Premier Financial Bancorp, Inc. Announces 2015 Annual Financial Results

HUNTINGTON, W.Va., March 8, 2016

Net interest income for the year ending December 31, 2015 totaled $48.380 million, compared to $48.414 million of net interest income earned during 2014, a decrease of $34,000, or 0.1%.  Total interest income in 2015 decreased by $339,000, or 0.6%, when compared to 2014, largely due to a $518,000, or 9.3%, decrease in interest income on investments partially offset by a $160,000, or 0.3%, increase in interest income on loans and a $20,000 increase in interest income on federal funds sold and interest-bearing bank balances.  The increase in interest income on loans in 2015 was largely due to a higher average volume of loans outstanding in 2015, substantially offset by a decrease in the average yield earned on loans compared to the yield earned during 2014.  Interest income on investments decreased in 2015, primarily as a result of a decrease in the average volume of investments outstanding but also due to a decrease in the average yield earned on the securities portfolio in 2015.  Nearly offsetting the $339,000 decrease in interest income in 2015 was a $305,000, or 7.0%, decrease in total interest expense when compared to 2014.  The decrease in total interest expense was largely due to a $256,000, or 6.8%, decrease in interest expense on deposits as well as a $53,000, or 9.4%, decrease in interest expense on other borrowings. 

During 2015, Premier recorded $326,000 of provision for loan losses compared to a $534,000 of provision for loan losses in 2014.  The provision for loan losses recorded in 2015 was largely in response to identified increases in the estimated credit risk in the loan portfolio related to loans collectively evaluated for impairment, partially offset by a decrease in specific reserves allocated to impaired loans and a significant level of recoveries of loans charged-off in 2015.  The provision expense in 2014 was largely to provide for an increase in credit risk as a result of internal loan growth as loans outstanding increased by an additional $43.8 million, or 5.9%, after excluding the $95.1 million of loans acquired via the purchase of Gassaway.  The loans acquired from the purchase of Gassaway were recorded at their estimated fair value on the date of acquisition, including an estimate of credit risk within the loan portfolio.  As the pace of economic recovery continues to be sluggish in Premier's markets, the ability of borrowers to consistently make their loan payments is increasingly being tested.  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.  Net charge-offs in 2015 were $1.026 million, down $188,000 from the $1.214 million of net charge-offs recorded in 2014.  While gross charge-offs increased by $495,000 in 2015 when compared to 2014 charge-offs, Premier realized a $683,000 increase in 2015 in recoveries of loans previously charged-off. 

Net overhead costs (non-interest expenses less non-interest income) for the calendar year 2015 totaled $28.705 million compared to $27.589 million in the year 2014.  The $1,116,000, or 4.0%, increase in net overhead costs is largely due a $1,951,000 increase in expenses on foreclosed properties (other real estate owned, or "OREO") in 2015.  However, while net overhead costs increased in 2015, the ratio of net overhead to average earning assets remained relatively unchanged in 2015 at 2.45%, compared to 2.42% during the prior year.  Non-interest income increased by $198,000, or 2.9%, in 2015 when compared to 2014 as an $89,000, or 2.5% increase in service charges on deposit accounts and a $254,000, or 10.4%, increase in electronic banking income more than offset a $62,000, or 31.2%, decrease in income from selling mortgages in the secondary market and a $83,000, or 12.0%, decrease in other non-interest income.  Non-interest expenses increased by $1,314,000, or 3.8%, in 2015 when compared to 2014, largely due to a $1,951,000 increase in OREO expenses.  In 2015, Premier realized $44,000 of gains on the sale of OREO compared to $1,302,000 of gains on the sale of OREO in 2014, an increase of $1,258,000 in net OREO expenses.  In addition, write downs on OREO properties to estimated realizable values increased by $472,000 in 2015 and net expenses to maintain the OREO properties increased by $221,000 in 2015.  Other increases in non-interest expense include a $338,000, or 8.3%, increase in data processing costs, a $188,000, or 3.8% increase in occupancy and equipment expenses, a $91,000, or 29.2%, increase in loan collection costs and a $129,000, or 4.1% increase in other non-interest expenses.  These increases more than offset a $1,122,000, or 6.25%, decrease in staff costs, a $142,000, or 25.0%, decrease in supplies expense, a $98,000, or 12.9%, decrease in professional fees and a $62,000, or 6.7%, decrease in FDIC insurance expense.  Not included in net overhead costs, but improving net income in 2014, Premier also realized $29,000 in gains on the sales of investment securities in 2014. 

President and CEO Robert W. Walker commented, "We are pleased to report another successful year for our company.  Our profitability remained strong.  Earnings per diluted share was $1.49, tying the highest amount reported by our company.  Our net interest margin for 2015 remained above peer level at 4.15%.  Both average total loans outstanding and average total deposits reached their highest levels for the year in 2015.  Our non-accrual loans decreased for the fifth year in a row, down this year by $5.6 million, or 43.8%, to $7.1 million at December 31, 2015.  Similarly, our non-performing assets are at their lowest level since 2008, at 2.19% of total assets.  On January 15, 2016 we consummated the merger with First National Bankshares Corporation, a $245 million single bank holding company headquartered in Ronceverte, West Virginia, and on March 4, 2016, we completed the merger of its subsidiary, First National Bank into Premier Bank, Inc.  I want to thank all of our hard working employees for their efforts in achieving these outstanding results.  While our future results will still be subject to the strengths and weaknesses of our local and national economy, we continue to be excited about our future and look forward to meeting its challenges." 

For the quarter ending December 31, 2015, Premier realized net income of $2,852,000 compared to $3,229,000 of net income reported for the fourth quarter of 2014.  On a diluted per share basis, Premier earned $0.35 during the fourth quarter of 2015 compared to $0.37 reported for the fourth quarter of 2014.  The decrease in quarterly earnings in 2015 was primarily the result of a $595,000 decrease in net interest income and a $155,000 increase in net operating costs which were only partially offset by a $293,000 decrease in the provision for loan losses.

Net interest income for the quarter ending December 31, 2015 totaled $11.710 million, compared to $12.305 million of net interest income earned in the fourth quarter of 2014.  When compared to the fourth quarter of 2014, net interest income decreased in 2015 by $595,000, or 4.8%, as a $729,000, or 5.4%, decrease in interest income was partially offset by a $134,000, or 12.4%, decrease in interest expense.  Total interest income earned in the fourth quarter of 2015 decreased when compared to the fourth quarter of 2014, largely due to a $671,000, or 5.6%, decrease in interest income on loans and an $82,000, or 6.0%, decrease in interest income on investments.  Total interest expense in the fourth quarter of 2015 decreased when compared to the fourth quarter of 2014, largely due to a $117,000, or 12.5%, decrease in interest expense on deposits and a $17,000, or 12.4%, decrease in interest expense on other borrowings.