10-Q 1 0001.txt 10-Q 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.