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EXCEL - IDEA: XBRL DOCUMENT - PREMIER FINANCIAL BANCORP INCFinancial_Report.xls
EX-32 - CEO AND CFO SECTION 906 CERTIFICATION - PREMIER FINANCIAL BANCORP INCexhibit32.htm
EX-31.1 - CEO SECTION 302 CERTIFICATION - PREMIER FINANCIAL BANCORP INCexhbit31-1.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 March 31, 2015

 
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, – 8,152,889 shares outstanding at April 29, 2015


PREMIER FINANCIAL BANCORP, INC.
MARCH 31, 2015





 
 
- 2 -


PREMIER FINANCIAL BANCORP, INC.
MARCH 31, 2015


PART I  - FINANCIAL INFORMATION


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 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 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, 2014 for further information in this regard.

Index to consolidated financial statements:










 
 
- 3 -


PREMIER FINANCIAL BANCORP, INC.
MARCH 31, 2015 AND DECEMBER 31, 2014
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)


   
(UNAUDITED)
     
   
2015
   
2014
 
ASSETS
           
Cash and due from banks
  $ 31,724     $ 35,147  
Interest bearing bank balances
    54,092       35,251  
Federal funds sold
    24,417       4,986  
Cash and cash equivalents
    110,233       75,384  
Securities available for sale
    225,137       229,750  
Loans held for sale
    633       226  
Loans
    872,114       879,711  
Allowance for loan losses
    (10,170 )     (10,347 )
Net loans
    861,944       869,364  
Federal Home Loan Bank stock, at cost
    2,996       2,996  
Premises and equipment, net
    20,384       21,384  
Real estate and other property acquired through foreclosure
    12,279       12,208  
Interest receivable
    3,105       3,219  
Goodwill
    33,796       33,796  
Other intangible assets
    2,809       3,033  
Other assets
    790       1,464  
Total assets
  $ 1,274,106     $ 1,252,824  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
               
Deposits
               
Non-interest bearing
  $ 256,974     $ 252,828  
Time deposits, $250,000 and over
    65,396       66,216  
Other interest bearing
    767,428       756,199  
Total deposits
    1,089,798       1,075,243  
Securities sold under agreements to repurchase
    18,099       15,580  
Other borrowed funds
    11,115       11,722  
Interest payable
    386       434  
Other liabilities
    5,830       4,063  
Total liabilities
    1,125,228       1,107,042  
                 
Stockholders' equity
               
Common stock, no par value; 20,000,000 shares authorized;
8,150,223 shares issued and outstanding at March 31, 2015, and
8,142,056 shares issued and outstanding at December 31, 2014
    74,718       74,568  
Retained earnings
    71,803       69,719  
Accumulated other comprehensive income
    2,357       1,495  
Total stockholders' equity
    148,878       145,782  
Total liabilities and stockholders' equity
  $ 1,274,106     $ 1,252,824  
                 



PREMIER FINANCIAL BANCORP, INC.
THREE MONTHS ENDED MARCH 31, 2015 AND 2014
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
 
   
Three Months Ended
March 31,
 
     
2015
     
2014
 
Interest income
               
Loans, including fees
  $
11,665
   
    11,663
 
Securities available for sale
               
Taxable
   
1,257
     
1,315
 
Tax-exempt
   
55
     
35
 
Federal funds sold and other
   
36
     
32
 
Total interest income
   
13,013
     
13,045
 
                 
Interest expense
               
Deposits
   
916
     
887
 
Repurchase agreements and other
   
10
     
7
 
Other borrowings
   
123
     
144
 
Total interest expense
   
1,049
     
1,038
 
                 
Net interest income
   
11,964
     
12,007
 
Provision (credit) for loan losses
   
69
     
(310)
 
