses. Deferred fees net of deferred incremental loan origination costs, are amortized to interest income generally over the contractual

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life of the loan using the interest method without anticipating prepayments. The recorded investment in loans includes accrued interest receivable, unamortized premiums and discounts, and net deferred fees and costs and undisbursed loan amounts.

Mortgage loans originated and intended for sale in the secondary market are classified as loans held for sale and are carried at fair value, as determined by market pricing from investors. Net unrealized gains and losses are recorded as a part of mortgage banking income on the Consolidated Statement of Income. Mortgage loans held for sale are generally sold with servicing rights retained. The carrying value of mortgage loans sold is reduced by the amount allocated to the servicing right. Gains or losses on sales of mortgage loans are based on the difference between the selling price and the carrying value of the related loan sold.

The Company may incur losses pertaining to loans sold to Fannie Mae and Freddie Mac but repurchased due to underwriting issues. Repurchase losses are recognized when the Company determines they are probable and estimable.

Interest receivable is accrued on loans and credited to income as earned. The accrual of interest on loans 90 days delinquent or those loans individually analyzed is discontinued when, in management’s opinion, the borrower may be unable to meet payments as they become due. For these loans, interest accrual is only to the extent cash payments are received. The accrual of interest on these loans is generally resumed after a pattern of repayment has been established and the collection of principal and interest is reasonably assured.

Purchased Credit Deteriorated (“PCD”) Loans

The Company acquires loans individually and in groups or portfolios. At acquisition, the Company reviews each loan to determine whether there is evidence of more than insignificant deterioration of credit quality since origination. The Company determines whether each such loan is to be accounted for individually or whether such loans will be assembled into pools of loans based on common risk characteristics (loan type and date of origination).

PCD loans acquired in a transaction are marked to fair value and a mark on yield is recorded. In addition, an adjustment is made to the ACL for the expected loss on the acquisition date. These loans are assessed on a regular basis and subsequent adjustments to the ACL are recorded on the income statement.

Allowance for credit losses

On January 1, 2020, the Company adopted ASU 2016-13 Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, as amended, which replaced the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology.  The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities.  It also applies to off-balance sheet credit exposures not accounted for as insurance (loan commitments, standby letters of credit, financial guarantees, and other similar instruments) and net investments in leases recognized by a lessor in accordance to Topic 842 on leases.   In addition, ASC 326 made changes to the accounting for available-for-sale debt securities.

The Company adopted ASC 326 using the prospective transition approach for financial assets purchased with credit deterioration that were previously classified as purchased credit impaired (“PCI”) and accounted for under ASC 310-30.  In accordance with the standard, management did not reassess whether PCI assets met the criteria of PCD assets as of the date of adoption.  As a part of the merger, the Bank recognized $7.6 million of the allowance for credit losses related to PCD loans.  The remaining noncredit discount (based on the adjusted amortized cost basis) will be accreted into interest income at the effective interest rate as of the merger date.

Loans that management has the intent and ability to hold for the foreseeable future or until maturity of payoff are reported at amortized cost.  Amortized cost is the principal balance outstanding, net of purchase premiums and discounts, adjustments, and deferred loan fees and costs.  Accrued interest receivable was reported in other assets and is excluded from the estimate of credit losses.  

Management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts.  Historical credit loss experience provides the basis for the estimation of expected credit losses.  Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, nature or volume of the Company’s financial assets, changes in experience in staff, as well as changes in environmental conditions, such as changes in unemployment rates, property values and other external factors, such as regulatory, legal and technological environments.

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The allowance for credit losses is measured on a collective pool basis when similar risk characteristics exist.  The Company has identified the following portfolio segments and is generally utilizing two methodologies to analyze loan pools: discounted cash flow (“DCF”) and probability of default/loss given default (“PD/LGD”):

Portfolio Segments	Loan Pool	Methodology	Loss Drivers
Residential real estate	1-4 Family nonowner occupied	DCF	National unemployment
	1-4 Family owner occupied	DCF	National unemployment
Commercial real estate	Commercial real estate nonowner occupied	DCF	National unemployment
	Commercial real estate owner occupied	DCF	National unemployment
	Multi Family	DCF	National unemployment
	Agriculture Land	DCF	National unemployment
	Other commercial real estate	DCF	National unemployment
Construction secured by real estate	Construction	PD/LGD	Call report loss history
Commercial	Commercial working capital	PD/LGD	Call report loss history
	Agriculture production	PD/LGD	Call report loss history
	Other commercial	PD/LGD	Call report loss history
Home equity and improvement	Home equity and improvement	PD/LGD	Call report loss history
Consumer finance	Consumer finance	Remaining life	Call report loss history

Loans that do not share risk characteristics are evaluated on an individual basis and included in the collective evaluation.  A loan is individually analyzed when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loans agreement. Loans, for which terms have been modified and for which the borrower is experiencing financial difficulties, are considered troubled debt restructurings and classified as impaired.   When a loan is considered individually analyzed, an analysis of the net present value of estimated cash flows is performed and an allowance may be established based on the outcome of that analysis, or if the loan is deemed to be collateral dependent an allowance is established based on the fair value of collateral. All modifications are reviewed by the bank’s Chief Credit Officer or Chief Credit Administration Officer to determine whether or not the modification constitutes a troubled debt restructure. Commercial and commercial real estate loan relationships greater than $500,000 are individually evaluated. If a loan is individually analyzed, a portion of the allowance is allocated so that the loan is reported net of the allowance allocation which is determined based on the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral. Loan relationships less than $500,000 are aggregated by loan segment and risk level and given a specific reserve based on the general reserve factor for that loan segment and risk level.  Large groups of smaller balance homogeneous loans, such as consumer and residential real estate loans, are collectively evaluated, and accordingly, they are not separately identified for disclosure.

Troubled Debt Restructurings (“TDR”):  A loans for which terms have been modified resulting in a concession, and for which the borrower is experiencing financial difficulties, is considered to be a TDR.  The allowance for credit loss on a TDR is measured using the same method as all other loans held for investment, except when the value of a concession is measured using the discounted cash flow method, the allowance for credit loss is determined by discounting the expected future cash flow at the original interest rate of the loan.  If a TDR is considered to be a collateral dependent loan, the loan is reported, net, at the fair value of the collateral.  For TDRs that subsequently default, the Company determines the amount of the allowance on that loan in accordance with the accounting policy for the allowance for credit losses on loans individually identified.  The Company incorporates recent historical experience related to TDRs including the performance of TDRs that subsequently default into the calculation of the allowance by loan portfolio segment.  See Footnote 7 – Loans for further discussion on TDRs.

Servicing Rights

Servicing rights are recognized separately when they are acquired through sales of loans. Servicing rights are initially recorded at fair value with the income statement effect recorded in gains on sales of loans. Fair value is based on market prices for comparable mortgage servicing contracts, when available, or alternatively, is based on a valuation model that calculates the present value of estimated future net servicing income. The valuation model incorporates assumptions that market participants would use in estimating future net servicing income, such as the cost to service, the discount rate, the custodial earnings rate, an inflation rate, ancillary income, prepayment speeds and default rates and losses. The Company compares the valuation model inputs and results to published industry data in order to validate the model results and assumptions.  All classes of servicing assets are subsequently measured using the amortization method which requires servicing rights to be amortized into noninterest income in proportion to, and over the period of, the estimated future net servicing income of the underlying loans, driven, generally, by changes in market interest rates.

Servicing assets are evaluated for impairment based upon the fair value of the rights as compared to carrying amount. Impairment is determined by stratifying rights into groupings based on predominant risk characteristics, such as interest rate, loan type and investor type. Impairment is recognized through a valuation allowance for an individual grouping, to the extent that fair value is less than the carrying amount. If the Company later determines that all or a portion of the impairment no longer exists for a particular grouping, a

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reduction of the allowance may be recorded as an increase to income. Changes in valuation allowances are reported within mortgage banking income on the income statement. The fair values of servicing rights are subject to significant fluctuations as a result of changes in estimated and actual prepayment speeds and default rates and losses.

Servicing fee income, which is reported on the income statement with mortgage banking income, is recorded for fees earned for servicing loans. The fees are based on a contractual percentage of the outstanding principal, or a fixed amount per loan, and are recorded as income when earned. The amortization of mortgage servicing rights is netted against loan servicing fee income. Servicing fees totaled $7.3 million, $3.8 million and $3.8 million for the years ended December 31, 2020, 2019 and 2018, respectively. Late fees and ancillary fees related to loan servicing are not material. See Note 8.

Bank Owned Life Insurance

The Company has purchased life insurance policies for certain key employees. Bank owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement.

Premises and Equipment and Long Lived Assets

Land is carried at cost. Premises and equipment are carried at cost less accumulated depreciation and amortization computed principally by the straight-line method over the following estimated useful lives:

Buildings and improvements	20 to 50 years
Furniture, fixtures and equipment	3 to 15 years

Long-lived assets to be held and those to be disposed of and certain intangibles are periodically evaluated for impairment. See Note 9.

Goodwill and Other Intangibles

Goodwill resulting from business combinations after January 1, 2009, is generally determined as the excess of the fair value of the consideration transferred, plus the fair value of any non-controlling interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but tested for impairment at least annually. The Company has selected November 30 as the date to perform the annual impairment test. Intangible assets with definite useful lives are amortized over their estimated useful lives to their estimated residual values. Goodwill is the only intangible asset with an indefinite life on Premier’s balance sheet.

Other intangible assets consist of core deposit and acquired customer relationship intangible assets arising from whole bank and branch acquisitions, as well as, , wealth management and insurance agency acquisitions. They are initially recorded at fair value and then amortized on an accelerated basis over their estimated lives, which range from five years for non-compete agreements to 10 years for core deposit and customer relationship intangibles. See Note 10.

Real Estate and Other Assets Held for Sale

Real estate and other assets held for sale are comprised of properties or other assets acquired through foreclosure proceedings or acceptance of a deed in lieu of foreclosure. These assets are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. Losses arising from the acquisition of such property are charged against the allowance for credit losses at the time of acquisition. These properties are carried at the lower of cost or fair value, less estimated costs to dispose. If fair value declines subsequent to foreclosure, the property is written down against expense. Costs after acquisition are expensed.

Stock Compensation Plans

Compensation cost is recognized for stock options and restricted share awards issued to employees and directors, based on the fair value of these awards at the date of grant. A Black-Scholes model is utilized to estimate the fair value of stock options. Restricted shares awards are valued at the market value of Company stock at the date of the grant. Compensation cost is recognized over the required service period, generally defined as the vesting period. For awards with graded vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award. See Note 20.

Fair Value of Financial Instruments

Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in Note 22. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect the estimates.

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Transfers of Financial Assets

Transfers of financial assets are accounted for as sales, when control over the assets has been relinquished. Control over transferred assets is deemed to be surrendered when the assets have been isolated from the Company, the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets and the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Mortgage Banking Derivatives

Commitments to fund mortgage loans (interest rate locks) to be sold into the secondary market and forward commitments for the future delivery of these mortgage loans are accounted for as free standing derivatives. Fair values of these mortgage derivatives are estimated based on changes in mortgage interest rates from the date the interest on the loan is locked. The Company enters into forward commitments for the future delivery of mortgage loans when interest rate locks are entered into, in order to hedge the change in interest rates resulting from its commitments to fund the loans. Changes in fair values of these derivatives are included in mortgage banking income.

Operating Segments

Management considers the following factors in determining the need to disclose separate operating segments: (1) the nature of products and services, which are all financial in nature; (2) the type and class of customer for the products and services; in Premier’s case retail customers for retail bank and insurance products and commercial customers for commercial loan, deposit, life, health and property and casualty insurance needs; (3) the methods used to distribute products or provide services; such services are delivered through banking and insurance offices and through bank and insurance customer contact representatives. Retail and commercial customers are frequently targets for both banking and insurance products; (4) the nature of the regulatory environment; both banking and insurance entities are subject to various regulatory bodies and a number of specific regulations.

Quantitative thresholds as stated in FASB ASC Topic 280, Segment Reporting are monitored. For the year ended December 31, 2020, the reported revenue for First Insurance was 5.6% of total revenue for Premier. Total revenue includes interest income plus noninterest income. Net income for First Insurance for the year ended December 31, 2020, was 5.5% of consolidated net income. Total assets of First Insurance at December 31, 2020, were 0.5% of total assets. First Insurance does not meet any of the quantitative thresholds of FASB ASC Topic 280. Accordingly, all of the financial service operations are considered by management to be aggregated in one reportable segment.

Dividend Restriction

Banking regulations require maintaining certain capital levels and may limit the dividends paid by the Bank to Premier. See Note 17 for further details on restrictions.

Loan Commitments and Related Financial Instruments

Financial instruments include off‑balance sheet credit instruments, such as commitments to make loans and commercial letters of credit, issued to meet customer financing needs. The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay. Such financial instruments are recorded when they are funded.

Loss Contingencies

Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe there are any such matters that will have a material effect on the financial statements.

Income Taxes

Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized. Realization of deferred tax assets is dependent upon the generation of a sufficient level of future taxable income and recoverable taxes paid in prior years. Although realization is not assured, management believes it is more likely than not that all of the deferred tax assets will be realized.  The Company recognizes interest and/or penalties related to income tax matters in income tax expense.

An effective tax rate of 21% is used to determine after-tax components of other comprehensive income (loss) included in the statements of stockholders’ equity.  See Note 18.

A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur.  The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, 0 tax benefit is recorded.  

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Retirement Plans

Pension expense is the net of service and interest cost, return on plan assets and amortization of gains and losses not immediately recognized.  Employee 401(k) plan expense is the amount of matching contributions.  Deferred compensation and supplemental retirement plan expense allocates the benefits over years of service. See Notes 16 and 19.

Revenue Recognition

ASC 606, Revenue from Contracts with Customers (“ASC 606”), establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity's contracts to provide goods or services to customers.    The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied.

The majority of the Company’s revenue-generating transactions are not subject to ASC 606, including revenue generated from financial instruments, such as loans, letters of credit, and investment securities, as well as revenue related to mortgage servicing activities, as these activities are subject to other GAAP discussed elsewhere within the Company’s disclosures. Descriptions of the Company’s revenue-generating activities that are within the scope of ASC 606, which are presented in the Company’s statement of income as components of noninterest income are as follows:

• Service charges on deposit accounts - these represent general service fees for monthly account maintenance and activity or transaction-based fees and consist of transaction-based revenue, time-based revenue (service period), item-based revenue or some other individual attribute-based revenue. Revenue is recognized when our performance obligation is completed which is generally monthly for account maintenance services or when a transaction has been completed (such as a wire transfer). Payment for such performance obligations are generally received at the time the performance obligations are satisfied.  Service charges on deposit accounts that are within the scope of ASC 606 were $10.2 million in 2020, $7.1 million in 2019 and $7.6 million in 2018. Income from services charges on deposit accounts is included in service fees and other charges in noninterest income.

• Interchange income - this represents fees earned from debit and credit cardholder transactions.  Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrent with the transaction processing services provided to the cardholder. Interchange fees were $9.3 million in 2020, $4.7 million in 2019 and $4.1 million in 2018, which are reported net of network related charges.  Interchange income is included in service fees and other charges in noninterest income.

• Wealth management income - this represents monthly fees due from wealth management customers as consideration for managing the customers’ assets. Wealth management and trust services include custody of assets, investment management, escrow services, and fees for trust services and similar fiduciary activities. Revenue is recognized when our performance obligation is completed each month, which is generally the time that payment is received. Also included are fees received from a third party broker-dealer as part of a revenue-sharing agreement for fees earned from customers that we refer to the third party. These fees are paid to us by the third party on a quarterly basis and recognized ratably throughout the quarter as our performance obligation is satisfied. Revenues from wealth management were $6.2 million, $3.1 million and $2.9 million in 2020, 2019 and 2018, respectively, and are included in in total noninterest income.

• Gain/loss on sales of other real estate owned (“OREO”) - the Company records a gain or loss from the sale of OREO when control of the property transfers to the buyer, which generally occurs at the time of an executed deed. When the Company finances the sale of OREO to the buyer, the Company assesses whether the buyer is committed to perform their obligations under the contract and whether collectability of the transaction price is probable.  Once these criteria are met, the OREO asset is derecognized and the gain or loss on sale is recorded upon the transfer of control of the property to the buyer.  In determining the gain or loss on the sale, the Company adjusts the transaction price and related gain or loss on sale if a significant financing component is present. Income from the gain/loss on sales of OREO were losses of $19,000 in 2020, $108,000 in 2019 and $28,000 in 2018. Income from the gain or loss on sales of OREO is included in total noninterest income.

• Insurance commissions - this represents new commissions that are recognized when the Company sells insurance policies to customers. The Company is also entitled to renewal commissions and, in some cases, contingent commissions in the form of profit sharing which are recognized in subsequent periods. The initial commission is recognized when the insurance policy is sold to a customer.  Renewal commission is variable consideration and is recognized in subsequent periods when the uncertainty around variable consideration is subsequently resolved (e.g., when customer renews the policy). Contingent commission is also a variable consideration that is not recognized until the variability surrounding realization of revenue is resolved. Another source of variability is the ability of the policy holder to cancel the policy anytime and in such cases, the Company may be required, under the terms of the contract, to return part of the commission received. The variability related to cancellation of the policy is not deemed significant and thus, does not impact the amount of revenue recognized. In the event the policyholder chooses to cancel the policy at any time, the revenue for amounts which qualify for claw-back are reversed in the period the cancellation occurs. Management views the income

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sources from insurance commissions in two categories: (i) new/renewal commissions and (ii) contingent commissions.  Insurance commissions were $16.8 million for 2020, of which $15.4 million were new/renewal commissions and $1.4 million were contingent commissions.  In 2019, insurance commissions were $14.1 million, of which $13.2 million were new/renewal commissions and $921,000 million were contingent commissions.  In 2018, insurance commissions were $14.1 million, of which $13.1 million were new/renewal commission and $1.0 million were contingent commissions.  

