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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
EX-31.1 - CEO SECTION 302 CERTIFICATION - PREMIER FINANCIAL BANCORP INCexhibit31-1.htm

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

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2018
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 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      No .

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 (§230.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes    No .

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

Large accelerated filer  
 
Accelerated filer 
Non-accelerated filer 
(Do not check if smaller reporting company)
Smaller reporting company 
Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   

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

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

Common stock, no par value, – 113,368,975 shares outstanding at August 3, 2018


PREMIER FINANCIAL BANCORP, INC.
JUNE 30, 2018
INDEX TO REPORT



PREMIER FINANCIAL BANCORP, INC.
JUNE 30, 2018
 

PART I - FINANCIAL INFORMATION

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, and the impairment of goodwill.  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, 2017 for further information in this regard.

Index to consolidated financial statements:



PREMIER FINANCIAL BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2018 AND DECEMBER 31, 2017
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)


   
(UNAUDITED)
       
   
June 30,
2018
   
Dec 31,
2017
 
ASSETS
           
Cash and due from banks
 
$
22,728
   
$
40,814
 
Interest bearing bank balances
   
85,708
     
37,191
 
Federal funds sold
   
3,092
     
4,658
 
Cash and cash equivalents
   
111,528
     
82,663
 
Time deposits with other banks
   
2,582
     
2,582
 
Securities available for sale
   
297,692
     
278,466
 
Loans
   
1,027,653
     
1,049,052
 
Allowance for loan losses
   
(12,982
)
   
(12,104
)
Net loans
   
1,014,671
     
1,036,948
 
Federal Home Loan Bank stock, at cost
   
3,173
     
3,185
 
Premises and equipment, net
   
25,294
     
23,815
 
Real estate acquired through foreclosure
   
14,194
     
19,966
 
Interest receivable
   
3,764
     
4,043
 
Goodwill
   
35,371
     
35,371
 
Other intangible assets
   
2,990
     
3,375
 
Other assets
   
3,041
     
3,010
 
Total assets
 
$
1,514,300
   
$
1,493,424
 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
               
Deposits
               
Non-interest bearing
 
$
358,370
   
$
332,588
 
Time deposits, $250,000 and over
   
62,452
     
63,905
 
Other interest bearing
   
873,334
     
876,182
 
Total deposits
   
1,294,156
     
1,272,675
 
Securities sold under agreements to repurchase
   
21,865
     
23,310
 
Other borrowed funds
   
3,800
     
5,000
 
Subordinated debt
   
5,391
     
5,376
 
Interest payable
   
462
     
393
 
Other liabilities
   
3,021
     
3,315
 
Total liabilities
   
1,328,695
     
1,310,069
 
                 
Stockholders' equity
               
Common stock, no par value; 20,000,000 shares authorized; 13,362,796 shares issued and outstanding at June 30, 2018, and 13,345,535 shares issued and outstanding at December 31, 2017
   
110,727
     
110,445
 
Retained earnings
   
80,872
     
74,983
 
Accumulated other comprehensive income (loss)
   
(5,994
)
   
(2,073
)
Total stockholders' equity
   
185,605
     
183,355
 
Total liabilities and stockholders' equity
 
$
1,514,300
   
$
1,493,424
 
 
Shares have been adjusted to reflect the 5 for 4 stock split issued on June 8, 2018 to shareholders of record on June 4, 2018.
PREMIER FINANCIAL BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
THREE AND SIX MONTHS ENDED JUNE 30, 2018 AND 2017
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)


