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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2003
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.)
2883 Fifth Avenue
Huntington, West Virginia 25702
(address of principal executive officer) (Zip Code)
Registrant's telephone number (304) 525-1600
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 by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes___ No X .
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 July 31, 2003.
PREMIER FINANCIAL BANCORP, INC.
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. Premier's
accounting and reporting policies are in accordance with accounting principles
generally accepted in the United States of America. Certain accounting
principles used by Premier involve a significant amount of judgment about future
events and require the use of estimates in their application. The following
policies are particularly sensitive in terms of judgments and the extent to
which estimates are used: allowance for loan losses, goodwill impairment, and
stock based compensation. These estimates are based on assumptions that may
involve significant uncertainty at the time of their use. However, the policies,
the estimates and the estimation process as well as the resulting disclosures
are periodically reviewed by the Audit Committee of the Board of Directors and
material estimates are subject to review as part of the external audit by the
independent public accountants.
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 accounting principles generally accepted in the United
States of America 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, 2002 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
JUNE 30, 2003 AND DECEMBER 31, 2002
(DOLLARS IN THOUSANDS)
- ------------------------------------------------------------------------------------------------------------------
(UNAUDITED)
2003 2002
---- ----
ASSETS
Cash and due from banks $ 24,576 $ 18,044
Federal funds sold 39,339 29,827
Investment securities available for sale 153,846 157,633
Loans 413,648 435,137
Allowance for loan losses (18,057) (11,360)
-------------- -------
Net loans 395,591 423,777
Federal Home Loan Bank and Federal Reserve Bank stock 4,533 4,395
Premises and equipment, net 11,334 11,685
Real estate and other property acquired through foreclosure 2,831 3,939
Interest receivable 5,183 6,485
Goodwill 16,044 16,044
Other assets 9,524 5,799
------------- --------------
Total assets $ 662,801 $ 677,628
============= ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Non-interest bearing $ 59,360 $ 62,874
Time deposits, $100,000 and over 64,969 66,033
Other interest bearing 419,776 419,067
------------- --------------
Total deposits 544,105 547,974
Securities sold under agreements to repurchase 5,755 5,851
Federal Home Loan Bank advances 22,453 23,533
Other borrowed funds 7,100 7,700
Notes payable 1,402 1,402
Guaranteed preferred beneficial interests in Company's debentures 25,750 28,750
Interest payable 2,978 1,818
Other liabilities 1,181 1,234
------------- --------------
Total liabilities 610,724 618,262
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 5,707 13,250
Accumulated other comprehensive income 1,822 1,568
------------- --------------
Total stockholders' equity 52,077 59,366
------------- --------------
Total liabilities and stockholders' equity $ 662,801 $ 677,628
============= ==============
- ------------------------------------------------------------------------------------------------------------------
See Accompanying Notes to Consolidated Financial Statements
PREMIER FINANCIAL BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
THREE AND SIX MONTHS ENDED JUNE 30, 2003 AND 2002
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
---- ---- ---- ----
Interest income
Loans, including fees $ 7,856 $ 9,495 $ 16,379 $ 19,074
Investment securities
Taxable 1,056 1,493 2,167 3,048
Tax-exempt 177 202 380 410
Federal funds sold and other 167 155 323 359
----------- ----------- ----------- -----------
Total interest income 9,256 11,345 19,249 22,891
Interest expense
Deposits 2,681 4,044 5,561 8,413
Other borrowings 402 438 804 928
Debentures 670 713 1,400 1,426
----------- ----------------------------- -----------
Total interest expense 3,753 5,195 7,765 10,767
Net interest income 5,503 6,150 11,484 12,124
Provision for loan losses 13,386 3,200 14,783 4,186
----------- ----------- ----------- -----------
Net interest income after
provision for loan losses (7,883) 2,950 (3,299) 7,938
Non-interest income
Service charges 691 625 1,241 1,119
Insurance commissions 33 79 74 119
Securities gains (losses) 15 (103) 204 (59)
Other 328 224 673 504
----------- ----------- ----------- -----------
1,067 825 2,192 1,683
Non-interest expenses
Salaries and employee benefits 2,653 2,592 5,471 5,299
Occupancy and equipment expenses 673 681 1,377 1,363
Professional fees 317 307 579 558
Taxes, other than payroll,
property and income 152 215 304 387
Write-downs, expenses, sales of
other real estate owned 190 932 266 993
Other expenses 1,252 1,217 2,467 2,286
----------- ----------- ----------- -----------
5,237 5,944 10,464 10,886
----------- ----------- ----------- -----------
Income (loss) before income taxes (12,053) (2,169) (11,571) (1,265)
Provision for income taxes (benefit) (4,157) (789) (4,028) (529)
------------ ------------ ------------ ------------
Net income (loss) $ (7,896) $ (1,380) $ (7,543) $ (736)
============ ============ ============ ============
Basic earnings (loss) per share $ (1.51) $ (0.26) $ (1.44) $ (0.14)
Earnings (loss) per share assuming dilution $ (1.51) $ (0.26) $ (1.44) $ (0.14)
