Premier Financial Bancorp Inc. has a market cap of $69.8 million; its shares were traded at around $8.78 with a P/E ratio of 10.3 and P/S ratio of 1.5. The dividend yield of Premier Financial Bancorp Inc. stocks is 5.1%.
Highlight of Business Operations:Net income for the three months ended March 31, 2010 was $2,313,000, or $0.25 per share, compared to net income of $1,229,000, or $0.19 per share for the three months ended March 31, 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 quarter 2010 results but not the first quarter 2009 results. The operations of Adams and CB&T added $788,000 of net income in the first three months of 2010. Excluding this income, the remaining Premier operations increased net income in the first three months of 2010 by $296,000, or 24.1%, 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. The annualized returns on common shareholders equity and average assets were approximately 7.29% and 0.85% for the three months ended March 31, 2010 compared to 5.44% and 0.68% for the same period in 2009.
Net interest income for the three months ended March 31, 2010 totaled $11.06 million, up $4.5 million, or 68.7%, from the $6.56 million of net interest income earned in the first three months of 2009, as the $4.25 million of additional net interest income of the Acquired Banks added to the 3.9% increase in net interest income of Premier s other operations. Interest income in 2010 increased by $4.48 million, or 49.0%, as a result of the $4.77 million of interest income added by the operations of the Acquired Banks. Excluding the operations of the Acquired Banks, interest income decreased by $285,000, or 3.1%, in 2010. Interest income on loans decreased by $126,000, largely due to a lower average volume of loans outstanding. Interest earned on investments decreased by $156,000, 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 $3,000, 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 0.00% to 0.25%.
Interest expense decreased in total in the first three months of 2010 by $24,000, or 0.9%, when compared to the same three months of 2009, which includes the $515,000 increase in interest expense in 2010 from the operations of the Acquired Banks. Excluding the Acquired Banks operations, interest expense decreased by $539,000, or 20.9%, in 2010 compared to the first quarter 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 $558,000, or 23.7%, 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 $5,000, largely due to a lower average balance. Interest expense on FHLB advances decreased by $8,000, due to decreases in the average balance outstanding from principal payments made during the last twelve months. Slightly offsetting these decreases, interest expense on other borrowings increased by $32,000 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 acquired from Adams and CB&T coupled with the lower rates paid on the interest bearing deposits and borrowings assumed from Adams and CB&T have combined to boost Premier s overall net interest margin. Premier s net interest margin in the first three months of 2010 was 4.47% 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 a note that was fully paid-off during the quarter. These events cannot be predicted with certainty and may positively or negatively affect interest income on loans in future months.
Non-interest income increased $347,000 to $1,517,000 for the first three months of 2010. Included in this increase is $320,000 of non-interest income from the operations of the Acquired Banks. Excluding their operations, service charges on deposit accounts decreased by $3,000, or 0.4%, and other non-interest income decreased by $6,000, or 4.8%. These decreases were more than offset by a $30,000, or 12.7%, increase in electronic banking income (income from debit/credit cards, ATM fees and internet banking charges) and a $6,000, or 7.2%, increase in secondary market mortgage income. Secondary market mortgage income increased as the number of mortgage borrowers have increased and the increased requirements to approve the purchase of mortgage loans by government agency buyers have become more widely accepted. 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.
Non-interest expenses for the first quarter of 2010 totaled $8,510,000, or 3.16% of average assets on an annualized basis, compared to $5,764,000, or 3.21% of average assets for the same period of 2009. The $2,746,000 increase in non-interest expenses in 2010 when compared to the first quarter of 2009 is largely due to the $2,943,000 of additional non-interest expenses from the operations of the Acquired Banks. Excluding their operations, non-interest expenses in the first quarter of 2010 decreased by $197,000, or 3.4%. Excluding the operations of the Acquired Banks, staff costs increased by $29,000, or 1.0%, in 2010 largely due to normal salary and benefit increases. Outside data processing increased by $38,000, or 5.0%, due to increases in processing fees and the outsourcing of statement rendering services. Taxes not on income increased by $62,000, or 34.8%, due to increases in taxes on equity resulting from the additional equity from the acquisition of Abigail Adams and the issuance of preferred stock to the U.S. Treasury. FDIC insurance increased by $126,000, or 138%, due to a combination of FDIC insurance rate increases and the expiration of offsetting FDIC insurance credits used to offset some FDIC insurance in 2009. The increase in these expenses were more than offset by decreases in occupancy and equipment expenses, professional fees, OREO expenses and writedowns, supplies and other operating expenses. Occupancy and equipment expenses decreased by $119,000, or 16.7%, largely due to $81,000 from gains on the sale of three buildings in the first quarter of 2010 and a $38,000 decrease in equipment depreciation expense including information technology and furniture and fixtures, as many of these assets have become fully depreciated. Professional fees decreased by $205,000, or 60.1%, in 2010 largely due to legal fees expensed in 2009 related to the acquisition of Abigail Adams and other legal fees incurred to settle outstanding lawsuits. OREO expenses and writedowns decreased by $60,000, or 77.9%, in 2010, largely due to writedowns of OREO property in the first quarter of 2009 partially offset by higher OREO expenses in 2010. Supplies expense decreased by $16,000 in the first quarter of 2010 while other operating expenses decreased in total by $52,000, largely due to customer fraud losses incurred in the first quarter of 2009.
Cash and due from banks at March 31, 2010 was $53.7 million, a $7.9 million decrease from the $61.6 million at December 31, 2009. Federal funds sold decreased by $356,000 from the $23.0 million reported at December 31, 2009. Changes in these two highly liquid assets are generally in response to increases in deposits, the demand for deposit withdrawals or the funding of loans or investment purchases and are part of Premier s management of its liquidity and interest rate risks. The decrease in cash and due from banks plus the decrease in federal funds sold during the first three months of 2010 was largely in response to meet the demand for deposit withdrawals and the retirement of customer repurchase agreements during that time, as these two sources of funding decreased in total by $16.0 million during the first quarter of 2010.
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