Premier Financial Bancorp, Inc. Reports 45% Increase In Third Quarter 2018 Earnings
HUNTINGTON, W.Va., Oct. 30, 2018 /PRNewswire/ -- PREMIER FINANCIAL BANCORP, INC. (PREMIER), (NASDAQ/GMS-PFBI), a $1.5 billion financial holding company with two community bank subsidiaries (as of Sept 30, 2018), announced its financial results for the third quarter of 2018. Premier realized net income of $5,021,000 (37 cents per diluted share) during the quarter ended September 30, 2018, a 44.8% increase from the $3,467,000 of net income reported for the third quarter of 2017. The increase in net income during the third quarter of 2018 is largely due to increases in interest income and non-interest income as well as a decrease in the provision for loan losses and income tax expense. On a diluted per share basis, Premier earned $0.37 during the third quarter of 2018 compared to $0.26 per share earned during the third quarter of 2017, adjusted for a 5 for 4 stock split issued to shareholders on June 8, 2018. As a result of the 5 for 4 stock split, all previous per share information has been restated to reflect the additional shares outstanding. For the first nine months of 2018 Premier realized net income of $14,529,000 ($1.08 per diluted share), a 31.5% increase over the $11,050,000 ($0.82 per diluted share) earned during the first nine months of 2017.
President and CEO Robert W. Walker commented, "This quarter's results illustrate why I have such confidence and optimism in our company and its ability to face the future. Given the rising interest rate scenario over the past several quarters and a 35% increase in our interest expense reported this quarter as a result, our net interest income still increased by 3.4% in the third quarter of 2018. Likewise our net interest margin remained above 4.00% at 4.04%, compared to 4.05% in the third quarter of 2017. Our quarter-end total loans and total deposit balances both increased during the quarter compared to the totals at June 30, 2018. Our non-interest income grew by 11.9% in the third quarter of 2018 compared to the same quarter of 2017, as we explore new sources of revenue and new product lines while remaining competitive in our pricing. All the while, our non-interest expense control resulted in maintaining a low 2.4% increase in total non-interest expense in the third quarter compared to the same quarter of 2017. These results were achieved as our team of talented employees were also working to convert the data systems of First Bank of Charleston to Premier, with a successful conversion and merger that was completed on October 12, 2018. As individual accomplishments, I am pleased to report each. As they collectively occurred during the same 90 day window, I reiterate my confidence and optimism in the future of our company."
Net interest income for the quarter ended September 30, 2018 totaled $14.509 million, up $478,000, or 3.4%, from the $14.031 million of net interest income earned in the third quarter of 2017. Interest income in 2018 increased by $867,000, or 5.7%, largely due to increases in all three major sources of interest income. Interest income on loans increased by $262,000, or 1.9%, in the third quarter of 2018. Interest income on loans in the third quarter of 2018 included approximately $141,000 of income recognized from deferred interest and discounts recognized on loans that paid off during the quarter compared to no interest income of this kind recognized during the third quarter of 2017. Otherwise, interest income on loans was relatively consistent and increased by $121,000, or 0.9%, in the third quarter of 2018, largely due to a higher average yield on a slightly lower average balance of loans outstanding during the quarter when compared to the third quarter of 2017. Interest income on investment securities in the third quarter of 2018 increased by $308,000, or 20.7%, largely due to higher average yields on a higher average balance of investments outstanding during the third quarter of 2018. Interest income from interest-bearing bank balances and federal funds sold increased by $297,000, or 169%, largely due to a 178% increase in the average balance outstanding during the third quarter of 2018 compared to the same quarter of 2017, although on a slightly lower average yield.