   
Three Months Ended
June 30,
   
Six Months Ended
June 30,
 
   
2018
   
2017
   
2018
   
2017
 
Interest income
                       
Loans, including fees
 
$
13,684
   
$
14,663
   
$
27,718
   
$
28,198
 
Securities available for sale
                               
Taxable
   
1,634
     
1,464
     
3,042
     
2,809
 
Tax-exempt
   
55
     
64
     
114
     
136
 
Federal funds sold and other
   
380
     
182
     
678
     
339
 
Total interest income
   
15,753
     
16,373
     
31,552
     
31,482
 
                                 
Interest expense
                               
Deposits
   
1,197
     
951
     
2,228
     
1,900
 
Repurchase agreements and other
   
7
     
7
     
15
     
14
 
Other borrowings
   
41
     
79
     
88
     
166
 
Subordinated debt
   
89
     
74
     
167
     
144
 
Total interest expense
   
1,334
     
1,111
     
2,498
     
2,224
 
                                 
Net interest income
   
14,419
     
15,262
     
29,054
     
29,258
 
Provision for loan losses
   
500
     
776
     
1,615
     
1,142
 
Net interest income after provision for loan losses
   
13,919
     
14,486
     
27,439
     
28,116
 
                                 
Non-interest income
                               
Service charges on deposit accounts
   
1,066
     
1,089
     
2,160
     
2,065
 
Electronic banking income
   
892
     
833
     
1,709
     
1,613
 
Secondary market mortgage income
   
81
     
39
     
113
     
106
 
Other
   
192
     
173
     
315
     
367
 
     
2,231
     
2,134
     
4,297
     
4,151
 
Non-interest expenses
                               
Salaries and employee benefits
   
5,043
     
4,973
     
9,821
     
9,943
 
Occupancy and equipment expenses
   
1,480
     
1,449
     
3,090
     
2,970
 
Outside data processing
   
1,277
     
1,355
     
2,526
     
2,675
 
Professional fees
   
399
     
277
     
735
     
525
 
Taxes, other than payroll, property and income
   
212
     
211
     
452
     
400
 
Write-downs, expenses, sales of other real estate owned, net
   
525
     
553
     
(361
)
   
793
 
Amortization of intangibles
   
190
     
251
     
385
     
516
 
FDIC insurance
   
124
     
154
     
272
     
347
 
Other expenses
   
1,208
     
1,181
     
2,527
     
2,233
 
     
10,458
     
10,404
     
19,447
     
20,402
 
Income before income taxes
   
5,692
     
6,216
     
12,289
     
11,865
 
Provision for income taxes
   
1,317
     
2,297
     
2,781
     
4,282
 
                                 
Net income
 
$
4,375
   
$
3,919
   
$
9,508
   
$
7,583
 
                                 
Net income per share:
                               
Basic
 
$
0.33
   
$
0.29
   
$
0.71
   
$
0.57
 
Diluted
   
0.32
     
0.29
     
0.71
     
0.57
 
 
Per share data has been adjusted to reflect the 5 for 4 stock split issued on June 8, 2018 to shareholders of record on June 4, 2018.
PREMIER FINANCIAL BANCORP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
THREE AND SIX MONTHS ENDED JUNE 30, 2018 AND 2017
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)



   
Three Months Ended
June 30,
   
Six Months Ended
June 30,
 
   
2018
   
2017
   
2018
   
2017
 
Net income
 
$
4,375
   
$
3,919
   
$
9,508
   
$
7,583
 
                                 
Other comprehensive income (loss):
                               
Unrealized gains (losses) arising during the period
   
(1,101
)
   
1,451
     
(4,963
)
   
3,725
 
Reclassification of realized amount
   
-
     
-
     
-
     
-
 
Net change in unrealized gain (loss) on securities
   
(1,101
)
   
1,451
     
(4,963
)
   
3,725
 
Less tax impact
   
231
     
(508
)
   
1,042
     
(1,304
)
Other comprehensive income (loss)
   
(870
)
   
943
     
(3,921
)
   
2,421
 
                                 
Comprehensive income
 
$
3,505
   
$
4,862
   
$
5,587
   
$
10,004
 



PREMIER FINANCIAL BANCORP, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 2018
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)



   
Common
Stock
   
Retained
Earnings
   
Accumulated
Other
Comprehensive
Income (loss)
   
Total
 
Balances, January 1, 2018
 
$
110,445
   
$
74,983
   
$
(2,073
)
 
$
183,355
 
     Net income
   
-
     
9,508
     
-
     
9,508
 
     Other comprehensive income (loss)
   
-
     
-
     
(3,921
)
   
(3,921
)
     Cash dividends paid ($0.27 per share)
   
-
     
(3,606
)
   
-
     
(3,606
)
     Cash in lieu of fractional share for 5 for 4 stock split
   
-
     
(13
)
   
-
     
(13
)
     Stock options exercised
   
101
     
-
     
-
     
101
 
     Stock based compensation expense
   
181
     
-
     
-
     
181
 
Balances, June 30, 2018
 
$
110,727
   
$
80,872
   
$
(5,994
)
 
$
185,605
 
 
Per share data has been adjusted to reflect the 5 for 4 stock split issued on June 8, 2018 to shareholders of record on June 4, 2018.
PREMIER FINANCIAL BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2018 AND 2017
(UNAUDITED, DOLLARS IN THOUSANDS)


   
2018
   
2017
 
Cash flows from operating activities
           
Net income
 
$
9,508
   
$
7,583
 
Adjustments to reconcile net income to net cash from operating activities
               
Depreciation
   
831
     
879
 
Provision for loan losses
   
1,615
     
1,142
 
Amortization (accretion), net
   
668
     
616
 
Writedowns (gains on the sale) of other real estate owned, net
   
(920
)
   
349
 
Stock compensation expense
   
181
     
169
 
Changes in:
               
Interest receivable
   
279
     
225
 
Other assets
   
1,011
     
294
 
Interest payable
   
69
     
(12
)
Other liabilities
   
(294
)
   
(591
)
Net cash from operating activities
   
12,948
     
10,654
 
                 
Cash flows from investing activities
               
Net change on time deposits with other banks
   
-
     
(250
)
Purchases of securities available for sale
   
(57,530
)
   
