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EXCEL - IDEA: XBRL DOCUMENT - PREMIER FINANCIAL BANCORP INCFinancial_Report.xls
EX-31.1 - CEO SECTION 302 CERTIFICATION - PREMIER FINANCIAL BANCORP INCexhibit31-1.htm
EX-32 - CEO AND CFO SECTION 906 CERTIFICATION - PREMIER FINANCIAL BANCORP INCexhibit32.htm
EX-31.2 - CFO SECTION 302 CERTIFICATION - PREMIER FINANCIAL BANCORP INCexhibit31-2.htm


UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 
For the quarterly period ended September 30, 2014

 
or

o
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 000-20908

 
PREMIER FINANCIAL BANCORP, INC.
 
(Exact name of registrant as specified in its charter)

Kentucky
 
61-1206757
(State or other jurisdiction of incorporation organization)
 
(I.R.S. Employer Identification No.)
     
2883 Fifth Avenue
Huntington, West Virginia
 
 
25702
(Address of principal executive offices)
 
(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 þ     No o.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes þ     No o.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer, ”and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one)

Large accelerated filer  o.
Accelerated filer  þ.
   Non-accelerated filer  o
(Do not check if smaller reporting company)
Smaller reporting company  o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act).  Yeso     No þ.

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date.

Common stock, no par value, – 8,115,444 shares outstanding at October 31, 2014


PREMIER FINANCIAL BANCORP, INC.
SEPTEMBER 30, 2014






PREMIER FINANCIAL BANCORP, INC.
SEPTEMBER 30, 2014



Item 1.  Financial Statements

The accompanying information has not been audited by an independent registered public accounting firm; 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 Financial Bancorp, Inc.’s (“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, the identification and evaluation of impaired loans, the impairment of goodwill, the realization of deferred tax assets and stock based compensation disclosures.  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 registered public accounting firm.

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 report on Form 10-K.  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, 2013 for further information in this regard.

Index to consolidated financial statements:










PREMIER FINANCIAL BANCORP, INC.
SEPTEMBER 30, 2014 AND DECEMBER 31, 2013
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
 
   
(UNAUDITED)
     
   
2014
   
2013
 
ASSETS
           
Cash and due from banks
  $ 35,275     $ 27,378  
Interest bearing bank balances
    38,765       36,606  
Federal funds sold
    7,877       12,777  
Cash and cash equivalents
    81,917       76,761  
Securities available for sale
    253,559       218,066  
Loans held for sale
    395       77  
Loans
    854,394       740,770  
Allowance for loan losses
    (10,180 )     (11,027 )
Net loans
    844,214       729,743  
Federal Home Loan Bank stock, at cost
    3,895       4,183  
Premises and equipment, net
    21,142       17,798  
Other real estate owned
    12,574       13,524  
Interest receivable
    3,342       3,132  
Goodwill
    33,796       29,875  
Other intangible assets
    3,258       2,121  
Deferred taxes
    1,800       4,439  
Other assets
    1,476       460  
Total assets
  $ 1,261,368     $ 1,100,179  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
               
Deposits
               
Non-interest bearing
  $ 242,215     $ 210,193  
Time deposits, $100,000 and over
    182,011       146,905  
Other interest bearing
    652,770       566,925  
Total deposits
    1,076,996       924,023  
Securities sold under agreements to repurchase
    13,155       11,319  
FHLB advances
    5,000       -  
Other borrowed funds
    12,330       13,800  
Interest payable
    443       383  
Other liabilities
    5,210       3,714  
Total liabilities
    1,113,134       953,239  
                 
Stockholders' equity
               
Preferred stock, no par value; $1,000 per share liquidation preference,
               
5% cumulative, 1,000,000 shares authorized;
5,000 shares issued and outstanding at September 30, 2014, and
12,000 shares issued and outstanding at December 31, 2013
    5,000       11,955  
Common stock, no par value; 20,000,000 shares authorized;
8,115,444 shares issued and outstanding at September 30, 2014, and
8,038,345 shares issued and outstanding at December 31, 2013
    74,364       73,589  
Retained earnings
    67,611       62,021  
Accumulated other comprehensive income (loss)
    1,259       (625 )
Total stockholders' equity
    148,234       146,940  
Total liabilities and stockholders' equity
  $ 1,261,368     $ 1,100,179  
                 