Weighted average shares outstanding 5,232 5,232 5,232 5,232
Weighted average shares assuming dilution 5,241 5,232 5,235 5,232
- ------------------------------------------------------------------------------------------------------------------
See Accompanying Notes to Consolidated Financial Statements
PREMIER FINANCIAL BANCORP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
THREE AND NINE MONTHS ENDED JUNE 30, 2003 AND 2002
(IN THOUSANDS)
(UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
---- ---- ---- ----
Net income (loss) $ (7,896) $ (1,380) $ (7,543) $ (736)
Other comprehensive income (loss), net of tax:
Unrealized gains and (losses) arising during
the period 560 953 389 $ 291
Reclassification of realized amount (10) 68 (135) 39
----------- ---------- ----------- ---------
Net change in unrealized gain (loss) on
securities 550 1,021 254 330
---------- ---------- ---------- ---------
Comprehensive income (loss) $ (7,346) $ (359) $ (7,289) $ (406)
========== =========== ========== ==========
- ------------------------------------------------------------------------------------------------------------------
See Accompanying Notes to Consolidated Financial Statements
PREMIER FINANCIAL BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2003 AND 2002
(IN THOUSANDS)
(UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------
2003 2002
---- ----
Cash flows from operating activities
Net (loss) income $ (7,543) $ (736)
Adjustments to reconcile net income (loss) to net
Cash from operating activities
Depreciation 605 520
Provision for loan losses 14,783 4,186
Amortization, net 448 136
FHLB stock dividends (95) (73)
Investment securities losses (gains), net (204) 59
Write downs of OREO 178 655
Changes in
Interest Receivable 1,302 1,005
Other assets (3,856) (10)
Interest Payable 1,160 547
Other liabilities (53) (537)
-------------- --------------
Net cash from operating activities 6,725 5,752
Cash flows from investing activities
Purchases of securities available for sale (80,796) (54,315)
Proceeds from sales of securities available for sale 13,294 4,061
Proceeds from maturities and calls of securities available
for sale 71,430 57,596
Purchases of FHLB stock (43) (50)
Redemption of FHLB stock - -
Net change in federal funds sold (9,512) (3,203)
Net change in loans 12,644 3,267
Purchases of premises and equipment, net (254) (331)
Proceeds from sale of other real estate acquired
through foreclosure 1,689 2,384
------------- -------------
Net cash from investing activities 8,452 9,409
Cash flows from financing activities
Net change in deposits (3,869) (5,653)
Advances from Federal Home Loan Bank 2,750 10,395
Repayment of Federal Home Loan Bank advances (3,830) (17,239)
Early redemption of Trust Preferred Securities (3,000) -
Repayment of Other Borrowed Funds (600) (3,300)
Proceeds from Notes Payable - 701
Net change in agreements to repurchase securities (96) 91
-------------- -------------
Net cash from financing activities (8,645) (15,005)
-------------- --------------
Net change in cash and cash equivalents 6,532 156
Cash and cash equivalents at beginning of period 18,044 20,628
------------- -------------
Cash and cash equivalents at end of period $ 24,576 $ 20,784
============= =============
- ------------------------------------------------------------------------------------------------------------------
See Accompanying Notes to Consolidated 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:
June 30, 2003
Year Net Income
------------------
Acquired Assets Qtr Year
Citizens Deposit Bank & Trust Vanceburg, Kentucky 1991 $ 86,383 $ 236 $ 359
Bank of Germantown Germantown, Kentucky 1992 24,087 22 32
Citizens Bank (Kentucky), Inc. Georgetown, Kentucky 1995 82,614 (76) (103)
Farmers Deposit Bank Eminence, Kentucky 1996 140,107 (8,514) (8,446)
Ohio River Bank Ironton, Ohio 1998 75,441 253 456
First Central Bank, Inc. Philippi, West Virginia 1998 84,697 272 451
Boone County Bank, Inc. Madison, West Virginia 1998 161,582 497 985
Mt. Vernon Financial Holdings, Inc. Huntington, West Virginia 1999 6,615 22 (13)
The Company also has a data processing subsidiary, Premier Data Services, Inc.,
and the PFBI Capital Trust subsidiary as discussed in Note 7. All intercompany
transactions and balances have been eliminated.
The Company maintains the Premier Financial Bancorp, Inc. 1996 Employee Stock
Ownership Incentive Plan (the Plan), whereby certain employees of the Company
are eligible to receive incentive stock options. Under the Plan, a maximum of
100,000 shares of the Company's common stock may be issued through the exercise
of these incentive stock options. The option price is the fair market value of
the Company's shares at the date of the grant. In January, 2003, the Company
granted 28,650 options under this plan at $7.96 per share which will be fully
vested in three years.
Employee compensation expense under stock options is reported using the
intrinsic value method. No stock-based compensation cost is reflected in net
income, as all options granted had an exercise price equal to or greater than
the market price of the underlying common stock at the date of grant.
- --------------------------------------------------------------------------------
CONTINUED
PREMIER FINANCIAL BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, IN THOUSANDS)
- --------------------------------------------------------------------------------
NOTE 1 - BASIS OF PRESENTATION (continued)
The following table illustrates the effect on net income and earnings per share
if expense was measured using the fair value recognition provisions of FASB
Statement No. 123, Accounting for Stock-Based Compensation.