Accumulated Other Comprehensive Income

In February 2018, the FASB issued ASU No. 2018-02, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” This ASU allows a reclassification from accumulated other comprehensive income (“AOCI”) to retained earnings for certain income tax effects stranded in AOCI as a result of public law No. 115-97, known as the Tax Cuts and Jobs Act (“Tax Act”). Consequently, the reclassification eliminates the stranded tax effects resulting from the Tax Act and is intended to improve the usefulness of information reported to financial statement users. However, because the ASU only relates to the reclassification of the income tax effects of the Tax Act, the underlying guidance that requires the effect of a change in tax laws or rates to be included in income from continuing operations is not affected. The Company adopted ASU No. 2018-02 during the first quarter of 2018, and elected to reclassify the income tax effects of the Tax Act from AOCI to retained earnings. The reclassification increased AOCI and decreased retained earnings by $47,000, with zero net effect on total shareholders’ equity.

Leases

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842). The guidance in the update supersedes the requirements in ASC Topic 840, Leases. The guidance is intended to increase transparency and comparability among organizations by recognizing right-of-use assets and lease liabilities on the balance sheet. The Company adopted this guidance in the first quarter of 2019. Upon adoption, the Company elected a practical expedient which allows existing leases to retain their classification as operating leases. The Company has elected to account for lease and related non-lease components as a single lease component. The Company also elected to not recognize right-of-use assets and lease liabilities arising from short-term leases, which are twelve months or less. Implementation of the guidance resulted in the recording of a right-of-use asset of $8.8 million and a lease liability of $9.3 million as of January 1, 2019.  See additional disclosures in Note 9.

Accounting Standards Updates

ASU 2017-12, Derivatives and Hedging (Topic 815) Targeted Improvements to Accounting for Hedging Activities: In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. This ASU gave all entities an opportunity to reclassify securities held to maturity without tainting the rest of the portfolio if they are eligible to be hedged using the “last-of-layer method.” Note that the securities need not be hedged but simply eligible to be hedged.  The amendments in this ASU are effective for the reporting periods after December 15, 2018. The Company adopted ASU No. 2017-12 effective December 31, 2019 and reclassified its’ held to maturity securities to available-for-sale.

ASU 2018-13 - Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement: In August 2018, the FASB issued ASU 2018-13 - Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. This ASU modifies the disclosure requirements for fair value measurements in Topic 820, Fair Value Measurement by removing, modifying and adding certain requirements. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted upon issuance of this ASU. An entity is permitted to early adopt and remove or modify disclosures upon issuance of the ASU and delay adoption of the additional disclosures until their effective date. The adoption of this guidance on January 1, 2020 did not have a material impact on the Company’s consolidated financial statements.

ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment:  Issued in January 2017, ASU 2017-04 simplifies the manner in which an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit's goodwill with the carrying amount of that goodwill. In computing the implied fair value of goodwill under Step 2, an entity, prior to the amendments in ASU 2017-04, had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities, including unrecognized assets and liabilities, in accordance with the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. However, under the amendments in ASU 2017-04, an entity should perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount, and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value, with the understanding that the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.  Additionally, ASU 2017-04 removes the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails such qualitative test, to perform Step 2 of the goodwill impairment test. ASU 2017-04 became effective for the Company on January 1, 2020, and the amendments of this ASU were applicable to the goodwill impairment testing for 2020.  

ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments: Issued in June 2016, ASU 2016-13 will add FASB ASC Topic 326, “Financial Instruments-Credit Losses” and finalizes amendments to FASB ASC Subtopic 825-15, “Financial Instruments-Credit Losses.” The amendments of ASU 2016-13 are intended to provide financial statement users with more decision-useful information related to expected credit losses on financial instruments and other commitments to extend credit by replacing the current incurred loss impairment methodology with a methodology that reflects

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expected credit losses and requires consideration of a broader range of reasonable and supportable information to determine credit loss estimates. The amendments of ASU 2016-13 eliminate the probable initial recognition threshold and, in turn, reflect an entity’s current estimate of all expected credit losses. ASU 2016-13 does not specify the method for measuring expected credit losses, and an entity is allowed to apply methods that reasonably reflect its expectations of the credit loss estimate. The amendments of ASU 2016-13, and all subsequent ASUs issued by FASB to provide additional guidance and clarification related to this Topic, became effective for the Company on January 1, 2020.

As a result of adopting the amendments of ASU 2016-13, the Company recorded an increase to its allowance for credit losses of $2.4 million and an increase to its allowance for credit losses on off-balance sheet credit exposures of $0.9 million resulting in a one-time cumulative effect adjustment through retained earnings of $2.6 million net of $0.7 million tax at the date of adoption. This adjustment included a qualitative adjustment to the allowance for credit losses related to loans and an allowance on off-balance sheet credit exposures. The Company estimates losses over an approximate one-year forecast period using Moody’s baseline economic forecasts, and then reverts to longer term historical loss experience over a three-year period.

Accounting Standards not yet adopted:

ASU No. 2020-04: Reference Rate Reform – Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848): This guidance provides temporary options to ease the potential burden in accounting for reference rate reform. It is intended to help stakeholders during the global market-wide reference rate transition period. The guidance is effective as of March 12, 2020, through December 31, 2022. The Company anticipates being fully prepared to implement a replacement for the reference rate and has determined that any change will not have a material impact to the consolidated financial statements.

3. Business Combinations

On September 30, 2019, Premier, through the Bank, completed the acquisition of Strategic Investment Advisors, LLC (“SIA”), a financial advisory and brokerage firm.  Located in Sylvania, Ohio, with assets under management of approximately $115 million and annual revenues of approximately $0.6 million, SIA was added to the Bank’s Trust and Wealth Management platform.  The total purchase price paid in cash was made up of the following: $1.6 million was paid at closing, and $400,000 at the end of a two-year earn-out based on the compound revenue growth over the performance period of SIA, for a total purchase price of $2.0 million.  At December 31, 2019, the Company had recorded goodwill of $1.5 million and identifiable intangible assets of $500,000 consisting of customer relationship intangible.  

Effective January 31, 2020, the Company merged (the “Merger”) with United Community Financial Corp. (“UCFC”) and its subsidiaries, pursuant to an Agreement and Plan of Merger dated September 9, 2019.  Immediately following the Merger, Home Savings was merged with and into the Bank, with the Bank surviving.  In addition, UCFC’s wholly-owned insurance subsidiaries, HSB Insurance, LLC, and United American Financial Services, Inc., each merged with and into First Insurance. UCFC’s consolidated assets and equity (unaudited) as of January 31, 2020 totaled $2.8 billion and $324.5 million, respectively.  The Company accounted for the transaction under the acquisition method of accounting, which means that the acquired assets and liabilities were recorded at fair value at the date of acquisition.    

In accordance with ASC 805, the Company expensed approximately $19.5 million and $1.4 million of direct acquisition costs during the years ended December 31, 2020 and 2019, respectively.  The Company recorded $217.9 million of goodwill and $33.0 million of intangible assets in 2020 as a result of the combination.  Goodwill represents the future economic benefits arising from net assets acquired that are not individually identified and separately recognized and is attributable to synergies expected to be derived from the combination of the 2 entities.  The Company analyzes goodwill annually for impairment.  The Merger was consistent with the Company’s strategy to enhance and expand its presence in northern Ohio.  The Merger offers the Company the opportunity to increase profitability by introducing existing products and services to the acquired customer base as well as add new customers in the expanded market area. The intangible assets are related to core deposits, which are being amortized over 10 years on an accelerated basis, and customer relationships, which are being amortized over 10 years on a straight-line basis.  For tax purposes, goodwill is non-deductible.  The following table summarizes the fair value of the total consideration transferred as part of the Merger as well as the fair value of identifiable assets and liabilities assumed as of the effective date of the transaction.

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	January 31, 2020
	(In Thousands)
Cash Consideration	$	132
Fair Value of Options Exchanged		461
Equity – Dollar Value of Issued Shares		526,850
Fair Value of Total Consideration Transferred		527,443
Recognized Amounts of Identifiable Assets Acquired and Liabilities Assumed:
Cash and Cash Equivalents		52,580
Securities available for sale		262,753
Net loans, including loans held for sale and allowance		2,340,701
FHLB Stock		12,753
Office Properties and Equipment		20,253
Intangible Assets		33,014
Bank-Owned Life Insurance		65,934
Mortgage Servicing Rights		9,747
Accrued Interest Receivable and Other Assets		35,943
Deposits – NonInterest-Bearing		(430,921	)
Deposits – Interest-Bearing		(1,651,669	)
Advances from FHLB		(381,000	)
Accrued Interest Payable and Other Liabilities		(60,524	)
Total Identifiable Net Assets		309,564
Goodwill	$	217,879

  As a result of the Merger and in accordance with the Merger Agreement, each share of UCFC common stock issued and outstanding immediately prior to the effective time was converted into 0.3715 share of Premier common stock.  No fractional shares of Premier common stock were issued in the Merger, and UCFC’s shareholders became entitled to receive cash in lieu of fractional shares. The Company issued 17,926,174 common shares and paid approximately $132,000 to UCFC shareholders as a result of the Merger.  The fair value of Premier common shares issued as part of the consideration paid for the UCFC common shares was determined based on the closing price of the Company’s common shares on the effective date of the Merger.

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The following table presents unaudited pro forma information as if the acquisition had occurred on January 1, 2019, after giving effect to certain adjustments.  The unaudited pro forma information for the years ended December 31, 2020 and 2019 includes adjustments for interest income on loans and securities acquired, amortization of intangibles arising from the transaction, interest expense on deposits and borrowings acquired, and the related income tax effects.  The unaudited pro forma financial information is not necessarily indicative of the results of operations that would have occurred had the transaction been effected on the assumed date.

	Pro Forma Twelve Months Ended
	December 31,
	2020		2019
	(In Thousands, except per share data)
Net Interest Income	$	215,922	$	212,498
Provision for loan losses		18,295		3,195
Noninterest Income		83,966		71,202
Noninterest Expense		154,544		166,429
Income Before Income Taxes		127,049		114,076
Income Tax Expense		26,216		21,478
Net Income	$	100,833	$	92,598
Diluted Earnings Per Share	$	2.66	$	2.44

The above pro forma financial information related to 2020 excludes non-recurring merger costs that totaled $19.5 million on a pre-tax basis. The above pro forma financial information excludes the $25.9 million pre-tax provision expense recognized for the year ended December 31, 2020, under CECL for acquired non-PCD loans as CECL was not effective as of the assumed transaction date of January 1, 2019.    

4. Earnings Per Common Share

Basic earnings per share is calculated using the two-class method. The two-class method is an earnings allocation formula under which earnings per share is calculated from common stock and participating securities according to dividends declared and participation rights in undistributed earnings. Under this method, all earnings distributed and undistributed, are allocated to participating securities and common shares based on their respective rights to receive dividends. Unvested share-based payment awards that contain non-forfeitable rights to dividends are considered participating securities (i.e. unvested restricted stock), not subject to performance based measures.

The following table sets forth the computation of basic and diluted earnings per common share for the years ended December 31:

	2020		2019		2018
	(In Thousands, Except Per Share Amounts)
Basic Earnings Per Share:
Net income available to common shareholders	$	63,077	$	49,370	$	46,249
Less: Income allocated to participating securities		89		36		16
Net income allocated to common shareholders	$	62,988	$	49,334	$	46,233
Weighted average common shares outstanding Including participating    securities		35,952		19,844		20,358
Less: Participating securities		50		20		9
Average common shares		35,902		19,824		20,349
Basic earnings per common share	$	1.75	$	2.49	$	2.27
Diluted Earnings Per Share:
Net income allocated to common shareholders	$	62,988	$	49,334	$	46,233
Weighted average common shares outstanding for basic earnings per    common share		35,902		19,824		20,349
Add: Dilutive effects of stock options and restricted stock units		47		107		119
Average shares and dilutive potential common shares		35,949		19,931		20,468
Diluted earnings per common share	$	1.75	$	2.48	$	2.26

Shares subject to issue upon exercise of options and vesting requirements of restricted stock units of 97,724 in 2020, 0 in 2019 and 10,500 in 2018 were excluded from the diluted earnings per common share calculation as they were anti-dilutive.

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5. Investment Securities

The following tables summarize the amortized cost and fair value of available-for-sale securities at December 31, 2020 and 2019, and the corresponding amounts of gross unrealized and unrecognized gains and losses:

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(In Thousands)
2020
Available-for-sale
Obligations of U.S. government corporations and agencies	$	39,233	$	1,707	$	—		$	40,940
Mortgage-backed securities		270,683		6,746		(247	)		277,182
Collateralized mortgage obligations		103,532		2,927		(160	)		106,299
Asset-backed securities		30,643		1		(98	)		30,546
Corporate bonds		43,826		489		(146	)		44,169
Obligations of state and political subdivisions		229,645		8,069		(196	)		237,518
Total Available-for-Sale	$	717,562	$	19,939	$	(847	)	$	736,654

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(In Thousands)
2019
Available-for-sale
Obligations of U.S. government corporations and agencies	$	2,518	$	6	$	—		$	2,524
Mortgage-backed securities - residential		88,380		1,380		(113	)		89,647
REMICs		1,618		18		—			1,636
Collateralized mortgage obligations - residential		81,390		796		(85	)		82,101
Corporate bonds		12,011		90		—			12,101
Obligations of state and political subdivisions		91,406		4,042		(9	)		95,439
Total Available-for-Sale	$	277,323	$	6,332	$	(207	)	$	283,448

The amortized cost and fair value of the investment securities portfolio at December 31, 2020, is shown below by contractual maturity. Expected maturities will differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. For purposes of the maturity tables below, mortgage-backed securities, collateralized mortgage obligations, and asset-backed securities which are not due at a single maturity date, have not been allocated over maturity groupings.

	Available-for-Sale
	Amortized		Fair
	Cost		Value
	(In Thousands)
Available-for-sale
Due in one year or less	$	9,656	$	9,711
Due after one year through five years		16,746		17,147
Due after five years through ten years		89,827		92,652
Due after ten years		196,475		203,117
MBS/CMO/ABS		404,858		414,027
Total	$	717,562	$	736,654

Securities pledged at year-end 2020 and 2019 had a carrying amount of $324.4 million and $158.8 million, respectively, and were pledged to secure public deposits, securities sold under repurchase agreements and FHLB advances.

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The following table summarizes Premier’s securities that were in an unrealized loss position at December 31, 2020, and December 31, 2019:

	Duration of Unrealized Loss Position
	Less than 12 Months					12 Months or Longer				Total
			Gross					Gross
	Fair		Unrealized			Fair		Unrealized		Fair		Unrealized
	Value		Loss			Value		Loss		Value		Loses
	(In Thousands)
At December 31, 2020
Available-for-sale securities:
Mortgage-backed securities	$	26,361	$	(247	)	$	—	$	—	$	26,361	$	(247	)
Collateralized mortgage obligations		5,161		(160	)		—		—		5,161		(160	)
Asset-backed securities		18,439		(98	)		—		—		18,439		(98	)
Corporate Bonds		12,177		(146	)		—		—		12,177		(146	)
Obligations of state and political subdivisions		41,088		(196	)		—		—		41,088		(196	)
Total temporarily impaired securities	$	103,226	$	(847	)	$	—	$	—	$	103,226	$	(847	)

At December 31, 2019
Available-for-sale securities:
Mortgage-backed securities-residential	$	13,830	$	(42	)	$	9,721	$	(71	)	$	23,551	$	(113	)
Collateralized mortgage obligations		7,448		(29	)		5,549		(56	)		12,997		(85	)
Obligations of state and political subdivisions		1,413		(9	)							1,413		(9	)
Total temporarily impaired securities	$	22,691	$	(80	)	$	15,270	$	(127	)	$	37,961	$	(207	)

ASU 2016-13 makes targeted improvements to the accounting for credit losses on securities available for sale. The concept of other than-temporarily impaired (OTTI) has been replaced in 2020 with the allowance for credit losses. Unlike securities held to maturity, securities available for sale are evaluated on an individual level and pooling of securities is not allowed.

Quarterly, the Company evaluates if any security has a fair value less than its amortized cost. Once these securities are identified, in order to determine whether a decline in fair value resulted from a credit loss or other factors, the Company performs further analysis as outlined below:

• Review the extent to which the fair value is less than the amortized cost and observe the security’s lowest credit rating as reported by third-party credit ratings companies.

• Any securities that are downgraded by a third party ratings company above would be subjected to additional analysis that may include, but is not limited to: changes in market interest rates, changes in securities credit ratings, security type, service area economic factors, financial performance of the issuer/or obligor of the underlying issue and third-party guarantee.

• If the Company determines that a credit loss exists, the credit portion of the allowance will be measured using a DCF analysis using the effective interest rate as of the security’s purchase date. The amount of credit loss the Company records will be limited to the amount by which the amortized cost exceeds the fair value.  As of December 31, 2020, management had determined that no credit loss exists.

In 2019 and 2018, management determined there was 0 OTTI.    

Net realized gains from the sales of investment securities totaled $1.5 million ($1.2 million after tax) in 2020 while there were net realized gains of $24,000 ($19,000 after tax) and $173,000 ($136,000 after tax) in 2019 and 2018, respectively.

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The proceeds from sales and calls of securities and the associated gains and losses for the years ended December 31 are listed below:

	2020			2019			2018
	(In Thousands)
Proceeds	$	52,420		$	2,667		$	5,503
Gross realized gains		1,471			35			178
Gross realized losses		(7	)		(11	)		(5	)

At December 31, 2020, the Company also owned $1.1 million of equity securities which consisted of a single trust preferred security.  During 2020, the Company recognized a gain of $90,000 associated with the mark to market requirement for equity securities.  The Company did 0t own any equity securities at December 31, 2019.

6. Commitments and Contingent Liabilities

Loan Commitments

Loan commitments are made to accommodate the financial needs of the Bank’s customers. Standby letters of credit commit the Company to make payments on behalf of customers when certain specified future events occur. They primarily are issued to facilitate customers’ trade transactions.

Both arrangements have credit risk, essentially the same as that involved in extending loans to customers, and are subject to the Company’s normal credit policies. Collateral (e.g., securities, receivables, inventory and equipment) is obtained based on management’s credit assessment of the customer.

