Premier Financial Bancorp Inc. Reports Operating Results (10-Q)
Premier Financial Bancorp is a multi-bank holding company. Through the banks and its data processing subsidiary the company focuses on providing quality community banking services to individuals and small-to medium sized businesses primarily in non-urban areas. By seeking to provide such banking services in non-urban areas the company believes that it can minimize the competitive effect of larger financial institutions that typically are focused on large metropolitan areas. Premier Financial Bancorp Inc. has a market cap of $35.3 million; its shares were traded at around $5.53 with a P/E ratio of 4.9 and P/S ratio of 0.8. The dividend yield of Premier Financial Bancorp Inc. stocks is 8%. Highlight of Business Operations:Net income for the three months ended March 31, 2009 was $1,229,000, or $0.19 per share, compared to net income of $1,774,000, or $0.34 per share for the three months ended March 31, 2008. The decrease in income in 2009 is largely due to decreasing yields on earning assets, particularly federal funds sold, and increases in non-interest expenses as well as the existence of benefits to 2008 net income, such as negative provisions for loan losses and reimbursed collection expenses, which did not reoccur in 2009. The annualized returns on shareholders equity and average assets were approximately 5.44% and 0.68% for the three months ended March 31, 2009 compared to 10.20% and 1.28% for the same period in 2008.
Net interest income for the three months ending March 31, 2009 totaled $6.56 million, up $964,000 or 17.2% from the $5.59 million of net interest income earned in the first three months of 2008, as the $1.349 million of additional net interest income of the combined Traders Bank more than offset the 6.9% decrease in net interest income of Premier s other five banks. The operations from the acquisitions of Citizens First Bank (“Citizens First) and Traders Bankshares, Inc. (“Traders”), (now merged together as Traders Bank), both of which occurred at the close of business on April 30, 2008 are included in the consolidated financial statements of Premier only from the date of acquisition and thus are not included in the comparison first quarter of 2008 results. Interest income in 2009 increased by $709,000 or 8.4%, as a result of the $1.95 million of interest income added by the operations of Traders Bank. Excluding the operations of Traders Bank, interest income decreased by $1.24 million or 14.7% in 2009. Interest income on loans decreased by $798,000, due to lower loan yields even though on a higher average volume of loans outstanding. Interest earned on investments decreased $151,000, due to lower average yields on a lower average volume of investments. Interest earned on federal funds sold decreased by $288,000, largely due lower yields earned resulting from the Federal Reserve Board of Governors policy to stimulate the economy by maintaining the federal funds sold rate near 0.25%.
Partially offsetting the decrease in interest income, interest expense decreased in total by $255,000 or 9.0% in 2009 compared to 2008, which includes the $602,000 of increase in interest expense in 2009 from the Traders Bank operations. Excluding the Traders Bank operations, interest expense decreased by $857,000 or 30.3% in 2009 compared to the first quarter of 2008. Interest expense on deposits decreased by $837,000 or 32.3%, largely due to lower rates paid, although on a slightly higher average balance outstanding. Interest expense on repurchase agreements and other short-term borrowings decreased $20,000, largely due to lower rates paid even though on a larger average balance. Interest expense on FHLB advances and other borrowings remained unchanged as the increase in interest expense from higher average balance of these borrowings was offset by the lower rates paid on the variable rate portion of the other borrowings. The decreases in all sources of interest income and expense (excluding the operations of Traders Bank) in 2009 are largely the result of the decrease in market interest rates following the Federal Reserve Bank Board of Governors monetary policy changes in 2008. 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. The overall result has been a decrease in Premier s net interest margin in the first three months of 2009 to 4.01% compared to 4.38% for the same period in 2008.
Non-interest income increased $104,000 to $1,170,000 for the first three months of 2009. Included in this increase is $228,000 of non-interest income from the operations of Traders Bank. Excluding their operations, service charges on deposit accounts decreased by $58,000 or 9.1%, secondary market mortgage income decreased by $78,000 or 48.4%, while electronic banking income (income from debit/credit cards, ATM fees and internet banking charges) increased by $18,000 or 11.0%. The decrease in service charges on deposit accounts is largely due to lower total NSF fees as Premier believes that deposit customers seem to keep a closer watch on their available deposit balances as economic conditions tighten. Secondary market mortgage income decreased significantly as the number of mortgage buyers in the private sector has decreased substantially and government agency buyers have increased their requirements to approve the purchase of mortgage loans. Premier concentrates its efforts on selling high quality mortgage loans and routinely searches for new buyers for these loans; however, the volume of future sales may depend on factors beyond the control of the Company. Electronic banking income increased largely due to continued increases in Premier s deposit customer base and customers greater propensity to use electronic means to conduct their banking business. Premier s conversion to a more modern banking software system in 2005 has allowed Premier to offer more electronic banking services and made it easier for customers to conduct their banking electronically.
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