<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 September 30, 1998
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 - 5,234,525 shares outstanding at November 11, 1998.
<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, 1997 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>
PREMIER FINANCIAL BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
September 30 December 31
1998 1997
---- ----
<S> <C> <C>
ASSETS
Cash and due from banks $ 18,109 $ 11,610
Federal funds sold 11,228 40,771
Investment securities
Available for sale 195,645 45,926
Held to maturity 20,002 20,362
Loans 364,905 285,798
Less: Unearned interest (2,489) (2,409)
Allowance for loan losses (4,210) (3,144)
--------- ---------
Net loans 358,206 280,245
FHLB and Federal Reserve stock 3,265 2,923
Premises and equipment, net 11,550 6,895
Goodwill and other intangibles 21,799 7,262
Other assets 11,285 9,442
--------- ---------
TOTAL ASSETS $651,089 $425,436
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Non-interest bearing $ 56,357 $ 37,702
Time deposits, $100,000 and over 57,495 47,105
Other interest bearing 400,560 239,747
--------- ---------
Total deposits 514,412 324,554
Securities sold under agreements to repurchase and other
short-term borrowings 8,203 5,634
Federal Home Loan Bank advances 33,518 15,263
Other borrowings 8,000 -
Other liabilities 3,641 3,438
--------- ---------
Total liabilities 567,774 348,889
Guaranteed preferred beneficial interests in Company's debentures 28,750 28,750
Stockholders' equity
Preferred stock, no par value; 1,000,000 shares authorized;
none issued or outstanding - -
Common stock, no par value; 10,000,000 shares authorized;
5,234,525 shares at September 30, 1998 and 4,685,390 shares
at December 31, 1997, issued and outstanding 1,103 982
Surplus 43,448 33,825
Retained earnings 9,543 13,055
Accumulated other comprehensive income 471 (65)
--------- ---------
Total stockholders' equity 54,565 47,797
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $651,089 $425,436
--------- ---------
--------- ---------
</TABLE>
See accompanying notes to the consolidated financial statements
3.
<PAGE>
PREMIER FINANCIAL BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans, including fees $ 8,602 $ 6,645 $24,516 $19,106
Investment securities
Taxable 3,067 2,829 5,898 4,397
Tax-exempt 283 300 859 873
Federal funds sold and other 504 42 1,623 386
------- ------- ------- -------
Total interest income 12,456 9,816 32,896 24,762
INTEREST EXPENSE
Deposits 5,318 3,235 13,826 9,247
Debt and other borrowings 1,865 2,600 4,523 3,615
------- ------- ------- -------
Total interest expense 7,183 5,835 18,349 12,862
Net interest income 5,273 3,981 14,547 11,900
Provision for possible loan losses 299 512 1,295 992
------- ------- ------- -------
Net interest income after provision for
possible loan losses 4,974 3,469 13,252 10,908
NON-INTEREST INCOME
Service charges 486 316 1,122 879
Insurance commissions 124 105 324 340
Investment securities gains 8 1,164 151 1,172
Other 219 109 2,024 557
------- ------- ------- -------
837 1,694 3,621 2,948
NON-INTEREST EXPENSES
Salaries and employee benefits 2,141 1,347 5,579 4,072
Occupancy and equipment expenses 651 431 1,615 1,120
Other expenses 1,223 1,466 3,840 3,162
------- ------- ------- -------
4,015 3,244 11,034 8,354
------- ------- ------- -------
Income before income taxes 1,796 1,919 5,839 5,502
Provision for income taxes 505 596 1,526 1,646
------- ------- ------- -------
NET INCOME $ 1,291 $ 1,323 $ 4,313 $ 3,856
------- ------- ------- -------
------- ------- ------- -------
Other comprehensive income (loss)
net of tax:
Change in unrealized losses on securities $ 395 $ 1,457 $ 679 $ 1,438
Reclassification of realized amount (8) (1,164) (151) (1,172)
------- ------- ------- -------
Net unrealized gain (loss) recognized
in comprehensive income 387 293 528 266
------- ------- ------- -------
COMPREHENSIVE INCOME $ 1,678 $ 1,616 $ 4,841 $ 4,122
------- ------- ------- -------
------- ------- ------- -------
Earnings per share $ .25 $ .27 $ .82 $ .78
Earnings per share assuming dilution $ .25 $ .27 $ .82 $ .78
Weighted average shares outstanding 5,232 4,934 5,232 4,934
</TABLE>
See accompanying notes to the consolidated financial statements
4.
