-----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, FjiXtF+rTycquu+2AvzbChpGKA0cLFL0qSmKNkojiraKCs/fKfBgyZk1csc1d0pQ plPe/PUkBIIFyjUpt89xOw== 0000887919-99-000011.txt : 19991117 0000887919-99-000011.hdr.sgml : 19991117 ACCESSION NUMBER: 0000887919-99-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991115 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: SEC FILE NUMBER: 000-20908 FILM NUMBER: 99755359 BUSINESS ADDRESS: STREET 1: 115 N HAMILTON ST STREET 2: P O BOX 9 CITY: GEORGETOWN STATE: KY ZIP: 40324 BUSINESS PHONE: 6067963001 10-Q 1 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 September 30, 1999 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 - 5,232,257 shares outstanding at November 12, 1999 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, 1998 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 Changes in Stockholders' Equity ...................................... 5 Consolidated Statements of Cash Flows............................................................ 6 Notes to Consolidated Financial Statements....................................................... 7
2. PREMIER FINANCIAL BANCORP, INC. CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 1999 AND DECEMBER 31, 1998 (IN THOUSANDS) (UNAUDITED) - --------------------------------------------------------------------------------
1999 1998 ---- ---- ASSETS Cash and due from banks $ 24,468 $ 20,171 Federal funds sold 15,217 19,406 Investment securities Available for sale 157,146 157,140 Held to maturity 18,993 20,052 Loans 554,954 398,728 Less: Unearned interest (1,642) (3,108) Allowance for loan losses (6,841) (4,363) ------------- -------------- Net loans 546,471 391,257 FHLB and Federal Reserve Bank stock 4,053 3,416 Premises and equipment, net 14,665 11,764 Real estate and other property acquired through foreclosure 1,379 992 Interest receivable 9,667 8,053 Goodwill and other intangibles 24,701 21,555 Other assets 6,859 3,938 ------------- -------------- Total assets $ 823,619 $ 657,744 ============= ============== LIABILITIES AND STOCKHOLDERS' EQUITY Deposits Non-interest bearing $ 64,697 $ 62,813 Time deposits, $100,000 and over 95,865 61,190 Other interest bearing 506,239 399,190 ------------- -------------- Total deposits 666,801 523,193 Securities sold under agreements to repurchase 17,086 7,772 Federal Home Loan Bank advances 32,775 31,898 Other borrowed funds 20,000 8,000 Interest payable 3,620 2,384 Other liabilities 1,928 1,348 ------------- -------------- Total liabilities 742,210 574,595 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; 5,232,257 shares at September 30, 1999 and December 31, 1998, issued and outstanding 1,103 1,103 Surplus 43,445 43,445 Retained earnings 11,096 10,151 Accumulated other comprehensive income (2,985) (300) ------------- -------------- Total stockholders' equity 52,659 54,399 ------------- -------------- Total liabilities and stockholders' equity $ 823,619 $ 657,744 ============= ==============
(continued) 3. PREMIER FINANCIAL BANCORP, INC. CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (IN THOUSANDS) (UNAUDITED) - --------------------------------------------------------------------------------
Three Months Ended Nine Months Ended September 30, September 30, 1999 1998 1999 1998 ---- ---- ---- ---- Interest Income Loans, including fees $ 13,046 $ 8,602 $ 37,215 $ 24,516 Investment securities Taxable 2,285 3,067 7,188 5,898 Tax-Exempt 358 283 1,060 859 Federal funds sold and other 247 504 930 1,623 -------------- -------------- -------------- -------------- Total interest income 15,936 12,456 46,393 32,896 Interest Expense Deposits 6,977 5,318 20,434 13,826 Debt and other borrowings 1,564 1,865 4,601 4,523 -------------- -------------- -------------- -------------- Total interest expense 8,541 7,183 25,035 18,349 Net interest income 7,395 5,273 21,358 14,547 Provision for possible loan losses 1,648 299 2,743 1,295 -------------- -------------- -------------- -------------- Net interest income after provision for possible loan losses 5,747 4,974 18,615 13,252 Non-interest income Service charges 510 486 1,460 1,122 Insurance commissions 153 124 450 324 Investment securities gains 2 8 7 151 Other 235 219 886 2,024 -------------- -------------- -------------- -------------- 900 837 2,803 3,621 