SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission file number 0-20908
PREMIER FINANCIAL BANCORP, INC.
(Exact name of registrant as specified in its charter)
Kentucky 61-1206757
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
115 N. Hamilton Street
Georgetown, Kentucky 40324
(address of principal executive officer) (Zip Code)
Registrant's telephone number (502) 863-1955
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 filing
requirements for the past 90 days. Yes X No
-- --
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date.
Common stock - 5,232,230 shares outstanding at August 11, 2000.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The accompanying information has not been audited by independent public
accountants; however, in the opinion of management such information reflects all
adjustments necessary for a fair presentation of the results for the interim
period. All such adjustments are of a normal and recurring nature.
The accompanying financial statements are presented in accordance with the
requirements of Form 10-Q and consequently do not include all of the disclosures
normally required by generally accepted accounting principles or those normally
made in the registrant's annual Form 10-K filing. Accordingly, the reader of the
Form 10-Q may wish to refer to the registrant's Form 10-K for the year ended
December 31, 1999 for further information in this regard.
Index to consolidated financial statements:
Consolidated Balance Sheets...................................... 3
Consolidated Statements of Income and Comprehensive Income....... 4
Consolidated Statements of Cash Flows ........................... 5
Consolidated Statements of Changes in Stockholders' Equity....... 6
Notes to Consolidated Financial Statements....................... 7
PREMIER FINANCIAL BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2000 AND DECEMBER 31, 1999
(IN THOUSANDS)
- --------------------------------------------------------------------------------
2000 1999
---- ----
(unaudited)
ASSETS
Cash and due from banks $ 22,659 $ 28,227
Interest earning balances with banks 736 1,634
------------- --------------
Cash and cash equivalents 23,395 29,861
Federal funds sold 12,849 25,197
Investment securities
Available for sale 157,838 151,787
Held to maturity 18,546 18,633
Loans 592,482 570,753
Unearned interest (247) (647)
Allowance for loan losses (8,245) (6,812)
------------- --------------
Net loans 583,990 563,294
Federal Home Loan Bank and Federal Reserve Bank stock 4,312 4,123
Premises and equipment, net 15,172 14,935
Real estate and other property acquired through foreclosure 3,066 3,019
Interest receivable 9,360 9,814
Goodwill and other intangibles 23,637 24,339
Other assets 8,189 7,466
------------- --------------
Total assets $ 860,354 $ 852,468
============= ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Non-interest bearing $ 72,978 $ 68,490
Time deposits, $100,000 and over 103,304 99,292
Other interest bearing 519,224 525,061
------------- --------------
Total deposits 695,506 692,843
Securities sold under agreements to repurchase 26,007 21,282
Federal Home Loan Bank advances 32,624 32,647
Other borrowed funds 20,000 20,000
Interest payable 4,064 3,265
Other liabilities 1,454 1,554
------------- --------------
Total liabilities 779,655 771,591
Guaranteed preferred beneficial interests in Company's debentures 28,750 28,750
Stockholders' equity
Preferred stock, no par value; 1,000,000 shares authorized;
none issued or outstanding - -
Common stock, no par value; 10,000,000 shares authorized;
5,232,230 shares issued and outstanding 1,103 1,103
Surplus 43,445 43,445
Retained earnings 11,526 11,601
Accumulated other comprehensive income (4,125) (4,022)
------------- --------------
Total stockholders' equity 51,949 52,127
------------- --------------
Total liabilities and stockholders' equity $ 860,354 $ 852,468
============= ==============
See Accompanying Notes to the Consolidated Financial Statements
3.
