10-Q/A 1 0001.txt 10-Q/A SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q/A [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 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 May 12, 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 Notes to Consolidated Financial Statements....................................................... 6
PREMIER FINANCIAL BANCORP, INC. CONSOLIDATED BALANCE SHEETS MARCH 31, 2000 AND DECEMBER 31, 1999 (IN THOUSANDS) (UNAUDITED) --------------------------------------------------------------------------------
2000 1999 ---- ---- ASSETS Cash and due from banks $ 22,865 $ 28,227 Interest earning balances with banks 1,435 1,634 ------------- -------------- Cash and cash equivalents 24,300 29,861 Federal funds sold 26,813 25,197 Investment securities Available for sale 161,873 151,787 Held to maturity 19,084 18,633 Loans 574,488 570,753 Unearned interest (400) (647) Allowance for loan losses (7,626) (6,812) ------------- -------------- Net loans 566,462 563,294 Federal Home Loan Bank and Federal Reserve Bank stock 4,204 4,123 Premises and equipment, net 14,960 14,935 Real estate and other property acquired through foreclosure 2,835 3,019 Interest receivable 9,242 9,814 Goodwill and other intangibles 24,030 24,339 Other assets 7,734 7,466 ------------- -------------- Total assets $ 861,537 $ 852,468 ============= ============== LIABILITIES AND STOCKHOLDERS' EQUITY Deposits Non-interest bearing $ 70,541 $ 68,490 Time deposits, $100,000 and over 104,975 99,292 Other interest bearing 528,696 525,061 ------------- -------------- Total deposits 704,212 692,843 Securities sold under agreements to repurchase 21,790 21,282 Federal Home Loan Bank advances 30,307 32,647 Other borrowed funds 20,000 20,000 Interest payable 3,370 3,265 Other liabilities 1,535 1,554 ------------- -------------- Total liabilities 781,214 771,591 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 11,264 11,601 Accumulated other comprehensive income (4,239) (4,022) ------------- -------------- Total stockholders' equity 51,573 52,127 ------------- -------------- Total liabilities and stockholders' equity $ 861,537 $ 852,468 ============= ==============
See Accompanying Notes to the Consolidated Financial Statements 3. PREMIER FINANCIAL BANCORP, INC. CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME THREE MONTHS ENDED MARCH 31, 2000 AND 1999 (IN THOUSANDS) (UNAUDITED) --------------------------------------------------------------------------------
2000 1999 ---- ---- Interest income Loans, including fees $ 13,359 $ 11,565 Investment securities Taxable 2,416 2,484 Tax-exempt 357 355 Federal funds sold and other 479 381 ----------- ----------- Total interest income 16,611 14,785 Interest expense Deposits 7,663 6,560 Debt and other borrowings 1,862 1,507 ----------- ----------- Total interest expense 9,525 8,067 Net interest income 7,086 6,718 Provision for possible loan losses 1,385 474 ----------- ----------- Net interest income after provision for possible loan losses 5,701 6,244 Non-interest income Service charges 492 434 Insurance commissions 117 124 Investment securities gains 1 31 Other 376 349 ----------- ----------- 986 938 Non-interest expenses Salaries and employee benefits 3,283 2,960 Occupancy and equipment expenses 772 685 Amortization of intangibles 393 448 Other expenses 1,672 1,427 ----------- ----------- 6,120 5,520 ----------- ----------- Income before income taxes 567 1,662 Provision for income taxes 120 444 ----------- ----------- Net income $ 447 $ 1,218 =========== =========== Other comprehensive income (loss), net of tax: Unrealized gains and (losses) arising during the period $ (216) $ (519) Reclassification of realized amount (1) (20) ----------- ----------- Net change in unrealized gain (loss) on securities (217) (539) ----------- ----------- Comprehensive income $ 230 $ 679 =========== =========== Earnings per share $ .09 $ .23 Earnings per share assuming dilution $ .09 $ .23 Weighted average shares outstanding 5,232 5,232
See Accompanying Notes to the Consolidated Financial Statements 4. PREMIER FINANCIAL BANCORP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS THREE MONTHS ENDED MARCH 31, 2000 AND 1999 (IN THOUSANDS) (UNAUDITED) --------------------------------------------------------------------------------
2000 1999 ---- ---- Cash flows from operating activities Net income $ 447 $ 1,218 Adjustments to reconcile net income to net cash from operating activities Depreciation 329 307 Provision for loan losses 1,385 474 Amortization, net 304 664 FHLB stock dividends (74) (60) Investment securities losses (gains), net (1) (31) Changes in Interest Receivable 572 761 Other assets (156) (291) Interest Payable 105 287 Other liabilities (18) 887 ------------- ------------- Net cash from operating activities 2,893 4,216 Cash flows from investing activities Purchases of securities available for sale (19,137) (62,640) Proceeds from sales of securities available for sale 500 23,419 Proceeds from maturities and calls of securities available for sale 8,230 34,402 Purchases of securities held to