2003 2002
---- ----
Net (loss) income as reported $ (7,543) $ (736)
Deduct: Stock-based compensation
expense determined under fair
value based method (21) -
------------ -----------
Pro forma net (loss) income $ (7,564) $ (736)
Basic loss per share as reported $ (1.44) $ (0.14)
Pro forma basic earnings per share (1.45) (0.14)
Diluted earnings per share as reported $ (1.44) $ (0.14)
Pro forma diluted earnings per share (1.45) (0.14)
The fair value of the options granted are estimated as of the measurement date
using the Black-Scholes option pricing model with the following weighted average
assumptions used for grants in 2003: dividend yield of 0.0%, expected volatility
of 42.4%, risk-free interest rate of 3.1%, and expected life of five years. The
weighted average fair value of options granted in 2003 was $3.30.
NOTE 2 - REGULATORY MATTERS
On January 29, 2003, the Company entered into a written agreement with the
Federal Reserve Bank of Cleveland (FRB) which supersedes and rescinds all
previous agreements between the Company and the FRB. Among the provisions of the
agreement were the continuation of the restriction on the Company's payment of
dividends on its common stock without the express written consent of the FRB and
the continuation of the restriction on the Company's payment of quarterly
distributions on its Trust Preferred Securities without the express written
consent of the FRB. Among other provisions, the agreement requires the Company
to retain an independent consultant to review its management, directorate and
organizational structure, adopt a management plan responsive to such
consultant's report, update its management succession plan in accordance with
any recommendations in such consultant's report, monitor its subsidiary banks'
compliance with bank policies and loan review programs, conduct formal quarterly
reviews of its subsidiary Banks' allowances for loan losses, maintain sufficient
capital, submit a plan to the FRB for improving consolidated earnings over a
three-year period, and submit to the FRB annual projections of planned sources
and uses of the Company's cash, including a plan to service its outstanding debt
and trust preferred securities.
- --------------------------------------------------------------------------------
CONTINUED
PREMIER FINANCIAL BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, IN THOUSANDS)
- --------------------------------------------------------------------------------
NOTE 2 - REGULATORY MATTERS (continued)
As of August 14, 2003, the Company has received a "Management, Directorate,
and Organizational Review" (the "Review") from an independent consultant it
retained. Management is drafting plans to implement the proposed recommendations
in the Review and will submit those plans to the FRB in accordance with the
Written Agreement. The Company's compliance with the written agreement is being
monitored by a committee which consists of three of its outside directors.
Three of the Company's subsidiaries, Citizens Deposit Bank & Trust, Bank of
Germantown and Citizens Bank (Kentucky), Inc. have entered into similar
agreements with their respective primary regulators which, among other things,
prohibit the payment of dividends without prior written approval and requires
significant changes in their credit administration policies.
These agreements, which require periodic reporting, will remain in force until
the regulators are satisfied that the Company and the banks have fully complied
with the terms of the agreement.
NOTE 3 - NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board (FASB) recently issued two new
accounting standards, Statement 149, Amendment of Statement 133 on Derivative
Instruments and Hedging Activities, and Statement 150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equities,
both of which generally become effective in the quarter beginning July 1, 2003.
Because the Company does not have any derivative instruments, Statement 149 will
not materially affect the Company's operating results or financial condition.
Under the new standard for certain liabilities and equity instruments, Statement
150, the Company's trust preferred securities are considered liabilities and not
part of mezzanine (or temporary) equity. As of December 31, 2002 the Company
opted for early adoption of Statement 150. Accordingly, as part of its year-end
2002 financial reporting, the Company included its trust preferred securities in
total liabilities.
A new accounting standard dealing with asset retirement obligations applies
for 2003. This standard did not have a material effect on the Company's
financial position or results of operations.
- --------------------------------------------------------------------------------
CONTINUED
PREMIER FINANCIAL BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, IN THOUSANDS)
- --------------------------------------------------------------------------------
NOTE 4 - SECURITIES
Amortized cost and fair value of investment securities, by category, at
June 30, 2003 are summarized as follows:
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
Available for sale
U. S. Treasury securities $ 650 $ 7 $ - $ 657
U. S. agency securities 116,849 1,450 - 118,299
Obligations of states and political
Subdivisions 15,709 1,077 (3) 16,783
Mortgage-backed securities 15,199 167 (6) 15,360
Corporate securities 2,679 68 - 2,747
-------------- -------------- -------------- ---------------
Total available for sale $ 151,086 $ 2,769 $ (9) $ 153,846
============== ============== ============== ===============
Amortized cost and fair value of investment securities, by category, at
December 31, 2002 are summarized as follows:
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
Available for sale
U. S. Treasury securities $ 399 $ 8 $ - $ 407
U. S. agency securities 120,660 1,256 - 121,916
Obligations of states and political
subdivisions 17,794 827 (11) 18,610
Mortgage-backed securities 7,369 279 - 7,648
Corporate securities 9,036 16 - 9,052
-------------- -------------- -------------- ---------------
Total available for sale $ 155,258 $ 2,386 $ (11) $ 157,633
============== ============== ============== ===============
NOTE 5 - LOANS
Major classifications of loans at June 30, 2003 and December 31, 2002 are
summarized as follows:
2003 2002
---- ----
Commercial, secured by real estate $ 114,281 $ 120,306
Commercial, other 55,311 64,014
Real estate construction 11,717 11,924
Residential real estate 149,615 156,215
Agricultural 8,354 8,862
Consumer and home equity 72,459 71,075
Other 1,911 2,741
------------ ------------
$ 413,648 $ 435,137
============ ============
- --------------------------------------------------------------------------------
CONTINUED
PREMIER FINANCIAL BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, IN THOUSANDS)
- --------------------------------------------------------------------------------
NOTE 5 - LOANS (continued)
The following table sets forth information with respect to the Company's
impaired loans at June 30, 2003 and December 31, 2002.