PREMIER FINANCIAL BANCORP, INC.
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
 
   
Three Months Ended
September 30,
   
Nine Months Ended
September 30,
 
   
2014
   
2013
   
2014
   
2013
 
Interest income
                       
Loans, including fees
  $ 12,056     $ 11,615     $ 34,981     $ 32,081  
Securities available for sale
                               
Taxable
    1,365       1,501       4,080       4,611  
Tax-exempt
    59       36       157       120  
Federal funds sold and other
    46       40       142       112  
Total interest income
    13,526       13,192       39,360       36,924  
                                 
Interest expense
                               
Deposits
    953       994       2,800       3,139  
Repurchase agreements and other
    8       9       24       27  
Other borrowings
    139       162       427       498  
Total interest expense
    1,100       1,165       3,251       3,664  
                                 
Net interest income
    12,426       12,027       36,109       33,260  
Provision for loan losses
    536       50       147       550  
Net interest income after provision for loan losses
    11,890       11,977       35,962       32,710  
                                 
Non-interest income
                               
Service charges on deposit accounts
    924       883       2,562       2,519  
Electronic banking income
    647       514       1,797       1,501  
Secondary market mortgage income
    73       70       142       211  
Gain on disposition of securities
    28       72       28       220  
Other
    186       219       493       533  
      1,858       1,758       5,022       4,984  
Non-interest expenses
                               
Salaries and employee benefits
    4,400       3,741       13,257       11,178  
Occupancy and equipment expenses
    1,281       1,070       3,741       3,252  
Outside data processing
    1,079       836       2,977       2,511  
Professional fees
    (104 )     356       641       801  
Taxes, other than payroll, property and income
    203       149       507       512  
Write-downs, expenses, sales of other real estate owned, net
    450       160       56       756  
Amortization of intangibles
    225       152       593       456  
FDIC insurance
    247       212       708       624  
Loan collection expenses
    63       114       257       380  
Other expenses
    984       789       2,834       2,305  
      8,828       7,579       25,571       22,775  
Income before income taxes
    4,920       6,156       15,413       14,919  
Provision for income taxes
    1,769       2,230       5,492       5,380  
                                 
Net income
  $ 3,151     $ 3,926     $ 9,921     $ 9,539  
                                 
Preferred stock dividends and accretion
    (205 )     (165 )     (535 )     (495 )
Net income available to common stockholders
  $ 2,946     $ 3,761     $ 9,386     $ 9,044  
                                 
Net income per share:
                               
Basic
  $ 0.36     $ 0.47     $ 1.16     $ 1.13  
Diluted
    0.34       0.44       1.09       1.07  

PREMIER FINANCIAL BANCORP, INC.
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
 
   
Three Months Ended
September 30,
   
Nine Months Ended
September 30,
 
   
2014
   
2013
   
2014
   
2013
 
Net income
  $ 3,151     $ 3,926     $ 9,921     $ 9,539  
                                 
Other comprehensive income (loss):
                               
Unrealized gains (losses) on securities available for sale arising during the period
    (577 )     (730 )     2,882       (6,139 )
Reclassification of realized gain on the disposition of securities
    (28 )     (72 )     (28 )     (220 )
Net change in unrealized gain (loss) on securities available for sale
    (605 )     (802 )     2,854       (6,359 )
Less tax impact
    206       273       (970 )     2,162  
Other comprehensive income (loss)
    (399 )     (529 )     1,884       (4,197 )
                                 
Comprehensive income
  $ 2,752     $ 3,397     $ 11,805     $ 5,342  
                                 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
PREMIER FINANCIAL BANCORP, INC.
NINE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013
(UNAUDITED, DOLLARS IN THOUSANDS)
 