Non-interest expenses Salaries and employee benefits 2,730 2,141 8,644 5,579 Occupancy and equipment expenses 743 651 2,237 1,615 Amortization of intangibles 392 334 1,232 644 Other expenses 1,659 889 4,659 3,196 -------------- -------------- -------------- -------------- 5,524 4,015 16,772 11,034 -------------- -------------- -------------- -------------- Income before income taxes 1,123 1,796 4,646 5,839 Provision for income taxes 352 505 1,346 1,526 -------------- -------------- -------------- -------------- Net income $ 771 $ 1,291 $ 3,300 $ 4,313 ============== ============== ============== ============== Other comprehensive income(loss) net of tax Change in net unrealized losses on securities $ (256) $ 392 $ (2,680) $ 628 Reclassification of realized amount (1) (5) (5) (100) -------------- -------------- -------------- -------------- Net unrealized gain (loss)recognized in comprehensive income (257) 387 (2,685) 528 -------------- -------------- -------------- -------------- Comprehensive income $ 514 $ 1,678 $ 615 $ 4,841 ============== ============== ============== ============== Earnings per share $.15 $.25 $.63 $.82 Earnings per share assuming dilution $.15 $.25 $.63 $.82 Weighted average shares outstanding 5,232 5,232 5,232 5,232
(Continued) 4. PREMIER FINANCIAL BANCORP, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY NINE MONTHS ENDED SEPTEMBER 30, 1999 (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 - - - (2,685) (2,685) Net income - - 3,300 - 3,300 Dividends paid - Company ($.45 per share) - - (2,355) - (2,355) ---------- ----------- ----------- ------------ ------------ Balances, September 30, 1999 $ 1,103 $ 43,445 $ 11,096 $ (2,985) $ 52,659 ========== =========== =========== ============ ============
(Continued) 5. PREMIER FINANCIAL BANCORP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (IN THOUSANDS) (UNAUDITED) - --------------------------------------------------------------------------------
1999 1998 ---- ---- Cash flows from operating activities Net income $ 3,300 $ 4,313 Adjustments to reconcile net income to net cash from operating activities Depreciation and amortization 2,344 668 Provision for loan losses 2,743 1,295 Investment securities losses (gains), net (7) (151) Federal Home Loan Bank Stock Dividends (201) (135) Changes in Other assets (500) (1,308) Other liabilities 1,112 (91) ------------- -------------- Net cash from operating activities 8,791 4,591 Cash flows from investing activities Purchases of investment securities available for sale (81,215) (614,756) Proceeds from sales of investment securities available for sale 39,901 109,284 Proceeds from maturities of investment securities available for sale 48,090 363,636 Purchases of investment securities held to maturity (1,918) (3,993) Proceeds from maturities of investment securities held to maturity 2,976 4,341 Purchase of FHLB and Federal Reserve Bank stock (44) (95) Net change in federal funds sold 16,913 30,018 Net change in loans (62,925) (41,613) Net purchases of bank premises and equipment (1,869) (2,316) Cash acquired(paid) in acquisitions (8,579) 125,010 ------------- ------------- Net cash used in investing activities (48,670) (30,484) Cash flows from financing activities Net change in deposits 24,940 5,355 Net change in agreements to repurchase securities 8,714 1,624 Advances from Federal Home Loan Bank, net 877 18,255 Net change in other borrowed funds 12,000 8,000 Dividends paid (2,355) (2,283) ------------- ------------- Net cash from financing activities 44,176 30,951 ------------- ------------- Net change in cash and cash equivalents 4,297 5,058 Cash and cash equivalents at beginning of period 20,171 13,051 ------------- ------------- Cash and cash equivalents at end of period $ 24,468 $ 18,109 ============= =============
