CORRESP 1 filename1.htm ltrsec100511.htm
[COMPANY LETTERHEAD]



October 5, 2011


Mark Webb, Legal Branch Chief
United States Securities and Exchange Commission
Division of Corporation Finance
100 F Street, N.E.
Washington, DC 20549

Re:       Premier Financial Bancorp, Inc.
Form 10-K for the Fiscal Year Ended December 31, 2010 Filed March 29, 2011
Form 10-Q for the Fiscal Quarter Ended June 30, 2011 Filed August 15, 2011
File No. 0-20908

Dear Mr. Webb:
 
We are in receipt of your letter dated September 21, 2011 providing comments on the referenced filings for Premier Financial Bancorp, Inc. (the “Company”).  The Company’s responses are set forth below and are keyed to the staff’s comment letter.

Form 10-K for the Fiscal Year Ended December 31, 2010
 
Item 13. Certain Relationships and Related Transactions, And Director Independence, page 168 Certain Relationships and Related Transactions, page 26 of definitive proxy statement on Schedule 14A

1.
It is not clear from your disclosure whether there are currently outstanding loans to related persons above the threshold amount. If yes, please revise your disclosure in future filings to so indicate. Also, in that case, revise your disclosure to include, if accurate, all three representations found in Instruction 4(c) to Item 404(a) of Regulation S-K, including the statement that such loans were made "on substantially the same terms ... as those of comparable transactions prevailing at the time with other persons not related to [the lender]."

The Company will clarify its disclosures related to outstanding loans to related persons to comply with the previous staff comment in all future Form 10-K and Schedule 14A filings to include the following:


{H0702517.1 }
 
 
 
Mark Webb, Legal Branch Chief
United States Securities and Exchange Commission
Division of Corporation Finance
October 5, 2011
Page 2


“During 2011, the Company’s subsidiary banks have had, and expect to have in the future, to the extent permitted by applicable federal and state banking laws, lending transactions with certain of the directors and officers of the Company and its subsidiaries and their affiliates and associates.  The transactions, which at times involved loans in excess of $120,000, were in the ordinary course of business, were made on substantially the same terms, including interest rates, collateral and repayment terms, as those prevailing at the time for comparable transactions with persons not related to the Company or its subsidiaries, and did not involve more than the normal risk of collectability or present other unfavorable features.  The Company’s subsidiary banks are subject to federal laws and regulations governing loans to officers and directors.  In addition, the Company’s banking subsidiaries have engaged, and in the future may engage, in transactions with such persons and their affiliates and associates as the depositary of funds, transfer agent, registrar, fiduciary and provider of other similar services.”

Exhibits 31.1 and 31.2

2.  
In future filings, please ensure that the certifications are in the exact form as set forth in Item 601(b)(31) of Regulation S-K, except as otherwise indicated in Commission statements or staff interpretations. For example, please delete from the first line the title of the certifying individual.

The Company will comply with previous staff comment in all future filings to ensure that certifications are in the exact form as set forth in Regulation S-K Item 601(b)(31), particularly by deleting from the identifying information the title of the certifying individual.

Form 10-Q for the Fiscal Quarter Ended June 30, 2011
 
Financial Statements
 
Note 3 - Loans, page 13

3.  
We note your tabular presentation on page 17 showing the balance of the allowance for loan losses and the recorded investment by impairment method for those collectively evaluated and individually evaluated. However, we did not see this disclosure for loans acquired with deteriorated credit quality. Please provide us and revise future filings to include this disclosure, in accordance with ASC 310-10-50-11B(g) and (h).

In its tabular disclosures regarding loans by impairment method on page 17 of the Company’s June 30, 2011 Form 10-Q, any loans acquired with deteriorated credit quality were not separately disclosed as the remaining balance of the entire group of loans acquired were still accounted for as non-accrual loans as of the balance sheet date.  Other than any residential real estate secured loans which were evaluated collectively for impairment, the remaining group of loans acquired with deteriorated credit quality were individually evaluated for impairment because the Company has not been able to reasonably estimate the timing of cash flows expected to be collected on these loans.  Therefore the loans are still accounted for using the cost recovery method of income recognition.  Management was concerned that separately disclosing the purchased loans may lead the reader to conclude that these acquired loans with deteriorated credit quality were now performing and generating interest income.