PREMIER FINANCIAL BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
THREE AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(IN THOUSANDS)
(UNAUDITED)
- --------------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
---- ---- ---- ----
Interest income
Loans, including fees $ 13,822 $ 12,604 $ 27,181 $ 24,169
Investment securities
Taxable 2,586 2,419 5,002 4,903
Tax-exempt 363 347 720 702
Federal funds sold and other 262 302 741 683
----------- ----------- ----------- -----------
Total interest income 17,033 15,672 33,644 30,457
Interest expense
Deposits 7,769 6,897 15,432 13,457
Debt and other borrowings 2,023 1,530 3,885 3,037
----------- ----------- ----------- -----------
Total interest expense 9,792 8,427 19,317 16,494
Net interest income 7,241 7,245 14,327 13,963
Provision for possible loan losses 1,505 621 2,890 1,095
----------- ----------- ----------- -----------
Net interest income after provision for
possible loan losses 5,736 6,624 11,437 12,868
Non-interest income
Service charges 573 516 1,065 950
Insurance commissions 121 173 238 297
Investment securities gains(losses) (281) (26) (280) 5
Other 560 302 936 651
----------- ----------- ----------- -----------
973 965 1,959 1,903
Non-interest expenses
Salaries and employee benefits 3,267 2,954 6,550 5,914
Occupancy and equipment expenses 766 809 1,538 1,494
Amortization of intangibles 392 392 785 840
Other expenses 1,965 1,573 3,637 3,000
----------- ----------- ----------- -----------
6,390 5,728 12,510 11,248
----------- ----------- ----------- -----------
Income before income taxes 319 1,861 886 3,523
Provision for income taxes 57 550 177 994
----------- ----------- ----------- -----------
Net income $ 262 $ 1,311 $ 709 $ 2,529
=========== =========== =========== ===========
Other comprehensive income (loss), net of tax:
Unrealized gains and (losses) arising during
the period $ (71) $ (1,906) $ (288) $ (2,425)
Reclassification of realized amount 185 17 185 (3)
----------- ----------- ----------- -----------
Net change in unrealized gain (loss) on
securities 114 (1,889) (103) (2,428)
----------- ----------- ----------- -----------
Comprehensive income $ 376 $ (578) $ 606 $ 101
=========== =========== =========== ===========
Earnings per share $ .05 $ .25 $ .14 $ .48
Earnings per share assuming dilution .05 .25 $ .14 $ .48
Weighted average shares outstanding 5,232 5,232 5,232 5,232
See Accompanying Notes to the Consolidated Financial Statements
4.
PREMIER FINANCIAL BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(IN THOUSANDS)
(UNAUDITED)
- --------------------------------------------------------------------------------
2000 1999
---- ----
Cash flows from operating activities
Net income $ 709 $ 2,529
Adjustments to reconcile net income to net cash
from operating activities
Depreciation 666 588
Provision for loan losses 2,890 1,095
Amortization, net 622 1,067
FHLB stock dividends (147) (120)
Investment securities losses (gains), net 280 (5)
Changes in
Interest Receivable 454 359
Other assets (669) 235
Interest Payable 799 164
Other liabilities (100) 175
------------- -------------
Net cash from operating activities 5,504 6,087
Cash flows from investing activities
Purchases of securities available for sale (31,624) (75,142)
Proceeds from sales of securities available for sale 12,890 39,901
Proceeds from maturities and calls of securities available
for sale 12,328 43,644
Purchases of securities held to maturity (1,165) (1,511)
Proceeds from maturities and calls of securities held
to maturity 1,251 2,614
Purchases of FHLB stock (42) (44)
Net change in federal funds sold 12,348 24,245
Net change in loans (24,104) (41,713)
Purchases of premises and equipment, net (903) (960)
Proceeds from sale of other real estate acquired
through foreclosure 471 393
Net cash received (paid) related to acquisitions - (8,579)
------------- ----------
Net cash from investing activities (18,550) (17,152)
Cash flows from financing activities
Net change in deposits 2,662 4,328
Advances from Federal Home Loan Bank 22,575 1,885
Repayment of Federal Home Loan Bank advances (22,598) (2,205)
Proceeds from other borrowed funds - 12,000
Net change in agreements to repurchase securities 4,725 (54)
Dividends paid (784) (1,570)
------------- -------------
Net cash from financing activities 6,580 14,384
------------- -------------
Net change in cash and cash equivalents (6,466) 3,319
Cash and cash equivalents at beginning of period 29,861 20,171
------------- -------------
Cash and cash equivalents at end of period $ 23,395 $ 23,490
============= =============
See Accompanying Notes to the Consolidated Financial Statements
5.