maturity (958) (1,600) Proceeds from maturities and calls of securities held to maturity 505 1,391 Purchases of FHLB stock (7) - Net change in federal funds sold (1,616) 10,546 Net change in loans (4,627) (17,838) Purchases of premises and equipment, net (355) (694) Proceeds from sale of other real estate acquired through foreclosure 258 237 Net cash received (paid) related to acquisitions - (8,579) ------------- ---------- Net cash from investing activities (17,207) (21,356) Cash flows from financing activities Net change in deposits 11,369 9,167 Advances from Federal Home Loan Bank 4,600 1,885 Repayment of Federal Home Loan Bank advances (6,940) (509) Proceeds from other borrowed funds - 12,000 Net change in agreements to repurchase securities 508 (1,635) Dividends paid (784) (785) ------------- ------------- Net cash from financing activities 8,753 20,123 ------------- ------------- Net change in cash and cash equivalents (5,561) 2,983 Cash and cash equivalents at beginning of period 29,861 20,171 ------------- ------------- Cash and cash equivalents at end of period $ 24,300 $ 23,154 ============= =============
See Accompanying Notes to the Consolidated Financial Statements 5. 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 March 31, 2000 Acquired Assets -------- ------ (In Thousands) Citizens Deposit Bank & Trust Vanceburg, Kentucky 1991 $ 131,085 Bank of Germantown Germantown, Kentucky 1992 27,952 Georgetown Bank & Trust Co. Georgetown, Kentucky 1995 58,696 Citizens Bank Sharpsburg, Kentucky 1995 48,536 Farmers Deposit Bank Eminence, Kentucky 1996 140,597 The Sabina Bank Sabina, Ohio 1997 56,543 Ohio River Bank Ironton, Ohio 1998 55,381 The Bank of Philippi, Inc. Philippi, West Virginia 1998 62,842 Boone County Bank, Inc. Madison, West Virginia 1998 143,475 The Bank of Mt. Vernon Mt. Vernon, Kentucky 1999 130,341
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 6. PREMIER FINANCIAL BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -------------------------------------------------------------------------------- NOTE 3 - SECURITIES Amortized cost and fair value of investment securities, by category, at March 31, 2000 are summarized as follows:
(In Thousands) Amortized Unrealized Unrealized Fair Cost Gains Losses Value Available for sale U. S. Treasury securities $ 3,425 $ - $ (10) $ 3,415 U. S. agency securities 140,488 - (5,317) 135,171 Obligations of states and political Subdivisions 7,466 1 (103) 7,364 Mortgage-backed securities 13,990 - (839) 13,151 Preferred stock 2,000 - - 2,000 Other equity securities 925 - (153) 772 -------------- -------------- -------------- --------------- Total available for sale $ 168,294 $ 1 $ (6,422) $ 161,873 ============== ============== ============== =============== Held to maturity U. S. Treasury securities $ 500 $ - $ (1) $ 499 U. S. agency securities 1,234 - (40) 1,194 Obligations of states and political Subdivisions 17,328 201 (237) 17,292 Mortgage-backed securities 22 1 - 23 -------------- -------------- -------------- --------------- Total held to maturity $ 19,084 $ 202 $ (278) $ 19,008 ============== ============== ============== ===============
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 7. PREMIER FINANCIAL BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -------------------------------------------------------------------------------- NOTE 4 - LOANS Major classifications of loans at March 31, 2000 and December 31, 1999 are summarized as follows:
2000 1999 ---- ---- (In Thousands) Commercial, secured by real estate $ 141,185 $ 135,078 Commercial, other 96,205 98,543 Real estate construction 24,396 26,092 Residential real estate 198,097 192,088 Agricultural 12,960 17,525 Consumer and home equity 100,444 100,075 Other 1,201 1,352 ------------ ------------ $ 574,488 $ 570,753 ============ ============
NOTE 5 - ALLOWANCE FOR LOAN LOSSES Changes in the allowance for loan losses for the three months ended March 31, 2000 and 1999 are as follows:
2000 1999 ---- ---- Balance, beginning of period $ 6,812 $ 4,363 Acquired - 1,310 Net charge-offs (571) (401) Provision for loan losses 1,385 474 ------------ ------------ Balance, end of period $ 7,626 $ 5,746 ============ ============
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 8. 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 $6.2 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 March 31, 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 March 31, December 31, Minimum 2000 1999 Requirements ---- ---- ------------ Tier I Capital (to Risk-Weighted Assets) 8.8% 8.9% 4.0% Total Capital (to Risk-Weighted Assets) 11.9% 11.9% 8.0% Tier I Capital (to Average Assets) 6.0% 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 March 31, 2000. 9. 