{H0702517.1 }
 
 
 
Mark Webb, Legal Branch Chief
United States Securities and Exchange Commission
Division of Corporation Finance
October 5, 2011
Page 3


The Company proposes to prospectively expand its disclosures regarding loans acquired with deteriorated credit quality in all future filings beginning with the Form 10-Q for the period ending September 30, 2011.  The proposed expanded disclosures will include a separate subsection within the Loan Footnote to address “Purchased Loans”.  In this subsection, a detail of the loans acquired with deteriorated credit remaining in the loan portfolio will be presented for each balance sheet date.  To address our concerns that a reader may conclude that these loans are now performing and generating interest income, we will include a paragraph indicating that these loans are still accounted for using the cost recovery method of income recognition, that these loans are still included in the total of non-accrual loans and that no accretable yield has been determined because the Company cannot reasonably estimate the cash flows expected to be collected on these loans.  If, in the future, cash flows from the borrower(s) can be reasonably estimated, a portion of the purchase discount would be allocated to an accretable yield adjustment and the footnote disclosures will be expanded to include a progression of the remaining accretable yield.  An example of this subsection is included on page 6 of the attached revised June 30, 2011 Note 3 for Loans.

We also propose to expand the presentation of the allowance for loan losses and the recorded investment in loans by portfolio segment and impairment method to separately present the remaining balance of loans acquired with deteriorated credit quality and any related allowance from the existing standard disclosures of individually impaired or collectively impaired.  An example of this presentation as of June 30, 2011 and December 31, 2010 balance sheet dates is included on page 6 of the attached revised June 30, 2011 Note 3 for Loans.

Please see the attached revised June 30, 2011 Note 3 for Loans, presented as an example of how the Company plans to present the current and expanded disclosures in future filings.  For your convenience, to accentuate the proposed changes, we have shaded the portions of Note 3 that remain unchanged from the originally filed Note 3 included in our Form 10-Q dated June 30, 2011.


4.  
In light of the significant impact of your accounting for certain covered loans pursuant to ASC 310-30 on your allowance for such loans and related ratios, in future filings where you present your ratio of allowance to nonperforming loans or nonperforming assets, please provide an alternative measure that excludes the impact of the loans where you applied ASC 310-30.

The Company will comply with previous staff comment in all future filings to ensure that any presentation of the ratio of the allowance to nonperforming loans or nonperforming assets will define an alternative measure that excludes the impact of performing loans where ASC 310-30 has been applied.


{H0702517.1 }
 
 
 
Mark Webb, Legal Branch Chief
United States Securities and Exchange Commission
Division of Corporation Finance
October 5, 2011
Page 4


5.  
As a related matter, please tell us how you complied with the disclosure requirements of ASC 310-30-50 for the loans acquired with deteriorated credit quality or revise future filings to include the required disclosures.

The Company will comply with previous staff comment in all future filings to include the disclosure requirements of ASC 310-30-50 for loans acquired with deteriorated credit quality.  Please see the attached revised June 30, 2011 Note 3 for Loans, presented as an example of how the expanded disclosures will be presented in future filings.  For your convenience, to accentuate the proposed changes, we have shaded the portions of Note 3 that remain unchanged from the originally filed Note 3 included in our Form 10-Q dated June 30, 2011.
 
The Company hereby acknowledges that:

 
•
the company is responsible for the adequacy and accuracy of the disclosure in the filing;

 
•
staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and

 
•
the company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

We trust that the foregoing is responsive to the Commission’s request for information.  If there are any questions regarding the foregoing, or if I can be of any assistance to the Commission, please feel free to contact me at 304-525-1600 or via email at brien.chase@pfbiwv.com.  Thank you for your consideration and cooperation.

Very truly yours,

/s/  Brien M. Chase                           

Brien M. Chase,
Senior Vice President and
Chief Financial Officer

cc:           Thomas J. Murray, Esq.