Net interest income after provision for loan losses
   
11,895
     
12,317
 
                 
Non-interest income
               
Service charges on deposit accounts
   
878
     
739
 
Electronic banking income
   
644
     
495
 
Secondary market mortgage income
   
38
     
19
 
Other
   
145
     
128
 
     
1,705
     
1,381
 
Non-interest expenses
               
Salaries and employee benefits
   
4,341
     
3,984
 
Occupancy and equipment expenses
   
1,327
     
1,153
 
Outside data processing
   
1,096
     
869
 
Professional fees
   
129
     
536
 
Taxes, other than payroll, property and income
   
196
     
152
 
Write-downs, expenses, sales of other real estate owned, net
   
342
     
94
 
Amortization of intangibles
   
225
     
144
 
FDIC insurance
   
215
     
201
 
Other expenses
   
921
     
896
 
     
8,792
     
8,029
 
Income before income taxes
   
4,808
     
5,669
 
Provision for income taxes
   
1,666
     
1,999
 
                 
Net income
  $
3,142
   
    3,670
 
                 
Preferred stock dividends and accretion
   
-
     
(165)
 
Net income available to common stockholders
  $
3,142
   
    3,505
 
                 
Net income per share:
               
Basic
  $
0.39
   
 0.44
 
Diluted
   
 0.36
     
 0.41
 


PREMIER FINANCIAL BANCORP, INC.
THREE MONTHS ENDED MARCH 31, 2015 AND 2014
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)


   
Three Months Ended
March 31,
 
     
2015
   
2014
 
Net income
  $
3,142
   $
    3,670
 
               
Other comprehensive income:
             
Unrealized gains arising during the period
   
1,306
   
2,718
 
Reclassification of realized amount
   
-
   
-
 
Net change in unrealized gain on securities
   
1,306
   
2,718
 
Less tax impact
   
(444)
   
(924)
 
Other comprehensive income
   
862
   
1,794
 
               
Comprehensive income
  $
4,004
   $
    5,464
 
               


PREMIER FINANCIAL BANCORP, INC.
THREE MONTHS ENDED MARCH 31, 2015 AND 2014
(UNAUDITED, DOLLARS IN THOUSANDS)


   
2015
   
2014
 
Cash flows from operating activities
           
Net income
  $ 3,142     $ 3,670  
Adjustments to reconcile net income to net cash from operating activities
               
Depreciation
    420       321  
Provision (credit) for loan losses
    69       (310 )
Amortization (accretion), net
    58       78  
OREO writedowns (gains on sales), net
    177       (54 )
Stock compensation expense
    139       42  
Loans originated for sale
    (1,679 )     (1,631 )
Secondary market loans sold
    1,308       806  
Secondary market income
    (38 )     (19 )
Changes in :
               
Interest receivable
    114       221  
Other assets
    544       510  
Interest payable
    (48 )     (49 )
Other liabilities
    523       1,686  
Net cash from operating activities
    4,729       5,271  
                 
Cash flows from investing activities
               
Purchases of securities available for sale
    (8,757 )     (12,268 )
Proceeds from maturities and calls of securities available for sale
    15,350       8,818  
Redemption of FHLB stock
    -       200  
Net change in loans
    6,587       1,437  
Purchases of premises and equipment, net
    (180 )     (16 )
Improvements to OREO property
    -       (242 )
Proceeds from sales of other real estate acquired through foreclosure
    1,652       1,366  
Net cash from investing activities
    14,652       (705 )
                 
Cash flows from financing activities
               
Net change in deposits
    14,603       15,830  
Net change in agreements to repurchase securities
    2,519       (829 )
Repayment of other borrowed funds
    (607 )     (600 )
Proceeds from stock option exercises
    11       63  
Common stock dividends paid
    (1,058 )     (1,850 )
Preferred stock dividends paid
    -       (150 )
Net cash from financing activities
    15,468       12,464  
                 
Net change in cash and cash equivalents
    34,849       17,030  
                 
Cash and cash equivalents at beginning of period
    75,384       76,761  
                 
Cash and cash equivalents at end of period
  $ 110,233     $ 93,791  


PREMIER FINANCIAL BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
THREE MONTHS ENDED MARCH 31, 2015 AND 2014
(UNAUDITED, DOLLARS IN THOUSANDS)


   
2015
   
2014
 
Supplemental disclosures of cash flow information:
           
Cash paid during period for interest
  $ 1,097     $ 1,088  
                 
Cash paid during period for income taxes
    -       260  
                 
Loans transferred to real estate acquired through foreclosure
    1,140       804  
                 




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”):

                 
March 31, 2015
 
       
Year
 
Total
   
Net Income
 
Subsidiary                               
 
Location                      
 
Acquired
 
Assets
   
Qtr
 
Citizens Deposit Bank & Trust
 
Vanceburg, Kentucky
 
1991
  $ 388,304     $ 1,014  
Premier Bank, Inc.
 