2003 2002
---- ----
Impaired loans at period end $ 17,769 $ 8,949
Amount of allowance for loan losses allocated 8,260 3,016
The following table sets forth information with respect to the Company's
nonperforming loans at June 30, 2003 and December 31, 2002.
2003 2002
---- ----
Non-accrual loans $ 8,188 $ 10,588
Accruing loans which are contractually
past due 90 days or more 1,661 1,399
Restructured loans 292 293
------------ ------------
$ 10,141 $ 12,280
============ ============
NOTE 6 - ALLOWANCE FOR LOAN LOSSES
Changes in the allowance for loan losses for the three months and six months
ended June 30, 2003 and 2002 are as follows:
Three Months Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
---- ---- ---- ----
Balance, beginning of period $ 11,617 $ 8,747 $ 11,360 $ 8,946
Gross charge-offs (7,137) (3,039) (8,489) (4,582)
Recoveries 191 218 403 576
Provision for loan losses 13,386 3,200 14,783 4,186
-------- -------- -------- --------
Balance, end of period $ 18,057 $ 9,126 $ 18,057 $ 9,126
======== ======== ======== ========
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 are payable at an annual rate of 9.75%
of the stated liquidation amount of $25 per Capital Security, payable quarterly
(see Note 8). 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 7 - GUARANTEED PREFERRED BENEFICIAL INTERESTS IN COMPANY'S
SUBORDINATED DEBENTURES (continued)
As previously disclosed, pursuant to an agreement entered into with the Federal
Reserve Bank (FRB) described in Note 2, the Company is required to request
approval for the payment of distributions due on the Trust Preferred Securities.
As part of a Debt Reduction and Profitability plan presented on January 6, 2003,
the Company requested and received approval from the FRB to redeem $3,000,000 of
the $28,750,000 outstanding Trust Preferred Securities which occurred on March
31, 2003. However, the FRB denied the Company's request to make distributions on
the remaining Trust Preferred Securities for the first quarter of 2003. The FRB
has also denied the Company's request to make distributions on the Trust
Preferred Securities for the second quarter of 2003.
In December 2002, the Company exercised its right to defer the payment of
interest on its 9.75% Trust Preferred Securities for December 31, 2002 and for
an indefinite period, which can be no longer than 20 consecutive quarterly
periods. That deferment has continued for consecutive quarters through June
30, 2003. These and any future deferred distributions will accrue interest at an
annual rate of 9.75% which will be paid when the deferred distributions are
ultimately paid. Management of Premier does not expect to resume payments on the
Subordinated Debentures or the Trust Preferred until the Federal Reserve Bank of
Cleveland determines that the Company has achieved adequate and sustained levels
of profitability to support such payments and approves such payments.
NOTE 8 - STOCKHOLDERS' EQUITY AND REGULATORY MATTERS
The Company's principal source of funds for dividend payments to shareholders 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
the remainder of 2003, the Banks could, without prior approval, declare
dividends of approximately $3.4 million plus any remaining 2003 net profits
retained by the Banks to the date of the dividend declaration. In July 2003,
$1.3 million of this total was declared and paid by one of the subsidiary banks.
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.
- --------------------------------------------------------------------------------
CONTINUED
PREMIER FINANCIAL BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, IN THOUSANDS)
- --------------------------------------------------------------------------------
NOTE 8 - STOCKHOLDERS' EQUITY AND REGULATORY MATTERS (continued)
These quantitative measures established by regulation to ensure capital adequacy
require the Company and Banks to maintain minimum amounts and ratios (set forth
in the following table) of Total and Tier I capital (as defined in the
regulations) to risk-weighted assets (as defined), and of Tier I capital (as
defined) to average assets (as defined). Management believes, as of June 30,
2003, that the Company and the Banks meet all quantitative capital adequacy
requirements to which they are subject.
Shown below is a summary of regulatory capital ratios for the Company:
Regulatory
June 30, December 31, Minimum
2003 2002 Requirements
---- ---- ------------
Tier I Capital (to Risk-Weighted Assets) 12.2% 14.1% 4.0%
Total Capital (to Risk-Weighted Assets) 15.6% 17.5% 8.0%
Tier I Capital (to Average Assets) 7.5% 9.1% 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 four 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 of Cleveland (FRB), as
discussed in Note 2, 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.
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 ratio was 11.7% at June 30, 2003, an
increase from 10.9% at December 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 7%. This agreement is in effect until terminated by the KDFI
and FDIC. Germantown's Tier I capital to average assets ratio was 8.4% at June
30, 2003, an increase from 7.6% at December 31, 2002.