   
2014
   
2013
 
Cash flows from operating activities
           
Net income
  $ 9,921     $ 9,539  
Adjustments to reconcile net income to net cash from
operating activities
               
Depreciation
    1,151       997  
Provision for loan losses
    147       550  
Amortization (accretion), net
    627       (608 )
OREO writedowns (gains on sales), net
    (679 )     (61 )
Stock compensation expense
    208       128  
Loans originated for sale
    (5,167 )     (9,919 )
Secondary market loans sold
    4,991       9,639  
Secondary market income
    (142 )     (211 )
Gain on disposition of securities
    (28 )     (220 )
Changes in :
               
Interest receivable
    461       408  
Other assets
    1,180       1,287  
Interest payable
    (74 )     (77 )
Other liabilities
    981       568  
Net cash from operating activities
    13,577       12,020  
                 
Cash flows from investing activities
               
Purchases of securities available for sale
    (36,435 )     (27,230 )
Proceeds from the sale of securities available for sale
    4,842       149  
Proceeds from maturities and calls of securities available for sale
    36,654       62,533  
Redemption of FHLB stock
    408       -  
Net change in loans
    (20,249 )     (26,622 )
Acquisition of subsidiary, net of cash received
    40,973       -  
Purchases of premises and equipment, net
    (725 )     (891 )
Improvements to OREO property
    (189 )     (1,571 )
Proceeds from sales of other real estate acquired through foreclosure
    3,370       2,721  
Net cash from investing activities
    28,649       9,089  
                 
Cash flows from financing activities
               
Net change in deposits
    (31,373 )     (6,247 )
Net change in agreements to repurchase securities
    1,836       (11,531 )
Net change in federal funds purchased
    -       2,219  
Net change in short-term Federal Home Loan Bank advances
    5,000       5,000  
Redemption of Preferred Stock
    (7,000 )     -  
Repayment of other borrowed funds
    (1,814 )     (1,649 )
Proceeds from stock option exercises
    567       444  
Common stock dividends paid
    (3,796 )     (2,640 )
Preferred stock dividends paid
    (490 )     (450 )
Net cash from financing activities
    (37,070 )     (14,854 )
                 
Net change in cash and cash equivalents
    5,156       6,255  
                 
Cash and cash equivalents at beginning of period
    76,761       70,245  
                 
Cash and cash equivalents at end of period
  $ 81,917     $ 76,500  

PREMIER FINANCIAL BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
NINE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013
(UNAUDITED, DOLLARS IN THOUSANDS)
 
   
2014
   
2013
 
Supplemental disclosures of cash flow information:
           
Cash paid during period for interest
  $ 3,325     $ 3,741  
                 
Cash paid during period for income taxes
    4,179       4,336  
                 
Loans transferred to real estate acquired through foreclosure
    1,552       1,462  
                 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 

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



The consolidated financial statements include the accounts of Premier Financial Bancorp, Inc. (the Company) and its wholly owned subsidiaries (the “Banks”):

                 
September 30, 2014
 
       
Year
 
Total
   
Net Income
 
Subsidiary                               
 
Location                      
 
Acquired
 
Assets
   
Qtr
   
YTD
 
Citizens Deposit Bank & Trust
 
Vanceburg, Kentucky
 
1991
  $ 372,951     $ 1,130     $ 3,390  
Premier Bank, Inc.
 
Huntington, West Virginia
 
1998
    880,810       2,578       7,665  
Parent and Intercompany Eliminations
            7,607       (557 )     (1,134 )
  Consolidated Total
          $ 1,261,368     $ 3,151     $ 9,921  


All significant intercompany transactions and balances have been eliminated.