Huntington, West Virginia
 
1998
    880,024       2,573  
Parent and Intercompany Eliminations
            5,778       (445 )
  Consolidated Total
          $ 1,274,106     $ 3,142  


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 did 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.

 
 
- 9 -


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 March 31, 2015 are summarized as follows:

2015
 
Amortized Cost
   
Unrealized Gains
   
Unrealized Losses
   
Fair Value
 
Available for sale
                       
Mortgage-backed securities
                       
U. S. sponsored agency MBS - residential
  $ 58,377     $ 1,165     $ (4 )   $ 59,538  
U. S. sponsored agency CMO’s - residential
    134,321       2,526       (499 )     136,348  
Total mortgage-backed securities of government sponsored agencies
    192,698       3,691       (503 )     195,886  
U. S. government sponsored agency securities
    18,494       106       -       18,600  
Obligations of states and political subdivisions
    10,374       277       -       10,651  
Total available for sale
  $ 221,566     $ 4,074     $ (503 )   $ 225,137  

Amortized cost and fair value of investment securities, by category, at December 31, 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
  $ 52,006     $ 774     $ -     $ 52,780  
U. S. sponsored agency CMO’s - residential
    142,932       2,167       (911 )     144,188  
Total mortgage-backed securities of government sponsored agencies
    194,938       2,941       (911 )     196,968  
U. S. government sponsored agency securities
    22,553       30       (57 )     22,506  
Obligations of states and political subdivisions
    10,015       261       -       10,276  
Total available for sale
  $ 227,486     $ 3,232     $ (968 )   $ 229,750  


 
 
- 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 March 31, 2015 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
  $ 3,795     $ 3,822  
Due after one year through five years
    20,574       20,816  
Due after five years through ten years
    3,833       3,918  
Due after ten years
    666       695  
Mortgage-backed securities of government sponsored agencies
    192,698       195,886  
Total available for sale
  $ 221,566     $ 225,137  
                 

There were no sales of securities during the first three months of 2015 nor the first three months of 2014.

Securities with unrealized losses at March 31, 2015 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 MBS – residential
  $ 1,805     $ (4 )   $ -     $ -     $ 1,805     $ (4 )
U.S government sponsored agency CMO – residential
    4,932       (27 )     21,092       (472 )     26,024       (499 )
Total temporarily impaired
  $ 6,737     $ (31 )   $ 21,092     $ (472 )   $ 27,829     $ (503 )
                                                 


 
 
- 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, 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
  $ 9,971     $ (57 )   $ -     $ -     $ 9,971     $ (57 )
U.S government sponsored agency CMO’s – residential
    5,194       (52 )     26,471       (859 )     31,665       (911 )
Total temporarily impaired
  $ 15,165     $ (109 )   $ 26,471     $ (859 )   $ 41,636     $ (968 )

The investment portfolio is predominately high credit quality interest-bearing bonds with defined maturity dates backed by the U.S. Government or Government sponsored entities.  The unrealized losses at March 31, 2015 and December 31, 2014 are price changes resulting from changes in the interest rate environment and are considered to be temporary declines in the value of the securities.  Management does not intend to sell and it is likely that management will not be required to sell the securities prior to their anticipated recovery.  Their fair value is expected to recover as the bonds approach their maturity date and/or market conditions improve.