PREMIER FINANCIAL BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 1999 AND JUNE 30, 2000
(IN THOUSANDS)
(UNAUDITED)
- --------------------------------------------------------------------------------
Accumulated
Other
Common Retained Comprehensive
Stock Surplus Earnings Income (Loss) Total
----- ------- -------- ------------ -----
Balances, January 1, 1999 $ 1,103 $ 43,445 $ 10,151 $ (300) $ 54,399
Net change in unrealized gains/(losses) on
securities available for sale - - - (2,428) (2,428)
Net income - - 2,529 - 2,529
Dividends paid - Company
($.30 per share) - - (1,570) - (1,570)
---------- ----------- ----------- ------------ ------------
Balances, June 30, 1999 $ 1,103 $ 43,445 $ 11,110 $ (2,728) $ 52,930
========== =========== =========== ============ ============
Balances, January 1, 2000 $ 1,103 $ 43,445 $ 11,601 $ (4,022) $ 52,127
Net change in unrealized gains/(losses) on
securities available for sale - - - (103) (103)
Net income - - 709 - 709
Dividends paid - Company
($.15 per share) - - (784) - (784)
---------- ----------- ----------- ------------ ------------
Balances, June 30, 2000 $ 1,103 $ 43,445 $ 11,526 $ (4,125) $ 51,949
========== =========== =========== ============ ============
See Accompanying Notes to the Consolidated Financial Statements
6.
PREMIER FINANCIAL BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
- --------------------------------------------------------------------------------
NOTE 1 - BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Premier Financial
Bancorp, Inc. (the Company) and its wholly owned subsidiaries:
Year June 30, 2000
Acquired Assets
-------- ------
(In Thousands)
Citizens Deposit Bank & Trust Vanceburg, Kentucky 1991 $ 120,164
Bank of Germantown Germantown, Kentucky 1992 27,985
Georgetown Bank & Trust Co. Georgetown, Kentucky 1995 58,496
Citizens Bank Sharpsburg, Kentucky 1995 47,956
Farmers Deposit Bank Eminence, Kentucky 1996 141,804
The Sabina Bank Sabina, Ohio 1997 57,640
Ohio River Bank Ironton, Ohio 1998 57,167
The Bank of Philippi, Inc. Philippi, West Virginia 1998 73,014
Boone County Bank, Inc. Madison, West Virginia 1998 145,352
The Bank of Mt. Vernon Mt. Vernon, Kentucky 1999 132,020
The Company also has a data processing subsidiary, Premier Data Services, Inc.,
and PFBI Capital Trust subsidiary as discussed in Note 6. All intercompany
transactions and balances have been eliminated.
NOTE 2 - BUSINESS COMBINATIONS
On January 20, 1999, the Company acquired all of the outstanding shares of Mt.
Vernon Bancshares, Inc., Mt. Vernon, Kentucky, a one-bank holding company owning
all of the shares of Bank of Mt. Vernon (Mt. Vernon) for cash. Mt. Vernon offers
full service banking in the counties of Rockcastle, Pulaski, and Madison,
Kentucky. The total acquisition cost exceeded the fair value of net assets
acquired by approximately $4.5 million. The combination was accounted for as a
purchase and the results of operations of Mt. Vernon are included in the
consolidated financial statements from January 20, 1999. At date of acquisition,
Mt. Vernon had total assets of $129.5 million, total loans of $96.8 million, and
total deposits of $118.7 million.
CONTINUED
7.
PREMIER FINANCIAL BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
- --------------------------------------------------------------------------------
NOTE 3 - SECURITIES
Amortized cost and fair value of investment securities, by category, at June 30,
2000 are summarized as follows:
(In Thousands)
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
Available for sale
U. S. Treasury securities $ 2,836 $ - $ (8) $ 2,828
U. S. agency securities 141,055 1 (5,508) 135,548
Obligations of states and political
subdivisions 7,380 2 (61) 7,321
Mortgage-backed securities 9,891 - (528) 9,363
Preferred stock 2,000 - - 2,000
Other equity securities 925 - (147) 778
-------------- -------------- -------------- ---------------
Total available for sale $ 164,087 $ 3 $ (6,252) $ 157,838
============== ============== ============== ===============
Held to maturity
U. S. Treasury securities $ 500 $ - $ (1) $ 499
U. S. agency securities 1,233 - (36) 1,197
Obligations of states and political
subdivisions 16,791 226 (197) 16,820
Mortgage-backed securities 22 - (1) 21
-------------- -------------- -------------- ---------------
Total held to maturity $ 18,546 $ 226 $ (235) $ 18,537
============== ============== ============== ===============
Amortized cost and fair value of investment securities, by category, at December
31, 1999 are summarized as follows:
(In Thousands)
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
Available for sale
U. S. Treasury securities $ 2,900 $ - $ (6) $ 2,894
U. S. agency securities 130,254 - (5,047) 125,207
Obligations of states and political
subdivisions 7,468 - (114) 7,354
Mortgage-backed securities 14,333 - (776) 13,557
Preferred stock 2,000 - - 2,000
Other securities 925 - (150) 775
-------------- -------------- -------------- ---------------
Total available for sale $ 157,880 $ - $ (6,093) $ 151,787
============== ============== ============== ===============
Held to maturity
U. S. Treasury securities $ 500 $ - $ (1) $ 499
U. S. agency securities 1,233 - (29) 1,204
Obligations of states and political
subdivisions 16,876 132 (150) 16,858
Mortgage-backed securities 24 - - 24
-------------- -------------- -------------- ---------------
Total held to maturity $ 18,633 $ 132 $ (180) $ 18,585
============== ============== ============== ===============
CONTINUED
8.