(43,190
)
Proceeds from maturities and calls of securities available for sale
   
32,574
     
33,291
 
Redemption of FHLB stock
   
12
     
15
 
Net change in loans
   
20,599
     
(13,077
)
Purchases of premises and equipment, net
   
(2,310
)
   
(305
)
Proceeds from sales of other real estate acquired through foreclosure
   
7,266
     
1,462
 
Net cash from (used in) investing activities
   
611
     
(22,054
)
                 
Cash flows from financing activities
               
Net change in deposits
   
21,469
     
(2,190
)
Net change in agreements to repurchase securities
   
(1,445
)
   
(3,342
)
Repayment of other borrowed funds
   
(1,200
)
   
(1,859
)
Proceeds from stock option exercises
   
101
     
138
 
Common stock dividends paid
   
(3,619
)
   
(3,197
)
Net cash from financing activities
   
15,306
     
(10,450
)
                 
Net change in cash and cash equivalents
   
28,865
     
(21,850
)
                 
Cash and cash equivalents at beginning of period
   
82,663
     
104,718
 
                 
Cash and cash equivalents at end of period
 
$
111,528
   
$
82,868
 

Supplemental disclosures of cash flow information:
           
Cash paid during period for interest
 
$
2,429
   
$
2,236
 
                 
    Cash paid during period for income taxes
   
1,545
     
3,632
 
                 
Loans transferred to real estate acquired through foreclosure
   
574
     
600
 
                 
Premises transferred to other real estate owned
   
-
     
71
 
PREMIER FINANCIAL BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)


NOTE  1 - BASIS OF PRESENTATION

The consolidated financial statements include the accounts of Premier Financial Bancorp, Inc. (the Company) and its wholly owned subsidiaries (the "Banks"):
 
                 
June 30, 2018
 
        Year  
Total
   
Net Income
 
Subsidiary
 
Location
 
Acquired
 
Assets
   
Qtr
   
YTD
 
Citizens Deposit Bank & Trust
 
Vanceburg, Kentucky
 
1991
 
$
429,714
   
$
1,394
   
$
2,684
 
Premier Bank, Inc.
 
Huntington, West Virginia
 
1998
   
1,077,580
     
3,592
     
8,078
 
Parent and Intercompany Eliminations
           
7,006
     
(611
)
   
(1,254
)
  Consolidated Total
          
$
1,514,300
   
$
4,375
   
$
9,508
 

All significant intercompany transactions and balances have been eliminated.
On June 8, 2018, Premier issued a 5 for 4 stock split to shareholders of record on June 4, 2018.  Each shareholder received 1 additional share of common stock for every 4 shares of common stock already owned on the record date.  Outstanding shares and per share amounts prior to the payment date have been restated to reflect the additional shares issued as a result of the stock split to aid in the comparison to current period results.
During the first three months of 2018, management updated its policies regarding estimation of probable incurred losses.  The updates included incorporating a common estimated loss ratio for all pass credits within a given loan classification, adding an additional qualitative factor for document exceptions on collectively impaired loans, and reallocating the qualitative portion of the allowance to align more closely to the inputs used to determine the qualitative portion.  The previous methodology allocated a higher loss ratio to loans graded "Watch" to estimate a higher credit risk on these loans due to risk downgrades resulting from document exceptions.  Loans graded "Watch" are considered pass credits.  The changes did not have a material impact on the overall allowance for loan losses or the provision for loan losses for the three and six months ended June 30, 2018.

Recently Issued Accounting Pronouncements

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.  The guidance provides the following steps to achieve the core principle (1) Identify the contract(s) with the customer, (2) Identify the performance obligations in the contract, (3) Determine the transaction price, (4) Allocate the transaction price to the performance obligations in the contract, and (5) Recognize revenue when (or as) the entity satisfies a performance obligation.   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, as amended, is effective for annual reporting periods, and interim reporting periods within those annual periods, beginning after December 15, 2017, including interim periods within those reporting periods.

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


NOTE  1 - BASIS OF PRESENTATION - continued

Management's assessment on revenue recognition by following the five steps resulted in no material changes from the current revenue recognition because the majority of revenues earned by the Company are not within the scope of ASU 2014-09.  As interest income on loans and securities are both excluded from Topic 606, the majority of revenue earned is not subject to the new guidance.  Service charges on deposit accounts, debit card interchange fees, and ATM fees are services provided that fall within the scope of Topic 606 and are presented within non-interest income as revenue when the obligation to the customer is satisfied.  Gains on the sale of OREO fall within the scope of Topic 606 and are recognized as a credit to non-interest expense as an offset to writedowns of carrying value and losses on the sale of OREO, as permitted.  The Company adopted Topic 606 as of January 1, 2018 with no material change in how revenues are recognized in the Company's financial statements.  Significant items of non-interest income are described below.

