-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GYZV/R5hIOooHCWoeXn0t8WxnCR9QOVaxRrq1m+RFer0cNuk69h2C5yVyRAYg/go omJ1vzIMm/oHNatJhCuh4w== 0000887919-02-000026.txt : 20020515 0000887919-02-000026.hdr.sgml : 20020515 20020515140012 ACCESSION NUMBER: 0000887919-02-000026 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PREMIER FINANCIAL BANCORP INC CENTRAL INDEX KEY: 0000887919 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 611206757 STATE OF INCORPORATION: KY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-20908 FILM NUMBER: 02650604 BUSINESS ADDRESS: STREET 1: 115 N HAMILTON ST STREET 2: P O BOX 1485 CITY: GEORGETOWN STATE: KY ZIP: 40324 BUSINESS PHONE: 5028631955 10-Q 1 mar200210q.txt MAR 2002 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 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) - ------------------------------------------------------------------------------------------------------------------- (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 ============= ============== - ------------------------------------------------------------------------------------------------------------------- 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 - ------------------------------------------------------------------------------------------------------------------- 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) - ------------------------------------------------------------------------------------------------------------------- 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 ============ =========== - ------------------------------------------------------------------------------------------------------------------- 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 ============= ============= - ------------------------------------------------------------------------------------------------------------------- See Accompanying Notes to Consolidtated Financial Statements
PREMIER FINANCIAL BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED, IN THOUSANDS) - -------------------------------------------------------------------------------- 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. - -------------------------------------------------------------------------------- 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 ============== ============== ============== =============== - ------------------------------------------------------------------------------------------------------------------- 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. - -------------------------------------------------------------------------------- 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. - -------------------------------------------------------------------------------- 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
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