<PAGE>
PREMIER FINANCIAL BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30 September 30
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 4,313 $ 3,856
Adjustments to reconcile net income to net cash
from operating activities
Depreciation and amortization 668 610
Provision for loan losses 1,295 992
Investment securities losses (gains), net (151) (1,172)
Federal Home Loan Bank stock dividends (135) (91)
Changes in
Other assets (1,308) (5,795)
Other liabilities (91) 4,323
--------- ---------
Net cash from operating activities 4,591 2,723
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of investment securities available for sale (614,756) (288,982)
Proceeds from sales of investment securities available
for sale 109,284 141,483
Proceeds from maturities of investment securities available
for sale 363,636 7,507
Purchases of investment securities held to maturity (3,993) (3,555)
Proceeds from maturities of investment securities held
to maturity 4,341 3,232
Purchase of FHLB and Federal Reserve stock (95) (1,073)
Net change in federal funds sold 30,018 5,116
Net change in loans (41,613) (30,351)
Purchases of bank premises and equipment (2,316) (1,591)
Cash acquired in branch acquisitions 124,961 -
Cash acquired through pooling (Note 2) 1,490 -
--------- ---------
Net cash used in investing activities (29,043) (168,214)
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposits 5,355 17,897
Net change in agreements to repurchase securities 1,624 110,424
Advances from Federal Home Loan Bank, net 18,255 11,679
Proceeds from other borrowings 8,000 -
Proceeds from issuance of Capital Trust preferred certificates - 28,750
Dividends paid (2,283) (1,768)
--------- ---------
Net cash from financing activities 30,951 166,982
--------- ---------
Net change in cash and cash equivalents 6,499 1,491
Cash and cash equivalents at beginning of period 11,610 9,304
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 18,109 $ 10,795
--------- ---------
--------- ---------
</TABLE>
See accompanying notes to the consolidated financial statements
5.
<PAGE>
PREMIER FINANCIAL BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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; Farmers Deposit Bancorp, Eminence,
Kentucky; The Sabina Bank, Sabina, Ohio; Ohio River Bank, Ironton, Ohio; The
Bank of Philippi, Inc., Philippi, West Virginia (Philippi); and Boone County
Bank, Inc., Madison, West Virginia (Boone). In addition, the Company has a
data processing service subsidiary, Premier Data Services, Inc., Vanceburg,
Kentucky and PFBI Capital Trust subsidiary discussed in Note 6. All material
intercompany transactions and balances have been eliminated.
NOTE 2 - BUSINESS COMBINATIONS
On October 5, 1998, the Company entered into a definitive agreement to
purchase Mt. Vernon Bancshares Inc., the holding company for The Bank of Mt.
Vernon (Mt. Vernon), in a cash transaction. Mt. Vernon offers full service
banking in Rockcastle and Pulaski counties and has two loan production
offices in Madison County, Kentucky. The merger is subject to regulatory
approval and is targeted for completion in the first quarter of 1999. Mt.
Vernon had total assets of $130 million and year to date earnings of $716,000
at September 30, 1998.
On June 26, 1998, the Company completed its acquisition of three branch
offices of Banc One Corporation located in Philippi (chartered as the Bank of
Philippi), and Madison and Van, West Virginia (chartered as Boone County
Bank, Inc.). Included in the purchase were approximately $150 million in
deposits, $9 million in loans and $1.5 million in facilities. The net
premium paid for these branches was approximately $14.5 million.
On March 20, 1998, the Company acquired Ohio River Bank (Ohio River) whereby
the Company exchanged 297,840 shares of its common stock for all the issued
and outstanding shares of Ohio River in a business combination accounted for
as a pooling of interests. The financial statement presentation prior to
January 1, 1998 has not been restated for this merger as the impact on those
statements is not material. As of and for the year ended December 31, 1997,
Ohio River reported net income of $176,000 and total assets of $39.5 million.
On November 13, 1997, the Company acquired The Sabina Bank, Sabina, Ohio
(Sabina), in a business combination accounted for as a pooling of interests.
All of the outstanding shares of Sabina were exchanged for 476,300 shares of
the Company's common stock. The accompanying consolidated financial
statements for 1997 have been restated to give the effect of the combination,
whereas the financial data released by the Company on October 21, 1998 for
the three and nine month periods ended September 30, 1997 had not yet been
restated for the combination.
NOTE 3 - STOCK DIVIDEND
The Company paid a 5% stock dividend on September 30, 1998. For comparability,
prior per share information has been restated to reflect the 249,135 shares
issued as a result.