Service charges on deposit accounts – Fees are earned from our deposit customers for transaction-based, account maintenance, and overdraft services. Transaction-based fees and overdraft fees are recognized at a point in time, since the customer generally has a right to cancel the depository arrangement at any time. The arrangement is considered a day-to-day contract with ongoing renewals and optional purchases, so the duration of the contract does not extend beyond the services already performed. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of a month, representing the period over which we satisfy our performance obligation.
Debit card interchange fees - Revenue earned from a portion of the fee charged to merchants for the immediate approval of credit for funds (whether debit or credit card usage) is recognized on a daily cash basis and the commission is paid through Premier's third-party processor.  The revenue is earned on a transaction basis determined by customer activity.  Premier records this revenue on a gross revenue basis and expenses the processing charges incurred as a non-interest expense.
Non-customer ATM fees – Fees charged to non-deposit customers for using bank owned automated teller machines is charged on a transaction basis and withdrawn from the users' deposit account at another financial institution upon completion of the transaction.
Gain on sale of OREO – A gain is recognized upon the sale of OREO when a contract exists between the seller and purchaser and the control of the asset is transferred to the buyer.  The gain is then reported as a reduction of non-interest expense under the heading "Write-downs, expenses, sales of other real estate owned, net."

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.  The ASU makes several targeted improvement modifications to Subtopic 825-10, which (1) Require equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income, (2) Simplify the impairment assessment of equity investments without readily

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


NOTE  1 - BASIS OF PRESENTATION - continued

determinable fair values by requiring a qualitative assessment to identify impairment and when an impairment exists, an entity is required to measure the investment at fair value, (3) Eliminate the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet, (4) Use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, (5) Present separately in other comprehensive income the portion of the total changes in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option of financial instruments, (6) Require separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial instruments, and (7) Clarify that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity's other deferred tax assets.  The Company adopted subtopic 825-10 on January 1, 2018 which resulted in the use of an exit price rather than an entrance price to determine the fair value of loans not measured at fair value on a non-recurring basis.  See footnote 7 for additional information on fair value.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This standard requires organizations to recognize lease assets and lease liabilities on the balance sheet and disclose key information about leasing requirements for leases that were historically classified as operating leases under previous generally accepted accounting principles. This ASU will become effective for the Company for interim and annual periods beginning after December 15, 2018.  The Company leases some of its branch locations.  Upon adoption of this standard, an asset will be recorded to recognize the right of the Company to use the leased facilities and a liability will be recorded representing the obligation to make all future lease payments on those facilities.  Management is currently evaluating the amounts to be recognized upon the adoption of this guidance in the Company's financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses: Measurement of Credit Losses on Financial Instruments.  This ASU replaces the measurement for credit losses from a probable incurred estimate with an expected future loss estimate, which is referred to as the "current expected credit loss" or "CECL".  The standard pertains to financial assets measured at amortized cost such as loans, debt securities classified as held-to-maturity, and certain other contracts, in which organizations will now use forward-looking information to enhance their credit loss estimates on these assets.  The largest impact will be on the allowance for loan and lease losses.  This ASU will become effective for the Company for interim and annual periods beginning after December 15, 2019, although early adoption is permitted beginning after December 15, 2018. The company has formed a committee to oversee the steps required in the adoption of the new current expected credit loss method.  The committee has selected a third-party vendor to assist in data analysis and modeling as well as the required disclosures.

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


NOTE  1 - BASIS OF PRESENTATION - continued

Management is currently evaluating the impact of the adoption of this guidance on the Company's financial statements.  Upon adoption, an initial cumulative increase in the allowance for loan losses is currently anticipated by management along with a corresponding decrease in capital as permitted by the standard but cannot yet determine the one-time adjustment.

In February 2018, the FASB issued ASU No. 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.  This ASU amends Topic 220, Income Statement – Reporting Comprehensive Income to permit the reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act and any future change in corporate income tax rates.  The update does not affect the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations.  The Company adopted ASU 2018-02 retroactively to December 31, 2017 as permitted by the guidance.


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


NOTE  2 –SECURITIES

Amortized cost and fair value of investment securities, by category, at June 30, 2018 are summarized as follows:

2018
 
Amortized Cost
   
Unrealized Gains
   
Unrealized Losses
   
Fair Value
 
Available for sale
                       
Mortgage-backed securities
                       
U. S. sponsored agency MBS - residential
 
$
214,588
   
$
50
   
$
(6,170
)
 
$
208,468
 
U. S. sponsored agency CMO's - residential
   
67,247
     
36
     
(1,250
)
   
66,033
 
Total mortgage-backed securities of government sponsored agencies
   
281,835
     
86
     
(7,420
)
   
274,501
 
U. S. government sponsored agency securities
   
14,255
     
-
     
(232
)
   
14,023
 
Obligations of states and political subdivisions
   
9,189
     
36
     
(57
)
   
9,168
 
Total available for sale
 
$
305,279
   
$
122
   
$
(7,709
)
 
$
297,692
 

Amortized cost and fair value of investment securities, by category, at December 31, 2017 are summarized as follows:

2017
 
Amortized Cost
   
Unrealized Gains
   
Unrealized Losses
   
Fair Value
 
Available for sale
                       
Mortgage-backed securities
                       
U. S. sponsored agency MBS - residential
 
$
198,631
   
$
175
   
$
(2,216
)
 
$
196,590
 
U. S. sponsored agency CMO's - residential
   
51,548
     
241
     
(681
)
   
51,108
 
Total mortgage-backed securities of government sponsored agencies
   
250,179
     
416
     
(2,897
)
   
247,698
 
U. S. government sponsored agency securities
   
19,312
     
1
     
(179
)
   
19,134
 
Obligations of states and political subdivisions
   
11,599
     
61
     
(26
)
   
11,634
 
Total available for sale
 
$
281,090
   
$
478
   
$
(3,102
)
 
$
278,466
 

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 June 30, 2018 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
 
$
5,718
   
$
5,692
 
Due after one year through five years
   
12,825
     
12,673
 
Due after five years through ten years
   
4,901
     
4,826
 
Mortgage-backed securities of government sponsored agencies
   
281,835
     
274,501
 
Total available for sale
 
$
305,279
   
$
297,692
 

Securities with unrealized losses at June 30, 2018 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
 
$
2,005
   
$
(31
)
 
$
12,018
   
$
(201
)
 
$
14,023
   
$
(232
)
U.S government sponsored agency MBS – residential
   
158,444
     
(3,866
)
   
48,235
     
(2,304
)
   
206,679
     
(6,170
)
U.S government sponsored agency CMO – residential
   
41,235
     
(417
)
   
15,843
     
(833
)
   
57,078
     
(1,250
)
Obligations of states and political subdivisions
   
4,016
     
(49
)
   
473
     
(8
)
   
4,489
     
(57
)
Total temporarily impaired
 
$
205,700
   
$
(4,363
)
 
$
76,569
   
$
(3,346
)
 
$
282,269
   
$
(7,709
)

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, 2017 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
 
$
6,780
   
$
(41
)
 
$
10,335
   
$
(138
)
 
$
17,115
   
$
(179
)
U.S government sponsored agency MBS – residential
   
134,211
     
(1,076
)
   
47,682
     
(1,140
)
   
181,893
     
(2,216
)
U.S government sponsored agency CMO's – residential
   
8,306
     
(64
)
   
17,868
     
(617
)
   
26,174
     
(681
)
Obligations of states and political subdivisions
   
3,512
     
(20
)
   
474
     
(6
)
   
3,986
     
(26
)
Total temporarily impaired
 
$
152,809
   
$
(1,201
)
 
$
76,359
   
$
(1,901
)
 
$
229,168
   
$
(3,102
)

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 June 30, 2018 and December 31, 2017 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.


NOTE  3 - LOANS

Major classifications of loans at June 30, 2018 and December 31, 2017 are summarized as follows:

   
2018
   
2017
 
Residential real estate
 
$
341,157
   
$
338,829
 
Multifamily real estate
   
58,154
     
62,151
 
Commercial real estate:
               
Owner occupied
   
136,795
     
136,048
 
Non-owner occupied
   
223,491
     
230,702
 
Commercial and industrial
   
78,358
     
78,259
 
Consumer
   
27,966
     
28,293
 
Construction and land
   
127,641
     
139,012
 
All other
   
34,091
     
35,758
 
   
$
1,027,653
   
$
1,049,052
 

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


NOTE  3–LOANS - continued

Activity in the allowance for loan losses by portfolio segment for the six months ended June 30, 2018 was as follows:

Loan Class
 
Balance
Dec 31, 2017
   
Provision (credit) for loan losses
   
Loans
charged-off
   
Recoveries
   
Balance
June 30, 2018
 
                               
Residential real estate
 
$
2,986
   
$
(609
)
 
$
(148
)
 
$
25
   
$
2,254
 
Multifamily real estate
   
978
     
(410
)
   
(11
)
   
-
     
557
 
Commercial real estate:
                                       
Owner occupied
   
1,653
     
266
     
(3
)
   
1
     
1,917
 
Non-owner occupied
   
2,313
     
140
     
(16
)
   
-
     
2,437
 
Commercial and industrial
   
1,101
     
976
     
(504
)
   
26
     
1,599
 
Consumer
   
328
     
51
     
(63
)
   
38
     
354
 
Construction and land
   
2,408
     
864
     
(19
)
   
-
     
3,253
 
All other
   
337
     
337
     
(130
)
   
67
     
611
 
Total
 
$
12,104
   
$
1,615
   
$
(894
)
 
$
157
   
$
12,982
 

Activity in the allowance for loan losses by portfolio segment for the six months ended June 30, 2017 was as follows:

Loan Class
 
Balance
Dec 31, 2016
   
Provision (credit) for loan losses
   
Loans
charged-off
   
Recoveries
   
Balance
June 30, 2017
 
                               
Residential real estate
 
$
2,948
   
$
193
   
$
(199
)
 