(Continued) 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, Georgetown Bancorp, Inc., Georgetown, Kentucky; Citizens Deposit Bank & Trust, Vanceburg, Kentucky; Bank of Germantown, Germantown, Kentucky; Citizens Bank, Sharpsburg, Kentucky; Farmers Deposit Bancorp, Eminence, Kentucky; The Sabina Bank, Sabina, Ohio; Ohio River Bank, Ironton, Ohio; The Bank of Philippi, Inc., Philippi, West Virginia; Boone County Bank, Inc., Madison, West Virginia; and Mt. Vernon Bancshares, Mt. Vernon, Kentucky. In addition, the Company has a data processing service subsidiary, Premier Data Services, Inc., Vanceburg, Kentucky. All material intercompany transactions and balances have been eliminated. Certain amounts have been reclassified in the prior financial statements to conform with the current period classifications. The reclassifications had no effect on net income or stockholders' equity as previously reported. NOTE 2 - BUSINESS COMBINATIONS On January 20, 1999, the Company completed the purchase of Mt. Vernon Bancshares Inc., the holding company for The Bank of Mt. Vernon (Mt. Vernon), in a cash transaction. Mt. Vernon offers full service banking in the central Kentucky counties of Rockcastle, Pulaski, and Madison. Total acquisition cost was $13.5 million which exceeded the net assets acquired by $4.5 million. At date of acquisition, Mt. Vernon had total assets of $120.1 million, total loans of $96.8 million, and total deposits of $118.7 million. On June 26, 1998, the Company chartered Boone County Bank, Inc. in Madison, West Virginia, and The Bank of Philippi, Inc. in Philippi, West Virginia, for the purpose of acquiring three branch offices of Banc One Corporation located in Madison, Philippi and Van, West Virginia. Included in the purchase were $150 million in deposits, $9 million in loans and $1.5 million in premises and equipment. On March 20, 1998, the Company acquired Ohio River Bank (Ohio River) whereby the Company exchanged 297,840 shares of its common stock for all the issued and outstanding shares of Ohio River in a business combination accounted for as a pooling of interests. The accompanying financial statements for 1998 are based on the assumption that the companies were combined for the full year. At the date of acquisition, Ohio River had $40.9 million in total assets, $28.0 million in net loans, $35.2 million in deposits, and $4.3 million in stockholders' equity. NOTE 3 - STOCK DIVIDEND The Company paid a 5% stock dividend on September 30, 1998. For comparability, prior per share information has been restated to reflect the 249,027 shares issued as a result. (Continued) 7. PREMIER FINANCIAL BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS) (UNAUDITED) - -------------------------------------------------------------------------------- NOTE 4 - SECURITIES Amortized cost and fair value of investment securities, by category, at September 30, 1999 are summarized as follows:
Amortized Unrealized Unrealized Fair Cost Gains Losses Value Available for sale (In Thousands) U. S. Treasury securities $ 2,754 $ 4 $ (2) $ 2,756 U. S. agency securities 133,709 - (3,806) 129,903 Obligations of states and political Subdivisions 7,609 41 (6) 7,644 Asset-backed securities 14,678 - (619) 14,059 Preferred stock 2,000 - - 2,000 Other equity securities 925 - (141) 784 -------------- -------------- -------------- --------------- Total available for sale $ 161,675 $ 45 $ (4,574) $ 157,146 ============== ============== ============== =============== Held to maturity U. S. Treasury securities $ 851 $ 2 $ - $ 853 U. S. agency securities 891 - (16) 875 Obligations of states and political Subdivisions 17,225 258 (123) 17,360 Asset-backed securities 26 - (1) 25 -------------- -------------- -------------- --------------- Total held to maturity $ 18,993 $ 260 $ (140) $ 19,113 ============== ============== ============== ===============
Amortized cost and fair value of investment securities, by category, at December 31, 1998 are summarized as follows:
Amortized Unrealized Unrealized Fair Cost Gains Losses Value Available for sale (In Thousands) U. S. Treasury securities $ 7,185 $ 44 $ - $ 7,229 U. S. agency securities 125,372 45 (540) 124,877 Obligations of states and political Subdivisions 3,691 142 (2) 3,831 Asset-backed securities 18,452 20 (67) 18,405 Preferred stock 2,000 - - 2,000 Other equity securities 900 - (102) 798 -------------- -------------- -------------- --------------- Total available for sale $ 157,600 $ 251 $ (711) $ 157,140 ============== ============== ============== =============== Held to maturity U. S. Treasury securities $ 899 $ 16 $ - $ 915 U. S. agency securities 2,631 - (73) 2,558 Obligations of states and political Subdivisions 16,474 770 (1) 17,243 Asset-backed securities 48 - - 48 -------------- -------------- -------------- --------------- Total held to maturity $ 20,052 $ 786 $ (74) $ 20,764 ============== ============== ============== ===============