(Continued)
6.
<PAGE>
PREMIER FINANCIAL BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 4 - INVESTMENT SECURITIES
Amortized cost and fair value of investment securities, by category, at
September 30, 1998 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 $ 12,360 $ 70 $ - $ 12,430
U. S. agency securities 170,571 531 (11) 171,091
Obligations of states and political
subdivisions 3,426 131 - 3,557
Asset-backed securities 5,674 54 - 5,728
Preferred stock 2,000 - - 2,000
Other equity securities 930 - (91) 839
--------- ----- ------ ---------
Total available for sale $ 194,961 $ 786 $ (102) $ 195,645
--------- ----- ------ ---------
--------- ----- ------ ---------
Held to maturity
U. S. Treasury securities $ 950 $ 17 $ - $ 967
U. S. agency securities 2,894 24 - 2,918
Obligations of states and political
subdivisions 16,102 637 (3) 16,736
Asset-backed securities 56 - - 56
--------- ----- ------ ---------
Total held to maturity $ 20,002 $ 678 $ (3) $ 20,677
--------- ----- ------ ---------
--------- ----- ------ ---------
</TABLE>
Amortized cost and fair value of investment securities, by category, at
December 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 $ 10,071 $ 2 $ (11) $ 10,062
U. S. agency securities 25,966 29 (90) 25,905
Obligations of states and political
subdivisions 3,458 110 (4) 3,564
Asset-backed securities 3,630 - (30) 3,600
Preferred stock 2,000 - - 2,000
Other equity securities 900 - (105) 795
--------- ----- ------ ---------
Total available for sale $ 46,025 $ 141 $ (240) $ 45,926
--------- ----- ------ ---------
--------- ----- ------ ---------
Held to maturity
U. S. Treasury securities $ 1,250 $ 6 $ (1) $ 1,255
U. S. agency securities 4,338 15 (5) 4,348
Obligations of states and political
subdivisions 14,625 500 (15) 15,110
Asset-backed securities 149 1 (1) 149
--------- ----- ------ ---------
Total held to maturity $ 20,362 $ 522 $ (22) $ 20,862
--------- ----- ------ ---------
--------- ----- ------ ---------
</TABLE>
(Continued)
7.
<PAGE>
PREMIER FINANCIAL BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 5 - LOANS
Major classifications of loans at September 30, 1998 and December 31, 1997 are
summarized as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
(In Thousands)
<S> <C> <C>
Commercial, secured by real estate $ 79,723 $ 66,893
Commercial, other 57,204 45,024
Real estate construction 11,636 7,857
Real estate mortgage 119,035 93,789
Agricultural 16,680 13,208
Consumer 74,494 58,523
Other 6,133 504
-------- --------
$364,905 $285,798
-------- --------
-------- --------
</TABLE>
NOTE 6 - ALLOWANCE FOR LOAN LOSSES
Changes in the allowance for loan losses are as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Balance, beginning of period $4,208 $2,917 $3,144 $2,854
Acquired - - 450 -
Net charge-offs (297) (296) (679) (713)
Provision for loan losses 299 512 1,295 992
------- ------- ------- -------
Balance, end of period $4,210 $3,133 $4,210 $3,133
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
NOTE 7 - CAPITAL SECURITIES OF SUBSIDIARY TRUST
Guaranteed preferred beneficial interests in the Company's subordinated
debentures (Preferred Securities) represent preferred beneficial interests in
the assets of PFBI Capital Trust (Trust), a wholly-owned subsidiary of the
Company. The Trust's sole assets are 9.75% junior subordinated debentures due
June 30, 2027 issued by the Company on June 9, 1997. Distributions on the
Preferred Securities will be payable at an annual rate of 9.75% of the stated
liquidation amount of $25 per Preferred Security, payable quarterly. Cash
distributions on the Preferred Securities are made to the extent interest on the
debentures is received by the Trust. In the event of certain changes or
amendments to regulatory requirements or federal tax rules, the Preferred
Securities are redeemable in whole. Otherwise, the Preferred Securities are
generally redeemable in whole or in part on or after June 30, 2002 at 100% of
the liquidation amount. The Trust's obligations under the Preferred Securities
are fully and unconditionally guaranteed by the Company.
8.
<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 nine months ended September 30, 1998 of $4,313,000
was 11.9% higher than the $3,856,000 recorded for the same period in 1997.