$
31
   
$
2,973
 
Multifamily real estate
   
785
     
552
     
-
     
-
     
1,337
 
Commercial real estate:
                                       
Owner occupied
   
1,543
     
(166
)
   
-
     
241
     
1,618
 
Non-owner occupied
   
2,350
     
(12
)
   
(4
)
   
-
     
2,334
 
Commercial and industrial
   
1,140
     
9
     
(134
)
   
78
     
1,093
 
Consumer
   
347
     
138
     
(165
)
   
53
     
373
 
Construction and land
   
1,397
     
392
     
(124
)
   
10
     
1,675
 
All other
   
326
     
36
     
(140
)
   
70
     
292
 
Total
 
$
10,836
   
$
1,142
   
$
(766
)
 
$
483
   
$
11,695
 
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 June 30, 2018 was as follows:

Loan Class
 
Balance
March 31, 2018
   
Provision (credit) for loan losses
   
Loans
charged-off
   
Recoveries
   
Balance
June 30, 2018
 
                               
Residential real estate
 
$
2,262
   
$
82
   
$
(99
)
 
$
9
   
$
2,254
 
Multifamily real estate
   
647
     
(90
)
   
-
     
-
     
557
 
Commercial real estate:
                                       
Owner occupied
   
1,816
     
102
     
(1
)
   
-
     
1,917
 
Non-owner occupied
   
2,187
     
250
     
-
     
-
     
2,437
 
Commercial and industrial
   
1,651
     
163
     
(237
)
   
22
     
1,599
 
Consumer
   
369
     
2
     
(30
)
   
13
     
354
 
Construction and land
   
3,302
     
(49
)
   
-
     
-
     
3,253
 
All other
   
606
     
40
     
(63
)
   
28
     
611
 
Total
 
$
12,840
   
$
500
   
$
(430
)
 
$
72
   
$
12,982
 

Activity in the allowance for loan losses by portfolio segment for the three months ended June 30, 2017 was as follows:

Loan Class
 
Balance
March 31, 2017
   
Provision (credit) for loan losses
   
Loans
charged-off
   
Recoveries
   
Balance
June 30, 2017
 
                               
Residential real estate
 
$
2,977
   
$
64
   
$
(94
)
 
$
26
   
$
2,973
 
Multifamily real estate
   
770
     
567
     
-
     
-
     
1,337
 
Commercial real estate:
                                       
Owner occupied
   
1,576
     
(198
)
   
-
     
240
     
1,618
 
Non-owner occupied
   
2,422
     
(88
)
   
-
     
-
     
2,334
 
Commercial and industrial
   
1,129
     
43
     
(134
)
   
55
     
1,093
 
Consumer
   
370
     
22
     
(48
)
   
29
     
373
 
Construction and land
   
1,313
     
358
     
-
     
-
     
1,675
 
All other
   
332
     
9
     
(81
)
   
32
     
292
 
Total
 
$
10,894
   
$
776
   
$
(357
)
 
$
382
   
$
11,695
 
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 June 30, 2018 and December 31, 2017.

   
2018
   
2017
 
Residential real estate
 
$
1,109
   
$
1,321
 
Commercial real estate
               
Owner occupied
   
1,410
     
1,508
 
Commercial and industrial
   
6
     
211
 
Construction and land
   
1,305
     
1,450
 
All other
   
286
     
286
 
Total carrying amount
 
$
4,116
   
$
4,776
 
Contractual principal balance
 
$
5,765
   
$
6,728
 
                 
Carrying amount, net of allowance
 
$
4,116
   
$
4,676
 

For those purchased loans disclosed above, the Company did not increase the allowance for loan losses during the six-months ended June 30, 2018, but did increase the allowance for loan losses by $50,000 during the six-months ended June 30, 2017.

For those purchased loans disclosed above, where the Company can reasonably estimate the cash flows expected to be collected on the loans, a portion of the purchase discount is 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 is being recognized as interest income over the remaining life of the loan.

Where the Company cannot reasonably estimate the cash flows expected to be collected on the loans, it 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.
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 June 30, 2018 and June 30, 2017.

   
2018
   
2017
 
Balance at January 1
 
$
754
   
$
1,208
 
New loans purchased
   
-
     
-
 
Accretion of income
   
(80
)
   
(206
)
Loans placed on non-accrual
   
(41
)
   
-
 
Income recognized upon full repayment
   
(38
)
   
(197
)
Reclassifications from non-accretable difference
   
-
     
-
 
Disposals
   
-
     
-
 
Balance at June 30
 
$
595
   
$
805
 

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 June 30, 2018 and December 31, 2017.  The recorded investment in non-accrual loans is less than the principal owed on non-accrual loans due to discounts applied to the carrying value of the loan at time of their acquisition and interest payments made by the borrower which have been used to reduce the recorded investment in the loan rather than recognized as interest income.