 
 

 
 
 
SAMPLE OF PROPOSED REVISED DISCLOSURES IN FUTURE FILINGS
 

PREMIER FINANCIAL BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)


NOTE  3 - LOANS

Major classifications of loans at June 30, 2011 and December 31, 2010 are summarized as follows:

   
2011
    
2010
  
Commercial, secured by real estate
   $ 318,666     $ 319,048  
Commercial, other
     79,421       82,591  
Real estate construction
     35,218       48,213  
Residential real estate, including home equity
     228,735       233,513  
Agricultural
     2,553       2,564  
Consumer
     31,321       32,926  
Other
     8,108       7,109  
    $ 704,022     $ 725,964  
 
 
 
 

 

1
 
 
SAMPLE OF PROPOSED REVISED DISCLOSURES IN FUTURE FILINGS

PREMIER FINANCIAL BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)


NOTE  3–LOANS - continued

Activity in the allowance for loan losses by portfolio segment for the six months ending June 30, 2011 was as follows:

Loan Class
  
Balance Dec 31, 2010
    
Provision for loan losses
    
Loans charged-off
    
Recoveries
    
Balance June 30, 2011
  
                               
Residential real estate
   $ 2,666     $ 152     $ 168     $ 16     $ 2,666  
Multifamily real estate
     252       95       -       2       349  
Commercial real estate:
                                        
Owner occupied
     1,141       (155 )     -       2       988  
Non owner occupied
     1,644       253       261       3       1,639  
Commercial and industrial
     2,421       2,218       16       8       4,631  
Consumer
     366       18       60       40       364  
All other
     1,375       (241 )     73       50       1,111  
Total
   $ 9,865     $ 2,340     $ 578     $ 121     $ 11,748  

Activity in the allowance for loan losses by portfolio segment for the three months ending    June 30, 2011 was as follows:

Loan Class
  
Balance March 31, 2011
    
Provision for loan losses
    
Loans charged-off
    
Recoveries
    
Balance June 30, 2011
  
                               
Residential real estate
   $ 2,760     $ (16 )   $ 88     $ 10     $ 2,666  
Multifamily real estate
     303       44       -       2       349  
Commercial real estate:
                                        
Owner occupied
     1,258       (270 )     -       -       988  
Non owner occupied
     1,896       (14 )     245       2       1,639  
Commercial and industrial
     2,262       2,369       -       -       4,631  
Consumer
     386       (5 )     32       15       364  
All other
     1,417       (288 )     33       15       1,111  
Total
   $ 10,282     $ 1,820     $ 398     $ 44     $ 11,748  

Changes in the allowance for loan losses for the three and six months ended June 30, 2010 are as follows:
   
Three Months Ended June 30, 2010
    
Six Months Ended June 30, 2010
  
   
 
    
 
  
Balance, beginning of period
   $ 8,068     $ 7,569  
Gross charge-offs
     (378 )     (583 )
Recoveries
     102       235  
Provision for loan losses
     1,409       1,980  
Balance, end of period
   $ 9,201     $ 9,201  


2
 
 
SAMPLE OF PROPOSED REVISED DISCLOSURES IN FUTURE FILINGS

PREMIER FINANCIAL BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)


NOTE  3–LOANS - continued

Purchased Loans

As a result of the acquisition Abigail Adams National Bancorp, the Company holds purchased loans for which there was, at the October 1, 2009 acquisition date, evidence of deterioration of credit quality since their origination and it was probable, at acquisition, that all contractually required payments would not be collected.  The carrying amount of those loans is as follows at June 30, 2011 and December 31, 2010.

   
2011
    
2010
  
Residential Real Estate
   $ 1,543     $ 1,553  
Multifamily Real Estate
     3,949       4,742  
Commercial Real Estate
                
Owner Occupied
     3,564       4,564  
Non owner Occupied
     4,556       5,189  
Commercial and industrial
     664       1,292  
All other
     10,317       11,519  
Total carrying amount
   $ 24,593     $ 28,859  
                 
Carrying amount, net of allowance
   $ 24,593     $ 28,669  

The Company cannot reasonably estimate the cash flows expected to be collected on these loans and therefore has continued to account for these loans using the cost recovery method of income recognition.  As such, no portion of a purchase discount adjustment has been determined to meet the definition of an accretable yield adjustment.  If, in the future, cash flows from the borrower(s) can be reasonably estimated, a portion of the purchase discount would be allocated to an accretable yield adjustment based upon the present value of the future estimated cash flows versus the current carrying value of the loan and the accretable yield portion would be recognized as interest income over the remaining life of the loan. Until such accretable yield can be calculated, under the cost recovery method of income recognition, all payments will be used to reduce the carrying value of the loan and no income will be recognized on the loan until the carrying value is reduced to zero.  Any loan accounted for under the cost recovery method is also still included as a non-accrual loan in the amounts presented in the tables above.