The Company’s maximum obligation to extend credit for loan commitments (unfunded loans and unused lines of credit) and standby letters of credit outstanding on December 31 was as follows (in thousands):

	2020				2019
	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
Commitments to make loans	$	409,813	$	292,290	$	55,013	$	123,798
Unused lines of credit		74,364		844,106		7,625		425,484
Standby letters of credit		—		22,250		—		14,215
Total	$	484,177	$	1,158,646	$	62,638	$	563,497

Commitments to make loans are generally made for periods of 60 days or less.  The fixed rate loan commitments at December 31, 2020, had interest rates ranging from 0.00% to 25.00% and maturities ranging from less than one year to 37 years.

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7. Loans

Loans receivable consist of the following:

	December 31, 2020			December 31, 2019
	(In Thousands)
Real Estate:
Residential	$	1,201,051		$	324,773
Commercial		2,383,001			1,506,026
Construction		667,649			305,305
		4,251,701			2,136,104
Other Loans:
Commercial		1,202,353			578,071
Home equity and improvement		272,701			122,864
Consumer Finance		120,729			37,649
		1,595,783			738,584
Total loans		5,847,484			2,874,688
Deduct:
Undisbursed loan funds		(355,065	)		(94,865	)
Net deferred loan origination fees and costs		(1,179	)		(2,259	)
Allowance for credit loss		(82,079	)		(31,243	)
Totals	$	5,409,161		$	2,746,321

Loan segments have been identified by evaluating the portfolio based on collateral and credit risk characteristics.  

The following tables disclose the annual activity in the allowance for credit losses for the periods indicated by portfolio segment (in thousands):

Year ended December 31, 2020	Residential Real Estate			Commercial Real Estate			Construction			Commercial			Home Equity and Improvement			Consumer Finance			Total
Beginning Allowance	$	2,867		$	16,302		$	996		$	9,003		$	1,700		$	375		$	31,243
Impact of ASC 326 Adoption		1,765			3,682			(223	)		(2,263	)		(521	)		(86	)		2,354
Acquisition related allowance for credit loss (PCD)		1,077			4,053			—			2,272			248			48			7,698
Charge-Offs		(307	)		(4,237	)		(1	)		(1,350	)		(164	)		(293	)		(6,352	)
Recoveries		342			1,352			—			1,850		262			176				3,982
Provisions(1)(2)		11,790			22,265			1,969			2,153			3,214			1,763			43,154
Ending Allowance	$	17,534		$	43,417		$	2,741		$	11,665		$	4,739		$	1,983		$	82,079

(1) Allowance/provision are not comparable to prior periods due to the adoption of CECL.

(2) Provision for the twelve months ended December 31, 2020, includes $25.9 million as a result of the Merger with UCFC in the first quarter.

Year ended December 31, 2019	Residential Real Estate			Commercial Real Estate			Construction		Commercial			Home Equity and Improvement			Consumer Finance			Total
Beginning Allowance	$	2,881		$	15,142		$	682	$	7,281		$	2,026		$	319		$	28,331
Charge-Offs		(515	)		(148	)		—		(528	)		(245	)		(289	)		(1,725	)
Recoveries		193			645			—		642		184			68				1,732
Provisions		308			663			314		1,608			(265	)		277			2,905
Ending Allowance	$	2,867		$	16,302		$	996	$	9,003		$	1,700		$	375		$	31,243

26

Year ended December 31, 2018	Residential Real Estate			Commercial Real Estate			Construction		Commercial			Home Equity and Improvement			Consumer Finance			Total
Beginning Allowance	$	2,532		$	13,056		$	647	$	7,965		$	2,255		$	228		$	26,683
Charge-Offs		(261	)		(1,387	)		—		(724	)		(269	)		(233	)		(2,874	)
Recoveries		131			777			—		2,221			191			26			3,346
Provisions		479			2,696			35		(2,181	)		(151	)		298			1,176
Ending Allowance	$	2,881		$	15,142		$	682	$	7,281		$	2,026		$	319		$	28,331

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of December 31, 2019 (in thousands):

	Residential Real Estate		Commercial Real Estate		Construction		Commercial		Home Equity & Improvement		Consumer Finance		Total
Allowance for loan losses:
Ending allowance balance    attributable to loans:
Individually evaluated    for impairment	$	115	$	85	$	—	$	174	$	48	$	—	$	422
Collectively evaluated    for impairment		2,752		16,217		996		8,829		1,652		375		30,821
Acquired with deteriorated    credit quality		—		—		—		—		—		—		—
Total ending allowance    balance	$	2,867	$	16,302	$	996	$	9,003	$	1,700	$	375	$	31,243
Loans:
Loans individually evaluated    for impairment	$	7,049	$	21,132	$	—	$	6,655	$	759	$	28	$	35,623
Loans collectively evaluated    for impairment		318,106		1,490,306		206,721		573,244		122,963		37,808		2,749,148
Loans acquired with    deteriorated credit quality		989		921		—		12		—		—		1,922
Total ending loans    balance	$	326,144	$	1,512,359	$	206,721	$	579,911	$	123,722	$	37,836	$	2,786,693

The following tables presents the average balance, interest income recognized and cash basis income recognized on individually analyzed loans by class of loans for the years ended December 31, 2019 and 2018 (in thousands):

	Twelve Months Ended December 31, 2019
	Average Balance		Interest Income Recognized		Cash Basis Income Recognized
Real Estate:
Residential	$	7,040	$	341	$	335
Commercial		23,080		1,382		1,301
Construction		—		—		—
Other Loans:
Commercial		8,397		446		345
Home equity and improvement		862		38		35
Consumer finance		27		1		1
Total	$	39,406	$	2,208	$	2,017

27

	Twelve Months Ended December 31, 2018
	Average Balance		Interest Income Recognized		Cash Basis Income Recognized
Real Estate:
Residential	$	7,058	$	284	$	276
Commercial		29,387		1,099		1,084
Construction		—		—		—
Other Loans:
Commercial		11,548		375		364
Home equity and improvement		1,150		38		38
Consumer finance		39		4		4
Total	$	49,182	$	1,800	$	1,766

The following table presents the amortized cost basis of collateral-dependent loans by class of loans and collateral type as of December 31, 2020 (in thousands):

	December 31, 2020
	Real Estate		Equipment and Machinery		Inventory and Receivables		Vehicles		Total
Real Estate:
Residential	$	1,024	$	—	$	—	$	—	$	1,024
Commercial		33,999		—		—		—		33,999
Construction		—		—		—		—		—
Other Loans:
Commercial		1,426		5,317		4,943		125		11,811
Home equity and improvement		—		—		—		—		—
Consumer finance		—		—		—		—		—
Total	$	36,449	$	5,317	$	4,943	$	125	$	46,834

28

The following table presents loans individually evaluated for impairment by class of loans (in thousands):

	December 31, 2019
	Unpaid Principal Balance*		Recorded Investment		Allowance for Loan Losses Allocated
With no allowance recorded:
Real Estate:
Residential	$	1,048	$	1,053	$	—
Commercial		19,775		18,742		—
Construction		—		—		—
Other Loans:
Commercial		5,886		5,906		—
Home equity and improvement		151		151		—
Consumer finance		—		—		—
Total loans with no allowance recorded	$	26,860	$	25,852	$	—
With an allowance recorded:
Real Estate:
Residential	$	6,151	$	5,996	$	115
Commercial		3,065		2,390		85
Construction		—		—		—
Other Loans:
Commercial		1,000		749		174
Home equity and improvement		654		608		48
Consumer finance		28		28		—
Total loans with an allowance recorded	$	10,898	$	9,771	$	422

* Presented gross of charge offs

Non-performing loans include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified loans.  All loans greater than 90 days past due are placed on non-accrual status.  Effective January 1, 2020 with the adoption of ASC Topic 326, the Company began including non-accrual PCD loans in its non-performing loans.  As such, the non-performing loans as of December 31, 2020 include PCD loans accounted for pursuant to ASC Topic 326 as these loans are individually evaluated.  The non-performing loans do not include PCD (formerly PCI) loans as of December 31, 2019, as the PCD loans prior to adopting ASC Topic 326 were evaluated on a pool basis.  The following table presents the current balance of the aggregate amounts of non-performing assets, comprised of non-performing loans and real estate owned as of the dates indicated:

	December 31, 2020		December 31, 2019
	(In Thousands)
Non-accrual loans	$	51,682	$	13,437
Loans over 90 days past due and still accruing		—		—
Total non-performing loans		51,682		13,437
Real estate and other assets held for sale		343		100
Total non-performing assets	$	52,025	$	13,537
Troubled debt restructuring, still accruing	$	7,173	$	8,486

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The following table presents the aging of the recorded investment in past due and non-accrual loans as of December 31, 2020, by class of loans (in thousands):

	Current		30-59 days		60-89 days		90+ days		Total Past Due		Total Non Accrual
Real Estate:
Residential		1,173,979		433		7,669		9,000		17,102		10,178
Commercial		2,357,909		1,033		369		844		2,246		11,980
Construction		310,152		—		1,626		806		2,432		806
Other Loans:
Commercial		1,172,636		9		4		394		407		1,365
Home equity and improvement		262,373		3,440		839		1,137		5,416		1,537
Consumer finance		117,088		1,687		491		1,521		3,699		1,624
PCD		50,218		402		1,882		13,299		15,583		24,192
Total Loans	$	5,444,355	$	7,004	$	12,880	$	27,001	$	46,885	$	51,682

The following table presents the aging of the recorded investment in past due and non-accrual loans as of December 31, 2019, by class of loans (in thousands):

	Current		30-59 days		60-89 days		90+ days		Total Past Due		Total Non Accrual
Real Estate:
Residential		323,600		1,328		570		646		2,544		2,411
Commercial		1,509,132		339		172		2,716		3,227		7,609
Construction		206,721		—		—		—		—		—
Other Loans:
Commercial		576,988		273		206		2,444		2,923		2,961
Home equity and improvement		122,487		956		240		39		1,235		449
Consumer finance		37,622		143		64		7		214		7
Total Loans	$	2,776,550	$	3,039	$	1,252	$	5,852	$	10,143	$	13,437

Troubled Debt Restructurings

As of December 31, 2020 and 2019, the Company had a recorded investment in TDRs of $16.6 million and $15.1 million, respectively.  The Company allocated $883,000 and $388,000 of specific reserves to those loans at December 31, 2020 and 2019, respectively, and committed to lend additional amounts totaling up to $303,000 and $226,000 at December 31, 2020 and 2019, respectively.

The Company has responded to the COVID-19 pandemic in numerous ways, including by actively participating in the Paycheck Protection Program (“PPP”) and distributing over $450 million to small businesses in our markets.  As of December 31, 2020, the Company had $386.9 million in PPP loans, which remained unpaid and were included in other commercial loans in our loan tables.  Through February 28^th the Company had $327.7 million in PPP loans from the first round of originations still outstanding.  In addition, the Company originated $139.3 million in PPP loans associated with the second round of originations.  The Company also worked with borrowers impacted by the COVID-19 pandemic by providing modifications to include either interest only deferral or principal and interest deferral.  These modifications range from one to nine months.  As of December 31, 2020, the Company had approximately $53.5 million in deferrals.  These modifications are excluded from TDR classification under Section 4013 of the CARES Act or under applicable interagency guidance of the federal banking regulators. Modified loans will be considered current and will continue to accrue interest during the deferral period unless repayment of the loan under contractual terms is not expected and thereby loans will be placed on non-accrual.

30

A breakout of active deferrals by loan category as of December 31, 2020, is as follows (in thousands):

	Balance deferred
Residential real estate	$	7,016
Commercial real estate		34,831
Construction		9,579
Commercial		1,628
Home equity and improvement		114
Consumer finance		282
Total	$	53,450

The following table is a breakout of commercial deferrals as of December 31, 2020 (in thousands):  

Commercial deferral expirations	Balance
January	$	15,698
February		5,075
March		-
April		25,265
May		-
June		-
Total	$	46,038

The Company offers various types of concessions when modifying a loan, however, forgiveness of principal is rarely granted.  Each TDR is uniquely designed to meet the specific needs of the borrower.  Commercial loans modified in a TDR often involve temporary interest-only payments, term extensions, and converting revolving credit lines to term loans.  Additional collateral or an additional guarantor is often requested when granting a concession.  Commercial real estate loans modified in a TDR often involve temporary interest-only payments, re-amortization of remaining debt in order to lower payments, and sometimes reducing the interest rate lower than the current market rate.  Residential mortgage loans modified in a TDR are comprised of loans where monthly payments are lowered, either through interest rate reductions or principal only payments for a period of time, to accommodate the borrowers’ financial needs, interest is capitalized into principal, or the term and amortization are extended.  Home equity modifications are made infrequently and usually involve providing an interest rate that is lower than the borrower would be able to obtain due to credit issues.  All retail loans where the borrower is in bankruptcy are classified as TDRs regardless of whether or not a concession is made.

Of the loans modified in a TDR, $9.4 million are on non-accrual status and partial charge-offs have in some cases been taken against the outstanding balance.  Loans modified as a TDR may have the financial effect of increasing the allowance associated with the loan.  If the loan is determined to be collateral dependent, the estimated fair value of the collateral, less any selling costs is used to determine if there is a need for a specific allowance or charge-off.  If the loan is determined to be cash flow dependent, the allowance is measured based on the present value of expected future cash flows discounted at the loan’s pre-modification effective interest rate.

31

The following table presents loans by class modified as TDRs that occurred during the years indicated (Dollars in Thousands):

	Loans Modified as a TDR for the Twelve Months Ended December 31, 2020 ($ in thousands)				Loans Modified as a TDR for the Twelve Months Ended December 31, 2019 ($ in thousands)				Loans Modified as a TDR for the Twelve Months Ended December 31, 2018 ($ in thousands)
Troubled Debt Restructurings:	Number of Loans		Recorded Investment (as of period end)		Number of Loans		Recorded Investment (as of period end)		Number of Loans		Recorded Investment (as of period end)
Real Estate:
Residential		7	$	892		12	$	1,332		22	$	1,169
Commercial		6		7,760		2		621		13		1,681
Construction		—		—		—		—		—		—
Other Loans:
Commercial		9		7,546		5		317		6		2,942
Home equity and improvement		4		92		1		25		7		89
Consumer finance		—		—		—		—		8		29
Total		26	$	16,290		20	$	2,295		56	$	5,910

The loans described above increased the allowance by $660,000 and $34,000 for the years ended December 31, 2020 and 2019, respectively, and decreased the allowance by $110,000 for the year ended December 31, 2018, respectively.  

The following table presents loans by class modified as TDRs for which there was a payment default within twelve months following the modification during the indicated:

	Loans Modified as a TDR for the Twelve Months Ended December 31, 2020 ($ in thousands)				Loans Modified as a TDR for the Twelve Months Ended December 31, 2019 ($ in thousands)				Loans Modified as a TDR for the Twelve Months Ended December 31, 2018 ($ in thousands)
TDRs That Subsequently Defaulted:	Number of Loans		Recorded Investment (as of period end)		Number of Loans		Recorded Investment (as of period end)		Number of Loans		Recorded Investment (as of period end)
Real Estate:
Residential		2	$	229		—	$	—		2	$	121
Commercial		—		—		1		81		—		—
Construction		—		—		—		—		—		—
Other Loans:
Commercial		—		—		3		2,248		3		2,644
Home equity and improvement		—		—		—		—		1		30
Consumer finance		—		—		—		—		1		61
Total		2	$	229		4	$	2,329		7	$	2,856

The TDRs that subsequently defaulted described above increased the allowance by $5,000, $4,000 and $17,000 for the years ended December 31, 2020, 2019 and 2018, respectively.     

32

A default for purposes of this disclosure is a TDR loan in which the borrower is 90 days contractually past due under the modified terms.

In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed regarding the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification.

Credit Quality Indicators

Loans are categorized into risk categories based on relevant information about the ability of borrowers to service their debt such as:  current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors.  Loans are analyzed individually by classifying the loans as to credit risk.  This analysis includes all non-homogeneous loans, such as commercial and commercial real estate loans and certain homogenous mortgage, home equity and consumer loans. This analysis is performed on a quarterly basis.  Premier uses the following definitions for risk ratings with loans not meeting such classifications being considered “unclassified”:

Special Mention.  Loans classified as special mention have a potential weakness that deserves management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution's credit position at some future date.

Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful.  Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Not Graded.  Loans classified as not graded are generally smaller balance residential real estate, home equity and consumer installment loans which are originated primarily by using an automated underwriting system.  These loans are monitored based on their delinquency status and are evaluated individually only if they are seriously delinquent.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans.  