Recently Issued Accounting Pronouncements

In January 2014, FASB issued Accounting Standards Update 2014-04, Receivables—Troubled Debt Restructurings by Creditors (Subtopic 310-40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure (a consensus of the FASB Emerging Issues Task Force). The ASU clarifies when an insubstance repossession or foreclosure occurs and a creditor is considered to have received physical possession of real estate property collateralizing a consumer mortgage loan. Specifically, the new ASU requires a creditor to reclassify a collateralized consumer mortgage loan to real estate property upon obtaining legal title to the real estate collateral, or the borrower voluntarily conveying all interest in the real estate property to the lender to satisfy the loan through a deed in lieu of foreclosure or similar legal agreement. Additional disclosures are required detailing the amount of foreclosed residential real estate property held by the creditor and the recorded investment in consumer mortgages collateralized by real estate property that are in the process of foreclosure. The new guidance is effective for annual periods, and interim reporting periods within those annual periods, beginning after December 15, 2014. The adoption of this guidance will not have a material impact on the Company’s consolidated financial statements, but will result in additional disclosures.

In May 2014, FASB issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606). The ASU creates a new topic, Topic 606, to provide guidance on revenue recognition for entities that enter into contracts with customers to transfer goods or services or enter into contracts for the transfer of nonfinancial assets. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Additional disclosures are required to provide quantitative and qualitative information regarding the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The new guidance is effective for annual reporting periods, and interim reporting periods within those annual periods, beginning after December 15, 2016. Early adoption is not permitted. Management is currently evaluating the impact of the adoption of this guidance on the Company’s financial statements.


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



Amortized cost and fair value of investment securities, by category, at September 30, 2014 are summarized as follows:

2014
 
Amortized Cost
   
Unrealized Gains
   
Unrealized Losses
   
Fair Value
 
Available for sale
                       
Mortgage-backed securities
                       
U. S. sponsored agency MBS - residential
  $ 54,390     $ 539     $ (74 )   $ 54,855  
U. S. sponsored agency CMO’s - residential
    151,665       2,415       (1,280 )     152,800  
Total mortgage-backed securities of government sponsored agencies
    206,055       2,954       (1,354 )     207,655  
U. S. government sponsored agency securities
    34,827       60       (51 )     34,836  
Obligations of states and political subdivisions
    10,769       299       -       11,068  
Total available for sale
  $ 251,651     $ 3,313     $ (1,405 )   $ 253,559  

Amortized cost and fair value of investment securities, by category, at December 31, 2013 are summarized as follows:

2013
 
Amortized Cost
   
Unrealized Gains
   
Unrealized Losses
   
Fair Value
 
Available for sale
                       
Mortgage-backed securities
                       
U. S. sponsored agency MBS - residential
  $ 27,681     $ 463     $ (321 )   $ 27,823  
U. S. sponsored agency CMO’s - residential
    178,000       1,167       (2,445 )     176,722  
Total mortgage-backed securities of government sponsored agencies
    205,681       1,630       (2,766 )     204,545  
U. S. government sponsored agency securities
    7,058       30       (107 )     6,981  
Obligations of states and political subdivisions
    6,275       265       -       6,540  
Total available for sale
  $ 219,014     $ 1,925     $ (2,873 )   $ 218,066  


 
 
10.

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


NOTE  2–SECURITIES - continued

The amortized cost and fair value of securities at September 30, 2014 by contractual maturity are shown below.  Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

   
Amortized
Cost
   
Fair
Value
 
Available for sale
           
Due in one year or less
  $ 11,473     $ 11,490  
Due after one year through five years
    23,492       23,734  
Due after five years through ten years
    9,431       9,456  
Due after ten years
    1,200       1,224  
Mortgage-backed securities of government sponsored agencies
    206,055       207,655  
Total available for sale
  $ 251,651     $ 253,559  
                 

Proceeds from the sale of securities were $4,842,000 and $149,000 during the first nine months of 2014 and 2013, while a $28,000 gain and a $72,000 gain was recognized on the sale of those securities, respectively.  In addition, a $148,000 gain was recognized from calls of securities during the first nine months of 2013.