(Continued) 8. PREMIER FINANCIAL BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS) (UNAUDITED) - -------------------------------------------------------------------------------- NOTE 5 - LOANS Major classifications of loans at September 30, 1999 and December 31, 1998 are summarized as follows: 1999 1998 ---- ---- (In Thousands) Commercial, secured by real estate $ 128,640 $ 86,010 Commercial, other 97,496 77,684 Real estate construction 26,073 13,374 Real estate mortgage 183,609 131,212 Agricultural 18,738 15,433 Consumer and home equity 99,679 74,215 Other 719 800 ------------ ------------ $ 554,954 $ 398,728 ============ ============ NOTE 6 - ALLOWANCE FOR LOAN LOSSES Changes in the allowance for loan losses are as follows:
Three Months Ended Nine Months Ended Sept 30 Sept 30 Sept 30 Sept 30 1999 1998 1999 1998 ---- ---- ---- ---- (In Thousands) Balances, beginning of period $ 5,925 $ 4,208 $ 4,363 $ 3,479 Acquired - - 1,310 115 Net charge-offs (732) (297) (1,575) (679) Provision for loan losses 1,648 299 2,743 1,295 ---------- ----------- ----------- ------------ Balances, end of period $ 6,841 $ 4,210 $ 6,841 $ 4,210 ========== =========== =========== ============
NOTE 7 - GUARANTEED PREFERRED BENEFICIAL INTERESTS IN COMPANY'S SUBORDINATED DEBENTURES Guaranteed preferred beneficial interests in the Company's subordinated debentures (Preferred Securities) represent preferred beneficial interests in the assets of PFBI Capital Trust (Trust), a wholly-owned subsidiary of the Company. The Trust's sole assets are 9.75% junior subordinated debentures due June 30, 2027 issued by the Company on June 9, 1997. Distributions on the Preferred Securities will be payable at an annual rate of 9.75% of the stated liquidation amount of $25 per Preferred 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 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. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations A. Results of Operations Net income for the nine months ended September 30, 1999 was $3,300,000 or $0.63 per share compared to net income of $4,313,000 or $0.82 per share for the nine months ended September 30, 1998. Results for the nine months ended September 30, 1999 reflect charges for amortization of goodwill and other intangibles associated with cash acquisitions totaling $964,000 (after tax) as compared to $541,000 (after tax) in the same period for 1998. Not including these charges, net income for the first nine months in 1999 would have been $4,264,000 or $0.81 per share versus $4,854,000 or $0.93 per share in 1998. Contributing to the 1998 period was a one-time fee in the amount of $858,000 (after tax) earned in connection with the sale of branch offices in West Virginia and $235,000 in the form of a tax credit of an acquired subsidiary. Excluding these non-recurring items, the results for the nine month period ended September 30, 1998, before charges for amortization of goodwill and other intangibles, was $3,761,000 or $0.72 per share. For the three months ended September 30, 1999, net income totaled $771,000 or $.15 per share compared to $1,291,000 or $.25 per share for the same period in 1998. This $520,000 decrease is the result of a $1,349,000 increase in the provision for loan loss and a $1,509,000 increase in non interest expenses which were partially offset by an increase of $2,122,000 in net interest income. The increases in net interest income and non-interest expense are primarily the result of volume increases due to acquisitions. The increase in the provision for loan loss is reflective of an additional provision in the amount of $950,000 which increased the consolidated loan loss reserve to 1.24% of total loans as compared to 1.10% of total loans on December 31, 1998. Net interest income increased $6,811,000 to $21,358,000 for the nine months ended September 30, 1999 compared to $14,547,000 for the same period in 1998. Net interest income increased $2,122,000 to $7,395,000 for the three months ended September 30, 1999 compared to the $5,273,000 reported in the three months ended September 30, 1998. Net interest margin on a tax equivalent basis for the nine months ending September 30, 1999 was approximately 4.07% as compared