June 30, 2018
 
Principal Owed on Non-accrual Loans
   
Recorded Investment in Non-accrual Loans
   
Loans Past Due Over 90 Days, still accruing
 
                   
Residential real estate
 
$
3,907
   
$
3,246
   
$
686
 
Multifamily real estate
   
1,984
     
1,972
     
-
 
Commercial real estate
                       
Owner occupied
   
4,063
     
3,887
     
-
 
Non-owner occupied
   
1,635
     
1,573
     
2,889
 
Commercial and industrial
   
1,017
     
438
     
47
 
Consumer
   
233
     
205
     
-
 
Construction and land
   
4,803
     
4,711
     
27
 
All other
   
185
     
185
     
6
 
Total
 
$
17,827
   
$
16,217
   
$
3,655
 

December 31, 2017
 
Principal Owed on Non-accrual Loans
   
Recorded Investment in Non-accrual Loans
   
Loans Past Due Over 90 Days, still accruing
 
                   
Residential real estate
 
$
2,944
   
$
2,422
   
$
869
 
Multifamily real estate
   
2,128
     
2,128
     
334
 
Commercial real estate
                       
Owner occupied
   
2,623
     
2,483
     
134
 
Non-owner occupied
   
1,862
     
1,755
     
85
 
Commercial and industrial
   
1,313
     
544
     
1,139
 
Consumer
   
268
     
241
     
-
 
Construction and land
   
5,824
     
5,673
     
830
 
Total
 
$
16,962
   
$
15,246
   
$
3,391
 

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.
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 June 30, 2018 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
 
$
341,157
   
$
5,730
   
$
2,145
   
$
7,875
   
$
333,282
 
Multifamily real estate
   
58,154
     
106
     
1,972
     
2,078
     
56,076
 
Commercial real estate:
                                       
Owner occupied
   
136,795
     
249
     
1,512
     
1,761
     
135,034
 
Non-owner occupied
   
223,491
     
989
     
2,889
     
3,878
     
219,613
 
Commercial and industrial
   
78,358
     
56
     
239
     
295
     
78,063
 
Consumer
   
27,966
     
347
     
82
     
429
     
27,537
 
Construction and land
   
127,641
     
4,001
     
813
     
4,814
     
122,827
 
All other
   
34,091
     
-
     
191
     
191
     
33,900
 
Total
 
$
1,027,653
   
$
11,478
   
$
9,843
   
$
21,321
   
$
1,006,332
 
 
 
The following table presents the aging of the recorded investment in past due loans as of December 31, 2017 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
 
$
338,829
   
$
5,242
   
$
1,835
   
$
7,077
   
$
331,752
 
Multifamily real estate
   
62,151
     
-
     
334
     
334
     
61,817
 
Commercial real estate:
                                       
Owner occupied
   
136,048
     
311
     
1,784
     
2,095
     
133,953
 
Non-owner occupied
   
230,702
     
12
     
225
     
237
     
230,465
 
Commercial and industrial
   
78,259
     
123
     
1,611
     
1,734
     
76,525
 
Consumer
   
28,293
     
492
     
87
     
579
     
27,714
 
Construction and land
   
139,012
     
144
     
2,508
     
2,652
     
136,360
 
All other
   
35,758
     
-
     
-
     
-
     
35,758
 
Total
 
$
1,049,052
   
$
6,324
   
$
8,384
   
$
14,708
   
$
1,034,344
 


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


NOTE  3–LOANS - continued

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of June 30, 2018:
   
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
 
$
-
   
$
2,254
   
$
-
   
$
2,254
   
$
298
   
$
339,750
   
$
1,109
   
$
341,157
 
Multifamily real estate
   
72
     
485
     
-
     
557
     
1,972
     
56,182
     
-
     
58,154
 
Commercial real estate:
                                                               
Owner occupied
   
400
     
1,517
     
-
     
1,917
     
3,054
     
132,331
     
1,410
     
136,795
 
Non-owner occupied
   
79
     
2,358
     
-
     
2,437
     
7,564
     
215,927
     
-
     
223,491
 
Commercial and industrial
   
64
     
1,535
     
-
     
1,599
     
539
     
77,813
     
6
     
78,358
 
Consumer
   
-
     
354
     
-
     
354
     
-
     
27,966
     
-
     
27,966
 
Construction and land
   
990
     
2,263
             
3,253
     
4,511
     
121,825
     
1,305
     
127,641
 
All other
   
-
     
611
     
-
     
611
     
283
     
33,522
     
286
     
34,091
 
Total
 
$
1,605
   
$
11,377
   
$
-
   
$
12,982
   
$
18,221
   
$
1,005,316
   
$
4,116
   
$
1,027,653
 
 
 
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, 2017:
   
