<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission file number 0-20908
PREMIER FINANCIAL BANCORP, INC.
(Exact name of registrant as specified in its charter)
KENTUCKY 61-1206757
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
120 N. HAMILTON STREET
GEORGETOWN, KENTUCKY 40324
(address of principal executive officer) (Zip Code)
Registrant's telephone number (502) 863-7500
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to filing
requirements for the past 90 days. Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date.
Common stock - 4,209,090 shares outstanding at May 8, 1997
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The accompanying information has not been audited by independent public
accountants; however, in the opinion of management such information reflects
all adjustments necessary for a fair presentation of the results for the
interim period. All such adjustments are of a normal and recurring nature.
The accompanying financial statements are presented in accordance with
the requirements of Form 10-Q and consequently do not include all of the
disclosures normally required by generally accepted accounting principles or
those normally made in the registrant's annual Form 10-K filing.
Accordingly, the reader of the Form 10-Q may wish to refer to the
registrant's Form 10-K for the year ended December 31, 1996 for further
information in this regard.
Index to consolidated financial statements:
Consolidated Balance Sheets............................... 3
Consolidated Statements of Income......................... 4
Consolidated Statements of Cash Flows..................... 5
Notes to Consolidated Financial Statements................ 6
Page 2
<PAGE>
PREMIER FINANCIAL BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
March 31 December 31
1997 1996
---------- --------------
ASSETS
Cash and due from banks $ 6,898 $ 7,134
Federal funds sold 8,285 10,635
Investment securities:
Available for sale 22,852 21,827
Held to maturity 21,795 20,993
Loans $ 225,197 $ 219,632
Less: Unearned interest (2,105) (2,045)
Allowance for loan losses (2,669) (2,523)
---------- ----------
Net loans $ 220,423 $ 215,064
Premises and equipment, net 4,315 3,800
Goodwill 5,456 5,490
Other assets 8,035 7,622
---------- ----------
TOTAL ASSETS $ 298,059 $ 292,565
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing $ 24,657 $ 25,031
Time deposits, $100,000 and over 32,788 33,651
Other interest bearing 182,423 176,892
---------- ----------
Total deposits $ 239,868 $ 235,574
Agreements to repurchase securities 5,779 5,599
Federal Home Loan Bank advances 9,484 9,377
Other liabilities 2,519 2,151
---------- ----------
Total liabilities $ 257,650 $ 252,701
STOCKHOLDERS' EQUITY:
Preferred stock, no par value;
1,000,000 shares authorized;
none issued or outstanding $ 0 $ 0
Common stock, no par value;
10,000,000 shares authorized;
4,209,090 shares at March 31,
1997 and December 31, 1996,
issued and outstanding 978 978
Surplus 32,941 32,941
Retained earnings 6,744 6,112
Net unrealized losses on securities
available for sale (254) (167)
---------- ----------
Total stockholders' equity $ 40,409 $ 39,864
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 298,059 $ 292,565
See accompanying notes to the consolidated financial statements.
Page 3
<PAGE>
PREMIER FINANCIAL BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)
Three Months Ended
----------------------------
March 31 March 31
1997 1996
------------ ----------
INTEREST INCOME:
Loans, including fees $ 5,470 $ 2,949
Investment securities -
Taxable 415 313
Tax-exempt 239 83
Federal funds sold and other 186 129
------------ ----------
Total interest income $ 6,310 $ 3,474
INTEREST EXPENSE:
Deposits $ 2,644 $ 1,528
Debt and other borrowings 200 125
------------ ----------
Total interest expense $ 2,844 $ 1,653
Net interest income $ 3,466 $ 1,821
Provision for possible loan losses 184 73
------------ ----------
Net interest income after provision
for possible loan losses $ 3,282 $ 1,748
NON-INTEREST INCOME:
Service charges $ 232 $ 147
Insurance commissions 120 44
Investment securities gains (losses) 0 0
Other 207 128
------------ ----------
$ 559 $ 319
NON-INTEREST EXPENSES:
Salaries and employee benefits $ 1,228 $ 817
Occupancy and equipment expenses 290 128
Other expenses 665 452
------------ ----------
$ 2,183 $ 1,397
Income before income taxes $ 1,658 $ 670
Provision for income taxes 500 172
------------ ----------
NET INCOME $ 1,158 $ 498
Primary earnings per share $ .28 $ .26
Weighted average shares outstanding 4,209,090 1,909,090
See accompanying notes to the consolidated financial statements.