to 3.88% for the same period in 1998. The returns on stockholders' equity and on average assets were approximately 8.14% and .56% for the nine months ended September 30, 1999 compared to 10.8% and 1.05% for the same period in 1998. Not including the charges for amortization of goodwill and other intangibles and the non-recurring items discussed above, the returns on stockholders' equity and on average assets would have been approximately 10.51% and .72% for the nine months ended September 30, 1999, compared to 9.42% and .92% for the same period in 1998. The decrease in return on average assets can be primarily attributed to the increase in assets as a result of the West Virginia and Mt. Vernon Bancshares acquisitions and associated goodwill. Non-interest income decreased $818,000 to $2,803,000 for the first nine months of 1999 compared to the first nine months of 1998. The decrease is primarily attributable to the one-time fee in the amount of approximately $1,300,000 that was recognized in the second quarter of 1998 in connection with the West Virginia acquisitions. Exclusive of this fee, non-interest income for the first nine months of 1999 increased $482,000 or 20.8% compared to the same period for 1998. Non-interest income increased $63,000 to $900,000 for the three months ended September 30, 1999 compared to $837,000 for the same period in 1998. (Continued) 10. Non-interest expenses for the first nine months of 1999 totaled $16,772,000 or 2.8% of average assets on an annualized basis compared to $11,034,000 or 2.7% of average assets for the same period of 1998. Non-interest expenses increased $1,509,000 for the three months ended September 30, 1999 to $5,524,000 compared to $4,015,000 for the three months ended September 30, 1998. This increase in non-interest expense can be primarily attributed to the start up of the new West Virginia banks and their inclusion in the entire nine month period ending September 30, 1999 along with the Mt. Vernon acquisition. Income tax expense was $1,346,000 for the first nine months of 1999 compared to $1,526,000 for the first nine months of 1998. For the three month period ended September 30, 1999, income tax expense decreased $153,000 to $352,000 compared to $505,000 for the three months ended September 30, 1998. The decrease in income tax expense can be attributed to the decrease in income before taxes, primarily as a result of the inclusion of the approximately $1.3 million one-time fee in the nine month period ended September 30, 1998. The effective tax rate through September 30, 1999 was approximately 29%, compared to the 26% effective tax rate for the same period in 1998. Included in the 1998 period is a reduction in income tax expense in the amount of $235,000 as the result of a reversal of a valuation allowance for deferred tax assets of an acquired subsidiary bank. B. Financial Position Total assets increased $165.9 million or 25.2% to $823.6 million from December 31, 1998. Excluding the Mt. Vernon acquisition, assets grew approximately $45.8 million or 6.9% since December 31, 1998. Cash and cash equivalents at September 30, 1999 were $24.5 million or a $4.3 million increase over the $20.2 million on December 31, 1998. Fed funds sold decreased to $15.2 million from $19.4 million during the same period, a decrease of $4.2 million. Total earning assets increased $154.8 million, or 26.0%, to $750.4 million from $595.6 million on December 31, 1998. Total loans at September 30, 1999 were $553.3 million compared to $395.6 million at December 31, 1998. Of this $157.7 million increase, approximately $96.8 million is a result of the Mt. Vernon acquisition. Excluding this event, the increase would be $60.9 million, or 15.4%. Deposits totaled $666.8 million as of September 30, 1999, an increase of $143.6 million over the December 31, 1998 amount of $523.2 million. Excluding the approximately $118.7 million acquired with the Mt. Vernon acquisition, the increase is $24.9 million. Noninterest bearing deposits increased $1.9 million, or 3.0%, and interest bearing deposits increased $141.7 million, or 30.8%, during the period December 31, 1998 to September 30, 1999. (Continued) 11. The following table sets forth information with respect to the Company's nonperforming assets at September 30, 1999 and December 31, 1998.