PREMIER FINANCIAL BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
- --------------------------------------------------------------------------------
NOTE 4 - LOANS
Major classifications of loans at June 30, 2000 and December 31, 1999 are
summarized as follows:
2000 1999
---- ----
(In Thousands)
Commercial, secured by real estate $ 151,322 $ 135,078
Commercial, other 88,055 98,543
Real estate construction 24,618 26,092
Residential real estate 206,676 192,088
Agricultural 14,595 17,525
Consumer and home equity 105,667 100,075
Other 1,549 1,352
------------ ------------
$ 592,482 $ 570,753
============ ============
NOTE 5 - ALLOWANCE FOR LOAN LOSSES
Changes in the allowance for loan losses are as follows:
Three Months Ended Six Months Ended
June 30 June 30 June 30 June 30
2000 1999 2000 1999
---- ---- ---- ----
(In Thousands)
Balances, beginning of period $ 7,626 $ 5,746 $ 6,812 $ 4,363
Acquired - - - 1,310
Net charge-offs (886) (442) (1,457) (843)
Provision for loan losses 1,505 621 2,890 1,095
---------- ----------- ----------- ------------
Balances, end of period $ 8,245 $ 5,925 $ 8,245 $ 5,925
========== =========== =========== ============
NOTE 6 - GUARANTEED PREFERRED BENEFICIAL INTERESTS IN COMPANY'S
SUBORDINATED DEBENTURES
Guaranteed preferred beneficial interests in Company's debentures
(Preferred Securities) represent preferred beneficial interests in the assets of
PFBI Capital Trust (Trust). The Trust holds certain 9.75% junior subordinated
debentures due June 30, 2027 issued by the Company on June 9, 1997.
Distributions on the Preferred Securities is payable at an annual rate of 9.75%
of the stated liquidation amount of $25 per Capital Security, payable quarterly.
Cash distributions on the Preferred Securities are made to the extent interest
on the debentures is received by the Trust. In the event of certain changes or
amendments to regulatory requirements or federal tax rules, the Preferred
Securities are redeemable in whole. Otherwise, the Preferred Securities are
generally redeemable by the Company in whole or in part on or after June 30,
2002 at 100% of the liquidation amount. The Trust's obligations under the
Preferred Securities are fully and unconditionally guaranteed by the Company.
CONTINUED
9.
PREMIER FINANCIAL BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
- --------------------------------------------------------------------------------
NOTE 7 - STOCKHOLDERS' EQUITY
Dividend Limitations - The Company's principal source of funds for dividend
payments is dividends received from the subsidiary Banks. Banking regulations
limit the amount of dividends that may be paid without prior approval of
regulatory agencies. Under these regulations, the amount of dividends that may
be paid in any calendar year is limited to the current year's net profits, as
defined, combined with the retained net profits of the preceding two years,
subject to the capital requirements as discussed below. During 2000, the Banks
could, without prior approval, declare dividends of approximately $6.0 million
plus any 2000 net profits retained to the date of the dividend declaration.
Regulatory Matters - The Company and the subsidiary Banks are subject to various
regulatory capital requirements administered by the federal banking agencies.
Failure to meet minimum capital requirements can initiate certain mandatory and
possibly additional discretionary actions by regulators that, if undertaken,
could have a direct material effect on the Company's financial statements. Under
capital adequacy guidelines and the regulatory framework for prompt corrective
action, the Company and the Banks must meet specific guidelines that involve
quantitative measures of their assets, liabilities, and certain off-balance
sheet items as calculated under regulatory accounting practices.