As of December 31, 2020, and based on the most recent analysis performed, the risk category and recorded investment in loans is as follows (in thousands):

Class	Unclassified		Special Mention		Substandard		Doubtful		Total classified		Total
Real Estate:
Residential		1,187,923		795		2,363		—		2,363		1,191,081
Commercial		2,203,652		111,039		45,464		—		45,464		2,360,155
Construction		299,866		12,718		—		—		—		312,584
Other Loans:
Commercial		1,142,289		23,907		6,847		—		6,847		1,173,043
Home equity and improvement		267,350		—		439		—		439		267,789
Consumer finance		120,682		—		105		—		105		120,787
PCD		26,829		3,813		35,159		—		35,159		65,801
Total Loans	$	5,248,591	$	152,272	$	90,377	$	—	$	90,377	$	5,491,240

33

As of December 31, 2019, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows (in thousands):

Class	Unclassified		Special Mention		Substandard		Doubtful		Total classified		Total
Real Estate:
Residential		322,250		415		3,479		—		3,479		326,144
Commercial		1,462,065		27,197		23,097		—		23,097		1,512,359
Construction		205,076		1,645		—		—		—		206,721
Other Loans:
Commercial		548,012		24,162		7,737		—		7,737		579,911
Home equity and improvement		123,407		—		315		—		315		123,722
Consumer finance		37,816		—		20		—		20		37,836
Total Loans	$	2,698,626	$	53,419	$	34,648	$	—	$	34,648	$	2,786,693

34

The table below presents the amortized cost basis of loans by vintage, credit quality indicator and class of loans based on the most recent analysis performed (in thousands):

	Term of loans by origination
	2020		2019		2018		2017		2016		Prior		Revolving Loans		Total
As of December 31, 2020
Real Estate
Residential:
Risk Rating
Pass	$	250,979	$	196,158	$	136,247	$	130,759	$	137,581	$	333,572	$	2,627	$	1,187,923
Special Mention		199		—		—		62		116		211		207		795
Substandard		—		74		289		252		136		1,612				2,363
Doubtful		—		—		—		—		—		—		—		—
Total	$	251,178	$	196,232	$	136,536	$	131,073	$	137,833	$	335,395	$	2,834	$	1,191,081
Commercial:
Risk Rating
Pass	$	517,691	$	457,905	$	299,072	$	300,573	$	198,247	$	414,082	$	16,082	$	2,203,652
Special Mention		6,014		7,239		10,452		60,712		7,977		17,723		922		111,039
Substandard		—		279		18,851		1,937		3,143		19,107		2,147		45,464
Doubtful		—		—		—		—		—		—		—		—
Total	$	523,705	$	465,423	$	328,375	$	363,222	$	209,367	$	450,912	$	19,151	$	2,360,155
Construction:
Risk Rating
Pass	$	101,616	$	100,553	$	82,972	$	11,666	$	2,911	$	148	$	-	$	299,866
Special Mention		5,587		—		7,131		—		—		—		—		12,718
Substandard		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—
Total	$	107,203	$	100,553	$	90,103	$	11,666	$	2,911	$	148	$	-	$	312,584
Other Loans
Commercial:
Risk Rating
Pass	$	568,678	$	144,977	$	82,492	$	42,421	$	21,262	$	21,969	$	260,490	$	1,142,289
Special Mention		1,180		2,026		2,514		2,109		37		5,121		10,920		23,907
Substandard		148		201		497		543		257		269		4,932		6,847
Doubtful		—		—		—		—		—		—		—		—
Total	$	570,006	$	147,204	$	85,503	$	45,073	$	21,556	$	27,359	$	276,342	$	1,173,043
Home equity and Improvement:
Risk Rating
Pass	$	8,736	$	7,483	$	4,508	$	7,963	$	7,748	$	31,382	$	199,530	$	267,350
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		86		353		439
Doubtful		—		—		—		—		—		—		—		—
Total	$	8,736	$	7,483	$	4,508	$	7,963	$	7,748	$	31,468	$	199,883	$	267,789
Consumer Finance:
Risk Rating
Pass	$	38,665	$	37,601	$	19,401	$	10,607	$	4,393	$	3,272	$	6,743	$	120,682
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		98		3		—		4		—		—		105
Doubtful		—		—		—		—		—		—		—		—
Total	$	38,665	$	37,699	$	19,404	$	10,607	$	4,397	$	3,272	$	6,743	$	120,787
PCD:
Risk Rating
Pass	$	-	$	45	$	2,378	$	2,547	$	1,524	$	18,998	$	1,337	$	26,829
Special Mention		—		—		—		1,160		509		1,758		386		3,813
Substandard		—		—		—		14,371		2,502		7,207		11,079		35,159
Doubtful		—		—		—		—		—		—		—		—
Total	$	-	$	45	$	2,378	$	18,078	$	4,535	$	27,963	$	12,802	$	65,801

35

Allowance for Credit Losses (“ACL”)

The Company has adopted ASU 2016-13 (Topic 326 – Credit Losses) to calculate the ACL, which requires a projection of credit loss over the contract lifetime of the credit adjusted for prepayment tendencies. This valuation account is deducted from the loans amortized cost basis to present the net amount expected to be collected on the loan.  The ACL is adjusted through the provision for credit losses and reduced by net charge offs of loans.  

The credit loss estimation process involves procedures that consider the unique characteristics of the Company’s portfolio segments.  These segments are further disaggregated into the loan pools for monitoring.  When computing allowance levels, a model of risk characteristics, such as loss history and delinquency status, along with current conditions and a supportable forecast is used to determine credit loss assumptions.  

The Company is generally utilizing two methodologies to analyze loan pools: discounted cash flows (“DCF”) and probability of default/loss given default (“PD/LGD”).  

A default can be triggered by one of several different asset quality factors including past due status, non-accrual status or if the loan has had a charge-off.  The PD/LGD utilizes charge off data from the Federal Financial Institutions Examination Council to construct a default rate.  The Company estimates losses over an approximate one-year forecast period using Moody’s baseline economic forecasts, and then reverts to longer term historical loss experience over a three-year period.  This default rate is further segmented based on the risk of the credit assigning a higher default rate to riskier credits.  

The DCF methodology was selected as the most appropriate for loan segments with longer average lives and regular payment structures.  The DCF model has two key components, the loss driver analysis combined with a cash flow analysis.  The contractual cash flow is adjusted for PD/LGD and prepayment speed to establish a reserve level.  The prepayment studies are updated quarterly by a third-party for each applicable pool.  

The remaining life method was selected for the consumer loan segment since the pool contains loans with many different structures and payment streams and collateral.  The weighted average remaining life uses an average annual charge-off rate applied to the contractual term, further adjusted for estimated prepayments to determine the unadjusted historical charge-off rate for the remaining balance of assets.  

Portfolio Segments	Loan Pool	Methodology	Loss Drivers
Residential real estate	1-4 Family nonowner occupied	DCF	National unemployment
	1-4 Family owner occupied	DCF	National unemployment
Commercial real estate	Commercial real estate nonowner occupied	DCF	National unemployment
	Commercial real estate owner occupied	DCF	National unemployment
	Multi Family	DCF	National unemployment
	Agriculture Land	DCF	National unemployment
	Other commercial real estate	DCF	National unemployment
Construction secured by real estate	Construction	PD/LGD	Call report loss history
Commercial	Commercial working capital	PD/LGD	Call report loss history
	Agriculture production	PD/LGD	Call report loss history
	Other commercial	PD/LGD	Call report loss history
Home equity and improvement	Home equity and improvement	PD/LGD	Call report loss history
Consumer finance	Consumer finance	Remaining life	Call report loss history

According to the accounting standard an entity may make an accounting policy election not to measure an allowance for credit losses for accrued interest receivable if the entity writes off the applicable accrued interest receivable balance in a timely

36

manner.  The Company has made the accounting policy election not to measure an allowance for credit losses for accrued interest receivables for all loan segments.  Current policy dictates that a loan will be placed on nonaccrual status, with the current accrued interest receivable balance being written off, upon the loan being 90 days delinquent or when the loan is deemed to be collateral dependent and the collateral analysis shows less than 1.2 times discounted collateral coverage based on a current assessment of the value of the collateral.

In addition, ASC Topic 326 requires the Company to establish a liability for anticipated credit losses for unfunded commitments. To accomplish this, the company must first establish a loss expectation for extended (funded) commitments.  This loss expectation, expressed as a ratio to the amortized cost basis, is then applied to the portion of unfunded commitments not considered unilaterally cancelable, and considered by the company’s management as likely to fund over the life of the instrument.  At December 31, 2020, the Company had $1.3 billion in unfunded commitments and set aside $5.3 million in anticipated credit losses.  This reserve is recorded in other liabilities as opposed to the ACL.  

The determination of ACL is complex and the Company makes decisions on the effects of factors that are inherently uncertain.  Evaluations of the loan portfolio and individual credits require certain estimates, assumptions and judgements as to the facts and circumstances related to particular situations or credits.  There may be significant changes in the ACL in future periods determined by prevailing factors at that point in time along with future forecasts.  

Certain loans acquired had evidence that the credit quality of the loan had deteriorated since its origination and in management’s assessment at the acquisition date it was probable that Premier would be unable to collect all contractually required payments due. In accordance with FASB ASC Topic 310 Subtopic 30, Loans and Debt Securities Acquired with Deteriorated Credit Quality, these loans have been recorded based on management’s estimate of the fair value of the loans.

Purchased Loans

As a result of the Merger, the Company acquired $2.2 billion in loans.  Par value of purchased loans was as follows (in thousands):

	2020
Par value of acquired loans at acquisition	$	2,247,317
Credit discount		(34,610	)
Non-credit discount/(premium) at acquisition		8,497
Purchase price of loans at acquisition	$	2,221,204

Under ASU Topic 326, when loans are purchased with evidence of more than insignificant deterioration of credit, they are accounted for as PCD. PCD loans acquired in a transaction are marked to fair value and a mark on yield is recorded. In addition, an adjustment is made to the ACL for the expected loss on the acquisition date. These loans are assessed on a regular basis and subsequent adjustments to the ACL are recorded on the income statement. On January 31, 2020, the Company acquired PCD loans with a fair value of $79.1 million, credit discount $7.7 million and a noncredit discount of $4.1 million. The outstanding balance at December 31, 2020 and related allowance on these loans is as follows (in thousands):

	Loan Balance		ACL Balance
	(In Thousands)
Real Estate:
Residential	$	14,895	$	201
Commercial		24,334		2,286
Construction		—		—
		39,229		2,487
Other Loans:
Commercial		20,990		1,896
Home equity and improvement		4,912		214
Consumer finance		670		20
		26,572		2,130
Total	$	65,801	$	4,617

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At December 31, 2020 the Company had $1.8 million in loans that had previously been accounted for as purchase credit impaired.

Loans to executive officers, directors, and their affiliates are as follows:

	Years Ended December 31,
	2020			2019
	(In Thousands)
Beginning balance	$	21,849		$	21,563
New loans		14,913			4,152
Effect of changes in composition of related parties		883			—
Repayments		(14,261	)		(3,866	)
Ending Balance	$	23,384		$	21,849

Foreclosure Proceedings

Consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure totaled $784,000 as of December 31, 2020 and $981,000 as of December 31, 2019.

8. Mortgage Banking

Net revenues from the sales and servicing of mortgage loans consisted of the following:

	Years Ended December 31,
	2020			2019			2018
	(In Thousands)
Gain from sale of mortgage loans	$	36,359		$	7,706		$	4,502
Mortgage loan servicing revenue (expense):
Mortgage loan servicing revenue		7,296			3,820			3,784
Amortization of mortgage servicing rights		(7,477	)		(1,809	)		(1,341	)
Mortgage servicing rights valuation adjustments		(7,979	)		(234	)		132
		(8,160	)		1,777			2,575
Net mortgage banking income	$	28,199		$	9,483		$	7,077

The unpaid principal balance of residential mortgage loans serviced for third parties was $2.95 billion at December 31, 2020, and $1.46 billion at December 31, 2019.

Activity for capitalized mortgage servicing rights (“MSRs”) and the related valuation allowance is as follows:

	Years Ended December 31,
	2020			2019			2018
	(In Thousands)
Mortgage servicing assets:
Balance at beginning of period	$	10,801		$	10,419		$	10,240
Loans sold, servicing retained		8,595			2,191			1,520
Mortgage servicing rights acquired		9,747			—			—
Amortization		(7,477	)		(1,809	)		(1,341	)
Carrying value before valuation allowance at end of period		21,666			10,801			10,419
Valuation allowance:
Balance at beginning of period		(534	)		(300	)		(432	)
Impairment recovery (charges)		(7,979	)		(234	)		132
Balance at end of period		(8,513	)		(534	)		(300	)
Net carrying value of MSRs at end of period	$	13,153		$	10,267		$	10,119
Fair value of MSRs at end of period	$	13,153		$	10,378		$	10,656

Amortization of mortgage servicing rights is computed based on payments and payoffs of the related mortgage loans serviced.

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The Company had no actual losses from secondary market buy-backs in 2020, 2019 or 2018.  Based on management’s estimate of potential losses from secondary market buyback activity, a liability of $43,000 was accrued at both December 31, 2020 and 2019, and is reflected in other liabilities in the Consolidated Statements of Financial Condition.  Expense (credit) recognized related to the accrual was $0, $0 and $0 for the years ended December 31, 2020, 2019 and 2018, respectively.

The Company’s servicing portfolio is comprised of the following:

	December 31,
	2020				2019
	Number of		Principal		Number of		Principal
Investor	Loans		Outstanding		Loans		Outstanding
	(In Thousands)
Fannie Mae		8,365	$	998,359		4,915	$	465,982
Freddie Mac		17,385		1,925,717		9,833		977,649
Federal Home Loan Bank		89		13,143		118		17,564
Other		105		9,826		12		450
Totals		25,944	$	2,947,045		14,878	$	1,461,645

Custodial escrow balances maintained in connection with serviced loans were $33.8 million and $15.3 million at December 31, 2020 and 2019, respectively.

Significant assumptions at December 31, 2020, used in determining the value of MSRs include a weighted average prepayment speed assumption (“PSA”) of 390 and a weighted average discount rate of 11.01%.  Significant assumptions at December 31, 2019, used in determining the value of MSRs include a weighted average prepayment rate of 177 PSA and a weighted average discount rate of 12.01%.  

9. Premises and Equipment and Leases

Premises and equipment are summarized as follows:

	December 31,
	2020			2019
	(In Thousands)
Cost:
Land	$	13,382		$	8,137
Land improvements		1,326			1,326
Buildings		58,426			44,707
Leasehold improvements		3,616			969
Furniture, fixtures and equipment		37,138			25,703
Construction in process		2,538			990
		116,426			81,832
Less allowances for depreciation and amortization		(57,761	)		(42,269	)
	$	58,665		$	39,563

Depreciation expense was $6.5 million, $4.2 million and $3.7 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Leases

Effective January 1, 2019, the Company adopted ASU 2016-02, Leases (Topic 842) using a modified retrospective transition approach applying several of available practical expedients at the date of initial application. These practical expedients included carryover of historical lease determination and classification conclusions, carryover of historical initial direct cost balances for existing leases and accounting for lease and non-lease components in contracts in which the Company is a lessee as a single lease component.  All periods presented after January 1, 2019 are under ASC 842 whereas periods presented prior to January 1, 2019 are in accordance with prior lease accounting of ASC 840. Financial information was not updated and the disclosures required under ASC 842 were not provided for dates and periods before January 1, 2019.

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On January 31, 2020, the Company performed a valuation on UCFC’s leases to determine an initial right of use asset (ROU asset) and lease liability in connection with the Merger.  The Company recorded an initial ROU asset of $5.0 million and a lease liability of $5.1 million for these leases.  

The Company’s lease agreements have maturity dates ranging from January 2021 to September 2044, some of which include options for multiple five and ten year extensions. The weighted average remaining life of the lease term for these leases was 15.09 and 17.07 years as of December 31, 2020 and 2019, respectively.

The discount rate used in determining the lease liability for each individual lease was the FHLB fixed advance rate or swap rate which corresponded with the remaining lease term as of January 1, 2019 for leases that existed at adoption and as of the lease commencement date for leases subsequently entered into. The weighted average discount rate for leases was 2.61% and 3.17% as of December 31, 2020 and 2019, respectively.

The total operating lease costs were $2.3 million and $945,000 for the years ended December 31, 2020 and 2019, respectively.  Rent expense for operating leases was $1.0 million in 2018.  The right-of-use asset, included in other assets, was $16.9 million and $8.9 million at December 31, 2020 and 2019, respectively.  The lease liabilities, included in other liabilities, were $17.8 million and $9.5 million as of December 31, 2020 and 2019, respectively.

Undiscounted cash flows included in lease liabilities have expected contractual payments at December 31, 2020 as follows:

(in thousands)
2021	$	2,429
2022		2,413
2023		2,021
2024		1,638
2025		1,412
Thereafter		15,020
Total undiscounted minimum lease payments	$	24,933
Present value adjustment		(7,167	)
Total lease liabilities	$	17,766

10. Goodwill and Intangible Assets

Goodwill

The change in the carrying amount of goodwill for the year is as follows:

	December 31,
	2020		2019
	(In Thousands)
Beginning balance	$	100,069	$	98,569
Goodwill acquired or adjusted during the year		217,879		1,500
Ending balance	$	317,948	$	100,069

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The Company tests goodwill at least annually and, more frequently, if events or changes in circumstances indicate that it may be more likely than not that there is a possible impairment. Due to the ongoing economic impacts from the COVID-19 pandemic, the Company conducted a quantitative goodwill impairment assessment at December 31, 2020. The impairment assessment compared the fair value of identified reporting units with their carrying amount (including goodwill). If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to the excess. The Company's assessment estimated fair value on an income approach that incorporated a discounted cash flow (“DCF”) model that involves management assumptions based upon future growth projections, which include estimates of the COVID-19 impact on the Company’s business. Results of the assessment indicated no goodwill impairment as of December 31, 2020. The Company will continue to monitor its goodwill for possible impairment.  

Acquired Intangible Assets

Activity in intangible assets for the years ended December 31, 2020, 2019 and 2018, was as follows:

	Gross Carrying Amount		Accumulated Amortization			Net Value
	(In Thousands)
Balance as of January 1, 2018	$	20,133	$	(14,430	)	$	5,703
Amortization of intangible assets		—		(1,312	)		(1,312	)
Balance as of December 31, 2018		20,133		(15,742	)		4,391
Intangible assets acquired		500		—			500
Amortization of intangible assets		—		(1,119	)		(1,119	)
Balance as of December 31, 2019		20,633		(16,861	)		3,772
Intangible assets acquired		33,014		—			33,014
Amortization of intangible assets		—		(6,449	)		(6,449	)
Balance as of December 31, 2020	$	53,647	$	(23,310	)	$	30,337

Estimated amortization expense for each of the next five years and thereafter is as follows (in thousands):

2021	$	6,208
2022		5,450
2023		4,722
2024		4,013
2025		3,306
Thereafter		6,638
Total	$	30,337

11. Deposits

The following schedule sets forth interest expense by type of deposit:

	Years Ended December 31,
	2020		2019		2018
	(In Thousands)
Checking and money market accounts	$	9,710	$	7,650	$	3,997
Savings accounts		222		142		115
Certificates of deposit		16,986		14,821		9,785
Totals	$	26,918	$	22,613	$	13,897

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A summary of deposit balances is as follows:

	December 31,
	2020		2019
	(In Thousands)
Noninterest-bearing checking accounts	$	1,597,262	$	630,359
Interest-bearing checking and money market accounts		2,627,669		1,198,012
Savings deposits		700,480		303,166
Retail certificates of deposit less than $250,000		912,006		631,253
Retail certificates of deposit greater than $250,000		210,424		107,535
	$	6,047,841	$	2,870,325

Scheduled maturities of certificates of deposit at December 31, 2020, are as follows (in thousands):

2021	$	781,972
2022		190,425
2023		63,266
2024		59,718
2025		25,085
Thereafter		1,964
Total	$	1,122,430

12. Advances from Federal Home Loan Bank

The Bank has the ability to borrow funds from the FHLB. The Bank pledges its single-family residential mortgage loan portfolio, certain commercial real estate loans, and certain agriculture real estate loans as security for these advances. Advances secured by residential mortgages must have collateral of at least 128% of the borrowings. Advances secured by commercial real estate loans, and agriculture real estate loans must have collateral of at least 120% and 123% of the borrowings, respectively. Total loans pledged to the FHLB at December 31, 2020, and December 31, 2019, were $2.0 billion and $1.2 billion, respectively. The Bank could obtain advances of up to approximately $1.4 billion from the FHLB at December 31, 2020.