Citizens Bank (Kentucky), Inc. (Citizens, KY) entered into an agreement with the
Kentucky Department of Financial Institutions (KDFI) and the Federal Deposit
Insurance Corporation (FDIC) on September 11, 2002 restricting Citizens, KY from
declaring or paying dividends, without prior approval. This agreement is in
effect until terminated by the KDFI and FDIC. Citizens KY's Tier I capital to
average assets ratio was 9.0% at June 30, 2003, an increase from 8.7% at
December 31, 2002.
- --------------------------------------------------------------------------------
CONTINUED
PREMIER FINANCIAL BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, IN THOUSANDS)
- --------------------------------------------------------------------------------
NOTE 8 - STOCKHOLDERS' EQUITY AND REGULATORY MATTERS (continued)
Due to the negative effects of the reported losses at Farmers Deposit Bank on
its capital, the Company developed a plan in conjunction with the Federal
Deposit Insurance Corporation (FDIC) to inject capital at Farmers Deposit Bank
as needed to maintain the bank's well capitalized designation. In July 2003, the
Company injected $3.5 million of capital as part of this plan.
As of June 30, 2003, the most recent notification from the FRB 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 capital ratio of 10.0%, a
minimum Tier I risk-based capital ratio of 6.0% and a Tier I leverage ratio if
5.0%. There are no conditions or events since that notification that management
believes have changed the Company's category.
NOTE 9 - NOTES PAYABLE
During 2002, the Company also entered into notes payable with the Company's
Chairman of the Board and President. Due to the regulatory restriction on the
Company's payment of its Trust Preferred distributions as discussed in Note 7,
the Company reached an agreement with the FRB whereby the Company's Chairman of
the Board, who is also the Company's largest shareholder, agreed to loan the
Company the amount of the second quarter distribution, $701,000, so that the
Company, with the FRB's approval, could make such distribution. A similar
agreement was reached with the FRB for the payment of the distribution due for
the third quarter 2002. The Company's President, who is also a director, agreed
to loan the Company the amount of that distribution, $701,000. Thus, the balance
of notes payable at June 30 2003, was $1,402,000. Both loans are unsecured at a
zero percent interest rate with no defined maturity date. The loans cannot be
repaid without the prior approval of the FRB.
- --------------------------------------------------------------------------------
PREMIER FINANCIAL BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------------
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
A. Results of Operations
Premier realized a net loss for the six months ended June 30, 2003, of
$7,543,000, or $1.44 per share, compared to a net loss of $736,000 or 14 cents
per share for the six months ended June 30, 2002. The net loss and loss per
share for 2003 was primarily the result of a $12.1 million provision for loan
losses in the month of June at Farmers Deposit Bank (the "Bank"), a wholly owned
subsidiary of Premier.
On June 16, 2003, Premier announced that as a result of an ongoing
internal investigation it had uncovered a systematic disregard for its loan
approval and credit administration policies at the Bank and had accepted the
resignation of the Bank's president. On July 31, 2003, Premier announced that as
a result of the investigation to date, Premier had charged-off approximately
$6.2 million of loans at the Bank in the month of June. Premier also increased
the allowance for loan losses at the Bank to over $8.7 million to absorb
probable future charge-offs which may be necessary as the investigation
continues and action plans are developed and executed. The combined result of
the charge-offs and the increase in the allowance for loan losses was a $12.1
million provision for loan losses. In addition to the provision for loan losses,
$303,000 of interest income reversals and $255,000 of additional expenses were
also recorded.
Premier's initial investigation indicates that the Bank's former
president had engaged in conduct which subverted the Bank's internal controls
and credit administration policies, conduct which appears to have been designed
to avoid detection by management and those entities employed by Premier to
perform independent reviews of its subsidiaries' accounting records, internal
controls, and credit risk. While the investigation is still on-going, management
at Premier has implemented a number of actions since the Bank president's
resignation including the appointment of one of Premier's senior executives as
interim chief executive officer of the Bank; the development of a plan in
conjunction with the FDIC to inject capital at the Bank as needed to continue to
maintain the Bank's "Well Capitalized" designation; daily meetings of a loan
committee, chaired by the interim chief executive officer, to review all new
loan applications and renewals; the hiring of a senior collection officer with
20+ years of collection experience; and developing collection plans for the
loans that were charged-off as well as other loans within the loan portfolio.
Excluding the transactions related to the Bank investigation, Premier
would have realized a net profit for the six months ended June 30, 2003 of
approximately $811,000, or 16 cents per share. For the quarter ending June 30,
2003, Premier recorded a net loss of $7,896,000, or $1.51 per share. Excluding
the transactions related to the Bank investigation, Premier would have realized
a net profit for the quarter ended June 30, 2003 of approximately $458,000, or 9
cents per share.
For the For the
Quarter Six Months
Ended Ended
June 30 June 30
Dollars in thousands 2003 2003
--------- ---------
Net Income before Bank investigation transactions 458 811
Impact on net income of transactions related to
Bank investigation
Interest income reversal (303) (303)
Additional provision for loan losses (12,100) (12,100)
Additional non-interest expenses (255) (255)
Income tax benefit 4,304 4,304
--------- ---------
Reported Net Loss (7,896) (7,543)
========= =========
The year-to-date 2002 loss is largely due to $4.2 million of provisions
for loan losses and $993,000 of OREO writedowns, sales and expenses. For the
quarter ending June 30, 2002, Premier recorded a net loss of $1,380,000, or 26
cents per share.