1999 1998 ---- ---- (In Thousands) Non-accrual loans $ 5,583 $ 3,500 Accruing loans which are contractually past due 90 days or more 1,289 1,322 Restructured 770 105 -------------- ------------ Total non-performing loans 7,642 4,927 Other real estate acquired through Foreclosure 1,369 961 -------------- ------------ Total non-performing assets $ 9,011 $ 5,888 Non-performing loans as a percentage of total loans 1.38% 1.25% Non-performing assets as a percentage of total assets 1.09% .90%
The provision for possible loan losses increased from $299,000 for the three months ended September 30, 1998 to $1,648,000 for the three months ended September 30, 1999. The provision for possible loan losses and net chargeoffs was $2,743,000 and $1,575,000 for the first nine months of 1999 compared to $1,295,000 and $679,000, respectively, for the nine months period ended September 30, 1998. The increases in these amounts primarily relate to the increase in average loans between the two periods and the additional provision of $950,000 recorded in the quarter ended September 30, 1999. This additional provision was deemed prudent after revision of loan loss reserve adequacy measurement methods. The allowance for loan losses at September 30, 1999 was 1.24% of total loans as compared to 1.10% at December 31, 1998. 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. (Continued) 12. 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 $157.1 million of securities at market value as of September 30, 1999. 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 September 30, 1999, total shareholders' equity of $52.7 million was 6.4% of total consolidated assets. This compares to total shareholders' equity of $54.4 million or 8.3% of total consolidated assets on December 31, 1998. This decrease in equity to assets ratio is reflective of the increase in asset size as a result of the Mt. Vernon acquisition. Tier I capital totaled $49.4 million at September 30, 1999, which represents a Tier I leverage ratio of 6.4%. Shown below is a summary of regulatory capital ratios:
Regulatory September 30 December 31 Minimum 1999 1998 Requirements - ------------------------------------------ ------------------- -------------------------- ---------------------------- Tier I Risk Based Capital Ratio 9.0% 12.6% 4.0% Total Risk Based Capital Ratio 12.1% 16.2% 8.0% Leverage Ratio 6.4% 8.1% 4.0%
Book value per share was $10.06 at September 30, 1999, and $10.40 at December 31, 1998. An increase in unrealized loss on securities available for sale was largely responsible for the decrease in comprehensive income and corresponding decrease in book value per share. The Company declared a third quarter dividend of $0.15 per share payable September 30, 1999 to shareholders of record as of September 21, 1999. (Continued) 13. E. Year 2000 Management has assessed the operational and financial implications of its Year 2000 needs and developed a plan to ensure that data processing systems can properly handle the change. This formal program is comprised of five phases: (1) Awareness; (2) Assessment; (3) Renovation; (4) Validation and (5) Implementation. The Company and its subsidiaries have been subject to examination with respect to their Year 2000 compliance by various state and federal agencies including the Federal Reserve Board, the Federal Deposit Insurance Corporation, and State banking agencies. Management has determined that if a business interruption as a result of the Year 2000 issue occurred, such an interruption could be material. The primary effort required to prevent a potential business interruption was the installation of the most current software release from the Company's third party provider and replacement of certain system hardware. The third party software provider has warranted that Year 2000 remediation and testing efforts to become compliant have been successfully completed. Non-compliant hardware has already been replaced through routine hardware upgrades. Management locally installed and tested the current software release before the end of 1998, which completed the Year 2000 plan for mission critical systems. Non-mission critical systems, including systems other than data processing with embedded technology, will continue to be evaluated and if necessary, will be upgraded or replaced. Premier must also rely on the Year 2000 readiness of additional third parties such as public utilities and governmental units that provide important ongoing services to the Company. Management has therefore developed and implemented contingency plans in the event these third party services are disrupted and need to be resumed. The cost of Year 2000 readiness was approximately $100,000, which was expensed as incurred. Management projects additional Year 2000 expenses to be minimal, however Year 2000 expenses are subject to change and could vary from current estimates if the final requirements for Year 2000 readiness exceed management's expectations. 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 1998 10-K for analysis of the interest rate sensitivity. 14. PART II - OTHER INFORMATION Item 1. Legal Proceedings None Item 2. Changes in Securities None Item 3. Defaults Upon Senior Securities None Item 4. Submission of Matters to a vote of Security Holders None Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit No. Description of Document ----------- ----------------------- 27 Financial Data Schedules (b) Reports on Form 8-K No reports on Form 8-K have been filed during the quarter for which the report is filed. 15. 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: November 12, 1999 /s/ Marshall T. Reynolds ----------------------------------- Marshall T. Reynolds Chairman of the Board Date: November 12, 1999 /s/ J. Howell Kelly ----------------------------------- J. Howell Kelly President & Chief Executive Officer 16. EX-27 2 FDS --
9 Article 9 Ex-27FDS 0000887919 Premier Financial Bancorp, Inc. 1,000 9-mos DEC-31-1999 JAN-01-1999 SEP-30-1999 22,835 1,633 15,217 0 157,146 18,993 19,113 553,312 6,841 823,619 666,801 27,311 5,548 71,300 0 0 1,103 51,556 823,619 37,215 8,248 930 46,393 20,434 25,035 21,358 2,743 7 16,772 4,646 3,300 0 0 3,300 .63 .63 4.07 5,583 1,289 770 0 4,363 1,885 310 6,841 6,841 0 315 Computed as tax-equivalent basis Includes allowance through acquisition
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