At December 31, 2020, the Bank had 0 outstanding FHLB advances.  At December 31, 2019, advances from the FHLB were as follows:

Principal Terms	Advance Amount			Range of Maturities	Weighted Average Interest Rate
	(In Thousands)
December 31, 2019
Single maturity fixed rate advances	$	83,999		January 2020 to October 2024		2.00	%
Amortizable mortgage advances		1,085		August 2027		2.14	%
Fair value adj. on acquired balances		(21	)
	$	85,063

13. Subordinated Debentures and Junior Subordinated Debentures Owed to Unconsolidated Subsidiary Trust

In September 2020, the Company completed the issuance of $50.0 million aggregate principal amount, fixed-to-floating rate subordinated notes due September 30, 2030 in a private offering exempt from the registration requirements under the Securities Act of 1933, as amended.  The notes carry a fixed rate of 4.0% for five years at which time they will convert to a floating rate based on the secured overnight borrowing rate, plus a spread of 388.5 basis points.  The Company may, at its option, beginning September 30, 2025, redeem the notes, in whole or in part, from time to time, subject to certain conditions.  The net proceeds from the sale were approximately $48.7 million, after deducting the estimated offering expenses.  The Company’s intent was to use the net proceeds for general corporate purposes, which may include, without limitation, providing capital to support its growth organically or through strategic acquisitions, repaying indebtedness, in financing investments, capital expenditures, repurchasing its common shares and for investments in the Bank as regulatory capital.  The subordinated debentures are included in Total Capital under current regulatory guidelines and interpretations.   

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In March 2007, the Company sponsored an affiliated trust, Premier Statutory Trust II (“Trust Affiliate II”) that issued $15.0 million of Guaranteed Capital Trust Securities (Trust Preferred Securities). In connection with the transaction, the Company issued $15.5 million of Junior Subordinated Deferrable Interest Debentures (“Subordinated Debentures”) to Trust Affiliate II. The Company formed Trust Affiliate II for the purpose of issuing Trust Preferred Securities to third-party investors and investing the proceeds from the sale of these capital securities solely in Subordinated Debentures of the Company. The Subordinated Debentures held by Trust Affiliate II are the sole assets of that trust. The Company is not considered the primary beneficiary of this Trust (variable interest entity), therefore the trust is not consolidated in the Company’s financial statements, but rather the subordinated debentures are shown as a liability. Distributions on the Trust Preferred Securities issued by Trust Affiliate II are payable quarterly at a variable rate equal to the three-month LIBOR rate plus 1.5%. The Coupon rate payable on the Trust Preferred Securities issued by Trust Affiliate II was 1.72% and 3.39% as of December 31, 2020 and 2019, respectively.

The Trust Preferred Securities issued by Trust Affiliate II are subject to mandatory redemption, in whole or part, upon repayment of the Subordinated Debentures. The Company has entered into an agreement that fully and unconditionally guarantees the Trust Preferred Securities subject to the terms of the guarantee. The Trust Preferred Securities and Subordinated Debentures mature on June 15, 2037, but can be redeemed at the Company’s option at any time now.

The Company also sponsors an affiliated trust, Premier Statutory Trust I (“Trust Affiliate I”) that issued $20.0 million of Trust Preferred Securities in 2005. In connection with this transaction, the Company issued $20.6 million of Subordinated Debentures to Trust Affiliate I. Trust Affiliate I was formed for the purpose of issuing Trust Preferred Securities to third-party investors and investing the proceeds from the sale of these capital securities solely in Subordinated Debentures of the Company. The Junior Debentures held by Trust Affiliate I are the sole assets of the trust. The Company is not considered the primary beneficiary of this Trust (variable interest entity), therefore the trust is not consolidated in the Company’s financial statements, but rather the subordinated debentures are shown as a liability.  Distributions on the Trust Preferred Securities issued by Trust Affiliate I are payable quarterly at a variable rate equal to the three-month LIBOR rate plus 1.38%. The Coupon rate payable on the Trust Preferred Securities issued by Trust Affiliate I was 1.60% and 3.27% as of December 31, 2020 and 2019, respectively.

The Trust Preferred Securities issued by Trust Affiliate I are subject to mandatory redemption, in whole or in part, upon repayment of the Subordinated Debentures. The Company has entered into an agreement that fully and unconditionally guarantees the Trust Preferred Securities subject to the terms of the guarantee. The Trust Preferred Securities and Subordinated Debentures mature on December 15, 2035, but can be redeemed at the Company’s option at any time now.

The Subordinated Debentures related to the Trust Preferred Securities may be included in tier 1 capital (with certain limitations applicable) under current regulatory guidelines and interpretations.

A summary of all junior subordinated debentures issued by the Company to affiliates and subordinated debentures follows. For the junior subordinated debentures, these amounts represent the par value of the obligations owed to these affiliates, including the Company’s equity interest in the trusts. For the subordinated debentures, these amounts represent the par value less remaining deferred offering expense associated with the issuance the debentures.  Balances were as follows:

	December 31,
	2020		2019
	(In Thousands)
First Defiance Statutory Trust I due December 2035	$	20,619	$	20,619
First Defiance Statutory Trust II due June 2037		15,464		15,464
Total junior subordinated debentures owed to unconsolidated subsidiary Trusts	$	36,083	$	36,083
Subordinated debentures	$	48,777	$	—

Interest on both issues of Trust Preferred Securities may be deferred for a period of up to five years at the option of the issuer.

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14. Securities Sold Under Agreements to Repurchase and Other Short Term Borrowings

Total securities sold under agreement to repurchase are summarized as follows:

	Years Ended December 31,
	2020			2019
	(In Thousands, Except Percentages)
Securities sold under agreement to repurchase
Amounts outstanding at year-end	$	-		$	2,999
Year-end interest rate		-			0.24	%
Average daily balance during year		4,309			3,587
Maximum month-end balance during the year		14,487			6,402
Average interest rate during the year		0.55	%		0.29	%

The Company has utilized securities sold under agreements to repurchase in the past to facilitate the needs of our customers and to facilitate secured short-term funding needs.  Securities sold under agreements to repurchase are stated at the amount of cash received in connection with the transaction.  We monitor levels on a continuous basis. We may be required to provide additional collateral based on the fair value of the underlying securities.  Securities pledged as collateral under repurchase agreements are maintained with our safekeeping agent.

The remaining contractual maturity of the securities sold under agreements to repurchase in the consolidated balance sheet as of December 31, 2019, is presented in the following table.

	Overnight and Continuous		Up to 30 Days		30-90 Days		Greater than 90 Days		Total
At December 31, 2019			(In Thousands)
Repurchase agreements:
Mortgage-backed securities – residential	$	1,848	$	—	$	—	$	—	$	1,848
Collateralized mortgage obligations		1,151		—		—		—		1,151
Total borrowings	$	2,999	$	—	$	—	$	—	$	2,999
Gross amount of recognized liabilities for repurchase    agreements									$	2,999

As of December 31, 2020 and 2019, the Company had the following undrawn lines of credit facilities available for short-term borrowing purposes:

A $20.0 million line of credit with First Horizon Bank.  The rate on the line of credit is at three- month LIBOR, which floats quarterly. This line was undrawn upon as of December 31, 2020 and 2019.

A $25.0 million line of credit with U.S. Bank.  The rate on this line of credit is U.S. Bank’s federal funds rate, which floats daily.  This line was undrawn upon as of December 31, 2020 and 2019.

15. Other Noninterest Expense

The following is a summary of other noninterest expense:

	Years Ended December 31,
	2020		2019		2018
	(In Thousands)
Legal and other professional fees	$	5,119	$	3,693	$	3,328
Marketing		1,938		2,262		2,407
OREO expenses and write-downs		86		369		742
Printing and office supplies		1,032		603		631
Postage		1,173		484		505
Check charge-offs and fraud losses		870		384		415
Credit and collection expense		550		398		379
Other (1)		12,521		9,415		6,710
Total other noninterest expense	$	23,289	$	17,608	$	15,117

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1) 2018 includes a credit of $806,000 for an accounting correction related to the Deferred Compensation Plan. See Note 19 for further details.

16. Postretirement Benefits

Premier sponsors a defined benefit postretirement plan that is intended to supplement Medicare coverage for certain retirees who meet minimum age requirements. The Bank employees who retired prior to April 1, 1997, and who completed 20 years of service after age 40 receive full medical coverage at no cost. The Bank employees retiring after April 1, 1997, are provided medical benefits at a cost based on their combined age and years of service at retirement. Surviving spouses are also eligible for continued coverage after the retiree is deceased at a subsidy level that is 10% less than what the retiree is eligible for. The Bank employees retiring before July 1, 1997, receive dental and vision care in addition to medical coverage. The Bank employees who retire after July 1, 1997, are not eligible for dental or vision care.

The Bank employees who were born after December 31, 1950, are not eligible for the medical coverage described above at retirement. Rather, a one-time medical spending account of up to $10,000 (based on the participant’s age and years of service) will be established to reimburse medical expenses for those individuals. First Insurance employees who were born before December 31, 1950, can continue coverage until they reach age 65, or in lieu of continuing coverage, can elect the medical spending account option, subject to eligibility requirements. Employees hired or acquired after January 1, 2003, are eligible only for the medical spending account option.

Included in accumulated other comprehensive income at December 31, 2020, 2019 and 2018, are the following amounts that have not yet been recognized in net periodic benefit cost:

	December 31,
	2020			2019			2018
	(In Thousands)
Unrecognized prior service cost	$	71		$	84		$	97
Unrecognized actuarial gains (losses)		29			224			(86	)
Total loss recognized in Accumulated Other Comprehensive Income		100			308			11
Income tax effect		(21	)		(64	)		80
Net loss recognized in Accumulated Other Comprehensive Income	$	79		$	244		$	91

The prior service cost and actuarial loss included in other comprehensive income and expected to be recognized in net postretirement benefit cost during the fiscal year-ended December 31, 2020, is $13,000 ($10,000 net of tax) and $0, respectively.

Reconciliation of Funded Status and Accumulated Benefit Obligation

The plan is not currently funded. The following table summarizes benefit obligation and plan asset activity for the plan measured as of December 31 each year:

	December 31,
	2020			2019
	(In Thousands)
Change in benefit obligation:
Benefit obligation at beginning of year	$	2,987		$	2,642
Service cost		61			53
Interest cost		87			105
Participant contribution		29			29
Actuarial  (gains) / losses		(195	)		310
Benefits paid		(182	)		(152	)
Benefit obligation at end of year		2,787			2,987
Change in fair value of plan assets:
Balance at beginning of year		—			—
Employer contribution		153			123
Participant contribution		29			29
Benefits paid		(182	)		(152	)
Balance at end of year		—			—
Funded status at end of year	$	(2,787	)	$	(2,987	)

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Net periodic postretirement benefit cost includes the following components:

	Years Ended December 31,
	2020			2019			2018
	(In Thousands)
Service cost-benefits attributable to service during the period	$	61		$	53		$	55
Interest cost on accumulated postretirement benefit obligation		87			105			105
Net amortization and deferral		13			14			18
Net periodic postretirement benefit cost		161			172			178
Net (gain) / loss during the year		(195	)		310			(632	)
Plan amendment for acquisition		—			—			72
Amortization of prior service cost and actuarial losses		(13	)		(14	)		(18	)
Total recognized in comprehensive income (loss)		(208	)		296			(578	)
Total recognized in net periodic postretirement benefit cost and other    comprehensive income	$	(47	)	$	468		$	(400	)

The following assumptions were used in determining the components of the postretirement benefit obligation:

	2020			2019			2018
Weighted average discount rates:
Used to determine benefit obligations at December 31		2.00	%		3.00	%		4.00	%
Used to determine net periodic postretirement benefit cost for years    ended December 31		3.00	%		4.00	%		3.50	%
Assumed health care cost trend rates at December 31:
Health care cost trend rate assumed for next year		5.50	%		6.00	%		6.50	%
Rate to which the cost trend rate is assumed to decline (the ultimate    trend rate)		4.00	%		4.00	%		3.90	%
Year that rate reaches ultimate trend rate	2075			2075			2075

The following benefits are expected to be paid over the next five years and in aggregate for the next five years thereafter. Because the plan is unfunded, the expected net benefits to be paid and the estimated Company contributions are the same amount.

��	Expected to be Paid
	(In Thousands)
2021	$	174
2022		186
2023		193
2024		207
2025		167
2026 through 2030		860

Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one-percentage-point change in assumed health care cost trend rates would have the following effect:

	One-Percentage-Point Increase				One-Percentage-Point Decrease
	Year Ended December 31,				Year Ended December 31,
	2020		2019		2020			2019
	(In Thousands)
Effect on total of service and interest cost	$	6	$	7	$	(5	)	$	(6	)
Effect on postretirement benefit obligation		162		199		(140	)		(172	)

The Company expects to contribute $174,000 before reflecting expected Medicare retiree drug subsidy payments in 2020.

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17. Regulatory Matters

Premier and the Bank are subject to minimum capital adequacy guidelines. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators, which could have a material impact on Premier’s financial statements.  Under capital adequacy guidelines, Premier and the Bank must maintain capital amounts in excess of minimum ratios based on quantitative measures of their assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices.

In July 2013, the Federal Reserve and the FDIC approved the final rules implementing the Basel Committee on Banking Supervision’s capital guidelines for U.S. banks (commonly known as Basel III).  Under the final rules, which began for Premier and the Bank on January 1, 2015, and are subject to a phase-in period through January 1, 2019, minimum requirements will increase for both quantity and quality of capital held by Premier and the Bank.  The rules include a minimum common equity tier 1 capital to risk-weighted assets ratio (“CET1”) of 4.5% and a capital conservation buffer of 2.5% of risk-weighted assets, which effectively results in a minimum CET1 ratio of 7.0%.  Basel III raises the minimum ratio of tier 1 capital to risk-weighted assets from 4.0% to 6.0% (which, with the capital conservation buffer, effectively results in a minimum tier 1 capital ratio of 8.5%), which effectively results in a minimum total capital to risk-weighted assets ratio of 10.5%, and requires a minimum leverage ratio of 4.0%.  Basel III also makes changes to risk weights for certain assets and off-balance sheet exposures.

The federal banking agencies have also established a system of “prompt corrective action” to resolve certain problems of undercapitalized banks.  The regulatory agencies can initiate certain mandatory actions if the Bank fails to meet the minimum capital requirements, which could have a material effect on Premier’s financial statements.

The following schedule presents Premier consolidated and the Bank’s regulatory capital ratios as of December 31, 2020 and 2019 (dollars in thousands):

	December 31, 2020
	Actual					Minimum Required for Adequately Capitalized					Minimum Required to be Well Capitalized for Prompt Corrective Action
	Amount		Ratio			Amount		Ratio(1)			Amount		Ratio
CET1 Capital (to Risk-Weighted Assets)
Consolidated	$	624,069		10.40	%	$	270,017		4.5	%	N/A		N/A
Premier Bank	$	629,653		10.52	%	$	269,396		4.5	%	$	389,128		6.5	%
Tier 1 Capital
Consolidated	$	659,069		9.76	%	$	270,072		4.0	%	N/A		N/A
Premier Bank	$	629,653		9.36	%	$	269,189		4.0	%	$	336,487		5.0	%
Tier 1 Capital (to Risk Weighted Assets)
Consolidated	$	659,069		10.98	%	$	360,022		6.0	%	N/A		N/A
Premier Bank	$	629,653		10.52	%	$	359,195		6.0	%	$	478,926		8.0	%
Total Capital (to Risk Weighted Assets)
Consolidated	$	784,148		13.07	%	$	480,030		8.0	%	N/A		N/A
Premier Bank	$	704,586		11.77	%	$	478,926		8.0	%	$	598,658		10.0	%

(1) Excludes capital conservation buffer of 2.50% as of December 31, 2020.

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	December 31, 2019
	Actual					Minimum Required for Adequately Capitalized					Minimum Required to be Well Capitalized for Prompt Corrective Action
	Amount		Ratio			Amount		Ratio(1)			Amount		Ratio
CET1 Capital (to Risk-Weighted Assets)
Consolidated	$	322,813		10.60	%	$	137,001		4.5	%	N/A		N/A
First Federal	$	335,251		11.03	%	$	136,752		4.5	%	$	197,531		6.5	%
Tier 1 Capital
Consolidated	$	357,813		10.78	%	$	132,805		4.0	%	N/A		N/A
First Federal	$	335,251		10.13	%	$	132,435		4.0	%	$	165,544		5.0	%
Tier 1 Capital (to Risk Weighted Assets)
Consolidated	$	357,813		11.75	%	$	182,667		6.0	%	N/A		N/A
First Federal	$	335,251		11.03	%	$	182,336		6.0	%	$	243,114		8.0	%
Total Capital (to Risk Weighted Assets)
Consolidated	$	389,056		12.78	%	$	243,556		8.0	%	N/A		N/A
First Federal	$	366,494		12.06	%	$	243,114		8.0	%	$	303,893		10.0	%

(1) Excludes capital conservation buffer of 2.50% as of December 31, 2019.