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
 
$
-
   
$
2,986
   
$
-
   
$
2,986
   
$
308
   
$
337,200
   
$
1,321
   
$
338,829
 
Multifamily real estate
   
218
     
760
     
-
     
978
     
2,462
     
59,689
     
-
     
62,151
 
Commercial real estate:
                                                               
Owner occupied
   
307
     
1,346
     
-
     
1,653
     
3,314
     
131,226
     
1,508
     
136,048
 
Non-owner occupied
   
88
     
2,225
     
-
     
2,313
     
11,578
     
219,124
     
-
     
230,702
 
Commercial and industrial
   
104
     
897
     
100
     
1,101
     
1,304
     
76,744
     
211
     
78,259
 
Consumer
   
-
     
328
     
-
     
328
     
-
     
28,293
     
-
     
28,293
 
Construction and land
   
685
     
1,723
     
-
     
2,408
     
5,672
     
131,890
     
1,450
     
139,012
 
All other
   
-
     
337
     
-
     
337
     
293
     
35,179
     
286
     
35,758
 
Total
 
$
1,402
   
$
10,602
   
$
100
   
$
12,104
   
$
24,931
   
$
1,019,345
   
$
4,776
   
$
1,049,052
 
PREMIER FINANCIAL BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)


NOTE  3–LOANS - continued

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

The following table presents loans individually evaluated for impairment by class of loans as of June 30, 2018.  The table does not include any loans acquired with deteriorated credit quality.

   
Unpaid Principal Balance
   
Recorded Investment
   
Allowance for Loan Losses Allocated
 
With no related allowance recorded:
                 
Residential real estate
 
$
434
   
$
298
   
$
-
 
Commercial real estate
                       
Owner occupied
   
2,187
     
2,186
     
-
 
Non-owner occupied
   
5,611
     
5,557
     
-
 
Commercial and industrial
   
1,005
     
474
     
-
 
All other
   
284
     
284
     
-
 
     
9,521
     
8,799
     
-
 
With an allowance recorded:
                       
Multifamily real estate
   
1,984
     
1,972
     
72
 
Commercial real estate
                       
Owner occupied
   
894
     
868
     
400
 
Non-owner occupied
   
2,007
     
2,007
     
79
 
Commercial and industrial
   
72
     
64
     
64
 
Construction and land
   
4,602
     
4,511
     
990
 
     
9,559
     
9,422
     
1,605
 
Total
 
$
19,080
   
$
18,221
   
$
1,605
 


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, 2017.  The table includes $199,000 of loans acquired with deteriorated credit quality for which 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
 
$
446
   
$
308
   
$
-
 
Multifamily real estate
   
334
     
334
     
-
 
Commercial real estate
                       
Owner occupied
   
2,451
     
2,439
     
-
 
Non-owner occupied
   
9,602
     
9,506
     
-
 
Commercial and industrial
   
1,719
     
1,188
     
-
 
Construction and land
   
1,798
     
1,678
     
-
 
All other
   
293
     
293
     
-
 
     
16,643
     
15,746
     
-
 
With an allowance recorded:
                       
Multifamily real estate
 
$
2,128
   
$
2,128
   
$
218
 
Commercial real estate
                       
Owner occupied
   
895
     
875
     
307
 
Non-owner occupied
   
2,072
     
2,072
     
88
 
Commercial and industrial
   
466
     
315
     
204
 
Construction and land
   
4,024
     
3,994
     
685
 
     
9,585
     
9,384
     
1,502
 
Total
 
$
26,228
   
$
25,130
   
$
1,502
 


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


NOTE  3–LOANS - continued

The following table presents the average balance of loans individually evaluated for impairment and interest income recognized on these loans for the six months ended June 30, 2018 and June 30, 2017.  The table includes loans acquired with deteriorated credit quality that are still individually evaluated for impairment.

   
Six months ended June 30, 2018
   
Six months ended June 30, 2017
 
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
 
$
302
   
$
-
   
$
-
   
$
345
   
$
1
   
$
1
 
Multifamily real estate
   
2,287
     
11
     
11
     
13,611
     
130
     
121
 
Commercial real estate:
                                               
Owner occupied
   
3,208
     
51
     
51
     
3,211
     
22
     
22
 
Non-owner occupied
   
9,535
     
241
     
241
     
2,079
     
61
     
61
 
Commercial and industrial
   
1,145
     
16
     
16
     
1,523
     
101
     
101
 
Construction and land
   
4,703
     
3
     
3
     
8,822
     
280
     
277
 
All other
   
288
     
4
     
4
     
307
     
9
     
9
 
Total
 
$
21,468
   
$
326
   
$
326
   
$
29,898
   
$
604
   
$
592
 

The following table presents the average balance of loans individually evaluated for impairment and interest income recognized on these loans for the three months ended June 30, 2018 and June 30, 2017.  The table includes loans acquired with deteriorated credit quality that are still individually evaluated for impairment.

   
Three months ended June 30, 2018
   
Three months ended June 30, 2017
 
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
 
$
299
   
$