Securities with unrealized losses at September 30, 2014 aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position are as follows:

   
Less than 12 Months
   
12 Months or More
   
Total
 
Description of Securities
 
Fair Value
   
Unrealized Loss
   
Fair Value
   
Unrealized Loss
   
Fair Value
   
Unrealized Loss
 
                                     
U.S. government sponsored agency securities
  $ 7,928     $ (51 )     -       -     $ 7,928     $ (51 )
U.S government sponsored agency MBS – residential
    27,807       (60 )     3,998       (14 )     31,805       (74 )
U.S government sponsored agency CMO – residential
    21,651       (240 )     26,533       (1,040 )     48,184       (1,280 )
   Total temporarily impaired
  $ 57,386     $ (351 )   $ 30,531     $ (1,054 )   $ 87,917     $ (1,405 )


 
 
11.

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


NOTE  2 – SECURITIES - continued

Securities with unrealized losses at December 31, 2013 aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position are as follows:

   
Less than 12 Months
   
12 Months or More
   
Total
 
Description of Securities
 
Fair Value
   
Unrealized Loss
   
Fair Value
   
Unrealized Loss
   
Fair Value
   
Unrealized Loss
 
                                     
U.S government sponsored agency securities
  $ 3,890     $ (107 )   $ -     $ -     $ 3,890     $ (107 )
U.S government sponsored agency MBS’s – residential
    13,797       (321 )     -       -       13,797       (321 )
U.S government sponsored agency CMO’s – residential
    102,341       (2,445 )     -       -       102,341       (2,445 )
Total temporarily impaired
  $ 120,028     $ (2,873 )   $ -     $ -     $ 120,028     $ (2,873 )

The investment portfolio is predominately high quality interest-bearing debt securities with defined maturity dates backed by the U.S. Government or Government sponsored entities.  The unrealized losses at September 30, 2014 and December 31, 2013 are price changes resulting from changes in the interest rate environment and are considered to be temporary declines in the value of the securities.  Their fair value is expected to recover as the bonds approach their maturity date and/or market conditions improve.



Major classifications of loans at September 30, 2014 and December 31, 2013 are summarized as follows:

   
2014
   
2013
 
Residential real estate
  $ 278,586     $ 216,081  
Multifamily real estate
    30,315       38,456  
Commercial real estate:
               
Owner occupied
    103,457       90,539  
Non owner occupied
    212,811       208,756  
Commercial and industrial
    103,764       85,301  
Consumer
    34,230       25,113  
All other
    91,231       76,524  
    $ 854,394     $ 740,770  


 
 
12.

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 nine months ended September 30, 2014 was as follows:

Loan Class
 
Balance
Dec 31, 2013
   
Provision for
loan losses
   
Loans
charged-off
   
Recoveries
   
Balance
Sept 30, 2014
 
                               
Residential real estate
  $ 2,694     $ (419 )   $ 308     $ 55     $ 2,022  
Multifamily real estate
    417       (137 )     -       -       280  
Commercial real estate:
                                       
Owner occupied
    1,407       112       207       -       1,312  
Non owner occupied
    2,037       310       323       -       2,024  
Commercial and industrial
    2,184       (335 )     111       11       1,749  
Consumer
    297       (12 )     105       45       225  
All other
    1,991       628       267       216       2,568  
Total
  $ 11,027     $ 147     $ 1,321     $ 327     $ 10,180  

Activity in the allowance for loan losses by portfolio segment for the nine months ending September 30, 2013 was as follows:

Loan Class
 
Balance
Dec 31, 2012
   
Provision for
loan losses
   
Loans
charged-off
   
Recoveries
   
Balance
Sept 30, 2013
 
                               
Residential real estate
  $ 2,163     $ 571     $ 191     $ 10     $ 2,553  
Multifamily real estate
    331       43       -       -       374  
Commercial real estate:
                                       
Owner occupied
    1,117       96       67       299       1,445  
Non owner occupied
    1,888       209       -       -       2,097  
Commercial and industrial
    3,046       215       12       87       3,336  
Consumer
    244       87       123       47       255  
All other
    2,699       (671 )     202       286       2,112  
Total
  $ 11,488     $ 550     $ 595     $ 729     $ 12,172  


 
 
13.