For the same periods on a per share basis, net income increased to $.82 from
$.78. The increase is primarily due to the second quarter recognition of a
$1.3 million finder's fee included in other income relative to certain branch
dispositions. Also contributing to the increase was a $2.6 million increase
in net interest income. Offsetting these increases was a $303,000 increase
in the provision for loan losses and a $2.7 million increase in non-interest
expenses. Earning assets increased $199 million to $592 million at September
30, 1998 over December 31, 1997. The increase is the result of acquiring
Ohio River Bank and three West Virginia branch offices from Banc One
Corporation which combined provided an additional $180 million in earning
assets. For the three months ended September 30, 1998, net income totaled
$1,291,000 or $.25 per share compared to $1,323,000 or $.27 per share for the
same period in 1997. This $32,000 decrease is the result of a $771,000
increase in noninterest expenses and a decrease in noninterest income of
$857,000, which were essentially offset by a $1,292,000 increase in net
interest income and a $213,000 decrease in the provision for loan losses.
Net interest income increased $2,647,000 to $14,547,000 for the nine
months ended September 30, 1998 compared to $11,900,000 for the same period
in 1997 and increased $1,292,000 to $5,273,000 for the three months ended
September 30, 1998 compared to the $3,981,000 reported in the three months
ended September 30, 1997. The year to date and current quarter increases in
net interest income is attributable to the current year acquisitions not
reflected in prior periods and to overall growth in earning assets. The net
interest margin on a tax-equivalent basis for the nine months ended September
30, 1998 was 3.88% compared to 4.35% for the first nine months of 1997 and
4.32% for all of 1997. The returns on average shareholders' equity and
return on average assets were 10.8% and 1.05%, respectively, for the nine
months ended September 30, 1998, compared to 11.2% and 1.28%, respectively
for the same period in 1997.
Non-interest income increased $673,000 to $3,621,000 for the first nine
months of 1998 compared to $2,948,000 for the first nine months of 1997. The
increase is primarily the attributable to a $1.3 million finder's fee
recognized during the second quarter included in other income. Received in
cash during the second quarter, the fee is the Company's portion of an
agreement to assist another financial institution in connection with the
acquisition of several offices of Banc One Corporation located in West
Virginia. Non-interest income was $837,000 for the three months ended
September 30, 1998 compared to $1,694,000 for the same period in 1997. The
decrease is primarily due to security gains of $1,164,000 realized in 1997
compared to $8,000 in 1998. Exclusive of security gains, noninterest income
increased$299,000, from $530,000 in the third quarter of 1997 to $829,000 in
the third quarter of 1998.
Non-interest expenses were $11,034,000 or 2.68% of average assets on an
annualized basis during the first nine months of 1998 compared to $8,353,000
or 2.78% of average assets during the same period of 1997. Non-interest
expenses increased $771,000 during the three months ended September 30, 1998
to $4,015,000 compared to $3,244,000 for the three months ended September 30,
1997. The increases in non-interest expenses are attributable to 1998
acquisitions, the results of operations for which are not included in the
third quarter of 1997, and the general expansion of the Company's business.
9.
<PAGE>
Income tax expense was $1,526,000 for the first nine months of 1998 as
compared to $1,646,000 for the first nine months of 1997. Income tax expense
for 1998 was lower than 1997 even though income before taxes increased as a
result of the reversal of a $234,000 valuation allowance for deferred tax
assets of an acquired subsidiary bank. The valuation was recorded by the
bank prior to its acquisition and was reversed by the Company during the
first quarter because the valuation allowance was no longer considered
necessary.
The following table sets forth information with respect to the Company's
non-performing assets at September 30, 1998 and December 31, 1997.
<TABLE>
<CAPTION>
1998 1997
---- ----
(In Thousands)
<S> <C> <C>
Non-accrual loans $ 1,685 $ 562
Accruing loans which are contractually
past due 90 days or more 978 490
Restructured 300 356
-------- --------
Total non-performing loans 2,963 1,408
Other real estate acquired through
foreclosure 1,071 836
-------- -------
Total non-performing assets $ 4,034 $ 2,244
Non-performing loans as a percentage
of total net loans .82% .50%
Non-performing assets as a percentage
of total assets .62% .53%
</TABLE>
The provision for possible loan losses increased from $992,000 to
$1,295,000 for the first nine months of 1997 compared to 1998. The increase
for possible loan losses are in line with the increase in loans outstanding
from $283.4 million at December 31, 1997 to $362.4 million at September 30,
1998. The allowance for loan losses at September 30, 1998 of $4,210,000
represented 1.16% of total loans outstanding.
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 Company
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.
10.
<PAGE>
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.