Page 4
<PAGE>
PREMIER FINANCIAL BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended
---------------------------
March 31 March 31
1997 1996
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,158 $ 498
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 112 42
Provision for loan losses 184 73
Changes in:
Other assets (378) 40
Other liabilities 368 (2)
------------ ------------
Net cash provided by operating activities $ 1,444 $ 651
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of securities available for sale $ (1,801) $(7,702)
Proceeds from sales of securities available for sale 0 1,800
Proceeds from maturities and calls of securities
available for sale 650 1,600
Purchases of investment securities held to maturity (1,148) (89)
Proceeds from maturities and calls of securities held
to maturity 351 721
Net change in federal funds sold 2,350 1,670
Net change in loans (5,543) (1,981)
Purchases of bank premises and equipment (594) (27)
------------ ------------
Net cash used in investing activities $ (5,735) $(4,008)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in deposits $ 4,294 $ 2,617
Increase in other borrowings, net 287 (103)
Dividends paid (526) (238)
------------ ------------
Net cash provided by financing activities $ 4,055 $ 2,276
Net decrease in cash and cash equivalents $ (236) $(1,081)
Cash and cash equivalents at beginning of period 7,134 6,340
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 6,898 $ 5,259
</TABLE>
See accompanying notes to the consolidated financial statements.
Page 5
<PAGE>
PREMIER FINANCIAL BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Premier
Financial Bancorp, Inc. (the Company) and its wholly-owned subsidiaries,
Georgetown Bancorp, Inc., Georgetown, Kentucky, Citizens Deposit Bank &
Trust, Vanceburg, Kentucky, Bank of Germantown, Germantown, Kentucky,
Citizens Bank, Sharpsburg, Kentucky, and Farmers Deposit Bank, Eminence,
Kentucky. In addition, the Company has a data processing service subsidiary,
Premier Data Services, Inc., Vanceburg, Kentucky. All material intercompany
transactions and balances have been eliminated.
NOTE 2 - INVESTMENT SECURITIES
Amortized cost and fair value of investment securities, by category, at
March 31, 1997 are summarized as follows:
<TABLE>
<CAPTION>
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Available for sale:
U. S. Treasury securities $ 3,696 $ 2 $ (8) $ 3,690
U. S. agency securities 14,891 6 (226) 14,671
Obligations of states and political
subdivisions 1,683 36 (3) 1,716
Preferred stock 2,000 0 0 2,000
Other equity securities 900 0 (125) 775
------- ----- ------ -------
Total available for sale $23,170 $ 44 $(362) $22,852
Held to maturity:
U. S. Treasury securities $ 1,855 $ 5 $ (6) $ 1,854
U. S. agency securities 6,128 17 (24) 6,121
Obligations of states and political
subdivisions 13,425 215 (95) 13,545
Asset-backed securities 387 2 (3) 386
------- ----- ------ -------
Total held to maturity $21,795 $239 $(128) $21,906
</TABLE>
Amortized cost and fair value of investment securities, by category, at
December 31, 1996 are summarized as follows:
<TABLE>
<CAPTION>
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Available for sale:
U. S. Treasury securities $ 4,098 $ 5 $ (9) $ 4,094
U. S. agency securities 13,440 40 (157) 13,323
Obligations of states and political
subdivisions 1,584 40 (2) 1,622
Preferred stock 2,000 0 0 2,000
Other equity securities 900 0 (112) 788
------- ----- ------ -------
Total available for sale $22,022 $ 85 $(280) $21,827
</TABLE>
Page 6
<PAGE>
PREMIER FINANCIAL BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - INVESTMENT SECURITIES (CONTINUED)
<TABLE>
<CAPTION>
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Held to maturity:
------- ----- ------ -------
U. S. Treasury securities $ 2,058 $ 6 $ (9) $ 2,055
U. S. agency securities 6,329 18 (26) 6,321
Obligations of states and political
subdivisions 12,190 250 (60) 12,380
Asset-backed securities 416 4 (4) 416
------- ----- ------ -------
Total held to maturity $20,993 $278 $ (99) $21,172
</TABLE>
NOTE 3 - LOANS
Major classifications of loans are summarized as follows:
March 31 December 31
1997 1996
----------- -------------
(In Thousands)
Commercial, secured by real estate $ 60,214 $ 59,834
Commercial, other 37,388 33,908
Real estate construction 3,315 4,138
Real estate mortgage 78,595 76,600
Agricultural 9,731 10,050
Consumer 35,504 33,751
Other 450 1,351
-------- --------
$225,197 $219,632
Unearned interest (2,105) (2,045)
Allowance for loan losses (2,669) (2,523)
-------- --------
$220,423 $215,064
NOTE 4 - ALLOWANCE FOR LOAN LOSSES
Changes in the allowance for loan losses are as follows:
Three Months Ended
--------------------------
March 31 March 31
1997 1996
----------- -------------
(In Thousands)
-------- --------
Balance, beginning of period $ 2,523 $ 1,735
Charge-offs (90) (80)
Recoveries 52 62
Provision for loan losses 184 73
-------- --------
Balance, end of period $ 2,669 $ 1,790
Page 7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
A. Financial Condition and Results of Operations
Net income for the three months ended March 31, 1997, of $1,158,000 or
$0.28 per share, was 132% above net income of $498,000 or $0.26 for the three
months ended March 31, 1996. This $660,000 increase in net income was
primarily due to the increase in average interest earning assets of
$127,356,000. The Company's asset growth is attributed to the additional
capital from the proceeds of the initial public stock offering in May and
June, 1996, and the acquisition of Farmers Deposit Bancorp on July 1, 1996,
in addition to the continued growth of the Company's other commercial bank
subsidiaries. The primary component of the growth is an increase of
$106,294,000 in average loans for the three month period as compared to the
corresponding three month period in 1996. The net interest margin was 5.24%
for the first quarter of 1997 compared to a 5.19% in the first quarter of
1996 and 5.32% for the full year 1996. The return on stockholders' equity and
return on average assets were 11.6% and 1.59%, respectively, for the three
months ended March 31, 1997 compared to 17.7% and 1.27%, respectively, for
the same period in 1996. The decrease in the return on equity is attributable
to the additional $27 million received from the initial public offering in
the second quarter of 1996.
Non-interest income increased $240,000 to $559,000 for the first three
months of 1997 compared to $319,000 for the first three months of 1996.
Non-interest income of $207,000 was recorded at Farmers Deposit Bank, which
was acquired in the second quarter of 1996, with the balance of the growth
attributed to overall growth and expansion of the Company's business and its
customer base. Non-interest income recorded in the first quarter of 1996
included a non-recurring fee of $50,000 received in connection with an
exchange of an investment in preferred stock.
Non-interest expenses for the first quarter of 1997 totaled $2,183,000 or
2.96% of average assets on an annualized basis compared to $1,397,000 or
3.56% of average assets for the same period of 1996. This increase in
non-interest expense is attributed to the expansion of the Company's
business, with $524,000 representing non-interest expenses incurred at
Farmers Deposit Bank. As a percentage of average assets, non-interest
expenses for the first quarter of 1997 were reduced by 16.7% as compared to
the first quarter of 1996.
Income tax expense was $500,000 for the first quarter of 1997 compared to
$172,000 for the first quarter of 1996. Income tax expense for 1997 was
higher than 1996 as a result of higher income before taxes and a higher
effective tax rate. The effective tax rate for 1997 was 30.2% as compared to
25.7% for the same period in 1996. This higher rate was primarily
attributable to the inclusion of amortization of goodwill recorded in
connection with the Farmers Deposit Bancorp acquisition which is
non-deductible for tax purposes.
The provision for possible loan losses and net chargeoffs were $184,000
and $38,000, respectively, for the first quarter of 1997, compared to $73,000
and $18,000, respectively, for the first quarter of 1996. The increases in
these amounts primarily relate to the increase in average loans between the
two periods. Total nonperforming loans were $1,313,000 at March 31, 1997,
compared to $951,000 at December 31, 1996. The allowance for loan losses at
March 31, 1997, of 1.20% of total loans was an increase from 1.16% of total
loans at December 31, 1996.
Page 8
<PAGE>
Any loans classified by regulatory examiners as loss, doubtful,
substandard, or special mention that have not been disclosed under Item III
of Industry Guide 3 do not (1) represent or result from trends or
uncertainties which management reasonably expects will materially impact
future operating results, liquidity, or capital resources, or (2) represent
material credits about which management is aware of any information which
causes management to have serious doubts as to the ability of borrowers to
comply with the loan repayment terms. The Company is unaware of any trends,
events, uncertainties or current recommendations by regulatory authorities
that will have, or that are reasonably likely to have a material effect.