For those purchased loans disclosed above, the Company increased the allowance for loan losses by $451 for the six months ended June 30, 2010 and decreased the allowance for loan losses by $190 for the six months ended June 30, 2011.



3
 
 
SAMPLE OF PROPOSED REVISED DISCLOSURES IN FUTURE FILINGS

PREMIER FINANCIAL BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)


NOTE  3–LOANS - continued

Past Due and Non-performing Loans

The following table sets forth information with respect to the Company’s nonperforming loans at June 30, 2011 and December 31, 2010.
   
2011
    
2010
  
Non-accrual loans
   $ 51,387     $ 47,131  
Accruing loans which are contractually past due 90 days or more
     308       414  
Restructured loans
     350       2,639  
Total
   $ 52,045     $ 50,184  

The following table presents the recorded investment in nonaccrual and loans past due over 90 days still on accrual by class of loans as of June 30, 2011 and December 31, 2010.  The recorded investment in non-accrual loans is less than the principal owed on non-accrual loans due to discounts applied to the carrying value of the loan at time of their acquisition and interest payments made by the borrower which have been used to reduce the recorded investment in the loan rather than recognized as interest income.

June 30, 2011
  
Principal Owed on Non-accrual Loans
    
Recorded Investment in Non-accrual Loans
    
Loans Past Due Over 90 Days, still accruing
  
                   
Residential  real estate
   $ 4,896     $ 3,768     $ 195  
Multifamily real estate
     10,788       8,598       -  
Commercial real estate
                        
Owner occupied
     13,158       11,143       -  
Non owner occupied
     9,841       7,710       -  
Commercial and industrial
     10,452       8,234       76  
Consumer
     82       80       13  
All other
     15,961       11,854       24  
Total
   $ 65,178     $ 51,387     $ 308  

December 31, 2010
  
Principal Owed on Non-accrual Loans
    
Recorded Investment in Non-accrual Loans
    
Loans Past Due Over 90 Days, still accruing
  
                   
Residential  real estate
   $ 4,845     $ 3,764     $ 80  
Multifamily real estate
     6,764       4,742       -  
Commercial real estate
                        
Owner occupied
     12,680       10,493       -  
Non owner occupied
     14,624       12,081       -  
Commercial and industrial
     7,939       5,813       319  
Consumer
     15       15       15  
All other
     14,805       10,223       -  
Total
   $ 61,672     $ 47,131     $ 414  
                         

4
 
 
SAMPLE OF PROPOSED REVISED DISCLOSURES IN FUTURE FILINGS

 PREMIER FINANCIAL BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)


NOTE  3–LOANS - continued

Nonaccrual loans and impaired loans are defined differently. Some loans may be included in both categories, and some may only be included in one category. Nonaccrual loans include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.

The following table presents the aging of the recorded investment in past due loans as of      June 30, 2011 by class of loans:
Loan Class
  
Total Loans
    
30-89 Days Past Due
    
Greater than 90 days past due
    
Total Past Due
    
Loans Not Past Due
  
                               
Residential real estate
   $ 228,735     $ 3,832     $ 2,551     $ 6,383     $ 222,352  
Multifamily real estate
     37,443       1,434       5,617       7,051       30,392  
Commercial real estate:
                                        
Owner occupied
     107,535       2,410       5,768       8,178       99,357  
Non owner occupied
     159,244       1,285       3,785       5,070       154,174  
Commercial and industrial
     79,421       400       7,563       7,963       71,458  
Consumer
     31,321       428       72       500       30,821  
All other
     60,323       2,269       11,851       14,120       46,203  
Total
   $ 704,022     $ 12,058     $ 37,207     $ 49,265     $ 654,757  