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 three months ended September 30, 2014 was as follows:

Loan Class
 
Balance
June 30, 2014
   
Provision for
loan losses
   
Loans
charged-off
   
Recoveries
   
Balance
Sept 30, 2014
 
                               
Residential real estate
  $ 2,140     $ (28 )   $ 137     $ 47     $ 2,022  
Multifamily real estate
    311       (31 )     -       -       280  
Commercial real estate:
                                       
Owner occupied
    1,364       73       125       -       1,312  
Non owner occupied
    2,270       (246 )     -       -       2,024  
Commercial and industrial
    1,489       281       27       6       1,749  
Consumer
    232       21       46       18       225  
All other
    2,071       466       63       94       2,568  
Total
  $ 9,877     $ 536     $ 398     $ 165     $ 10,180  

Activity in the allowance for loan losses by portfolio segment for the three months ending September 30, 2013 was as follows:

Loan Class
 
Balance
June 30, 2013
   
Provision for
loan losses
   
Loans
charged-off
   
Recoveries
   
Balance
Sept 30, 2013
 
                               
Residential real estate
  $ 2,371     $ 213     $ 35     $ 4     $ 2,553  
Multifamily real estate
    429       (55 )     -       -       374  
Commercial real estate:
                                       
Owner occupied
    1,094       351       -       -       1,445  
Non owner occupied
    1,968       129       -       -       2,097  
Commercial and industrial
    4,073       (772 )     -       35       3,336  
Consumer
    233       60       60       22       255  
All other
    2,030       124       108       66       2,112  
Total
  $ 12,198     $ 50     $ 203     $ 127     $ 12,172  


 
 
14.

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


NOTE  3 – LOANS - continued

Purchased Impaired Loans

The Company holds purchased loans for which there was, at their 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 September 30, 2014 and December 31, 2013.

   
2014
   
2013
 
Residential real estate
  $ -     $ 183  
Multifamily real estate
    515       1,229  
Commercial real estate
               
Owner occupied
    245       250  
Non owner occupied
    5,728       6,782  
Commercial and industrial
    327       496  
All other
    5,117       4,623  
Total carrying amount
  $ 11,932     $ 13,563  
                 
Carrying amount, net of allowance
  $ 10,937     $ 12,931  

For those purchased loans disclosed above, the Company increased the allowance for loan losses by $400,000 for the three and nine months ended September 30, 2014.  The Company did not increase the allowance for loan losses for purchased impaired loans during the nine months ended September 30, 2013.

For the majority of these loans, the Company cannot reasonably estimate the cash flows expected to be collected on the loans and therefore has continued to account for those 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 on those loans accounted for using the cost recovery method.  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 below.

The Company has determined that the cash flows from borrowers on a limited number of purchased loans can be reasonably estimated.  As such, a portion of the non-accretable difference was reclassified to accretable yield and is being recognized as interest income over the remaining life of the loan(s).

 
 
15.

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


NOTE  3 – LOANS - continued

The accretable yield, or income expected to be collected, on the purchased loans above is as follows at September 30, 2014 and September 30, 2013.

   
2014
   
2013
 
Balance at January 1
  $ 217     $ 635  
New loans purchased
    -       -  
Accretion of income
    (9 )     (22 )
Income recognized upon full loan repayment
    -       (415 )
Reclassifications from non-accretable difference
    -       23  
Disposals
    -       -  
Balance at September 30
  $ 208     $ 221  



 
 
16.

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 tables present the recorded investment in nonaccrual and loans past due over 90 days still on accrual by class of loans as of September 30, 2014 and December 31 2013.  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.

September 30, 2014
 
Principal Owed on Non-accrual Loans
   
Recorded Investment in Non-accrual Loans
   
Loans Past Due Over 90 Days, still accruing
 
                   
Residential real estate
  $ 2,105     $ 1,898     $ 1,973  
Multifamily real estate
    1,933       1,176       1,355  
Commercial real estate
                       
Owner occupied
    2,347       2,073       5  
Non owner occupied
    2,061       1,887       26  
Commercial and industrial
    2,574       1,284       106  
Consumer
    267       232       60  
All other
    12,596       5,162       481  
Total
  $ 23,883     $ 13,712     $ 4,006  
                         