Major classifications of loans at March 31, 2015 and December 31, 2014 are summarized as follows:

   
2015
   
2014
 
Residential real estate
  $ 277,825     $ 278,212  
Multifamily real estate
    28,971       30,310  
Commercial real estate:
               
Owner occupied
    124,918       120,861  
Non owner occupied
    224,566       230,750  
Commercial and industrial
    81,113       85,943  
Consumer
    31,182       32,745  
All other
    103,539       100,890  
    $ 872,114     $ 879,711  


 
 
- 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 three months ended  March 31, 2015 was as follows:

Loan Class
 
Balance
Dec 31, 2014
   
Provision (credit) for loan losses
   
Loans charged-off
   
Recoveries
   
Balance
March 31, 2015
 
                               
Residential real estate
  $ 2,093     $ 154     $ 74     $ 23     $ 2,196  
Multifamily real estate
    304       (17 )     -       -       287  
Commercial real estate:
                                       
Owner occupied
    1,501       (11 )     2       1       1,489  
Non owner occupied
    2,316       8       -       -       2,324  
Commercial and industrial
    1,444       165       161       2       1,450  
Consumer
    243       18       54       34       241  
All other
    2,446       (248 )     59       44       2,183  
Total
  $ 10,347     $ 69     $ 350     $ 104     $ 10,170  

Activity in the allowance for loan losses by portfolio segment for the three months ended  March 31, 2014 was as follows:

Loan Class
 
Balance
Dec 31, 2013
   
Provision (credit) for loan losses
   
Loans charged-off
   
Recoveries
   
Balance
March 31, 2014
 
                               
Residential real estate
  $ 2,694     $ (427 )   $ 19     $ 2     $ 2,250  
Multifamily real estate
    417       (120 )     -       -       297  
Commercial real estate:
                                       
Owner occupied
    1,407       71       1       -       1,477  
Non owner occupied
    2,037       648       300       -       2,385  
Commercial and industrial
    2,184       (596 )     63       2       1,527  
Consumer
    297       (70 )     26       19       220  
All other
    1,991       184       37       50       2,188  
Total
  $ 11,027     $ (310 )   $ 446     $ 73     $ 10,344  


 
 
- 13 -


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 March 31, 2015 and December 31, 2014.

   
2015
   
2014
 
Multifamily real estate
  $ 479     $ 497  
Commercial real estate
               
Owner occupied
    131       131  
Non owner occupied
    5,658       5,695  
Commercial and industrial
    133       136  
All other
    5,146       5,128  
Total carrying amount
  $ 11,547     $ 11,587  
Contractual principal balance
  $ 21,215     $ 21,250  
                 
Carrying amount, net of allowance
  $ 10,599     $ 10,639  

For those purchased loans disclosed above, the Company did not increase the allowance for loan losses for the three-months ended March 31, 2015, nor did it increase the allowance for loan losses for purchased impaired loans during the three-months ended March 31, 2014.

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.

During 2015 and 2014, the Company determined that the cash flows from borrowers on a limited number of purchased loans could 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).

 
 
- 14 -


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 March 31, 2015 and March 31, 2014.

   
2015
   
2014
 
Balance at January 1
  $ 204     $ 217  
New loans purchased
    -       -  
Accretion of income
    (5 )     (3 )
Reclassifications from non-accretable difference
    -       -  
Disposals
    -       -  
Balance at December 31
  $ 199     $ 214  


 
 
- 15 -


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 March 31, 2015 and December 31 2014.  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.

March 31, 2015
 
Principal Owed on Non-accrual Loans
   
Recorded Investment in Non-accrual Loans
   
Loans Past Due Over 90 Days, still accruing
 
                   
Residential  real estate
  $ 2,598     $ 2,094     $ 1,060  
Multifamily real estate
    1,801       1,018       173  
Commercial real estate
                       
Owner occupied
    989       831       -  
Non owner occupied
    1,988       1,757       -  
Commercial and industrial
    1,761       663       563  
Consumer
    208       181       -  
All other
    12,633       5,199       -  
Total
  $ 21,978     $ 11,743     $ 1,796  
                         

December 31, 2014
 
Principal Owed on Non-accrual Loans
   
Recorded Investment in Non-accrual Loans
   
Loans Past Due Over 90 Days, still accruing
 
                   
Residential  real estate
  $ 1,996     $ 1,768     $ 668  
Multifamily real estate
    1,803       1,033       564  
Commercial real estate
                       
Owner occupied
    2,115       1,928       -  
Non owner occupied
    2,020       1,819       26  
Commercial and industrial
    2,012       806       8  
Consumer
    213       185       -  
All other
    12,608       5,173       -  
Total
  $ 22,767     $ 12,712     $ 1,266  
                         

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.

