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 March 31, 2002
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 April 30, 2002.
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, 2001 for further information in this regard.
Index to consolidated financial statements:
Consolidated Balance Sheets..................................... 3
Consolidated Statements of Income .............................. 4
Consolidated Statements of Comprehensive Income ................ 5
Consolidated Statements of Cash Flows........................... 6
Notes to Consolidated Financial Statements...................... 7
PREMIER FINANCIAL BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2002 AND DECEMBER 31, 2001
(DOLLARS IN THOUSANDS)
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(UNAUDITED)
2002 2001
---- ----
ASSETS
Cash and due from banks $ 20,270 $ 20,628
Federal funds sold 39,649 33,517
Investment securities available for sale 148,047 155,566
Loans 454,245 458,833
Unearned interest ( 55) ( 92)
Allowance for loan losses (8,747) (8,946)
------------- --------------
Net loans 445,443 449,795
Federal Home Loan Bank and Federal Reserve Bank stock 4,305 4,261
Premises and equipment, net 12,114 12,035
Real estate and other property acquired through foreclosure 5,725 5,831
Interest receivable 7,088 7,842
Goodwill and other intangibles 15,857 16,044
Other assets 7,056 6,331
------------- --------------
Total assets $ 705,554 $ 711,850
============= ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Non-interest bearing $ 63,236 $ 57,916
Time deposits, $100 and over 85,950 89,149
Other interest bearing 418,911 423,466
------------- --------------
Total deposits 568,097 570,531
Securities sold under agreements to repurchase 5,700 5,520
Federal Home Loan Bank advances 27,961 30,795
Other borrowed funds 11,500 13,000
Interest payable 2,548 1,903
Other liabilities 1,293 1,476
------------- --------------
Total liabilities 617,099 623,225
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 14,991 14,470
Accumulated other comprehensive income 166 857
------------- --------------
Total stockholders' equity 59,705 59,875
------------- --------------
Total liabilities and stockholders' equity $ 705,554 $ 711,850
============= ==============
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See Accompanying Notes to Consolidtated Financial Statements
PREMIER FINANCIAL BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 2002 AND 2001
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
- -------------------------------------------------------------------------------------------------------------------
2002 2001
---- ----
Interest income
Loans, including fees $ 9,579 $ 12,580
Investment securities
Taxable 1,555 2,442
Tax-exempt 208 302
Federal funds sold and other 204 472
----------- -----------
Total interest income 11,546 15,796
Interest expense
Deposits 4,369 7,645
Debt and other borrowings 1,203 1,797
----------- -----------
Total interest expense 5,572 9,442
Net interest income 5,974 6,354
Provision for loan losses 986 632
----------- -----------
Net interest income after
provision for loan losses 4,988 5,722
Non-interest income
Service charges 494 526
Insurance commissions 40 39
Investment securities gains 44 180
Gain on the sale of subsidiary's banking operations - 3,418
Other 280 399
----------- -----------
858 4,562
Non-interest expenses
Salaries and employee benefits 2,707 3,032
Occupancy and equipment expenses 682 772
Amortization of intangibles 187 337
Other expenses 1,553 1,944
----------- -----------
5,129 6,085
----------- -----------
Income before income taxes 717 4,199
Provision for income taxes 196 2,975
----------- -----------
Net income $ 521 $ 1,224
=========== ===========
Earnings per share $ .10 $ .23
Earnings per share assuming dilution $ .10 $ .23
Weighted average shares outstanding 5,232 5,232
Weighted average shares assuming dilution 5,232 5,232
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See Accompanying Notes to Consolidtated Financial Statements
PREMIER FINANCIAL BANCORP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
THREE MONTHS ENDED MARCH 31, 2002 AND 2001
(IN THOUSANDS)
(UNAUDITED)
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2002 2001
---- ----
Net Income $ 521 $ 1,224
Other comprehensive income (loss), net of tax:
Unrealized gains and (losses) arising during
the period $ ( 662) $ 1,588
Reclassification of realized amount ( 29) (119)
------------ -----------
Net change in unrealized gain (loss) on
securities ( 691) 1,469
------------ -----------
Comprehensive income $ ( 170) $ 2,693
============ ===========