Partially offsetting the increase in interest income in the third quarter of 2018 was a $389,000, or 35.3%, increase in interest expense. Interest expense on deposits increased by $401,000, or 42.0%, in the third quarter of 2018, due to increases in the average rate paid on interest-bearing deposits during the quarter, with the largest increase in average rates originating from certificates of deposit. Average interest-bearing deposit balances were relatively unchanged compared to the third quarter of 2017, while the average interest rate paid on interest-bearing deposits increased by 17 basis points in 2018, from 0.40% in the third quarter of 2017 to 0.57% in the third quarter of 2018. Increases in short-term rates have increased competition for deposits and time deposits in particular. The related rates of interest paid on time deposits increased by 34 basis points, driving the overall increase in interest expense on deposits in the third quarter of 2018 when compared to the third quarter of 2017. Partially offsetting the increase in interest expense on deposit accounts, interest expense on borrowings in the third quarter of 2018 decreased by $31,000, or 45.5%, largely due to a decrease in outstanding borrowings from scheduled and accelerated principal payments on long-term borrowings at the parent company. Also adding to the overall increase in interest expense during the third quarter of 2018 was a $16,000, or 21.6%, increase in interest expense on Premier's subordinated debt due to an increase in the variable rate interest rate paid in 2018. The variable interest rate is indexed to the short-term three-month LIBOR interest rate, which has increased over the past twelve months in conjunction with increases in short-term interest rate policy by the Federal Reserve Board of Governors.
During the quarter ended September 30, 2018, Premier recorded $275,000 of provision for loan losses compared to $891,000 of provision for loan losses recorded during the same quarter of 2017. The decrease in the provision for loan losses recorded during the third quarter of 2018 was primarily in response to greater than anticipated recoveries during the quarter of loans previously charged-off, reducing the need for additional provision expense compared to the third quarter 2017. The provision expense in the third quarter of 2017 was largely to provide for an increase in specific reserves on impaired loans identified in 2017. The third quarter 2018 provision expense did include an increase in specific reserves on impaired loans and also provided for the $9.4 million, or 0.9%, increase in loans outstanding since June 30, 2018. The level of provision expense is determined under Premier's internal analyses of evaluating credit risk. The amount of future provisions for loan losses will depend on any future improvement or further deterioration in the estimated credit risk in the loan portfolio as well as whether additional payments are received on loans previously identified as having significant credit risk. Gross charge-offs of loans decreased by $100,000 in the third quarter of 2018 when compared to the same quarter of 2017, while recoveries on loans previously charged-off increased by $352,000 as a result of a large recovery recorded in the third quarter of 2018. While loans individually evaluated for impairment decreased during the quarter ended September 30, 2018, non-accrual loans increased by $2.1 million since June 30, 2018, while accruing loans over 90 days past due decreased by approximately $2.7 million.
Net overhead costs (non-interest expenses less non-interest income) for the quarter ended September 30, 2018 totaled $7.730 million compared to $7.748 million in the third quarter of 2017. Net overhead decreased by $18,000, or 0.2%, in the third quarter of 2018 when compared to the third quarter of 2017, as a $260,000, or 11.9%, increase in non-interest income was substantially offset by a $242,000, or 2.4%, increase in non-interest expense. Total non-interest income increased by $260,000 in the third quarter of 2018 when compared to the third quarter of 2017, largely due to a $157,000, or 19.4%, increase in electronic banking income, a $47,000, or 4.1%, increase in service charges on deposit accounts, and $90,000 of proportional revenue from an investment in a start-up insurance agency. These increases were partially offset by a $38,000, or 56.7%, decrease in secondary market mortgage income. Non-interest expense increased by $242,000, or 2.4% in the third quarter of 2018 compared to the third quarter of 2017. Increases in operating costs include a $330,000, or 168%, increase in professional fees, a $59,000, or 3.9% increase in occupancy and equipment expense, and an $86,000, or 1.8%, increase in salaries and employee benefit costs. The unusually high increase in professional fees was primarily due to increased legal fees, consulting costs and audit costs as well as expenses related to the proposed acquisition of First Bank of Charleston announced on April 19, 2018 and consummated on October 12, 2018. These increases were partially offset by a $29,000, or 2.2%, decrease in data processing costs, a $62,000, or 24.6%, decrease in the amortization of intangible assets, a $29,000, or 17.7%, decrease in supplies, and a $320,000, or 92.5%, decrease in OREO expenses when compared to the third quarter of 2017.