The following table presents the aging of the recorded investment in past due loans as of December 31, 2010 by class of loans:
Loan Class
  
Total Loans
    
30-89 Days Past Due
    
Greater than 90 days past due
    
Total Past Due
    
Loans Not Past Due
  
                               
Residential real estate
   $ 233,513     $ 5,902     $ 2,266     $ 8,168     $ 225,345  
Multifamily real estate
     41,037       4,471       2,140       6,611       34,426  
Commercial real estate:
                                        
Owner occupied
     106,924       5,638       5,797       11,435       95,489  
Non owner occupied
     155,839       1,141       6,907       8,048       147,791  
Commercial and industrial
     82,591       1,216       5,965       7,181       75,410  
Consumer
     32,926       395       29       424       32,502  
All other
     73,134       4,852       10,203       15,055       58,079  
Total
   $ 725,964     $ 23,615     $ 33,307     $ 56,922     $ 669,042  



5
 
 
SAMPLE OF PROPOSED REVISED DISCLOSURES IN FUTURE FILINGS

PREMIER FINANCIAL BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)


NOTE  3–LOANS - continued

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of June 30, 2011:
   
Allowance for Loan Losses
    
Loan Balances
  
Loan Class
  
Individually Evaluated for Impairment
    
Collectively Evaluated for Impairment
    
Acquired with Deteriorated Credit Quality
    
Total
    
Individually Evaluated for Impairment
    
Collectively Evaluated for Impairment
    
Acquired with Deteriorated Credit Quality
    
Total
  
                                                 
Residential real estate
   $ 119     $ 2,547     $ -     $ 2,666     $ 319     $ 226,873     $ 1,543     $ 228,735  
Multifamily real estate
     2       347       -       349       3,855       29,639       3,949       37,443  
Commercial real estate:
                                                                
Owner occupied
     216       772       -       988       8,704       95,267       3,564       107,535  
Non-owner occupied
     386       1,253       -       1,639       3,474       151,214       4,556       159,244  
Commercial and industrial
     3,741       890       -       4,631       7,900       70,857       664       79,421  
Consumer
     22       342       -       364       41       31,280       -       31,321  
All other
     378       733       -       1,111       2,790       47,216       10,317       60,323  
Total
   $ 4,864     $ 6,884     $ -     $ 11,748     $ 27,083     $ 652,346     $ 24,593     $ 704,022  

The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of December 31, 2010:
   
Allowance for Loan Losses
    
Loan Balances
  
Loan Class
  
Individually Evaluated for Impairment
    
Collectively Evaluated for Impairment
    
Acquired with Deteriorated Credit Quality
    
Total
    
Individually Evaluated for Impairment
    
Collectively Evaluated for Impairment
    
Acquired with Deteriorated Credit Quality
    
Total
  
                                                 
Residential real estate
   $ 48     $ 2,618     $ -     $ 2,666     $ 207     $ 231,753     $ 1,553     $ 233,513  
Multifamily real estate
     -       252       -       252       -       36,295       4,742       41,037  
Commercial real estate:
                                                                
Owner occupied
     280       861       -       1,141       7,328       95,032       4,564       106,924  
Non-owner occupied
     429       1,025       190       1,644       7,031       143,619       5,189       155,839  
Commercial and industrial
     1,389       1,032       -       2,421       5,022       74,047       3,522       82,591  
Consumer
     23       343       -       366       43       32,883       -       32,926  
All other
     163       1,212       -       1,375       2,163       61,682       9,289       73,134  
Total
   $ 2,332     $ 7,343     $ 190     $ 9,865     $ 21,794     $ 675,311     $ 28,859     $ 725,964  
 
 

6
 
 
SAMPLE OF PROPOSED REVISED DISCLOSURES IN FUTURE FILINGS

PREMIER FINANCIAL BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)


NOTE  3–LOANS - continued

In the tables below, total individually evaluated impaired loans include certain purchased loans that were acquired with deteriorated credit quality that are still individually evaluated for impairment.