The total provision for loan losses was $13.4 million for the second
quarter of 2003 (largely due to the $12.1 million provision in June resulting
from the Bank investigation) compared to $3.2 million for the second quarter of
2002. This addition brings the year-to-date provision to $14.8 million compared
to $4.2 million for the same year-to-date period in 2002. While management has
not yet exhausted all efforts and means available to collect the identified
problem loans, the additional provisions were made in accordance with Premier's
policies regarding the adequacy of the allowance for loan losses which are in
accordance with accounting principles generally accepted in the United States of
America. Any collections on these loans would be presented in future financial
statements as recoveries of the amounts charged against the allowance. The
allowance for loan losses at June 30, 2003 was 4.36% of total loans as compared
to 2.61% at December 31, 2002. The increase in the percentage of allowance for
loan losses to total loans is largely due to the large provision for loan losses
required versus the level of net charge-offs actually taken during the first six
months of 2003 plus the effect of the decline in total loans outstanding.
Net interest income for the six months ending June 30, 2003 totaled
$11.48 million, a 5.3% decrease from the $12.12 million of net interest income
earned in the first six months of 2002. The decrease was largely due to interest
income reversals at the Bank coupled with an overall decline in loans
outstanding across the remainder of Premier and lower yields on investments.
This decline in interest income more than offset the lower cost of funds
resulting from the decline in market interest rates over the past year and the
reduction in trust preferred obligations, FHLB advances and other borrowings. As
a result, the net interest margin for the six months ending June 30, 2003 was
approximately 3.72% compared to 3.82% for the same period in 2002. For the
quarter ending June 30, 2003, net interest income totaled $5.50 million, an 8.0%
decrease from the $5.98 million reported for the first quarter of 2003, and a
10.5% decrease from the $6.15 million of net interest income earned in the
second quarter of 2002. The decrease compared to the first quarter of 2003 was
largely due the interest income reversals at the Bank and the lower rates earned
on floating rate loans and reinvestments of maturing securities in the low
interest rate environment. These declines more than offset the $259,000 of
interest expense savings resulting from debt reduction and lower rates paid on
deposits. The decrease compared to the prior year second quarter was also
primarily the result of the interest income reversals and the lower reinvestment
rate on maturing securities.
Non-interest income increased $509,000 to $2,192,000 for the first six
months of 2003 compared to $1,683,000 for the first six months of 2002,
partially due to a $263,000 increase in gains on the sale of securities. The
remaining increase was largely due to a 10.9% or $122,000 increase in service
charges and fees and an increased volume of secondary market mortgage loan
activity resulting in secondary market fee income. These were partially offset
by a $45,000 decrease in insurance commissions. For the quarter ended June 30,
2003, non-interest income decreased $58,000 to $1,067,000 compared to the
$1,125,000 reported for the first quarter of 2003. The decline was largely due
to a $174,000 reduction in gains on investment security transactions. These were
only partially offset by a $141,000 (25.6%) increase in revenue from service
charges on deposit accounts. When compared to the second quarter of 2002, the
$1,067,000 of non-interest income was a $242,000 or 29.3% increase over the
$825,000 reported last year. Approximately half of the increase was due to an
increase in gains on investment security transactions while the remaining
increase was largely due to a $66,000 or 10.6% increase service charges on
deposit and an increased volume of secondary market mortgage loan activity.
Non-interest expenses for the first six months of 2003 totaled
$10,464,000 or 3.1% of average assets on an annualized basis compared to
$10,886,000 or 3.1% of average assets for the same period of 2002. The decrease
in non-interest expense is largely due to a $727,000 decrease in expenses to
maintain, sell or writedown to estimated realizable values various Other Real
Estate Owned (OREO) properties, as well as a decline in taxes other than
payroll, property and income taxes. These were partially offset by a $172,000 or
3.3% increase in staff costs, a $14,000 or 1.0% increase in occupancy &
equipment expense and the $255,000 of expenses related to the Bank
investigation.
For the quarter ending June 30, 2003, non-interest expense totaled
$5,237,000, an $11.9% or $707,000 decrease from the same quarter of 2002. The
decrease is again largely due to the $742,000 decrease in OREO expenses and
writedowns, coupled with the decrease in taxes other than payroll, property and
income taxes. These positive variances were partially offset by a $61,000 or
2.4% increase in staff costs and the $255,000 of expenses related to the Bank
investigation. When compared to the first quarter of 2003, non-interest expense
increased by $10,000 or 0.2%. A $165,000 or 5.9% decline in staff costs due to
the commencement of employee participation in the cost of medical insurance and
a planned reduction in staff and a $31,000 or 4.4% decrease in occupancy and
equipment costs were more than offset by the $255,000 of expenses related to the
Bank investigation.
The income tax benefit was $4,028,000 for the first six months of 2003
compared to an income tax benefit of $529,000 for the first six months of 2002.
The decrease in income tax expense can be primarily attributed to the decrease
in pretax net income resulting from the additional provision for loan losses.