Total assets as of September 30, 2018 were up $51.0 million, or 3.4%, to $1.544 billion from the $1.493 billion of total assets at year-end 2017. Liquid assets, such as cash and due from banks, interest bearing bank balances and federal funds sold, increased by $32.0 million, largely due to an increase in funds from an increase in total deposits and net payoffs on loans during the first nine months of 2018. Cash and due from banks decreased by $18.8 million, due to a decrease in reserves required to be kept in non-interest bearing bank accounts under Federal Reserve Regulation D. These funds were moved to interest-bearing bank balances, improving Premier's overall interest income from short-term investments. Investment securities increased by $36.8 million, or 13.2%, since year-end 2017, as $92.6 million of new investment purchases from available funds were partially offset by principal paydowns and a $6.4 million decrease in the market value of securities available for sale. Total loans outstanding decreased by $12.0 million, or 1.1%, largely due to payoffs on loans in the first quarter of 2018, including expected sizable payoffs from completed construction projects, exceeding new loans generated during that quarter. Since March 31, 2018, total loans have increased by $8.3 million, or 0.8%, through the end of the third quarter of 2018. Other real estate owned ("OREO") decreased by $5.6 million, or 28.0%, due to the first quarter 2018 sale of two of the three largest OREO properties held, which also generated nearly $1.07 million of profit upon liquidation. Total deposits increased by $46.9 million, or 3.7%, since year-end 2017, including a $33.0 million, or 9.9%, increase in non-interest bearing deposits. Interest bearing transaction and savings deposits have increased by $17.1 million, or 2.9%, since year-end 2017 while time deposits decreased by $3.2 million, or 0.9%, since year-end 2017. Customer repurchase agreements increased by $1.4 million, or 6.1% since year-end 2017. Other borrowings decreased by $1.7 million since year-end 2017 due to scheduled principal payments plus additional principal payments on Premier's existing borrowings. Premier's subordinated debentures increased by $22,000 since year-end 2017 due to the accretion of purchase accounting fair value adjustments applied to the $6.186 million face value of the subordinated debentures from previous acquisitions.
Stockholders' equity of $187.6 million equaled 12.1% of total assets at September 30, 2018, which compares to stockholders' equity of $183.4 million, 12.3% of total assets, at December 31, 2017. The increase in stockholders' equity was largely due to the $14.5 million of net income in the first nine months of 2018. The increase in stockholders' equity was substantially offset by a $5.1 million, net of tax, decrease in the market value of the investment portfolio available for sale and the $0.42 per share of common stock dividends declared and paid during the first nine months of 2018.
Certain Statements contained in this news release, including without limitation statements including the word "believes," "anticipates," "intends," "expects" or words of similar import, constitute "forward-looking statements" within the meaning of section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of Premier to be materially different from any future results, performance or achievements of Premier expressed or implied by such forward-looking statements. Such factors include, among others, general economic and business conditions, changes in business strategy or development plans and other factors referenced in this press release. Given these uncertainties, prospective investors are cautioned not to place undue reliance on such forward-looking statements. Premier disclaims any obligation to update any such factors or to publicly announce the results of any revisions to any of the forward-looking statements contained herein to reflect future events or developments.
