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Premier Financial Bancorp Inc. Reports Operating Results (10-Q)

August 13, 2010 | About:
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10qk

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Premier Financial Bancorp Inc. (PFBI) filed Quarterly Report for the period ended 2010-06-30.

Premier Financial Bancorp Inc. has a market cap of $57 million; its shares were traded at around $7.18 with a P/E ratio of 8.2 and P/S ratio of 1.2. The dividend yield of Premier Financial Bancorp Inc. stocks is 6.2%. Premier Financial Bancorp Inc. had an annual average earning growth of 5.3% over the past 5 years.

Highlight of Business Operations:

Net income for the six months ended June 30, 2010 was $4,532,000, or $0.48 per diluted share, compared to net income of $2,584,000, or $0.40 per diluted share for the six months ended June 30, 2009. The increase in income in 2010 is largely due to the acquisition of Abigail Adams National Bancorp, Inc. (Abigail Adams) and its two subsidiary banks, Adams National Bank (Adams) and Consolidated Bank and Trust (CB&T) on October 1, 2009 (collectively the “Acquired Banks”). The operations of the Acquired Banks are only included in Premier s results from the date of acquisition and therefore, are included in the first six months of 2010 results but not the first six months of 2009 results. The operations of Adams and CB&T added $943,000 of net income in the first six months of 2010. Excluding this income, the remaining Premier operations increased net income in the first six months of 2010 by $1,005,000, or 38.9%, compared to the same period of 2009, as the decrease in interest expense exceeded the decrease in interest income while the decrease in net overhead costs more than offset an increase in the provision for loan losses. These were also complemented by a decrease in income tax expense. The annualized returns on average common shareholders equity and average assets were approximately 7.09% and 0.82% for the six months ended June 30, 2010 compared to 5.66% and 0.70% for the same period in 2009. For the quarter ending June 30, 2010, annualized returns on average common shareholders equity and average assets were approximately 6.96% and 0.81% compared to 5.95% and 0.74% for the same quarter of 2009.

Net income for the three months ended June 30, 2010 was $2,219,000, or $0.23 per diluted share, compared to net income of $1,355,000, or $0.21 per diluted share for the three months ended June 30, 2009. Again, the increase in income in 2010 is partially due to the inclusion of the operations of the Acquired Banks in 2010 but not in 2009. The operations of Adams and CB&T added $155,000 of net income in the second quarter of 2010.

Net interest income for the six months ending June 30, 2010 totaled $21.78 million, up $8.56 million, or 64.7%, from the $13.22 million of net interest income earned in the first six months of 2009, as the $7.99 million of additional net interest income of the Acquired Banks added to the 4.3% increase in net interest income of Premier s other operations. Interest income in the first six months of 2010 increased by $8.53 million, or 46.7%, as a result of the $9.03 million of interest income added by the operations of the Acquired Banks. Excluding the operations of the Acquired Banks, interest income decreased by $505,000, or 2.8%, in the first six months of 2010. Interest income on loans decreased by $272,000, largely due to a lower average volume of loans outstanding and a slightly lower yield earned on those loans. Interest earned on investments decreased by $229,000, due to lower average yields even though on a higher average volume of investments. Interest earned on federal funds sold and interest bearing bank balances decreased by $4,000, largely due to lower yields earned resulting from the Federal Reserve Board of Governors policy to stimulate the economy by maintaining the federal funds sold rate near 0.00% to 0.25%.

Interest expense in the first six months of 2010 (which includes the $1.04 million increase in interest expense in 2010 from the operations of the Acquired Banks) decreased by $30,000, or 0.6%, when compared to the same six months of 2009. Excluding the Acquired Banks operations, interest expense decreased by $1.07 million, or 21.3%, in 2010 compared to the first six months of 2009, more than offsetting the decrease in interest income from the remaining Premier operations. Interest expense on deposits (excluding the operations of the Acquired Banks) decreased by $1.08 million, or 23.5%, largely due to lower rates paid, although on a higher average balance of deposits outstanding. Interest expense on repurchase agreements and other short-term borrowings decreased by $3,000, largely due to a lower average balance. Interest expense on FHLB advances decreased by $53,000, due to a decrease in the average balance outstanding resulting from principal payments and maturities during the last twelve months as well as a lower average rate paid as a result of maturities in the second quarter of 2010. Slightly offsetting these decreases, interest expense on other borrowings increased by $62,000 due to higher rates paid on a higher average outstanding balance. The Board of Governors policy to reduce the federal funds rate to nearly zero, coupled with the U.S. Treasury actively buying investment securities, has significantly reduced the yield on much of Premier s earning assets including investments, federal funds sold and variable rate loans. Premier has tried to offset some of the lower interest income by lowering the rates paid on its deposits and repurchase agreements with customers. However, the higher yield on the loans of the Acquired Banks coupled with the lower rates paid on the interest bearing deposits and borrowings of the Acquired Banks have combined to boost Premier s overall net interest margin. Premier s net interest margin in the first six months of 2010 was 4.38% compared to 4.01% for the same period in 2009. A portion of the additional interest income on loans from the acquired banks is the result of recognizing into interest income the remaining fair value discount on notes that are fully paid-off during the period. These events cannot be predicted with certainty and may positively or negatively affect interest income on loans in future months.

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