The following table presents loans individually evaluated for impairment by class of loans as of June 30, 2011.  The table includes $23,050 of loans acquired with deteriorated credit quality that are still individually evaluated for impairment.

   
Unpaid Principal Balance
    
Recorded Investment
    
Allowance for Loan Losses Allocated
  
With no related allowance recorded:
                  
Residential real estate
   $ -     $ -     $ -  
Multifamily real estate
     9,802       7,722       -  
Commercial real estate
                        
Owner occupied
     11,514       9,541       -  
Non owner occupied
     8,329       6,559       -  
Commercial and industrial
     4,625       3,256       -  
All other
     12,304       8,202       -  
      46,574       35,280       -  
With an allowance recorded:
                        
Residential real estate
   $ 319     $ 319     $ 119  
Multifamily real estate
     82       82       2  
Commercial real estate
                        
Owner occupied
     2,769       2,727       216  
Non owner occupied
     1,821       1,470       386  
Commercial and industrial
     6,565       5,308       3,741  
Consumer
     41       41       22  
All other
     4,908       4,906       378  
      16,505       14,853       4,864  
Total
   $ 63,079     $ 50,133     $ 4,864  

 

 
7
 
 
SAMPLE OF PROPOSED REVISED DISCLOSURES IN FUTURE FILINGS


PREMIER FINANCIAL BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)


NOTE  3–LOANS - continued

The following table presents loans individually evaluated for impairment by class of loans as of December 31, 2010.  The table includes $27,306 of loans acquired with deteriorated credit quality that are still individually evaluated for impairment.

   
Unpaid Principal Balance
    
Recorded Investment
    
Allowance for Loan Losses Allocated
  
With no related allowance recorded:
                  
Residential real estate
   $ 207     $ 10     $ -  
Multifamily real estate
     6,764       4,742       -  
Commercial real estate
                        
Owner occupied
     10,437       8,720          
Non owner occupied
     6,338       5,105       -  
Commercial and industrial
     5,043       3,837       -  
All other
     13,868       9,289       -  
      42,657       31,703       -  
With an allowance recorded:
                        
Residential real estate
   $ 197     $ 197     $ 48  
Commercial real estate
                        
Owner occupied
     3,596       3,172       280  
Non owner occupied
     8,484       7,115       619  
Commercial and industrial
     5,891       4,707       1,389  
Consumer
     43       43       23  
All other
     2,165       2,163       163  
      20,376       17,397       2,522  
Total
   $ 63,033     $ 49,100     $ 2,522  
 
 

 
8
 
 
SAMPLE OF PROPOSED REVISED DISCLOSURES IN FUTURE FILINGS

PREMIER FINANCIAL BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)


NOTE  3–LOANS - continued

The following table presents the average balance of loans individually evaluated for impairment and interest income recognized on these loans for the six months ended June 30, 2011.  The table includes loans acquired with deteriorated credit quality that are still individually evaluated for impairment.

   
Six months ended June 30, 2011
  
Loan Class
  
Average Recorded Investment
    
Interest Income Recognized
    
Cash Basis Interest Recognized
  
                   
Residential real estate
   $ 281     $ 84     $ 93  
Multifamily real estate
     6,748       16       16  
Commercial real estate:
                        
Owner occupied
     11,949       25       26  
Non-owner occupied
     10,147       30       32  
Commercial and industrial
     8,441       189       192  
Consumer
     41       4       4  
All other
     12,865       25       25  
Total
   $ 50,472     $ 373     $ 388  

The following table presents the average balance of loans individually evaluated for impairment and interest income recognized on these loans for the three months ended June 30, 2011.  The table includes loans acquired with deteriorated credit quality that are still individually evaluated for impairment.