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See Accompanying Notes to Consolidtated Financial Statements
PREMIER FINANCIAL BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2002 AND 2001
(IN THOUSANDS)
(UNAUDITED)
- -------------------------------------------------------------------------------------------------------------------
2002 2001
---- ----
Cash flows from operating activities
Net income $ 521 $ 1,224
Adjustments to reconcile net income to net cash
from operating activities
Depreciation 273 342
Provision for loan losses 986 632
Amortization, net 262 214
FHLB stock dividends (20) (69)
Investment securities losses (gains), net (44) (180)
Gain on the sale of subsidiary's banking operations - (3,418)
Changes in
Interest Receivable 754 625
Other assets (369) (1,031)
Interest Payable 645 625
Other liabilities (183) 3,365
-------------- -------------
Net cash from operating activities 2,825 1,079
Cash flows from investing activities
Purchases of securities available for sale (26,230) (48,871)
Proceeds from sales of securities available for sale 3,264 10,602
Proceeds from maturities and calls of securities available
for sale 29,407 66,356
Purchases of FHLB stock (24) (172)
Redemption of FHLB stock - 451
Net change in federal funds sold (6,132) (19,139)
Net change in loans 3,257 (7,150)
Purchases of premises and equipment, net (352) (115)
Proceeds from sale of other real estate acquired
through foreclosure 215 530
Net cash received (paid) related to acquisitions - (7,178)
------------- -------------
Net cash from investing activities 3,405 (4,686)
Cash flows from financing activities
Net change in deposits (2,434) 8,584
Advances from Federal Home Loan Bank 10,395 17,220
Repayment of Federal Home Loan Bank advances (13,229) (16,984)
Repayment of Other Borrowed Funds (1,500) -
Net change in agreements to repurchase securities 180 (8,618)
------------- -------------
Net cash from financing activities (6,588) 202
-------------- -------------
Net change in cash and cash equivalents (358) (3,405)
Cash and cash equivalents at beginning of period 20,628 24,076
------------- -------------
Cash and cash equivalents at end of period $ 20,270 $ 20,671
============= =============
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See Accompanying Notes to Consolidtated Financial Statements
PREMIER FINANCIAL BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, IN THOUSANDS)
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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 March 31, 2002
Acquired Assets
Citizens Deposit Bank & Trust Vanceburg, Kentucky 1991 $ 99,576
Bank of Germantown Germantown, Kentucky 1992 28,879
Citizens Bank (Kentucky), Inc. Georgetown, Kentucky 1995 101,139
Farmers Deposit Bank Eminence, Kentucky 1996 146,899
Ohio River Bank Ironton, Ohio 1998 68,948
First Central Bank, Inc. Philippi, West Virginia 1998 85,598
Boone County Bank, Inc. Madison, West Virginia 1998 160,785
Mt.Vernon Financial Holdings, Inc. Georgetown, Kentucky 1999 12,085
The Company also has a data processing subsidiary, Premier Data Services, Inc.,
the PFBI Capital Trust subsidiary as discussed in Note 7, and a former bank, The
Sabina Bank, in the process of liquidation. All intercompany transactions and
balances have been eliminated.
NOTE 2 - GOODWILL AND OTHER INTANGIBLE ASSETS
Intangible assets subject to amortization are as follows:
Original Accumulated
Amount Amortization
Core deposit intangible $14,977 $2,764
Amortization expense for the first quarter 2002 was $187.
Estimated amortization expense for the next five years is: 2002 - $749; 2003 -
$749; 2004 - $749; 2005 - $749; and 2006 - $749.
Intangible assets not subject to amortization because they have indefinite lives
are as follows:
Original Accumulated
Amount Amortization
Goodwill $5,177 $1,533
The Company has not yet completed its impairment testing of goodwill. This is
expected to be completed by the end of the second quarter of 2002.
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CONTINUED
PREMIER FINANCIAL BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, IN THOUSANDS)
- --------------------------------------------------------------------------------
NOTE 3 - NEW ACCOUNTING PRONOUNCEMENTS
A new accounting standard dealing with asset retirement obligations will apply
for 2003. The Company does not believe this standard will have a material affect
on its financial position or results of operations.
Effective January 1, 2002, the Company adopted a new standard issued by the FASB
on impairment and disposal of long-lived assets. The effect of this on the
financial position and results of operations of the Company is not expected to
be material.