 
 
- 16 -


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      March 31, 2015 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
  $ 277,825     $ 5,197     $ 2,248     $ 7,445     $ 270,380  
Multifamily real estate
    28,971       1,126       712       1,838       27,133  
Commercial real estate:
                                       
Owner occupied
    124,918       2,217       453       2,670       122,248  
Non owner occupied
    224,566       1,827       1,757       3,584       220,982  
Commercial and industrial
    81,113       279       1,115       1,394       79,719  
Consumer
    31,182       414       76       490       30,692  
All other
    103,539       277       5,199       5,476       98,063  
Total
  $ 872,114     $ 11,337     $ 11,560     $ 22,897     $ 849,217  
 
 
The following table presents the aging of the recorded investment in past due loans as of December 31, 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
  $ 278,212     $ 5,810     $ 1,706     $ 7,516     $ 270,696  
Multifamily real estate
    30,310       177       1,100       1,277       29,033  
Commercial real estate:
                                       
Owner occupied
    120,861       250       1,530       1,780       119,081  
Non owner occupied
    230,750       2,173       1,670       3,843       226,907  
Commercial and industrial
    85,943       1,720       608       2,328       83,615  
Consumer
    32,745       497       71       568       32,177  
All other
    100,890       234       5,127       5,361       95,529  
Total
  $ 879,711     $ 10,861     $ 11,812     $ 22,673     $ 857,038  



 
 
- 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 balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of March 31, 2015:
   
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
  $ -     $ 2,196     $ -     $ 2,196     $ 133     $ 277,692     $ -     $ 277,825  
Multifamily real estate
    -       287       -       287       2,082       26,410       479       28,971  
Commercial real estate:
                                                               
Owner occupied
    69       1,420       -       1,489       901       123,886       131       124,918  
Non-owner occupied
    33       2,291       -       2,324       4,727       214,181       5,658       224,566  
Commercial and industrial
    359       1,043       48       1,450       975       80,005       133       81,113  
Consumer
    -       241       -       241       -       31,182       -       31,182  
All other
    -       1,283       900       2,183       1,008       97,385       5,146       103,539  
Total
  $ 461     $ 8,761     $ 948     $ 10,170     $ 9,826     $ 850,741     $ 11,547     $ 872,114  

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, 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
  $ -     $ 2,093     $ -     $ 2,093     $ 137     $ 278,075     $ -     $ 278,212  
Multifamily real estate
    -       304       -       304       536       29,277       497       30,310  
Commercial real estate:
                                                               
Owner occupied
    107       1,394       -       1,501       2,011       118,719       131       120,861  
Non-owner occupied
    54       2,262       -       2,316       4,874       220,181       5,695       230,750  
Commercial and industrial
    291       1,105       48       1,444       902       84,905       136       85,943  
Consumer
    -       243       -       243       -       32,745       -       32,745  
All other
    -       1,546       900       2,446       1,109       94,653       5,128       100,890  
Total
  $ 452     $ 8,947     $ 948     $ 10,347     $ 9,569     $ 858,555     $ 11,587     $ 879,711  

 
 
- 18 -


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


NOTE  3–LOANS - continued

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

The following table presents loans individually evaluated for impairment by class of loans as of March 31, 2015.  The table includes $5,673,000 of loans acquired with deteriorated credit quality that the Company cannot reasonably estimate cash flows such that they are accounted for on the cost recovery method and are still individually evaluated for impairment.

   
Unpaid Principal Balance
   
Recorded Investment
   
Allowance for Loan Losses Allocated
 
With no related allowance recorded:
                 
Residential real estate
  $ 175     $ 133     $ -  
Multifamily real estate
    3,343       2,561       -  
Commercial real estate
                       
Owner occupied
    549       486       -  
Non owner occupied
    4,336       4,105       -  
Commercial and industrial
    1,325       548       -  
All other
    1,044       1,008       -  
      10,772       8,841       -  
With an allowance recorded:
                       
Commercial real estate
                       
Owner occupied
    415       415       69  
Non-owner occupied
    622       622       33  
Commercial and industrial
    747       475       407  
All other
    12,543       5,146       900  
      14,327       6,658       1,409  
Total
  $ 25,099     $ 15,499     $ 1,409  
                         


 
 
- 19 -



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


NOTE  3–LOANS - continued

The following table presents loans individually evaluated for impairment by class of loans as of December 31, 2014.  The table includes $5,673,000 of loans acquired with deteriorated credit quality that the Company cannot reasonably estimate cash flows such that they are accounted for on the cost recovery method and are still individually evaluated for impairment.