B. Liquidity
Liquidity for a financial institution can be expressed in terms of
maintaining sufficient cash flows to meet both existing and unplanned
obligations in a cost effective manner. Adequate liquidity allows the
Company to meet the demands of both the borrower and the depositor on a
timely basis, as well as pursuing other business opportunities as they arise.
Thus, liquidity management embodies both an asset and liability aspect. In
order to provide for funds on a current and long-term basis, the Corporation
primarily relies on the following sources:
1. Core deposits consisting of both consumer and commercial deposits and
certificates of deposit of $100,000 or more.
2. Cash flow generated by repayment of loans and interest.
3. Arrangements with correspondent banks for purchase of unsecured
federal funds.
4. The sale of securities under repurchase agreements and borrowing from
the Federal Home Loan Bank.
5. Maintenance of an adequate available-for-sale security portfolio.
The cash flow statements for the periods presented in the financial
statements provide an indication of the Company's sources and uses of cash as
well as an indication of the ability of the Company to maintain an adequate
level of liquidity.
Page 9
<PAGE>
C. Capital
On March 31, 1997, the Company's Tier I leverage capital ratio was
12.25%, which is approximately three times the regulatory minimum. The
proceeds from the initial public offering in the second quarter of 1996 have
provided the Company with the necessary capital required to fund the
Company's future growth, both internal growth and additional acquisitions.
The Company's principal source of funds for dividend payments to
stockholders is dividends received from the subsidiary Banks. Banking
regulations limit the amount of dividends that may be paid without prior
approval of regulatory agencies. Under these regulations, the amount of
dividends that may be paid without prior approval of regulatory agencies in
any calendar year is limited to the current year's net profits, as defined,
combined with the retained net profits of the preceding two years, subject to
the capital requirement limitations. At March 31, 1997, the Banks could,
without prior approval, declare dividends to the Company of approximately
$4,000,000 plus any additional 1997 net profits retained to the date of the
dividend declaration.
The Company declared a first quarter dividend of $.125 per share, or
$526,136, payable March 31, 1997 to shareholders of record as of March 24,
1997.
Page 10
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings None
Item 2. Changes in Securities None
Item 3. Defaults Upon Senior Securities None
Item 4. Submission of Matters to a vote of Security Holders None
Item 5. Other Information None
Item 6. Exhibits and Reports on Form 8-K None
Page 11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Corporation has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PREMIER FINANCIAL BANCORP, INC.
/s/ Marshall T. Reynolds
Date: May 12, 1997 ---------------------------------
Marshall T. Reynolds
Chairman of the Board
/s/ J. Howell Kelly
Date: May 12, 1997 ----------------------------------
J. Howell Kelly
President & Chief Executive Officer
Page 12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 6,898
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 8,285
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 22,852
<INVESTMENTS-CARRYING> 21,795
<INVESTMENTS-MARKET> 21,906
<LOANS> 223,092
<ALLOWANCE> 2,669
<TOTAL-ASSETS> 298,059
<DEPOSITS> 239,868
<SHORT-TERM> 12,779
<LIABILITIES-OTHER> 5,003
<LONG-TERM> 0
0
0
<COMMON> 978
<OTHER-SE> 39,431
<TOTAL-LIABILITIES-AND-EQUITY> 298,059
<INTEREST-LOAN> 5,470
<INTEREST-INVEST> 654
<INTEREST-OTHER> 186
<INTEREST-TOTAL> 6,310
<INTEREST-DEPOSIT> 2,644
<INTEREST-EXPENSE> 2,844
<INTEREST-INCOME-NET> 3,466
<LOAN-LOSSES> 184
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,183
<INCOME-PRETAX> 1,658
<INCOME-PRE-EXTRAORDINARY> 1,658
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,158
<EPS-PRIMARY> .28
<EPS-DILUTED> .28
<YIELD-ACTUAL> 5.24<F1>
<LOANS-NON> 426
<LOANS-PAST> 887
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,523
<CHARGE-OFFS> 90
<RECOVERIES> 52
<ALLOWANCE-CLOSE> 2,669
<ALLOWANCE-DOMESTIC> 2,669
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
<FN>
<F1>Note 1, Tag number 46 computed on a tax-equivalent basis
</FN>
</TABLE>