Dividend Restrictions - Dividends paid by the Bank to Premier are subject to various regulatory restrictions. The Bank paid $24.0 million in dividends to Premier in 2020 and $36.0 million in 2019. The Bank may not pay dividends to Premier in excess of its net profits (as defined by statute) for the last two fiscal years, plus any year to date net profits without the approval of the ODFI.  First Insurance paid $400,000 in dividends to Premier in 2020 and $1.2 million in dividends in 2019.  First Defiance Risk Management paid $1.5 million in dividends to Premier in 2020 and $1.4 million in 2019.

18. Income Taxes

The components of income tax expense are as follows:

	Years Ended December 31,
	2020			2019			2018
	(In Thousands)
Current:
Federal	$	25,323		$	11,476		$	9,538
State and local		650			210			207
Deferred		(9,781	)		(419	)		881
	$	16,192		$	11,267		$	10,626

The effective tax rates differ from federal statutory rate applied to income before income taxes due to the following:

	Years Ended December 31,
	2020			2019			2018
	(In Thousands)
Tax expense at statutory rate (21%)	$	16,646		$	12,734		$	11,944
Increases (decreases) in taxes from:
State income tax – net of federal tax benefit		513			166			164
Tax exempt interest income, net of TEFRA		(806	)		(729	)		(770	)
Bank owned life insurance		(882	)		(555	)		(255	)
Captive insurance		(445	)		(354	)		(325	)
Other		1,166			5			(132	)
Totals	$	16,192		$	11,267		$	10,626

Deferred federal income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

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Significant components of Premier’s deferred federal income tax assets and liabilities are as follows:

	December 31,
	2020		2019
	(In Thousands)
Deferred federal income tax assets:
Allowance for credit losses	$	17,237	$	6,475
Allowance for unfunded commitments		1,123		—
Interest on nonaccrual loans		1,003		344
Postretirement benefit costs		546		613
Deferred compensation		2,057		1,208
Individually evaluated loans		2,483		855
Deferred loan origination fees and costs		—		474
Accrued vacation		10		11
Accrued bonus		1,065		938
Right of use asset		3,731		1,993
Net operating loss carryforward		307		—
Other		2,175		1,173
Total deferred federal income tax assets		31,737		14,084
Deferred federal income tax liabilities:
FHLB stock dividends		—		1,404
Goodwill		4,542		4,956
Mortgage servicing rights		2,762		2,156
Fixed assets		2,230		1,935
Other intangible assets		7,118		647
Loan mark to market		—		5
Deferred loan origination fees and costs		1,294		—
Net unrealized gains on available-for-sale securities		4,009		1,286
Prepaid expenses		762		708
Lease liabilities		3,557		1,876
Other		25		16
Total deferred federal income tax liabilities		26,299		14,989
Net deferred federal income tax asset/ (liability)	$	5,438	$	(905	)

The realization of the Company’s deferred tax assets is dependent upon the Company’s ability to generate taxable income in future periods and the reversal of deferred tax liabilities during the same period. The Company has evaluated the available evidence supporting the realization of its deferred tax assets and determined it is more likely than not that the assets will be realized and thus 0 valuation allowance was required at December 31, 2020.

Retained earnings at December 31, 2020, include approximately $32.1 million for which no tax provision for federal income taxes has been made. This amount represents the tax bad debt reserve at December 31, 1987, which is the end of the Company’s base year for purposes of calculating the bad debt deduction for tax purposes. If this portion of retained earnings is used in the future for any purpose other than to absorb bad debts, the amount used will be added to future taxable income. The unrecorded deferred tax liability on the above amount at December 31, 2020, was approximately $6.7 million.

The total amount of interest and penalties recorded in the income statement was $0 for each of the years ended December 31, 2020, 2019 and 2018.  The amount accrued for interest and penalties was $0 at December 31, 2020, 2019 and 2018.

The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax in the states of Indiana and West Virginia. The Company is no longer subject to examination by taxing authorities for years before 2017. At December 31, 2020, the Company operated primarily in the states of Ohio and Michigan, which tax financial institutions based on their equity rather than their income.

The Company’s net operating loss of $1.5 million will be carried forward to use against future taxable income.  The net operating loss carryforwards begin to expire in the year ending December 31, 2029.  This tax benefit is subject to an annual limitation under Internal Revenue Code Section 382; however, Premier and the Bank expect to utilize the full amount of the benefit.  

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19. Employee Benefit Plans

401(k) Plan

Employees of Premier are eligible to participate in the Premier Financial Corp. 401(k) Employee Savings Plan (the “Premier 401(k)”) if they meet certain age and service requirements. Under the Premier 401(k), Premier matches 100% of the participants’ contributions up to 3% of compensation and then 50% of the participants’ contributions for the next 2% of compensation. The Premier 401(k) also provides for a discretionary Premier contribution in addition to the Premier matching contribution. Premier matching contributions totaled $2.5 million, $1.4 million and $1.3 million for the years ended December 31, 2020, 2019 and 2018, respectively. There were no discretionary contributions in any of those years.

Group Life Plan

On June 30, 2010, the Bank adopted the First Federal Bank of the Midwest Executive Group Life Plan – Post Separation (the “Group Life Plan”) in which various employees, including the Company’s named executive officers, may participate. Under the terms of the Group Life Plan, the Bank will purchase and own life insurance policies covering the lives of employees selected by the Board of Directors of the Bank as participants. There was $40,000, $60,000 and $38,000 of expense recorded for the years ended December 31, 2020, 2019 and 2018, respectively, with a liability of $1.8 million and $1.8 million for future benefits recorded at December 31, 2020 and 2019, respectively.

Deferred Compensation

The deferred compensation plan covers all directors and certain employees that elect to participate.  Under the plan, the Company pays each participant, or their beneficiary, the amount of fees deferred plus interest over a defined time period.  In the fourth quarter of 2018, the stock market declined significantly resulting in a significant decline in the value of the assets and liabilities of the deferred compensation plan and an accounting correction in the deferred compensation plan was recognized.  The deferred compensation plan has approximately $8.2 and $6.8 million in assets and liabilities, respectively, as of December 31, 2020, which are matched in terms of investment elections.  As of December 31, 2019, the deferred compensation plan had approximately $6.9 and $5.5 million in assets and liabilities, respectively, which were matched in terms of investment elections.  Every year, other noninterest income and other noninterest expense reflects the changes in fair value of the underlying investments in the assets and liabilities, respectively.  The Company made an accounting correction in 2018, which was expected to minimize any net impact to earnings from the deferred compensation plan going forward.  This accounting correction was deemed immaterial and resulted in a one-time reduction to other noninterest expense of $806,000, including a $636,000 adjustment to equity for the phantom stock elections within the plan, and a $170,000 adjustment for the tax liability, as of December 31, 2018.  The phantom shares are carried at cost in equity and will be treated as outstanding shares for earnings per share calculations. The net expense (income) recorded for the deferred compensation plan, excluding the one-time accounting correction, for each of the last three years was ($11,000), $85,000 and $15,000 in 2020, 2019 and 2018, respectively.

As a part of the Merger, Premier assumed the United Community Financial Corp. Deferred Compensation Plan.  This is an unfunded plan for a select group of key management including named executive officers.  The deferred compensation plan has approximately $1.9 million in both assets and liabilities as of December 31, 2020.  As of December 31, 2020, this plan has been frozen.  Participants can choose to receive a lump sum payout or elect to receive installments for up to 11 years once they are eligible to withdraw funds.  

20. Stock Compensation Plans

Premier has established equity based compensation plans for its directors and employees.  On February 27, 2018, the Board adopted, and the shareholders approved at the 2018 Annual Shareholders Meeting, the Premier Financial Corp. 2018 Equity Incentive Plan (the “2018 Equity Plan”). The 2018 Equity Plan replaced all existing plans, although the Company’s former equity plans remain in existence to the extent there were outstanding grants thereunder at the time the 2018 Equity Plan was approved. In addition, as a result of the Merger, Premier assumed certain outstanding stock options granted under UCFC’s Amended and Restated 2007 Long-Term Incentive Plan and UCFC’s 2015 Long Term Incentive Plan (the “UCFC 2015 Plan”).  Premier also assumed the UCFC 2015 Plan with respect to the available shares under the UCFC 2015 Plan as of the effective date of the Merger, with appropriate adjustments to the number of shares available to reflect the Merger. The stock options assumed from UCFC in the Merger became exercisable solely to purchase shares of Premier, with appropriate adjustments to the number of shares subject to the assumed stock options and the exercise price of such stock options.  All awards currently outstanding under prior plans will remain in effect in accordance with their respective terms. Any new awards will be made under the 2018 Equity Plan.  The 2018 Equity Plan allows for issuance of up to 900,000 common shares through the award of options, stock grants, restricted stock units (“RSU”), stock appreciation rights or other stock-based awards.

As of December 31, 2020, 36,261 options had been granted pursuant to previous plans, and remain outstanding at option prices based on the market value of the underlying shares on the date the options were granted. On the date of the Merger, 39,983 Premier options were exchanged for all of the outstanding stock options on the books of UCFC at the same conversion price and ratio applied to UCFC common shares at January 31, 2020.  All of these options were fully vested at the time of acquisition.  Options granted under all plans

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vest 20% per year. All options expire ten years from the date of grant. Vested options of retirees expire on the earlier of the scheduled expiration date or three months after the retirement date.

The Company approved a Short-Term (“STIP”) Incentive Plan and a Long-Term (“LTIP”) Equity Incentive Plan for selected members of management.  There are two types of LTIP awards: an Executive LTIP and a Key LTIP.

Under the 2018, 2019 and 2020 STIPs, the participants can earn a cash payout.  The final amount of benefits under the STIPs is determined as of December 31 of the same year and paid out in cash in the first quarter of the following year.

Under each Executive LTIP, the participants may earn between 20% to 45% of their salary for potential payout in the form of equity awards based on the achievement of certain corporate performance targets over a three-year period. The Company granted 41,676 and 69,014 RSU’s to the participants in the 2018 and 2019 Executive LTIPs, respectively, which represents the maximum target award. The Company granted 100,714 performance stock units to the participants in the 2020 Executive LTIP.  The performance stock units work like the RSU’s under the Executive LTIP. A total of 32,288 shares of PFC common stock were issued to the participants of the 2017 LTIP in the first quarter of 2020 for the three year performance period ended December 31, 2019.  In addition, as a result of the Merger, the 2018 and 2019 grants were accelerated and vested based on performance up to the date of the Merger.  This resulted in the award of 51,677 shares of PFC stock to the participants with another 21,834 shares to be issued in 2021 to the CEO of the Company.  This delay in the receipt of the CEO’s shares was mandated by the merger agreement.  The amount of benefit under the remaining 2020 LTIP will be determined individually at the end of the 36 month performance period ending December 31. The benefits earned under this LTIP will be paid out in equity in the first quarter following the end of the performance period. The participants are required to be employed on the day of payout in order to receive the payment.  

Under each Key LTIP, the participants are granted shares based upon the achievement of certain targets in the prior year.  The participants can earn from 5% to 10% of their salary in restricted stock units that vest three years from the date of grant.  The Company granted 12,038 RSU’s in the first quarter of 2020 as a payout under the Key LTIP.

In 2020, the Company also granted 14,859 restricted shares, of which 1,510 were discretionary RSUs that vest three years from the date of grant and 13,349 were restricted stock grants.  Of the 13,349 restricted stock grants, all were issued to directors and have a one-year vesting period.  The fair value of all granted restricted shares was determined by the stock price at the date of the grant.

The fair value of each option award is estimated on the date of grant using the Black-Scholes model. Expected volatilities are based on historical volatilities of the Company’s common shares. The Company uses historical data to estimate option exercise and post-vesting termination behavior. The expected term of options granted is based on historical data and represents the period of time that options granted are expected to be outstanding, which takes into account that the options are not transferable. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of the grant.

There were 0 options granted during the years ended December 31, 2020, 2019 or 2018.

Following is options activity under the plans during 2020:

	Options Outstanding			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in 000’s)
Options outstanding, January 1, 2020		17,700		$	17.60
Forfeited or cancelled		(1,500	)		17.92
Exercised		(19,922	)		7.10
Exchanged		39,983			16.00
Granted		—			—
Options outstanding, December 31, 2020		36,261		$	21.59		5.78	$	107
Exercisable at December 31, 2020		34,661		$	21.72		5.81	$	100

Information related to the stock option plans is as follows:

	Year Ended December 31,
	2020		2019		2018
	(In Thousands, except per share amounts)
Intrinsic value of options exercised	$	189	$	390	$	893
Cash received from option exercises		—		189		111
Tax benefit realized from option exercises		40		4		28
Weighted average fair value of options granted	$	—	$	—	$	—

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As of December 31, 2020, there was a de minimus amount of total unrecognized compensation costs related to unvested stock options granted under the Company’s equity plans. The cost is expected to be recognized over a weighted-average period of 1.0 month.

At December 31, 2020, a total of 187,707 restricted share awards were outstanding. Compensation expense is recognized over the performance or vesting period. Total expense of $2.3 million, $2.1 million and $2.0 million was recorded during the years ended December 31, 2020, 2019 and 2018, respectively, and approximately $3.2 million and $1.2 million is included within other liabilities at December 31, 2020 and 2019, respectively, related to the cash portion of the STIPs.

	Performance Stock Units					Restricted Stock Units					Stock Grants
Unvested Shares	Shares			Weighted- Average Grant Date Fair Value		Shares			Weighted- Average Grant Date Fair Value		Shares			Weighted- Average Grant Date Fair Value
Unvested at January 1, 2020		—		$	—		158,470		$	25.72		48,545		$	27.49
Granted		100,714			26.48		13,548			21.69		13,349			25.75
Vested		—			—		(88,005	)		25.48		(19,502	)		27.32
Forfeited		(9,823	)		26.48		(28,254	)		25.61		(1,335	)		29.97
Unvested at December 31, 2020		90,891		$	26.48		55,759		$	25.18		41,057		$	26.93

The maximum amount of compensation expense that may be earned for the 2020 Executive LTIP at December 31, 2020, is approximately $2.4 million in the aggregate.  However, the estimated expense expected to be earned as of December 31, 2020, based on the performance measures in the plans, is $1.6 million of which $1.0 million was unrecognized at December 31, 2020, and will be recognized over the remaining performance period.

As of December 31, 2020, 695,869 shares were available for grant under the 2018 Equity Plan and 126,758 shares were available for grant under the 2015 UCFC Plan. Options forfeited or cancelled under all plans except the 2018 Equity Plan and the UCFC 2015 Plan are no longer available for grant to other participants.

21. Parent Company Statements

Condensed parent company financial statements, which include transactions with subsidiaries, are as follow:

	December 31,
Statements of Financial Condition	2020		2019
	(In Thousands)
Assets
Cash and cash equivalents	$	58,017	$	18,011
Investment in banking subsidiary		962,675		419,496
Investment in non-bank subsidiaries		39,699		24,103
Other assets		7,103		1,169
Total assets	$	1,067,494	$	462,779
Liabilities and stockholders’ equity:
Subordinated debentures	$	84,860	$	36,083
Accrued liabilities		358		529
Stockholders’ equity		982,276		426,167
Total liabilities and stockholders’ equity	$	1,067,494	$	462,779

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	Years Ended December 31,
Statements of Income	2020			2019			2018
	(In Thousands)
Dividends from subsidiaries	$	25,900		$	38,585		$	24,550
Interest income		30			—			—
Interest expense		(1,308	)		(1,368	)		(1,281	)
Other income		105			1			1
Noninterest expense		(902	)		(1,234	)		(831	)
Income before income taxes and equity in earnings of subsidiaries		23,825			35,984			22,439
Income tax credit		(423	)		(534	)		(431	)
Income before equity in earnings of subsidiaries		24,248			36,518			22,870
Undistributed equity in earnings of subsidiaries		38,829			12,852			23,379
Net income		63,077			49,370			46,249
Other comprehensive income (loss)		10,409			6,743			(2,412	)
Comprehensive income	$	73,486		$	56,113		$	43,837

	Years Ended December 31,
Statements of Cash Flows	2020			2019			2018
	(In Thousands)
Operating activities:
Net income	$	63,077		$	49,370		$	46,249
Adjustments to reconcile net income to net cash (used in)    provided by operating activities:
Undistributed equity in earnings of subsidiaries		(38,829	)		(12,852	)		(23,379	)
Change in other assets and liabilities		1,630			(201	)		(419	)
Net cash provided by (used in) operating activities		25,878			36,317			22,451
Investing activities:
Net Cash received for United Community Financial Corp.		9,414			—			—
Purchase of equity securities		(1,000	)		—			—
Net cash used in investing activities		8,414			—			—
Financing activities:
Repurchase of common stock		(10,183	)		(15,147	)		(6,330	)
Cash dividends paid		(32,898	)		(15,624	)		(13,043	)
Proceeds from subordinated debentures		48,777			—			—
Stock Options Exercised		—			189			111
Direct stock sales		18			123			104
Net cash used in financing activities		5,714			(30,459	)		(19,158	)
Net increase (decrease) in cash and cash equivalents		40,006			5,858			3,293
Cash and cash equivalents at beginning of year		18,011			12,153			8,860
Cash and cash equivalents at end of year	$	58,017		$	18,011		$	12,153

22. Fair Value

FASB ASC Topic 820, Fair Value Measurements, defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. The price in the principal (or most advantageous) market used to measure the fair value of the asset or liability shall not be adjusted for transaction costs. An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets and liabilities; it is not a forced transaction. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact and (iv) willing to transact.

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FASB ASC Topic 820 requires the use of valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities. The income approach uses valuation techniques to convert future amounts, such as cash flows or earnings, to a single present amount on a discounted basis. The cost approach is based on the amount that currently would be required to replace the service capacity of an asset (replacement cost). Valuation techniques should be consistently applied. Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on the best information available. In that regard, FASB ASC Topic 820 established a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:

• Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

• Level 2: Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by a correlation or other means.