   
Unpaid Principal Balance
   
Recorded Investment
   
Allowance for Loan Losses Allocated
 
With no related allowance recorded:
                 
Residential  real estate
  $ 179     $ 137     $ -  
Multifamily real estate
    1,803       1,033       -  
Commercial real estate
                       
Owner occupied
    1,404       1,304       -  
Non owner occupied
    4,398       4,190       -  
Commercial and industrial
    1,030       270       -  
All other
    1,144       1,108       -  
      9,958       8,042       -  
With an allowance recorded:
                       
Commercial real estate
                       
Owner occupied
  $ 707     $ 707     $ 107  
Non owner occupied
    684       684       54  
Commercial and industrial
    929       680       339  
All other
    12,525       5,129       900  
      14,845       7,200       1,400  
Total
  $ 24,803     $ 15,242     $ 1,400  
                         


 

 
 
- 20 -


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


NOTE  3–LOANS - continued

The following table presents the average balance of loans individually evaluated for impairment and interest income recognized on these loans for the three months ended March 31, 2015 and March 31, 2014.   The table includes loans acquired with deteriorated credit quality that are still individually evaluated for impairment.

   
Three months ended March 31, 2015
   
Three months ended March 31, 2014
 
Loan Class
 
Average Recorded Investment
   
Interest Income Recognized
   
Cash Basis Interest Recognized
   
Average Recorded Investment
   
Interest Income Recognized
   
Cash Basis Interest Recognized
 
                                     
Residential real estate
  $ 135     $ 1     $ 1     $ 2,676     $ 34     $ 34  
Multifamily real estate
    1,796       -       -       2,708       708       708  
Commercial real estate:
                                               
Owner occupied
    1,457       9       8       2,262       16       11  
Non-owner occupied
    4,800       48       48       1,097       627       627  
Commercial and industrial
    987       4       4       2,967       335       335  
All other
    6,195       16       11       7,774       44       44  
Total
  $ 15,370     $ 78     $ 72     $ 19,484     $ 1,765     $ 1,759  

 
 
- 21 -


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


NOTE  3–LOANS - continued

Troubled Debt Restructurings

A loan is classified as a troubled debt restructuring ("TDR") when loan terms are modified due to a borrower's financial difficulties and a concession is granted to a borrower that would not have otherwise been considered. Most of the Company’s loan modifications involve a restructuring of loan terms prior to maturity to temporarily reduce the payment amount and/or to require only interest for a temporary period, usually up to six months.  These modifications generally do not meet the definition of a TDR because the modifications are considered to be an insignificant delay in payment.  The determination of an insignificant delay in payment is evaluated based on the facts and circumstances of the individual borrower(s).

The following table presents TDR’s as of March 31, 2015 and December 31, 2014:

March 31, 2015
 
TDR’s on Non-accrual
   
Other TDR’s
   
Total TDR’s
 
                   
Residential  real estate
  $ 13     $ 187     $ 200  
Multifamily  real estate
    -       1,543       1,543  
Commercial real estate
                       
Non owner occupied
    -       469       469  
Commercial and industrial
    -       427       427  
All other
    -       963       963  
Total
  $ 13     $ 3,589     $ 3,602  
                         

December 31, 2014
 
TDR’s on Non-accrual
   
Other TDR’s
   
Total TDR’s
 
                   
Residential  real estate
  $ 13     $ 191     $ 204  
Commercial real estate
                       
Non owner occupied
    -       474       474  
Commercial and industrial
    -       761       761  
All other
    -       1,063       1,063  
Total
  $ 13     $ 2,489     $ 2,502