These quantitative measures established by regulation to ensure capital adequacy
require the Company and Banks to maintain minimum amounts and ratios (set forth
in the following table) of Total and Tier I capital (as defined in the
regulations) to risk-weighted assets (as defined), and of Tier I capital (as
defined) to average assets (as defined). Management believes, as of June 30,
2000, the Company and the Banks meet all quantitative capital adequacy
requirements to which they are subject.
Shown below is a summary of regulatory capital ratios for the Company:
Regulatory
June 30, December 31, Minimum
2000 1999 Requirements
-------- ------------ ------------
Tier I Capital (to Risk-Weighted Assets) 8.9% 8.9% 4.0%
Total Capital (to Risk-Weighted Assets) 11.9% 11.9% 8.0%
Tier I Capital (to Average Assets) 6.1% 6.2% 4.0%
The capital amounts and classifications are also subject to qualitative
judgments by the regulators. As a result of these qualitative judgments,
Citizens Deposit Bank (Citizens) entered into an agreement with the Federal
Reserve Bank (FRB) on December 14, 1999 restricting Citizens from declaring or
paying dividends if its Tier 1 capital to average assets falls below 8%. This
agreement, in effect until terminated by the FRB, is more restrictive than the
quantitative measures governing a bank's ability to pay dividends. Citizens Tier
I capital to average assets was 8.4% at June 30, 2000.
CONTINUED
10.
PREMIER FINANCIAL BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
- --------------------------------------------------------------------------------
Also as a result of these qualitative judgements, Bank of Germantown
(Germantown) entered into an agreement with the Kentucky Department of Financial
Institutions (KDFI) and the Federal Deposit Insurance Corporation (FDIC) on June
13, 2000 restricting Germantown from declaring or paying dividends, without
prior approval, if its Tier I capital to average assets falls below 8%. This
agreement, in effect until terminated by the KDFI and FDIC, is more restrictive
than the quantitative measures governing a bank's ability to pay dividends.
Germantown's Tier I capital to average assets was 8.1% at June 30, 2000.
Mt. Vernon Bancshares, Inc. is precluded from declaring or paying any dividends
without prior approval as the result of an existing agreement with the Federal
Reserve Bank. Mt. Vernon's Tier I capital to average assets was 8.5% at June 30,
2000.
11.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
- --------------------------------------------------------------------------------
A. Results of Operations
Net income for the six months ended June 30, 2000 was $709,000 or $0.14
per share compared to net income of $2,529,000 or $0.48 per share for the six
months ended June 30, 1999. Results for the six months ended June 30, 2000
reflect charges for amortization of goodwill and other intangibles associated
with cash acquisitions totaling $621,000 (after tax) as compared to $654,000
(after tax) in the same period for 1999. Not including these charges, net income
for the first six months in 2000 was $1,330,000 or $0.25 per share versus
$3,183,000 or $0.61 per share in 1999. For the three months ended June 30, 2000,
net income totaled $262,000 or $.05 per share compared to $1,311,000 or $.25 per
share for the same period in 1999.
Net interest income increased $364,000 to $14,327,000 for the six
months ended June 30, 2000 compared to $13,963,000 for the same period in 1999.
Net interest income decreased $4,000 to $7,241,000 for the three months ended
June 30, 2000 compared to the $7,245,000 reported in the three months ended June
30, 1999. Net interest margin on a tax equivalent basis for the six months
ending June 30, 2000 was approximately 3.75% as compared to 4.02% for the same
period in 1999. The decrease in net interest margin is primarily attributable to
rising interest rates and their impact on a majority of the Company's subsidiary
banks. The returns on stockholders' equity and on average assets were
approximately 2.74% and .17% for the six months ended June 30, 2000 compared to
9.30% and .65% for the same period in 1999. Not including the charges for
amortization of goodwill and other intangibles, the returns on stockholders'
equity and on average assets were approximately 5.14% and .31% for the six
months ended June 30, 2000, compared to 11.71% and .82% for the same period in
1999.