NOTE 4 - SECURITIES
Amortized cost and fair value of investment securities, by category, at March 31, 2002 are summarized as follows:
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
Available for sale
U. S. Treasury securities $ 1,745 $ 9 $ (3) $ 1,751
U. S. agency securities 110,053 544 (606) 109,991
Obligations of states and political
Subdivisions 17,355 573 (63) 17,865
Mortgage-backed securities 8,634 34 (23) 8,645
Corporate Securities 9,101 - (82) 9,019
Other equity securities 900 - (124) 776
-------------- -------------- -------------- ---------------
Total available for sale $ 147,788 $ 1,160 $ (901) $ 148,047
============== ============== ============== ===============
Amortized cost and fair value of investment securities, by category, at December
31, 2001 are summarized as follows:
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
Available for sale
U. S. Treasury securities $ 1,151 $ 21 $ - $ 1,172
U. S. agency securities 115,954 1,029 (63) 116,920
Obligations of states and political
Subdivisions 18,884 411 (70) 19,225
Mortgage-backed securities 8,223 37 (9) 8,251
Corporate securities 9,128 94 (26) 9,196
Other securities 927 - (125) 802
-------------- -------------- -------------- ---------------
Total available for sale $ 154,267 $ 1,592 $ (293) $ 155,566
============== ============== ============== ===============
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CONTINUED
PREMIER FINANCIAL BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, IN THOUSANDS)
- --------------------------------------------------------------------------------
NOTE 5 - LOANS
Major classifications of loans at March 31, 2002 and December 31, 2001 are
summarized as follows:
2002 2001
---- ----
Commercial, secured by real estate $ 124,076 $ 117,692
Commercial, other 67,884 70,315
Real estate construction 13,413 15,751
Residential real estate 162,325 164,810
Agricultural 8,141 9,613
Consumer and home equity 75,794 79,571
Other 2,612 1,081
------------ ------------
$ 454,245 $ 458,833
============ ============
NOTE 6 - ALLOWANCE FOR LOAN LOSSES
Changes in the allowance for loan losses for the three months ended
March 31, 2002 and 2001 are as follows:
2002 2001
---- ----
Balance, beginning of period $ 8,946 $ 7,821
Gross charge-offs (1,543) (658)
Recoveries 358 158
Provision for loan losses 986 632
------------ ------------
Balance, end of period $ 8,747 $ 7,953
============ ============
NOTE 7 - 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.
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CONTINUED
PREMIER FINANCIAL BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, IN THOUSANDS)
- --------------------------------------------------------------------------------
NOTE 8 - STOCKHOLDERS' EQUITY
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 and additional restrictions as discussed below. During 2002, the
Banks could, without prior approval, declare dividends of approximately $3.2
million plus any 2002 net profits retained to the date of the dividend
declaration.
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 March 31,
2002, 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
March 31, December 31, Minimum
2002 2001 Requirements
---- ---- ------------
Tier I Capital (to Risk-Weighted Assets) 13.8% 13.4% 4.0%
Total Capital (to Risk-Weighted Assets) 17.1% 16.6% 8.0%
Tier I Capital (to Average Assets) 9.2% 8.5% 4.0%
The capital amounts and classifications are also subject to qualitative
judgments by the regulators. As a result of these qualitative judgments, the
Company and two of the Company's subsidiaries have entered into agreements with
the applicable regulatory authorities which provide for additional restrictions
on their respective capital levels and the payment of dividends. The Company
entered into an agreement with the Federal Reserve Bank (FRB) on September 29,
2000 restricting the Company from declaring or paying dividends without prior
approval from the FRB. An additional provision of this agreement requires prior
approval from the FRB before the Company increases its borrowings or incurs any
debt. This agreement is in effect until terminated by the FRB.
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CONTINUED
PREMIER FINANCIAL BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, IN THOUSANDS)
- --------------------------------------------------------------------------------
NOTE 8 - STOCKHOLDERS' EQUITY (continued)
Citizens Deposit Bank (Citizens) entered into a Written Agreement with the FRB
on September 29, 2000 restricting Citizens from declaring or paying dividends
without prior approval. This agreement is in effect until terminated by the FRB.
Citizens' Tier I capital to average assets was 10.5% at March 31, 2002.
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 is in effect until terminated by the KDFI
and FDIC. Germantown's Tier I capital to average assets was 7.1% at March 31,
2002.
As of March 31, 2002, the most recent notification from the Federal Reserve Bank
categorized the Company and its subsidiary banks as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as well
capitalized, the Company must maintain minimum Total risk-based, Tier I
risk-based and Tier I leverage ratios as set forth in the preceding table. There
are no conditions or events since that notification that management believes
have changed the Company's category.
- --------------------------------------------------------------------------------
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
A. Results of Operations
Net income for the three months ended March 31, 2002 was $521,000 or
$0.10 per share compared to net income of $1,224,000 or $0.23 per share for the
three months ended March 31, 2001. The net income and earnings per share
comparisons are impacted by two significant events affecting the comparability
of financial results of the first quarter 2002 to 2001.