C. Capital
In June 1997, the Corporation issued $28.8 million of 9.75% Mandatorily
Redeemable Capital Securities of Subsidiary Trust. These securities will
qualify as Tier I capital up to an amount not to exceed 25% of Tier I capital
and the portion that exceeds the 25% limitation will qualify as Tier 2 or
supplementary capital of the Corporation. The issuance of these securities
and resultant increase in capital has allowed the Corporation to target
larger financial institutions as potential acquisitions.
At September 30, 1998, total shareholders' equity of $54.6 million
equaled 8.4% of total consolidated assets. Tier I capital totaled $50.2
million at September 30, 1998, which represents a Tier I leverage ratio of
8.0%.
Dividends of the Company for 1998 were as follows:
<TABLE>
<CAPTION>
Amount Date of Date
Per Share Total Record Paid
--------- ----- ------- ----
<S> <C> <C> <C> <C>
Cash $.15 $747,809 March 20 March 31
Cash $.15 $747,809 June 22 June 30
Stock 5% - September 21 September 30
Cash $.15 $787,000 September 21 September 30
</TABLE>
D. Year 2000
Management has assessed the operational and financial implications of
its Year 2000 needs and developed a plan to ensure that data processing
systems can properly handle the change. Management has determined that if a
business interruption as a result of the Year 2000 issue occurred, such an
interruption could be material. The primary effort required to prevent a
potential business interruption is the installation of the most current
software release from the Company's third party provider and replacement of
certain system hardware. The third party software provider has warranted
that Year 2000 remediation and testing efforts to become compliant have been
successfully completed. Non-compliant hardware has already been replaced
through routine hardware upgrades. Management intends to locally install and
test the current software release before the end of 1998 which will complete
the Year 2000 plan for mission critical systems. Should mission critical
system readiness not be achieved by March 31, 1999, the Company intends to
seek alternative solutions from other vendors. Non-mission critical systems,
11.
<PAGE>
including systems other than data processing with embedded technology, will
continue to be evaluated and if necessary, will be upgraded or replaced.
Management projects that the cost of Year 2000 readiness will be in a range
of $40,000 to $100,000, which will be expensed as incurred. Year 2000
expenses are subject to change and could vary from current estimates if the
final requirements for Year 2000 readiness exceed management's expectations.
12.
<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
(a) Exhibits
Exhibit No. Description of Document
---------- ------------------------
27 Financial Data Schedules
(b) Reports on Form 8-K No reports on Form 8-K have been filed
during the quarter for which the report is
filed.
13.
<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.
Date: November 11, 1998 /s/ Marshall T. Reynolds
--------------------------------
Marshall T. Reynolds
Chairman of the Board
Date: November 11, 1998 /s/ J. Howell Kelly
--------------------------------
J. Howell Kelly
President & Chief Executive Officer
14.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 18,109
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 11,228
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 195,645
<INVESTMENTS-CARRYING> 20,002
<INVESTMENTS-MARKET> 20,677
<LOANS> 362,416
<ALLOWANCE> 4,210
<TOTAL-ASSETS> 651,089
<DEPOSITS> 514,412
<SHORT-TERM> 8,203
<LIABILITIES-OTHER> 3,641
<LONG-TERM> 70,268
0
0
<COMMON> 1,103
<OTHER-SE> 53,462
<TOTAL-LIABILITIES-AND-EQUITY> 651,089
<INTEREST-LOAN> 24,516
<INTEREST-INVEST> 6,757
<INTEREST-OTHER> 1,623
<INTEREST-TOTAL> 32,896
<INTEREST-DEPOSIT> 13,826
<INTEREST-EXPENSE> 18,349
<INTEREST-INCOME-NET> 14,547
<LOAN-LOSSES> 1,295
<SECURITIES-GAINS> 151
<EXPENSE-OTHER> 11,034
<INCOME-PRETAX> 5,839
<INCOME-PRE-EXTRAORDINARY> 4,313
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,313
<EPS-PRIMARY> .82
<EPS-DILUTED> .82
<YIELD-ACTUAL> 3.88<F1>
<LOANS-NON> 1,685
<LOANS-PAST> 978
<LOANS-TROUBLED> 300
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,144
<CHARGE-OFFS> 847
<RECOVERIES> 168
<ALLOWANCE-CLOSE> 4,210<F2>
<ALLOWANCE-DOMESTIC> 4,210
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
<FN>
<F1>Computed on a tax-equivalent basis
<F2>Includes allowance acquired through merger
</FN>
</TABLE>