Following is a summary of the financial highlights for Premier as of and for the periods ended September 30, 2018
PREMIER FINANCIAL BANCORP, INC. |
|||||||
For the Quarter Ended |
For the Nine Months Ended |
||||||
Sept 30 |
Sept 30 |
Sept 30 |
Sept 30 |
||||
2018 |
2017 |
2018 |
2017 |
||||
Interest Income |
|||||||
Loans, including fees |
13,731 |
13,469 |
41,449 |
41,667 |
|||
Investments and other |
2,270 |
1,665 |
6,104 |
4,949 |
|||
Total interest income |
16,001 |
15,134 |
47,553 |
46,616 |
|||
Interest Expense |
|||||||
Deposits |
1,355 |
954 |
3,583 |
2,854 |
|||
Borrowings and other |
137 |
149 |
407 |
473 |
|||
Total interest expense |
1,492 |
1,103 |
3,990 |
3,327 |
|||
Net interest income |
14,509 |
14,031 |
43,563 |
43,289 |
|||
Provision for loan losses |
275 |
891 |
1,890 |
2,033 |
|||
Net interest income after provision |
14,234 |
13,140 |
41,673 |
41,256 |
|||
Non-interest Income |
|||||||
Service charges on deposit accounts |
1,183 |
1,136 |
3,343 |
3,201 |
|||
Electronic banking income |
968 |
811 |
2,677 |
2,424 |
|||
Other non-interest income |
286 |
230 |
714 |
703 |
|||
Total non-interest income |
2,437 |
2,177 |
6,734 |
6,328 |
|||
Non-Interest Expense |
|||||||
Salaries and employee benefits |
4,846 |
4,760 |
14,667 |
14,703 |
|||
Net occupancy and equipment |
1,570 |
1,511 |
4,660 |
4,481 |
|||
Outside data processing |
1,315 |
1,344 |
3,841 |
4,019 |
|||
OREO expenses and writedowns, net |
26 |
346 |
(335) |
1,139 |
|||
Amortization of intangibles |
190 |
252 |
575 |
768 |
|||
Other non-interest expenses |
2,220 |
1,712 |
6,206 |
5,217 |
|||
Total non-interest expense |
10,167 |
9,925 |
29,614 |
30,327 |
|||
Income Before Taxes |
6,504 |
5,392 |
18,793 |
17,257 |
|||
Income Taxes |
1,483 |
1,925 |
4,264 |
6,207 |
|||
NET INCOME |
5,021 |
3,467 |
14,529 |
11,050 |
|||
EARNINGS PER SHARE * |
0.38 |
0.26 |
1.09 |
0.83 |
|||
DILUTED EARNINGS PER SHARE * |
0.37 |
0.26 |
1.08 |
0.82 |
|||
DIVIDENDS PER SHARE * |
0.15 |
0.12 |
0.42 |
0.36 |
|||
Charge-offs |
236 |
336 |
1,130 |
1,102 |
|||
Recoveries |
461 |
109 |
619 |
592 |
|||
Net charge-offs (recoveries) |
(225) |
227 |
511 |
510 |
|||
* Previously presented per share information as been restated to reflect a 5 for 4 stock split issued on June 8, 2018 to shareholders of record on June 4, 2018. |
PREMIER FINANCIAL BANCORP, INC. |
|||
Balances as of |
|||
September 30 |
December 31 |
||
2018 |
2017 |
||
ASSETS |
|||
Cash and Due From Banks |
22,048 |
40,814 |
|
Interest Bearing Bank Balances |
87,654 |
39,773 |
|
Federal Funds Sold |
7,589 |
4,658 |
|
Securities Available for Sale |
315,225 |
278,466 |
|
Loans (net) |
1,023,583 |
1,036,948 |
|
Other Real Estate Owned |
14,379 |
19,966 |
|
Other Assets |
35,821 |
34,053 |
|
Goodwill and Other Intangible Assets |
38,171 |
38,746 |
|
TOTAL ASSETS |
1,544,470 |
1,493,424 |
|
LIABILITIES & EQUITY |
|||
Deposits |
1,319,623 |
1,272,675 |
|
Fed Funds/Repurchase Agreements |
24,728 |
23,310 |
|
Other Borrowings |
3,350 |
5,000 |
|
Subordinated Debentures |
5,398 |
5,376 |
|
Other Liabilities |
3,793 |
3,708 |
|
TOTAL LIABILITIES |
1,356,892 |
1,310,069 |
|
Common Stockholders' Equity |
187,578 |
183,355 |
|
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY |
1,544,470 |
1,493,424 |
|
TOTAL BOOK VALUE PER COMMON SHARE |
14.03 |
13.74 |
|
Tangible Book Value per Common Share |
11.18 |
10.84 |
|
Non-Accrual Loans |
18,293 |
15,246 |
|
Loans 90 Days Past Due and Still Accruing |
992 |
3,391 |
SOURCE Premier Financial Bancorp, Inc.
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