• Level 3: Unobservable inputs for determining fair value of assets and liabilities that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.

A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.  

Available-for-sale securities - Securities classified as available for sale are generally reported at fair value utilizing Level 2 inputs where the Company obtains fair value measurements from an independent pricing service that uses matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs). The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows and the bonds’ terms and conditions, among other things. Securities in Level 2 include U.S. federal government agencies, mortgage-backed securities, corporate bonds and municipal securities.

Equity securities – These securities are reported at fair value utilizing Level 1 inputs where the Company obtains fair value measurements from Bloomberg or a broker.

Loans held for sale, carried at fair value – The Company elected the fair value option for all conventional residential one-to four-family loans held for sale and all permanent construction loans held for sale that were acquired from UCFC in the Merger.  In addition, the Company has elected the fair value option for all loans held for sale originated after January 31, 2020.

The fair value of conventional loans held for sale is determined using the current 15 day forward contract price for either 15 or 30 year conventional mortgages (Level 2). The fair value of permanent construction loans held for sale is determined using the current 60 day forward contract price for 15 or 30 year conventional mortgages which is then adjusted for unobservable market data such as estimated fall out rates and estimated time from origination to completion of construction (Level 3).

Collateral Dependant loans - Fair values for individually analyzed, collateral dependent loans are generally based on appraisals obtained from licensed real estate appraisers and in certain circumstances consideration of offers obtained to purchase properties prior to foreclosure.  Appraisals for commercial real estate generally use three methods to derive value: cost, sales or market comparison and income approach.  The cost method bases value on the cost to replace the current property.  Value of market comparison approach evaluates the sales price of similar properties in the same market area.  The income approach considers net operating income generated by the property and an investor’s required return.  Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available.  Comparable sales adjustments are based on known sales prices of similar type and similar use properties and duration of time that the property has been on the market to sell.  Such adjustments made in the appraisal process are typically significant and result in a Level 3 classification of the inputs for determining fair value.

Real estate held for sale - Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis.  These assets are then reviewed monthly by members of the asset review committee for valuation changes and are accounted for at lower of cost or fair value less estimated costs to sell.  Fair value is commonly based on recent real estate appraisals which may utilize a single valuation approach or a combination of approaches including cost, comparable sales and the income approach.  Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available.  Such adjustments may be significant and typically result in a Level 3 classification of the inputs for determining fair value.

Appraisals for both collateral-dependent loans and other real estate owned are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company.  Once received, a member of the Company’s asset quality or collections department reviews

54

the assumptions and approaches utilized in the appraisal.  Appraisal values are discounted from 0% to 30% to account for other factors that may impact the value of collateral. In determining the value of collateral dependent loans and other real estate owned, significant unobservable inputs may be used, which include but are not limited to:  physical condition of comparable properties sold, net operating income generated by the property and investor rates of return.

Mortgage servicing rights - On a quarterly basis, mortgage servicing rights are evaluated for impairment based upon the fair value of the rights as compared to the carrying amount.  If the carrying amount of an individual tranche exceeds fair value, impairment is recorded on that tranche so that the servicing asset is carried at fair value.  Fair value is determined at a tranche level based on a model that calculates the present value of estimated future net servicing income.  The valuation model utilizes assumptions that market participants would use in estimating future net servicing income and are validated against available market data (Level 2).

Mortgage banking derivative - The fair value of mortgage banking derivatives are evaluated monthly based on derivative valuation models using quoted prices for similar assets adjusted for specific attributes of the commitments and other observable market data at the valuation date (Level 2).    

Purchased and written certificate of deposit option – The Company acquired purchased and written certificate of deposit options in its Merger with UCFC.  These written and purchased options are mirror derivative instruments which are carried at fair value on the statement of financial condition.  The Company uses an independent third party that performs a market valuation analysis for purchased and written certificate of deposit options.  (Level 2)

Interest rate swaps – The Company periodically enters into interest rate swap agreements with its commercial customers who desire a fixed rate loan term that is longer than the Company is willing to extend.  The Company then enters into a reciprocal swap agreement with a third party that offsets the interest rate risk from the interest rate swap extended to the customer.  The interest rate swaps are derivative instruments which are carried at fair value on the statement of financial condition.  The Company uses an independent third party that performs a market valuation analysis for both swap positions. (Level 2)

The following table summarizes the financial assets measured at fair value on a recurring basis segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

Assets and Liabilities Measured on a Recurring Basis

December 31, 2020	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
	(In Thousands)
Assets:
Available for sale securities:
Obligations of U.S. government corporations and agencies	$	—	$	40,940	$	—	$	40,940
Mortgage-backed securities		—		277,182		—		277,182
Collateralized mortgage obligations		—		106,299		—		106,299
Asset-backed securities		—		30,546		—		30,546
Corporate bonds		—		44,169		—		44,169
Obligations of state and political subdivisions		—		237,518		—		237,518
Equity securities		1,090		—		—		1,090
Loans held for sale, at fair value		—		98,587		123,029		221,616
Purchased certificate of deposit option		—		56		—		56
Interest rate swaps		—		1,870		—		1,870
Mortgage banking derivative - asset		—		3,833		—		3,833
Liabilities:
Written certificate of deposit option		—		56		—		56
Interest rate swaps		—		2,036		—		2,036

55

December 31, 2019	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
	(In Thousands)
Available for sale securities:
Obligations of U.S. government corporations and agencies	$	—	$	2,524	$	—	$	2,524
Mortgage-backed securities		—		89,647		—		89,647
REMICs		—		1,636		—		1,636
Collateralized mortgage obligations		—		82,101		—		82,101
Corporate bonds		—		12,101		—		12,101
Obligations of state and political subdivisions		—		92,028		3,411		95,439
Mortgage banking derivative - asset		—		892		—		892

The tables below present a reconciliation of all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the twelve month periods ended December 31, 2020 and 2019.

	Construction loans held for sale
	Twelve Months Ended December 31,
	2020			2019
Balance of recurring Level 3 assets at beginning of period	$	—		$	—
Total gains (losses) for the period
Included in change in fair value of loans held for sale		13,492			—
Originations		108,847			—
Acquired in acquisition		37,711			—
Sales		(37,021	)		—
Balance of recurring Level 3 assets at end of period	$	123,029		$	—
	Securities available-for-sale
	Twelve Months Ended December 31,
	2020			2019
Balance of recurring Level 3 assets at beginning of period	$	3,411		$	—
Balance of assets classified as Level 3 during the period		—			3,411
Balance of Level 3 assets moved to Level 2 during the period		(3,411	)		—
Balance of recurring Level 3 assets at end of period	$	—		$	3,411

The Company has elected the fair value option for new applications taken post January 31, 2020, and subsequently originated for residential mortgage and permanent construction loans held for sale.  These loans are intended for sale and the Company believes that fair value is the best indicator of the resolution of these loans.  Interest income is recorded based on the contractual terms of the loan and in accordance with the Company’s policies.  There were 0 loans at December 31, 2019, where the fair value option had been elected.  

The aggregate fair value of the residential mortgage loans held for sale at December 31, 2020 was $98.6 million and they had a contractual balance of $93.2 million for this same period.  The difference between these two figures is recorded in gains and losses on the sale of loans held for sale.  For the twelve months ended December 31, 2020, $5.4 million was recorded in gains on the sale of loans held for sale for the change in fair value.

The aggregate fair value of the permanent construction loans held for sale at December 31, 2020 was $123.0 million and they had a contractual balance of $109.5 million for this same period.  The difference between these two figures is recorded in gains and losses on the sale of loans held for sale.  For the twelve months ended December 31, 2020, $13.5 was recorded in gains on the sale of loans held for sale for the change in fair value.

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The following table summarizes the financial assets measured at fair value on a non-recurring basis segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

Assets and Liabilities Measured on a Non-Recurring Basis

December 31, 2020	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
	(In Thousands)
Collateral dependent loans held for sale
Commercial Real Estate	$	—	$	—	$	4,601	$	4,601
Commercial		—		—		7,151		7,151
Total individually analyzed loans		—		—		11,752		11,752
Mortgage servicing rights		—		13,153		—		13,153

December 31, 2019	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
	(In Thousands)
Impaired loans
Commercial Real Estate	$	—	$	—	$	68	$	68
Commercial		—		—		38		38
Total impaired loans		—		—		106		106
Mortgage servicing rights		—		273		—		273

For Level 3 assets and liabilities measured at fair value on a nonrecurring basis as of December 31, 2020, the significant unobservable inputs used in the fair value measurements were as follows:

	Fair Value		Valuation Technique	Unobservable Inputs	Range of Inputs	Weighted Average
			(Dollars in Thousands)
Collateral Dependent Loans- Applies to    all loan classes	$	11,752	Appraisals which utilize sales comparison, net income and cost approach	Discounts for collection issues and changes in market conditions	5 - 37%	24.17%

For Level 3 assets and liabilities measured at fair value on a nonrecurring basis as of December 31, 2019, the significant unobservable inputs used in the fair value measurements were as follows:

	Fair Value		Valuation Technique	Unobservable Inputs	Range of Inputs	Weighted Average
			(Dollars in Thousands)
Impaired Loans- Applies to    all loan classes	$	106	Appraisals which utilize sales comparison, net income and cost approach	Discounts for collection issues and changes in market conditions	10-13%	10.86%

Individually analyzed loans, which are evaluated using the fair value of the collateral for collateral dependent loans, had a fair value of $11.7 million that includes a valuation allowance of $2.9 million and a fair value of $106,000 that includes a valuation allowance of $26,000 at December 31, 2020 and 2019, respectively. A provision expense of $2.9 million, $12,000, $1.2 million for the years ended December 31, 2020, 2019 and 2018, respectively, related to these loans was included in earnings.

57

Mortgage servicing rights, which are carried at the lower of cost or fair value, had a fair value of $13.2 million with a valuation allowance of $8.5 million and a fair value of $273,000 with a valuation allowance of $534,000 at December 31, 2020 and 2019, respectively.  Expense of $8.0 million and $234,000 was included in earnings for the years ended December 31, 2020 and 2019, respectively, and a recovery of $132,000 was included in earnings for the year ended December 31, 2018.

Real estate held for sale is determined using Level 3 inputs which include appraisals and are adjusted for changes in market conditions. The change in fair value of real estate held for sale was $0, $264,000 and $552,000 for the years ended December 31, 2020, 2019 and 2018, respectively, which was recorded directly as an adjustment to current earnings through noninterest expense.

In accordance with FASB ASC Topic 825, the Fair Value Measurements tables are a comparative condensed consolidated statement of financial condition based on carrying amount and estimated fair values of financial instruments as of December 31, 2020, and December 31, 2019. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of Premier.

Much of the information used to arrive at “fair value” is highly subjective and judgmental in nature and therefore the results may not be precise. Subjective factors include, among other things, estimated cash flows, risk characteristics and interest rates, all of which are subject to change. With the exception of investment securities, the Company’s financial instruments are not readily marketable and market prices do not exist. Since negotiated prices for the instruments, which are not readily marketable, depend greatly on the motivation of the buyer and seller, the amounts that will actually be realized or paid per settlement or maturity of these instruments could be significantly different.

The carrying amount of cash and cash equivalents, as a result of their short-term nature, is considered to be equal to fair value and are classified as Level 1.

It was not practicable to determine the fair value of FHLB stock due to restrictions placed on its transferability.

The Company adopted the amendments to ASU 2016-01 relating to the loan portfolio in 2018 and an exit price income approach is now used to determine the fair value. The loans were valued on an individual basis, with consideration given to the loans underlying characteristics, including account types, remaining terms (in months), annual interest rates or coupons, interest types, past delinquencies, timing of principal and interest payments, current market rates, loss exposures, and remaining balances. The model utilizes a discounted cash flow approach to estimate the fair value of the loans using assumptions for the coupon rates, remaining maturities, prepayment speeds, projected default probabilities, losses given defaults, and estimates of prevailing discount rates. The discounted cash flow approach models the credit losses directly in the projected cash flows. The model applies various assumptions regarding credit, interest, and prepayment risks for the loans based on loan types, payment types and fixed or variable classifications. For all periods presented, the estimated fair value of individually analyzed loans is based on the fair value of the collateral, less estimated cost to sell, or the present value of the loan’s expected future cash flows (discounted at the loan’s effective interest rate). All individually analyzed loans are classified as Level 3 within the valuation hierarchy.  

The fair value of noninterest-bearing deposits are considered equal to the amount payable on demand at the reporting date (i.e., carrying value) and are classified as Level 1.  The fair value of savings, NOW and certain money market accounts are equal to their carrying amounts and are a Level 1 classification.  Fair values of fixed rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits resulting in a Level 2 classification.  

The fair values of securities sold under repurchase agreements are equal to their carrying amounts resulting in a Level 1 classification.  The fair value of subordinated debentures are estimated using a discounted cash flow calculation that applies interest rates currently being offered on subordinated debentures to the schedule of maturities on the subordinated debt tranches resulting in a Level 2 classification.

58

FHLB advances with maturities greater than 90 days are valued based on discounted cash flow analysis, using interest rates currently being quoted for similar characteristics and maturities resulting in a Level 2 classification.

			Fair Value Measurements at December 31, 2020 (In Thousands)
	Carrying Value		Total		Level 1		Level 2		Level 3
Financial Assets:
Cash and cash equivalents	$	159,266	$	159,266	$	159,266	$	—	$	—
Securities available for sale		736,654		736,654		—		736,654		—
Equity securities		1,090		1,090		1,090		—		—
FHLB Stock		16,026	N/A		N/A		N/A		N/A
Loans receivable, net		5,409,161		5,412,814		—		—		5,412,814
Loans held for sale, carried at fair value		221,616		221,616		—		98,587		123,029
Financial Liabilities:
Deposits	$	6,047,841	$	6,056,426	$	4,925,411	$	1,131,015	$	—
Subordinated debentures		84,860		83,237		—		—		83,237

			Fair Value Measurements at December 31, 2019 (In Thousands)
	Carrying Value		Total		Level 1		Level 2		Level 3
Financial Assets:
Cash and cash equivalents	$	131,254	$	131,254	$	131,254	$	—	$	—
Investment securities		283,448		283,448		—		280,037		3,411
FHLB Stock		11,915	N/A		N/A		N/A		N/A
Loans, net, including loans held for sale		2,764,329		2,756,092		—		18,456		2,737,636
Financial Liabilities:
Deposits	$	2,870,325	$	2,871,166	$	2,131,537	$	739,629	$	—
Advances from FHLB		85,063		85,003		—		85,003		—
Securities sold under repurchase agreements		2,999		2,999		2,999		—		—
Subordinated debentures		36,083		36,083		—		36,083		—

23. Derivative Financial Instruments

Commitments to fund certain mortgage loans (interest rate locks) to be sold into the secondary market and forward commitments for the future delivery of mortgage loans to third-party investors are considered derivatives.  It is the Company’s practice to enter into forward commitments for the future delivery of residential mortgage loans when interest rate lock commitments are entered into in order to economically hedge the effect of changes in interest rates resulting from its commitments to fund the loans.  These mortgage banking derivatives are not designated in hedge relationships.  The Bank had approximately $135.7 million and $17.0 million of interest rate lock commitments at December 31, 2020 and 2019, respectively.  There were $265.0 million of forward sales of mortgage-backed securities and $34.4 million of forward commitments for the future delivery of residential mortgage loans at December 31, 2020 and 2019, respectively.  

The fair value of these mortgage banking derivatives are reflected by a derivative asset or a derivative liability.  The table below provides data about the carrying values of these derivative instruments:

December 31, 2020

December 31, 2019

Assets

(Liabilities)

Assets

(Liabilities)

Derivative

Derivative

Carrying

Carrying

Net Carrying

Carrying

Carrying

Net Carrying

Value

Value

Value

Value

Value

Value

(In Thousands)

Derivatives not designated as hedging    instruments

Mortgage Banking

Derivatives

$

3,833

$

—

$

3,833

$

883

$

(9

)

$

892

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The table below provides data about the amount of gains and losses recognized in income on derivative instruments not designated as hedging instruments.  The difference in derivative net carrying value at December 31, 2020 and 2019 represents a fair value adjustment that runs through mortgage banking income.  For fiscal year 2020, $2.2 million of this difference ran through mortgage banking income while the remaining difference of $806,000 was part of the Merger consideration.

	Twelve Months Ended December 31,
	2020		2019		2018
	(In Thousands)
Derivatives not designated as hedging instruments
Mortgage Banking Derivatives – Gain (Loss)	$	2,154	$	598	$	(304	)

Interest Rate Swaps

The Company maintains an interest rate protection program for commercial loan customers that was acquired in the Merger.  Under this program, the Company provides a customer with a fixed rate loan while creating a variable rate asset for the Company by the customer entering into an interest rate swap with terms that match the loan.  The Company offsets its risk exposure by entering into an offsetting interest rate swap with an unaffiliated institution.  The Company had interest rate swaps associated with commercial loans with a notional value of $87.8 million and fair value of $1.9 million in other assets and $2.0 million in other liabilities at December 31, 2020.  The difference in fair value of $166,000 between the asset and liability represents a credit valuation adjustment that flows through noninterest income.  For the twelve months ended December 31, 2020, $80,000 of this figure flowed through noninterest income.  The remainder was part of the Merger consideration.  The Company had0 interest rate swaps outstanding at December 31, 2019.

Equity Linked Time Deposit

The Company also acquired time deposits in its acquisition of UCFC that have written and purchased option derivatives to facilitate an equity linked time deposit product.  The time deposit provides the purchaser a guaranteed return of principal at maturity plus a potential equity return (a written option), while the Bank receives a known stream of funds based on the equity return (a purchase option).  The written and purchased options are mirror derivative instruments which are carried at fair value on the consolidated statement of financial condition.  At December 31, 2020, the balance of the equity linked time deposits was $5.7 million and the written and purchased options each had a fair value of $56,000.