The provision for loan losses increased $1,795,000 to $2,890,000 for
the six months ended June 30, 2000 compared to $1,095,000 for the same period in
1999. For the three months ended June 30, 2000, the provision for loan losses
was $1,505,000 compared to the $621,000 reported in the three months ended June
30, 1999, an increase of $884,000. The increases in both the six months ended
June 30, 2000 and the three months ended June 30, 2000 are primarily
attributable to the replenishment and required additions to the reserve for loan
losses at a majority of the Company's subsidiary banks. Additional information
concerning the level of and the activity within the reserve for loan losses can
be found in the Financial Position section.
Non-interest income increased $56,000 to $1,959,000 for the first six
months of 2000 compared to $1,903,000 for the first six months of 1999.
Non-interest income increased $8,000 to $973,000 for the three months ended June
30, 2000 compared to $965,000 for the same period in 1999.
Non-interest expenses for the first half of 2000 totaled $12,510,000 or
2.9% of average assets on an annualized basis compared to $11,248,000 or 2.9% of
average assets for the same period of 1999. Non-interest expenses increased
$662,000 for the three months ended June 30, 2000 to $6,390,000 compared to
$5,728,000 for the three months ended June 30, 1999. This increase in
non-interest expense can be primarily attributed to the branching activities of
four of the Company's subsidiary banks in the 2000 time periods compared to the
same periods for 1999.
12.
Income tax expense was $177,000 for the first six months of 2000
compared to $994,000 for the first six months of 1999. For the three month
period ended June 30, 2000, income tax expense decreased $493,000 to $57,000
compared to $550,000 for the three months ended June 30, 1999. The decrease in
income tax expense can be attributed to the decrease in income before taxes,
primarily as a result of the increase in the provision for loan loss for the
three month and six month periods ended June 30, 2000. The effective tax rate
through June 30, 2000 was approximately 20%, compared to the 28% effective tax
rate for the same period in 1999.
B. Financial Position
Total assets increased $7.9 million or .9% to $860.4 million from the
$852.5 million on December 31, 1999. Earning assets increased to $786.5 million
on June 30, 2000 from $771.5 million on December 31, 1999, an increase of $15.0
million or 1.9%.
Cash and cash equivalents at June 30, 2000 were $23.4 million or a $6.5
million decrease from the $29.9 million on December 31, 1999. Fed funds sold
decreased to $12.8 million from $25.2 million during the same period, a decrease
of $12.4 million. The decrease in cash equivalents and fed funds sold is
primarily attributed to the placement of those funds in higher yielding loans.
Total loans at June 30, 2000 were $592.2 million compared to $570.1
million at December 31, 1999, an increase of $22.1 million or 3.9%.
Deposits totaled $695.5 million as of June 30, 2000, an increase of
$2.7 million over the December 31, 1999 amount of $692.8 million. Noninterest
bearing deposits increased $4.5 million, or 6.6%, and interest bearing deposits
decreased $1.8 million during the period December 31, 1999 to June 30, 2000.
Short term borrowings and Federal Home Loan Bank Advances at June 30,
2000 were $58.6 million compared to the $53.9 million at December 31, 1999, an
increase of $4.7 million.
13.
The following table sets forth information with respect to the
Company's nonperforming assets at June 30, 2000 and December 31, 1999.
2000 1999
---- ----
(In Thousands)
Non-accrual loans $ 6,388 $ 4,540
Accruing loans which are contractually
past due 90 days or more 1,391 1,721
Restructured 455 666
-------------- ------------
Total non-performing loans 8,234 6,927
Other real estate acquired through
foreclosure 3,066 3,009
-------------- ------------
Total non-performing assets $ 11,300 $ 9,936
Non-performing loans as a percentage
of total loans 1.39% 1.22%
Non-performing assets as a percentage
of total assets 1.31% 1.17%
The provision for possible loan losses increased from $621,000 for the
three months ended June 30, 1999 to $1,505,000 for the three months ended June
30, 2000. The provision for possible loan losses and net chargeoffs was
$2,890,000 and $1,457,000 for the first six months of 2000 compared to
$1,095,000 and $843,000, respectively, for the six months period ended June 30,
1999. The increases in these amounts were prompted by the increase in average
loans between the two periods, changes in the economy both locally and
nationally and an increase in non-performing loans from December 31, 1999. The
allowance for loan losses at June 30, 2000 was 1.39% of total loans as compared
to 1.19% at December 31, 1999.