December 31, 2013
 
Principal Owed on Non-accrual Loans
   
Recorded Investment in Non-accrual Loans
   
Loans Past Due Over 90 Days, still accruing
 
                   
Residential real estate
  $ 2,021     $ 1,725     $ 1,737  
Multifamily real estate
    3,282       1,889       1,369  
Commercial real estate
                       
Owner occupied
    1,364       1,147       1,387  
Non owner occupied
    2,683       1,973       3,739  
Commercial and industrial
    6,838       4,961       84  
Consumer
    167       148       16  
All other
    12,212       4,798       146  
Total
  $ 28,567     $ 16,641     $ 8,478  
                         

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.

 
 
17.

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 aging of the recorded investment in past due loans as of September 30, 2014 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
  $ 278,586     $ 6,827     $ 3,068     $ 9,895     $ 268,691  
Multifamily real estate
    30,315       330       2,016       2,346       27,969  
Commercial real estate:
                                       
Owner occupied
    103,457       543       1,464       2,007       101,450  
Non owner occupied
    212,811       3,892       1,665       5,557       207,254  
Commercial and industrial
    103,764       175       1,181       1,356       102,408  
Consumer
    34,230       530       130       660       33,570  
All other
    91,231       4,210       5,595       9,805       81,426  
Total
  $ 854,394     $ 16,507     $ 15,119     $ 31,626     $ 822,768  

The table above includes approximately $2,352,000 of loans 30-89 days past due and $1,003,000 of loans greater than 90 days past due that were acquired via the purchase of the Bank of Gassaway on April 4, 2014.  See Note 9 below for additional details on purchase of the Bank of Gassaway.

The following table presents the aging of the recorded investment in past due loans as of December 31, 2013 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
  $ 216,081     $ 4,770     $ 2,431     $ 7,201     $ 208,880  
Multifamily real estate
    38,456       367       2,688       3,055       35,401  
Commercial real estate:
                                       
Owner occupied
    90,539       516       2,073       2,589       87,950  
Non owner occupied
    208,756       278       5,478       5,756       203,000  
Commercial and industrial
    85,301       1,433       1,438       2,871       82,430  
Consumer
    25,113       421       82       503       24,610  
All other
    76,524       2,510       4,881       7,391       69,133  
Total
  $ 740,770     $ 10,295     $ 19,071     $ 29,366     $ 711,404  



 
 
18.

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 September 30, 2014:
   
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
  $ -     $ 2,022     $ -     $ 2,022     $ 2,076     $ 276,510     $ -     $ 278,586  
Multifamily real estate
    26       254       -       280       1,800       28,000       515       30,315  
Commercial real estate:
                                                               
Owner occupied
    125       1,187       -       1,312       2,104       101,108       245       103,457  
Non-owner occupied
    14       2,010       -       2,024       3,151       203,932       5,728       212,811  
Commercial and industrial
    368       1,286       95       1,749       1,190       102,247       327       103,764  
Consumer
    -       225       -       225       -       34,230       -       34,230  
All other
    -       1,668       900       2,568       2,572       83,542       5,117       91,231  
Total
  $ 533     $ 8,652     $ 995     $ 10,180     $ 12,893     $ 829,569     $ 11,932     $ 854,394  

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 December 31, 2013:
   
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
  $ 138     $ 2,556     $ -     $ 2,694     $ 2,787     $ 213,111     $ 183     $ 216,081  
Multifamily real estate
    -       417       -       417       1,822       35,405       1,229       38,456  
Commercial real estate:
                                                               
Owner occupied
    170       1,237       -       1,407       2,386       87,903       250       90,539  
Non-owner occupied
    362       1,675       -       2,037       1,024       200,950       6,782       208,756  
Commercial and industrial
    1,088       964       132       2,184       4,270       80,535       496       85,301  
Consumer
    -       297       -       297       -       25,113       -       25,113  
All other
    102       1,389       500       1,991       3,279       68,622       4,623       76,524  
Total
  $ 1,860     $ 8,535     $ 632     $ 11,027     $ 15,568     $ 711,639