24. Quarterly Consolidated Results of Operations (Unaudited)

The following is a summary of the quarterly consolidated results of operations:

	Three Months Ended
	March 31			June 30		September 30			December 31
2020	(In Thousands, Except Per Share Amounts)
Interest income	$	54,522		$	62,449	$	60,159		$	60,816
Interest expense		9,059			8,145		6,888			5,849
Net interest income		45,463			54,304		53,271			54,967
Provision for credit losses		43,786			1,868		3,658			(6,158	)
Provision for unfunded commitments		1,459			1,107		(864	)		(606	)
Net interest income after provision for credit losses		218			51,329		50,477			61,731
Noninterest income		13,999			23,015		25,000			18,670
Noninterest expense		42,310			37,984		43,563			41,313
Income before income taxes		(28,093	)		36,360		31,914			39,088
Income taxes		(5,610	)		7,303		6,259			8,240
Net income	$	(22,483	)	$	29,057	$	25,655		$	30,848
Earnings per common share:
Basic	$	(0.71	)	$	0.78	$	0.69		$	0.83
Diluted	$	(0.71	)	$	0.78	$	0.69		$	0.82

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	Three Months Ended
	March 31		June 30			September 30			December 31
2019	(In Thousands, Except Per Share Amounts)
Interest income	$	33,919	$	35,241		$	35,683		$	36,241
Interest expense		5,649		6,252			6,791			6,743
Net interest income		28,270		28,989			28,892			29,498
Provision for loan losses		212		282			1,327			1,084
Provision for loan losses		87		(85	)		(62	)		39
Net interest income after provision for loan losses		27,971		28,792			27,627			28,375
Noninterest income		10,813		10,486			11,842			11,815
Noninterest expense		24,779		24,320			23,265			24,720
Income before income taxes		14,005		14,958			16,204			15,470
Income taxes		2,523		2,759			3,033			2,952
Net income	$	11,482	$	12,199		$	13,171		$	12,518
Earnings per common share:	$	0.57	$	0.62		$	0.67		$	0.63
Basic	$	0.57	$	0.61		$	0.66		$	0.63
Diluted

25. Other Comprehensive Income (Loss)

The before and after tax amounts allocated to each component of other comprehensive income (loss) are presented in the table below. Reclassification adjustments related to securities available for sale are included in gains on sale or call of securities in the accompanying consolidated condensed statements of income.  Reclassification adjustments related to the defined benefit postretirement medical plan are included in compensation and benefits in the accompanying consolidated condensed statements of income.

	Before Tax Amount			Tax Effect			Net of Tax Amount
	(In Thousands)
Twelve months ended December 31, 2020:
Securities available for sale and transferred securities:
Change in net unrealized gain/(loss) during the period	$	14,431		$	3,030		$	11,401
Reclassification adjustment for net gains included in net income		(1,464	)		(307	)		(1,157	)
Defined benefit postretirement medical plan:
Net gain on defined benefit postretirement medical plan realized    during the period		195			41			154
Reclassification adjustment for net amortization and deferral on defined    benefit postretirement medical plan (included in compensation and    benefits)		13			2			11
Total other comprehensive income	$	13,175		$	2,766		$	10,409

	Before Tax Amount			Tax Effect			Net of Tax Amount
	(In Thousands)
Twelve months ended December 31, 2019:
Securities available for sale and transferred securities:
Change in net unrealized gain/(loss) during the period	$	8,754		$	1,839		$	6,915
Reclassification adjustment for net gains included in net income		(24	)		(5	)		(19	)
Defined benefit postretirement medical plan:
Net gain on defined benefit postretirement medical plan realized    during the period		(310	)		(146	)		(164	)
Reclassification adjustment for net amortization and deferral on defined    benefit postretirement medical plan (included in compensation and    benefits)		14			3			11
Total other comprehensive income	$	8,434		$	1,691		$	6,743

61

	Before Tax Amount			Tax Effect			Net of Tax Amount
	(In Thousands)
Twelve months ended December 31, 2018
Securities available for sale and transferred securities:
Change in net unrealized gain/(loss) during the period	$	(3,356	)	$	(706	)	$	(2,650	)
Reclassification adjustment for net gains included in net income		(173	)		(36	)		(137	)
Defined benefit postretirement medical plan:
Net gain on defined benefit postretirement medical plan realized    during the period		560			200			360
Reclassification adjustment for net amortization and deferral on defined    benefit postretirement medical plan (included in compensation and    benefits)		18			3			15
Total other comprehensive income	$	(2,951	)	$	(539	)	$	(2,412	)

Activity in accumulated other comprehensive income (loss), net of tax, was as follows:

	Securities Available For Sale			Post- retirement Benefit			Accumulated Other Comprehensive Income
	(In Thousands)
Balance January 1, 2020	$	4,839		$	(244	)	$	4,595
Other comprehensive income before reclassifications		11,401			154			11,555
Amounts reclassified from accumulated other comprehensive loss		(1,157	)		11			(1,146	)
Net other comprehensive income during period		10,244			165			10,409
Balance December 31, 2020	$	15,083		$	(79	)	$	15,004
Balance January 1, 2019	$	(2,057	)	$	(91	)	$	(2,148	)
Other comprehensive income before reclassifications		6,915			(164	)		6,751
Amounts reclassified from accumulated other comprehensive loss		(19	)		11			(8	)
Net other comprehensive income during period		6,896			(153	)		6,743
Balance December 31, 2019	$	4,839		$	(244	)	$	4,595
Balance January 1, 2018	$	601		$	(384	)	$	217
Other comprehensive income before reclassifications		(2,650	)		360			(2,290	)
Amounts reclassified from accumulated other comprehensive loss		(137	)		15			(122	)
Net other comprehensive income during period		(2,787	)		375			(2,412	)
Reclassification Adjustment upon adoption of ASU 2018-02		129			(82	)		47
Balance December 31, 2018	$	(2,057	)	$	(91	)	$	(2,148	)

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PART IV

Item 15.Exhibits, Financial Statement Schedules

(a) Financial Statements

(1) The following documents are filed as Item 8 of this Form 10-K.

(A) Report of Independent Registered Public Accounting Firm (Crowe LLP)

(B) Consolidated Statements of Financial Condition as of December 31, 2020 and 2019

(C) Consolidated Statements of Income for the years ended December 31, 2020, 2019 and 2018

(D) Consolidated Statements of Comprehensive Income for the years ended December 31, 2020, 2019 and 2018

(E) Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2020, 2019 and 2018

(F) Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019 and 2018

(G) Notes to Consolidated Financial Statements

(2) Separate financial statement schedules are not being filed because of the absence of conditions under which they are required or because the required information is included in the consolidated financial statements or the related notes.

(3) The exhibits required by this item are as follows:

24.1*Power of Attorney

31.1* Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2* Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1* Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2* Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

*Filed herewith

63

SIGNATURES

Pursuant to the requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	PREMIER FINANCIAL CORP.
September 28, 2021	By:	/s/ Paul Nungester
		Paul Nungester, Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on September 28, 2021.

Signature	Title
/s/ Gary M. Small	Chief Executive Officer, President and Director
Gary M. Small
/s/ Paul Nungester	Executive Vice President and Chief
Paul Nungester	Financial Officer (principal accounting officer)
/s/ Donald P. Hileman*	Executive Chairman and Director
Donald P. Hileman
/s/ Richard J. Schiraldi*	Vice Chairman and Director
Richard J. Schiraldi
/s/ Marty E. Adams*	Director
Marty E. Adams
/s/ Zahid Afzal*	Director
Zahid Afzal
/s/ Louis M. Altman*	Director
Louis M. Altman
/s/ Terri A. Bettinger*	Director
Terri A. Bettinger
/s/ John L. Bookmyer*	Director
John L. Bookmyer
/s/ Lee Burdman*	Director
Lee Burdman
/s/ Jean A. Hubbard*	Director
Jean A. Hubbard
/s/ Charles D. Niehaus*	Director
Charles D. Niehaus
/s/ Mark A. Robison*	Director
Mark A. Robison
/s/ Samuel S. Strausbaugh*	Director
Samuel S. Strausbaugh
*By:/s/ Paul Nungester
Paul Nungester, Attorney in Fact

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Exhibit Index

This report incorporates by reference the documents listed below that we have previously filed with the SEC. The SEC allows us to incorporate by reference information in this document. The information incorporated by reference is considered to be part of this document.

The SEC maintains an internet web site that contains reports, proxy statements, and other information about issuers, like Premier, who file electronically with the SEC. The address of the site is http://www.sec.gov. The reports and other information filed by Premier with the SEC are also available at the Premier Financial Corp. web site. The address of the site is http://www.yourpremierbank.com. Except as specifically incorporated by reference into this Form 10-K, information on those web sites is not part of this report.

Exhibit
Number	Description
2.1	Agreement and Plan of Merger, dated as of September 9, 2019, between First Defiance Financial Corp. and United Community Financial Corp. (incorporated herein by reference to Exhibit 2.1 in Registrant’s Form 8-K filed September 10, 2019 (File No. 000-26850))
3.1	Second Amended and Restated Articles of Incorporation of Premier Financial Corp. (incorporated herein by reference to Exhibit 3.2 in Registrant’s Form 8-K filed June 22, 2020 (File No. 000-26850))
3.2	Second Amended and Restated Code of Regulations of Premier Financial Corp. (reflecting all amendments) (incorporated herein by reference to Exhibit 3.3 in Registrant’s Form 8-K filed June 22, 2020 (File No. 000-26850))
4.1	Description of Capital Stock (incorporated herein by reference to Exhibit 4.1 in Registrant’s Form 10-K filed March 12, 2021 (File No. 000-26850))
4.2	Indenture, dated September 30, 2020, between Premier Financial Corp. and U.S. Bank National Association, as trustee (incorporated herein by reference to Exhibit 4.2 in Registrant’s Form 8-K filed September 30, 2020 (File No. 000-26860))
4.3	First Supplemental Indenture, dated September 30, 2020, between Premier Financial Corp, and U.S. Bank National Association, as trustee (incorporated herein by reference to Exhibit 4.2 in Registrant’s Form 8-K filed September 30, 2020 (File No. 000-26860))
4.4	Form of 4.00% Fixed-to-Floating Rate Subordinated Note due 2030 (included in Exhibit 4.3)
10.1+	First Federal Amended and Restated Executive Group Life Plan – Post Separation, effective June 30, 2010 (incorporated herein by reference to Exhibit 10.1 in the Registrant’s Form 10-Q filed November 2, 2010 (File No. 000-26850))
10.2+	2010 Equity Incentive Plan (incorporated herein by reference to Annex A to the Registrant’s 2010 Proxy Statement filed March 19, 2010 (File No. 000-26850))
10.3+	First Amendment to First Defiance Financial Corp. 2010 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.1 in the Registrant’s Form 8-K filed March 15, 2012 (File No. 000-26850))
10.4+	2010 Equity Plan Form of Long-Term Incentive Performance-Based Award Agreement (incorporated herein by reference to Exhibit 10.1 in the Registrant’s Form 10-Q filed November 8, 2011 (File No. 000-26850))
10.5+	First Defiance Financial Corp. and Affiliates Incentive Compensation Plan (incorporated herein by reference to Exhibit 10.2 in the Registrant’s Form 8-K filed March 15, 2012 (File No. 000-26850))
10.6+	Premier Financial Corp. 2018 Equity Incentive Plan (formerly the First Defiance Financial Corp. 2018 Equity Incentive Plan) (incorporated herein by reference to Exhibit 10.6 in Registrant’s Form 10-K filed March 12, 2021 (File No. 000-26850))
10.7+	United Community Financial Corp. Amended and Restated 2007 Long-Term Incentive Plan (incorporated herein by reference to Exhibit 4.3 in the Registrant’s Form S-8 filed February 3, 2020 (File No. 000-26850))
10.8+	Jude J. Nohra Consulting Agreement and General Release (incorporated herein by reference to Exhibit 10.8 in Registrant’s Form 10-K filed March 12, 2021 (File No. 000-26850))
10.9+	Form of Restricted Stock Award Agreement under 2018 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.1 in the Registrant’s Form 10-Q filed August 7, 2018 (File No. 000-26850))
10.10+	Form of Restricted Stock Unit Award Agreement under 2018 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.2 in the Registrant’s Form 10-Q filed August 7, 2018 (File No. 000-26850))
10.11+	First Defiance Deferred Compensation Plan, revised October 30, 2014 (incorporated herein by reference to Exhibit 10.3 in the Registrant’s Form 10-Q filed August 7, 2018 (File No. 000-26850))
10.12+	Employment Agreement with Donald P. Hileman, dated December 20, 2018 (incorporated herein by reference to Exhibit 10.1 in the Registrant’s Form 8-K filed December 27, 2018 (File No. 000-26850))
10.13+	First Amendment to the Employment Agreement with Donald P. Hileman, dated March 4, 2019 (incorporated herein by reference to Exhibit 10.1 in the Registrant’s Form 8-K filed March 6, 2019 (File No. 000-26850))
10.14+	Premier Financial Corp. 2015 Long Term Incentive Plan (formerly the United Community Financial Corp. 2015 long term Incentive Plan) (incorporated herein by reference to Exhibit 10.14 in Registrant’s Form 10-K filed March 12, 2021 (File No. 000-26850))
10.15+	Form of Performance-Based Restricted Stock Unit Award Agreement (LTIP) under the 2018 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.26 in the Registrant’s Form 10-K filed February 28, 2019 (File No. 000-26850))
10.16+	Amendment to Form of Performance-Based Restricted Stock Unit Award Agreements (LTIP) under the 2018 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.3 in Registrant’s Form 8-K filed January 21, 2020 (File No. 000-26850))
10.17+	Form of Performance-Based Restricted Stock Unit Award Agreement (Long-Term Equity Asset Growth) under the 2018 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.27 in the Registrant’s Form 10-K filed February 28, 2019 (File No. 000-26850))
10.18+	Amendment to Form of Performance-Based Restricted Stock Unit Award Agreement (Long-Term Equity Asset Growth) under the 2018 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.4 in the Registrant’s Form 8-K filed January 21, 2020 (File No. 000-26850))
10.19+	Form of Performance-Based Restricted Stock Unit Award Agreement (LTIP) under the 2010 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.28 in the Registrant’s Form 10-K filed February 28, 2019 (File No. 000-26850))
10.20+	Form of Performance-Based Restricted Stock Unit Award Agreement (Long-Term Equity Asset Growth) under the 2010 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.29 in the Registrant’s Form 10-K filed February 28, 2019 (File No. 000-26850))
10.21+	2020 Form of Long Term Incentive Plan Performance Share Units Award Agreement (incorporated herein by reference to Exhibit 10.1 in the Registrant’s Form 8-K filed March 16, 2020 (File No. 000-26850))
10.22+	Employment Agreement with Vince Liuzzi, dated March 4, 2019 (incorporated herein by reference to Exhibit 10.22 in Registrant’s Form 10-K filed March 12, 2021 (File No. 000-26850))
10.23+	Employment Agreement with Paul D. Nungester, dated May 1, 2019 (incorporated herein by reference to Exhibit 10.1 in the Registrant’s Form 10-Q filed May 7, 2019 (File No. 000-26850))
10.24+	Employment Agreement with Donald P. Hileman, dated September 9, 2019 (incorporated herein by reference to Exhibit 10.1 in Registrant’s Form 8-K filed September 10, 2019 (File No. 000-26850))
10.25+	Employment Agreement with Gary M. Small, dated September 9, 2019 (incorporated herein by reference to Exhibit 10.2 in Registrant’s Form 8-K filed September 10, 2019 (File No. 000-26850))
10.26+	Amendment to Donald P. Hileman Performance-Based Restricted Stock Unit Award Agreements (LTIP) under the 2018 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.1 in Registrant’s Form 8-K filed January 21, 2020 (File No. 000-26850))
10.27+	Amendment to Donald P. Hileman Performance-Based Restricted Stock Unit Award Agreement (Long-Term Equity Asset Growth) under the 2018 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.2 in the Registrant’s Form 8-K filed January 21, 2020 (File No. 000-26850))
10.28	Form of Severance and Change in Control Agreement (incorporated herein by reference to Exhibit 10.5 in the Registrant’s Form 10-Q filed June 18, 2020 (File No. 000-26850))
10.29	Purchase Agreement, among Premier Financial Corp., Premier Bank and Piper Sandler & Co., dated September 25, 2020 (incorporated herein by reference to Exhibit 10.1 in Registrant’s Form 8-K filed September 30, 2020 (File 000-26850))
10.30+	2021 Form of Restricted Stock Award Agreement under 2018 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.30 in Registrant’s Form 10-K filed March 12, 2021 (File No. 000-26850))
10.31+	2021 Form of Restricted Stock Unit Award Agreement under 2018 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.31 in Registrant’s Form 10-K filed March 12, 2021 (File No. 000-26850))
10.32+	2021 Form of Long Term Incentive Plan Performance Share Units Award Agreement (incorporated herein by reference to Exhibit 10.32 in Registrant’s Form 10-K filed March 12, 2021 (File No. 000-26850))
21	List of Subsidiaries of the Company (incorporated herein by reference to Exhibit 10.32 in Registrant’s Form 10-K filed March 12, 2021 (File No. 000-26850))
23.1*	Consent of Crowe LLP
24.1*	Power of Attorney
31.1*	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101**	The following financial information from the Registrant's Annual Report on Form 10-K/A for the year ended December 31, 2020 is formatted in Inline XBRL: (i) Audited Consolidated Condensed Statements of Financial Condition at December 31, 2020 and December 31, 2019; (ii) Audited Consolidated Condensed Statements of Income for the years ended December 31, 2020, 2019 and 2018; (iii) Audited Consolidated Condensed Statements of Comprehensive Income for the years ended December 31, 2020, 2019 and 2018; (iv) Audited Consolidated Condensed Statements of Changes in Stockholders’ Equity for the years ended December 31, 2020, 2019 and 2018; (v) Audited Consolidated Condensed Statements of Cash Flows for the years ended December 31, 2020, 2019 and 2018; and (vi) Notes to Audited Consolidated Condensed Financial Statements.
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Filed herewith

** Furnished herewith

+ Indicates management contract or compensatory plan.

66