C. Liquidity
Liquidity objectives for the Company can be expressed in terms of
maintaining sufficient cash flows to meet both existing and unplanned
obligations in a cost effective manner. Adequate liquidity allows the Company to
meet the demands of both the borrower and the depositor on a timely basis, as
well as pursuing other business opportunities as they arise. Thus, liquidity
management embodies both an asset and liability aspect while attempting to
maximize profitability. In order to provide for funds on a current and long-term
basis, the Company's subsidiary banks rely primarily on the following sources:
1. Core deposits consisting of both consumer and commercial
deposits and certificates of deposit of $100,000 or more.
Management believes that the majority of its $100,000 or more
certificates of deposit are no more volatile than its other
deposits. This is due to the nature of the markets in which the
subsidiaries operate.
2. Cash flow generated by repayment of loans and interest.
14.
3. Arrangements with correspondent banks for purchase of unsecured
federal funds.
4. The sale of securities under repurchase agreements and borrowing
from the Federal Home Loan Bank.
5. Maintenance of an adequate available-for-sale security
portfolio. The Company owns $157.8 million of securities at
market value as of June 30, 2000. This is an increase of $6.0
million or approximately 4.0% from the December 31, 1999 balance
$151.8 million.
The cash flow statements for the periods presented in the financial
statements provide an indication of the Company's sources and uses of cash as
well as an indication of the ability of the Company to maintain an adequate
level of liquidity.
D. Capital
At June 30, 2000, total shareholders' equity of $51.9 million was 6.0%
of total consolidated assets. This compares to total shareholders' equity of
$52.1 million or 6.1% of total consolidated assets on December 31, 1999.
Tier I capital totaled $51.0 million at June 30, 2000, which represents
a Tier I leverage ratio of 6.1%.
Book value per share was $9.93 at June 30, 2000 and $9.96 at December
31, 1999. An increase in unrealized loss on securities available for sale was
primarily responsible for the decrease in accumulated other comprehensive income
and corresponding decrease in book value per share.
The Company declared a first quarter dividend of $0.15 per share, or
$784,835 payable March 31, 2000 to shareholders of record as of March 20, 2000.
The Company did not declare a second quarter dividend.
Management's discussion and analysis contains forward-looking statements
that are provided to assist in the understanding of anticipated future financial
performance. However, such performance involves risks and uncertainties, and
there are certain important factors that may cause actual results to differ
materially from those anticipated. These important factors include, but are not
limited to, economic conditions (both generally and more specifically in the
markets in which Premier operates), competition for Premier's customers from
other providers of financial services, government legislation and regulation
(which changes from time to time), changes in interest rates, Premier's ability
to originate quality loans and attract and retain deposits, the impact of
Premier's growth, Premier's ability to control costs, and new accounting
pronouncements, all of which are difficult to predict and many of which are
beyond the control of Premier.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company currently does not engage in any derivative or hedging
activity. Refer to the Company's 1999 10-K for analysis of the interest rate
sensitivity. The Company believes there have been no significant changes in the
interest rate sensitivity since previously reported 10-K.
15.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings None
Item 2. Changes in Securities None
Item 3. Defaults Upon Senior Securities None
Item 4. Submission of Matters to a vote of Security Holders None
(a) Annual Meeting of the Shareholders was held June 21, 2000.
(b) The following were elected as directors of the Corporation for a
term of one year.
(1) J. Howell Kelly
(2) Marshall T. Reynolds
(3) Gardner E. Daniel
(4) Toney Adkins
(5) Benjamin T. Pugh
(6) Wilbur M. Jenkins
(7) E. V. Holder, Jr.
(8) Neal Scaggs
(9) Keith Molihan
(10) Jeanne Hubbard
(c) Ratification of Crowe, Chizek and Company, LLP as independent
auditors of the Corporation for 2000. Votes for 4,273,634; votes against 21,434;
votes abstaining 937,162.
Item 5. Other Information None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description of Document
----------- -----------------------
27 Financial Data Schedules
(b) Reports on Form 8-K Form 8-K dated June 30,
2000 reporting management
change and resignation of
three directors.
16.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Corporation has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PREMIER FINANCIAL BANCORP, INC.
Date: August 11, 2000 /s/ Marshall T. Reynolds
------------------------
Marshall T. Reynolds
Chairman of the Board
Date: August 11, 2000 /s/ Gardner E. Daniel
---------------------
Gardner E. Daniel
President & Chief Executive Officer
17.