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, 2000 was $447,000 or $0.09 per share compared to net income of $1,218,000 or $0.23 per share for the three months ended March 31, 1999. This $771,000 decrease is primarily the result of a $911,000 increase in the provision for loan loss from $474,000 for the quarter ended March 31, 1999 to $1,385,000 for the same period in 2000. Results for the quarter reflect charges for amortization of goodwill and other intangibles associated with cash acquisitions totaling $311,000 (after tax) as compared to $343,000 (after tax) in the same period for 1999. Not including these charges, net income for the first quarter 2000 was $758,000 or $0.14 per share versus $1,561,000 or $0.30 per share in 1999. Net interest income increased $368,000 to $7,086,000 for the three months ended March 31, 2000 compared to $6,718,000 for the same period in 1999. Net interest margin for the three months ending March 31, 2000 was approximately 3.73% as compared to 3.88% for the same period in 1999. The annualized returns on stockholders' equity and on average assets were approximately 3.45% and .21% for the three months ended March 31, 2000 compared to 8.93% and .64% for the same period in 1999. Non-interest income increased $48,000, or 5.1%, to $986,000 for the first three months of 2000 compared to $938,000 for the first three months of 1999. Non-interest expenses for the first quarter of 2000 totaled $6,120,000 or 2.9% of average assets on an annualized basis compared to $5,520,000 or 2.9% of average assets for the same period of 1999. Contributing to this increase is the inclusion of the Mt. Vernon acquisition for the full quarter in 2000 versus the partial quarter for 1999. Income tax expense was $120,000 for the first quarter of 2000 compared to $444,000 for the first quarter of 1999. The decrease in income tax expense can be attributed to the $1,095,000 decrease in income before taxes from $1,662,000 for the quarter ending March 31, 1999 to $567,000 for the same period in 2000. The annualized effective tax rate for the period ended March 31, 2000 was 21.2%, compared to the 26.7% effective tax rate for the same period in 1999. B. Financial Position Total assets increased $9.0 million or 1.1% to $861.5 million from the $852.5 million on December 31, 1999. Earning assets increased to $787.5 million on March 31, 2000 from $771.5 million on December 31, 1999, an increase of $16.0 million or 2.1%. Cash and cash equivalents at March 31, 2000 were $24.3 million or a $5.6 million decrease from $29.9 million on December 31, 1999. Fed funds sold increased to $26.8 million from $25.2 million during the same period; an increase of $1.6 million, or 6.3%. 10. Total loans at March 31, 2000 were $574.1 million compared to $570.1 million at December 31, 1999, an increase of $4.0 million. Deposits totaled $704.2 million as of March 31, 2000, an increase of $11.4 million, or 1.6%, over the December 31, 1999 amount of $692.8 million. Noninterest bearing deposits increased $2.0 million, or 2.9%, and interest bearing deposits increased $9.4 million, or 1.5%, during the period December 31, 1999 to March 31, 2000. The following table sets forth information with respect to the Company's nonperforming assets at March 31, 2000 and December 31, 1999.
2000 1999 ---- ---- (In Thousands) Non-accrual loans $ 5,413 $ 4,540 Accruing loans which are contractually past due 90 days or more 1,132 1,721 Restructured 462 666 -------------- ------------ Total non-performing loans 7,007 6,927 Other real estate acquired through foreclosure 2,835 3,009 -------------- ------------ Total non-performing assets $ 9,842 $ 9,936 Non-performing loans as a percentage of total loans 1.22% 1.22% Non-performing assets as a percentage of total assets 1.14% 1.17%
The provision for possible loan losses and net chargeoffs were $1,385,000 and $571,000 for the first quarter of 2000 compared to $474,000 and $401,000, respectively, for the first quarter of 1999. The increase in the provision for loan losses was prompted by our loan growth, changes in loan mix, recent experience and changes in the economy both locally and nationally. The allowance for loan losses at March 31, 2000 was 1.33% 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: 11. 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 $161.9 million of securities at market value as of March 31, 2000. This reflects an increase of $10.1 million or approximately 6.7% from the December 31, 1999 balance of $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 March 31, 2000, total shareholders' equity of $51.6 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 $50.3 million at March 31, 2000, which represents a Tier I leverage ratio of 6.0%. Book value per share was $9.86 at March 31, 2000, and $9.96 at December 31, 1999. An increase in unrealized loss on securities available for sale was 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. 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. 12. 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 (b) Reports on Form 8-K No reports on Form 8-K have been filed during the quarter for which the report is filed. 13. 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: July 19, 2000 /s/ Marshall T. Reynolds ------------------------ Marshall T. Reynolds Chairman of the Board Date: July 19, 2000 /s/ Gardner E. Daniel --------------------- Gardner E. Daniel President & Chief Executive Officer 14.