The income tax benefit for the quarter ending June 30, 2003 was $4,157,000
compared to a tax benefit of $789,000 during the same period of 2002.
The annualized returns on stockholders' equity and on average assets
were approximately (25.77)% and (2.23)% for the six months ended June 30, 2003
compared to (3.28)% and (0.28)% for the same period in 2002.
B. Financial Position
Total assets at June 30, 2003 decreased $14.8 million or 2.2% to $662.8
million from the $677.6 million at December 31, 2002. This decrease is largely
due to the year-to-date loss resulting from the $12.1 million provision for loan
losses, a $3.9 million decrease in deposits, and the $3.0 million early
redemption of the Company's preferred debentures in March 2003.
Earning assets decreased to $612.2 at June 30, 2003 from the $627.3
million at December 31, 2002, a decrease of $15.1 million, or 2.4%. The decrease
is largely due to a $28.2 million decline in net loans (see below), partially
offset by a $6.5 million increase in cash and due from banks and a $9.5 million
increase in federal funds sold.
Cash and due from banks at June 30, 2003 was $24.6 million, a $6.5
million increase from $18.0 million on December 31, 2002. Likewise, federal
funds sold increased to $39.3 million from the $29.8 million reported at
December 31, 2002, an increase of $9.5 million. Approximately, $11.3 million of
the increase in these liquid assets was at the Bank to satisfy some scheduled
maturities of short-term deposits and to provide increased liquidity for deposit
withdrawals. The remaining increase in these liquid assets was the result of
retaining the liquidity from maturing investments and loan payoffs as part of
Premier's interest rate management strategy. As investments have matured and
loan principal balances have paid down, Premier has been reluctant to reinvest
the proceeds and lock in at the unusually low yields investment securities were
offering. Rather, Premier has elected to keep funds in more short-term
investments in order to take advantage of anticipated increases in interest
rates and to meet loan demand in growing markets. See the additional discussion
on liquidity below.
Total loans at June 30, 2003 were $413.6 million compared to $435.1
million at December 31, 2002, a decrease of $21.5 million. This decrease is due
to various factors. During the first six months of 2003, Premier charged-off
$8.5 million of loans, $6.2 million in June as a result of the Bank
investigation. Premier has continued its efforts to collect the loans retained
from the sale of the Bank of Mt Vernon, reducing their outstanding balances by
approximately $1.5 million during the first six months of 2003. Most of
Premier's other affiliate banks have experienced a significant level of
commercial loan and residential real estate loan payoffs as interest rates have
declined and opportunities for customers to refinance at lower rates have
expanded. Furthermore, the sluggish economy has reduced the consumer demand for
new loans and the resulting competition for new loan volume has increased.
However, two of Premier's banks have continued to increase their loans
outstanding during this time by a combined $4.9 million.
While total loans outstanding have decreased by $21.5 million, the
allowance for loan losses has increased by $6.7 million since December 31, 2003,
largely due to the $12.1 million provision resulting from the Bank
investigation. The combined effect of these two factors was a reduction in net
loans of approximately $28.2 million.
Deposits totaled $544.1 million as of June 30, 2003, a $3.9 million
decrease from the $548.0 million in deposits at December 31, 2002. The decrease
is due to $6.5 million decline in time deposits, largely due to non-renewal of
some high rate certificates of deposit, the non-renewal of a contract for
approximately $5.5 million of interest bearing public funds and a $3.5 million
decline in demand deposits. These declines were nearly offset by an
approximately $11.6 million increase in transaction based interest bearing
deposit accounts and traditional money market and savings accounts.
Outstanding debt, including the Company's outstanding trust preferred
debentures, has declined by $4.7 million since December 31, 2002. Federal Home
Loan Bank advances have declined by $1.1 million due to maturities and principal
payments. Other borrowed funds have declined by $600,000 due to scheduled
principal payments. Additionally, the Company's outstanding trust preferred
debentures have declined by $3.0 million due to a one-time call executed on
March 31, 2003 (see footnote 7 to the consolidated financial statements.)
The following table sets forth information with respect to the
Company's nonperforming assets at June 30, 2003 and December 31, 2002.
(In Thousands)
2003 2002
---- ----
Non-accrual loans $ 8,188 $10,588
Accruing loans which are contractually
past due 90 days or more 1,661 1,399
Restructured 292 293
------- -------
Total non-performing loans 10,141 12,280
Other real estate acquired through
foreclosure 2,831 3,939
------- -------
Total non-performing assets $12,972 $16,219
======= =======
Non-performing loans as a percentage
of total loans 2.45% 2.82%
Non-performing assets as a percentage
of total assets 1.96% 2.39%
The following table sets forth information with respect to the
Company's impaired loans at June 30, 2003 and December 31, 2002.