During the first quarter of 2001, Premier recognized the sale of
certain assets and the assumption of certain liabilities of its subsidiary the
Bank of Mt. Vernon. Furthermore, during the fourth quarter of 2001, Premier
recognized the sale of certain assets and the assumption of certain liabilities
of its subsidiary the Sabina Bank. As a result, the operations of the Bank of
Mt. Vernon and the Sabina Bank are NOT included in Premier's 2002 financial
results. An equivalent 2001 comparison should exclude the net gain on the sale
and the 2001 operations of the Bank of Mt. Vernon while also excluding the 2001
operations of the Sabina Bank. On an equivalent basis, Premier's net income for
the first quarter of 2001 totaled $453,000 or 9 cents per share.
Results for the quarter reflect charges for amortization of goodwill
and other intangibles associated with cash acquisitions totaling $124,000 (after
tax) as compared to $255,000 (after tax) in the same period for 2001.
Net interest income for the quarter ending March 31, 2002 totaled $5.97
million, an 11.8% increase over the $5.35 million of net interest income earned
in the first quarter of 2001, (excluding the operations of the Sabina Bank and
the Bank of Mt. Vernon.) The increase was largely due to a lower cost of funds
resulting from the declines in market interest rates over the past year. Net
interest margin for the three months ending March 31, 2002 was approximately
3.75% as compared to 3.53% for the same period in 2001.
The annualized returns on stockholders' equity and on average assets
were approximately 3.47% and 0.30% for the three months ended March 31, 2002
compared to 8.48% and .61% for the same period in 2001. Excluding the net gain
(after tax) from the sale of the operations of the Bank of Mt. Vernon, the
annualized returns on stockholders equity and on average assets were
approximately 4.15% and 0.30% for the three months ended March 31, 2001.
Non-interest income decreased $3,704,000 to $858,000 for the first
three months of 2002 compared to $4,562,000 for the first three months of 2001.
Excluding the gain on sale of the Mt. Vernon banking operations of $3,418,000
and the Sabina Bank's first quarter 2001 non-interest income of $75,000,
non-interest income decreased $211,000 or 19.7%, for the quarter ending March
31, 2002 compared to the same period for 2001.
Non-interest expenses for the first quarter of 2002 totaled $5,129,000
or 2.9% of average assets on an annualized basis compared to $6,085,000 or 3.0%
of average assets for the same period of 2001. Contributing to this decrease is
the exclusion of the Bank of Mt. Vernon's and The Sabina Bank's operations for
the first quarter in 2002 versus their inclusion for the first quarter of 2001.
After excluding operating costs of the Bank of Mt. Vernon and The Sabina Bank
from the first quarter of 2001, non-interest expense totaled $5,077,000.
Income tax expense was $196,000 for the first quarter of 2002 compared
to $2,975,000 for the first quarter of 2001. The decrease in income tax expense
can be primarily attributed to the $2,792,000 tax effect associated with the
gain on sale of subsidiary's banking operations in 2001. The annualized
effective tax rate for the period ended March 31, 2002 was 27.3%, compared to
the 70.9% effective tax rate for the same period in 2001. The high rate in 2001
was primarily due to the elimination of intangibles associated with the
Company's acquisition of the Bank of Mt. Vernon. The expensing of this
intangible was a non-deductible event thereby raising the annualized effective
tax rate for the quarter ended March 31, 2001.
B. Financial Position
Total assets at March 31, 2002 decreased $6.3 million or 0.9% to $705.6
million from the $711.9 million at December 31, 2001. This decrease is largely
due to the planned pay down of $4.0 million of borrowed funds.
Earning assets decreased to $646.2 at March 31, 2002 from the $652.1
million at December 31, 2001, a decrease of $5.9 million, or 0.9%. The decrease
is largely due to a $4.6 million decline in total loans (see below), and a $1.0
million decline in the market value of investments.
Cash and cash equivalents at March 31, 2002 were $20.3 million, a $0.4
million decrease from $20.7 million on December 31, 2001. Fed funds sold
increased to $39.6 million from the $33.5 million reported at December 31, 2001,
an increase of $6.1 million.
Total loans at March 31, 2002 were $454.2 million compared to $458.8
million at December 31, 2001, a decrease of $4.6 million. This decrease can
primarily be attributed to the collection of $1.8 million in loans owned by Mt.
Vernon Financial Holdings and the $1.5 million in loan charge-offs recorded
during the first three months of 2002.
Deposits totaled $568.1 million as of March 31, 2002, relatively
unchanged from the $570.5 million in deposits at December 31, 2001.
The following table sets forth information with respect to the
Company's nonperforming assets at March 31, 2002 and December 31, 2001.