   
Three months ended June 30, 2011
  
Loan Class
  
Average Recorded Investment
    
Interest Income Recognized
    
Cash Basis Interest Recognized
  
                   
Residential real estate
   $ 319     $ 82     $ 91  
Multifamily real estate
     7,751       16       16  
Commercial real estate:
                        
Owner occupied
     11,977       12       12  
Non-owner occupied
     9,111       23       24  
Commercial and industrial
     8,390       16       18  
Consumer
     40       3       3  
All other
     13,571       19       17  
Total
   $ 51,159     $ 171     $ 181  

 

 

9
 
 
SAMPLE OF PROPOSED REVISED DISCLOSURES IN FUTURE FILINGS

PREMIER FINANCIAL BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)


NOTE  3–LOANS - continued

Troubled Debt Restructurings

A loan is classified as a troubled debt restructuring ("TDR") when a concession is granted to the borrower that would not have otherwise been considered due to a borrower's financial difficulties. Most of the Company’s TDRs involve a restructuring of loan terms to reduce the payment amount and/or to require only interest for a period prior to maturity. The following table presents TDR’s as of June 30, 2011 and December 31, 2010:

June 30, 2011
  
TDR’s on Non-accrual
    
Other TDR’s
    
Total TDR’s
  
                   
Residential  real estate
   $ 59     $ 354     $ 413  
Non owner occupied
     -       98       98  
Commercial and industrial
     -       4       4  
Consumer
     17       5       22  
Total
   $ 76     $ 461     $ 537  
                         

December 31, 2010
  
TDR’s on Non-accrual
    
Other TDR’s
    
Total TDR’s
  
                   
Residential  real estate
   $ -     $ 1,078     $ 1,078  
Multifamily real estate
     -       -       -  
Commercial real estate
                        
Owner occupied
     -       365       365  
Non owner occupied
     -       511       511  
Commercial and industrial
     -       292       292  
Consumer
     -       3       3  
All other
     -       390       390  
Total
   $ -     $ 2,639     $ 2,639  
                         

At June 30, 2011, $15,000 in specific reserves was allocated to loans that had restructured terms.  At December 31, 2011 $5,000 in specific reserves was allocated to loans that had restructured terms.
 

 
10
 
 
SAMPLE OF PROPOSED REVISED DISCLOSURES IN FUTURE FILINGS

PREMIER FINANCIAL BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)


NOTE  3–LOANS - continued

Credit Quality Indicators:

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as:  current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors.  The Company analyzes loans individually by classifying the loans as to credit risk.  This analysis includes non-homogeneous loans, such as commercial and commercial real estate loans.  This analysis is performed on a monthly basis.  The Company uses the following definitions for risk ratings:

Special Mention.  Loans classified as special mention have a potential weakness that deserves management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution's credit position at some future date.

Substandard.  Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful.  Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans.


11
 
 
SAMPLE OF PROPOSED REVISED DISCLOSURES IN FUTURE FILINGS

PREMIER FINANCIAL BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)


NOTE  3–LOANS - continued

As of June 30, 2011, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

Loan Class
  
Pass
    
Special Mention
    
Substandard
    
Doubtful
    
Total Loans
  
                               
Residential real estate
   $ 206,445     $ 10,007     $ 11,964     $ 319     $ 228,735  
Multifamily real estate
     21,376       6,489       9,578       -       37,443  
Commercial real estate:
                                        
Owner occupied
     81,722       7,420       18,002       391       107,535  
Non-owner occupied
     140,765       4,852       13,627       -       159,244  
Commercial and industrial
     58,877       11,873       8,611       60       79,421  
Consumer
     30,872       331       77       41       31,321  
All other
     44,047       2,939       12,764       573       60,323  
Total
   $ 584,104     $ 43,911     $ 74,623     $ 1,384     $ 704,022  

As of December 31, 2010, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

Loan Class
  
Pass
    
Special Mention
    
Substandard
    
Doubtful
    
Total Loans
  
                               
Residential real estate
   $ 210,519     $ 13,696     $ 9,091     $ 207     $ 233,513  
Multifamily real estate
     24,231       5,955       10,851       -       41,037  
Commercial real estate:
                                        
Owner occupied
     79,147       11,024       16,373       380       106,924  
Non-owner occupied
     136,019       3,086       16,734       -       155,839  
Commercial and industrial
     56,842       17,112       8,524       113       82,591  
Consumer
     32,537       233       113       43       32,926  
All other
     57,106       4,336       11,119       573       73,134  
Total
   $ 596,401     $ 55,442     $ 72,805     $ 1,316     $ 725,964  

 

12