(In Thousands)
2003 2002
---- ----
Impaired loans $17,769 $ 8,949
Amount of the allowance for loan
losses allocated 8,260 3,016
Total non-performing loans and non-performing assets have declined
since year-end due to loan charge-offs and the continuation of senior management
directives that have emphasized the reduction of the level of delinquency,
non-accrual loans and OREO. However, while total non-performing loans have
declined, accruing loans at least 90 days past due have increased. A significant
effort has been placed on reviews of loan files, efforts by lenders to bring
borrowers current with the terms of their loan agreements and the sale of
certain OREO properties. It was during the course of this effort that facts
arose that led to the Bank investigation and the resulting charge-offs and
increase in the provision for loan losses. The increase in impaired loans is
primarily a result of the Bank investigation. As Premier's other Kentucky
institutions are in various stages of producing positive results toward improved
credit quality, senior management plans include developing and executing similar
action plans on the troubled loans recently identified at the Bank. As in the
past, when these plans are executed, Premier may experience increases in
non-performing loans and non-performing assets. Furthermore, any resulting
increases in loans placed on non-accrual status will have a negative impact on
future loan interest income. Also, as the investigation continues, other loans
may be identified that would necessitate additional charge-offs and potentially
additional provisions for loan losses.
C. Critical Accounting Policies
The Company follows financial accounting and reporting policies that
are in accordance with generally accepted accounting principles in the United
States of America. These policies are presented in Note 1 to the consolidated
audited financial statements in the Company's annual report on Form 10-K for the
year ended December 31, 2002. Some of these accounting policies, as discussed
below, are considered to be critical accounting policies. Critical accounting
policies are those policies that require management's most difficult, subjective
or complex judgments, often as a result of the need to make estimates about the
effect of matters that are inherently uncertain. The Company has identified
three accounting policies that are critical accounting policies and an
understanding of these policies is necessary to understand the financial
statements. These policies relate to determining the adequacy of the allowance
for loan losses, the impairment of goodwill, and the valuation of deferred tax
assets. There have been no significant changes in the application of accounting
policies since December 31, 2002.
Management believes that the judgments, estimates and assumptions used
in the preparation of the consolidated financial statements are appropriate
given the factual circumstances at the time.
D. 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 $153.8 million of securities at
market value as of June 30, 2003.
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.
E. Capital
At June 30, 2003, total shareholders' equity of $52.1 million was 7.9%
of total consolidated assets. This compares to total shareholders' equity of
$59.4 million or 8.8% of total consolidated assets on December 31, 2002.
Tier I capital totaled $49.8 million at June 30, 2003, which represents
a Tier I leverage ratio of 7.5%.
Book value per share was $9.95 at June 30, 2003, and $11.35 at December
31, 2002. The $7.5 million loss for the year-to-date was primarily responsible
for the decrease in comprehensive income and corresponding decrease in book
value per share. Partially offsetting this decrease was the after tax increase
in the market value of investment securities available for sale of $254,000.
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 2002 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 2002 10-K.
Item 4. Controls and Procedures
Premier management, including the Chief Executive Officer and Chief
Financial Officer, has conducted an evaluation of the effectiveness of
disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based
on that evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that the disclosure controls and procedures are effective in ensuring
that all material information required to be filed in this quarterly report has
been made known to them in a timely fashion. There have been no significant
changes in internal controls, or in factors that could significantly affect
internal controls, subsequent to the date the Chief Executive Officer and Chief
Financial Officer completed their evaluation.
PREMIER FINANCIAL BANCORP, INC.
- --------------------------------------------------------------------------------
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
(a) Annual meeting of the Shareholders was held June 18, 2003.
(b) All director nominees were elected.
(c) Certain matters voted upon at the meeting and the votes cast with
respect to such matters are as follows:
(i) The following were elected as directors of the Company for a
term of one year.
Director Votes Received Votes Withheld
1. Toney K. Adkins 4,622,469 81,495
2. Hosmer A. Brown, III 4,620,964 83,000
3. Edsel R. Burns 4,617,991 85,973
4. E. V. Holder, Jr. 4,621,519 82,445
5. Charles R. Hooten, Jr. 4,620,964 83,000
6. Wilbur M. Jenkins 4,621,174 82,790
7. Keith F. Molihan 4,622,218 81,746
8. Marshall T. Reynolds 4,507,859 196,105
9. Neal Scaggs 4,622,594 81,370
10. Robert W. Walker 4,622,024 81,940
11. Thomas W. Wright 4,622,344 81,620
(ii) Ratification of Crowe Chizek and Company, LLC as independent
auditors of the Corporation for 2003. Votes for 4,652,450;
votes against 44,534; votes abstaining 6,980.
Item 5. Other Information None
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are furnished in accordance with the
provisions of Item 601 of Regulation S-K.
31.1 Certification Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
31.2 Certification Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
32 Certification Pursuant to 18 U.S.Css.1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(b) The following Current Reports on Form 8-K were filed in the second
quarter of the Company's year.
April 28, 2003 - Press release reporting first quarter 2003
earnings.
June 5, 2003 - Press release regarding the continuation of the
deferral to pay the quarterly distributions on
Premier's Trust Preferred Certificates
outstanding.
June 16, 2003 - Press release regarding an anticipated increase in
the allowance for loan losses at one of Premier's
subsidiary banks.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Corporation has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PREMIER FINANCIAL BANCORP, INC.
Date: August 14, 2003 /s/ Robert W. Walker
---------------------------------------
Robert W. Walker
President & Chief Executive Officer
Date: August 14, 2003 /s/ Brien M. Chase
---------------------------------------
Brien M. Chase
Vice President & Chief Financial Officer