(In Thousands)
2002 2001
---- ----
Non-accrual loans $ 9,583 $ 9,307
Accruing loans which are contractually
past due 90 days or more 2,660 5,948
Restructured - 275
-------------- ------------
Total non-performing loans 12,243 15,530
Other real estate acquired through
foreclosure 5,725 5,831
-------------- ------------
Total non-performing assets $ 17,968 $ 21,361
Non-performing loans as a percentage
of total loans 2.70% 3.38%
Non-performing assets as a percentage
of total assets 2.55% 3.00%
The provision for possible loan losses was $986,000 for the first
quarter of 2002 compared to $632,000 for the first quarter of 2001. The increase
in the provision for loan losses was the result of management's continuing
analysis of the adequacy of the allowance for loan losses. The allowance for
loan losses at March 31, 2002 was 1.92% of total loans as compared to 1.95% at
December 31, 2001. The slight decrease in the percentage of allowance for loan
losses to total loans is largely due to the higher level of charge-offs in the
first quarter versus the provision for possible future losses.
Nonperforming loans decreased to $12.2 million as of March 31, 2002,
when compared to the $15.5 million on December 31, 2001. This decrease resulted
in the decrease of the ratio of nonperforming loans to total loans to 2.70% at
March 31, 2002 from the 3.38% at December 31, 2001. Similarly, non-performing
assets declined to 2.55% of total assets at March 31, 2002, from 3.00% of total
assets at December 31, 2001.
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.
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 $148.0 million of securities at
market value as of March 31, 2002.
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 March 31, 2002, total shareholders' equity of $59.7 million was 8.5%
of total consolidated assets. This compares to total shareholders' equity of
$59.8 million or 8.4% of total consolidated assets on December 31, 2001.
Tier I capital totaled $63.4 million at March 31, 2002, which
represents a Tier I leverage ratio of 9.2%.
Book value per share was $11.41 at March 31, 2002, and $11.44 at
December 31, 2001. A decrease in unrealized gain on securities available for
sale was primarily responsible for the decrease in accumulated other
comprehensive income and corresponding decrease in book value per share.
Partially offsetting this decrease was the retention of earnings in the amount
of $521,000.
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 2001 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 on the Company's 2001 10-K.
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
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
(electronic filing only)
(b) Reports on Form 8-K None filed.
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: May 15, 2002 /s/ Marshall T. Reynolds
-------------------------------------
Marshall T. Reynolds
Chairman of the Board
Date: May 15, 2002 /s/ Robert W. Walker
-------------------------------------
Robert W. Walker
President & Chief Executive Officer
Date: May 15, 2002 /s/ Brien M. Chase
----------------- -------------------
Brien M. Chase
Vice President & Chief Financial Officer
Exhibit No. 27
Financial Data Schedules
Article 9
MULTIPLIER 1000
PERIOD TYPE 3-mos
FISCAL-YEAR-END Dec-31-2002
PERIOD-START Jan-01-2002
PERIOD-END Mar-31-2002
CASH 20,270
INT-BEARING-DEPOSITS 0
FED-FUNDS-SOLD 39,649
TRADING ASSETS 0
INVESTMENTS-HELD-FOR-SALE 148,47
INVESTMENTS-CARRYING 0
INVESTMENTS-MARKET 0
LOANS 454,190
ALLOWANCE 8,747
TOTAL-ASSETS 705,554
DEPOSITS 568,097
SHORT-TERM 25,328
LIABILITIES-OTHER 3,841
LONG-TERM 48,583
PREFERRED-MANDATORY 0
PREFERRED 0
COMMON 1,103
OTHER-SE 58,602
TOTAL-LIABILTIES-AND-EQUITY 705,554
INTEREST-LOAN 9,579
INTEREST-INVEST 1,763
INTEREST-OTHER 204
INTEREST-TOTAL 11,546
INTEREST-DEPOSIT 4,369
INTEREST-EXPENSE 5,572
INTEREST-INCOME-NET 5,974
LOAN-LOSSES 986
SECURITIES-GAINS 44
EXPENSE-OTHER 1,129
INCOME-PRETAX 717
INCOME-PRE-EXTRAORDINARY 521
EXTRAORDINARY 0
CHANGES 0
NET-INCOME 521
EPS-BASIC .10
EPS-DILUTED .10
YIELD-ACTUAL 3.75 F1
LOANS-NON 9,583
LOANS-PAST 2,660
LOANS-TROUBLED 0
LOANS-PROBLEM 0
ALLOWANCE-OPEN 8,946
CHARGE-OFFS 1,543
RECOVERIES 358
ALLOWANCE-CLOSE 8,747
ALLOWANCE-DOMESTIC 8,747
ALLOWANCE-FOREIGN 0
ALLOWANCE-UNALLOCATED 1,207
F1 Computed as tax-equivalent basis