Premier Financial Corp. Announces Solid 2021 Results

Increases Quarterly Dividend

Increases Buyback Authorization

Fourth Quarter 2021 Highlights

• Loan growth of $112 million excluding PPP (up 9% annualized) including $88 million for commercial loans (up 10% annualized) during 2021 fourth quarter
• Net interest margin of 3.41%, up 3 basis points from third quarter 2021
• Average deposit costs down 4 basis points to 0.16% from third quarter 2021
• Asset quality improved with non-performing assets down to 0.64% of assets and classifieds down to 1.2% of loans
• Allowance to loans ratio of 1.26%, or 1.27% excluding PPP loans, for 2021 fourth quarter
• Service fee income of $6.4 million, up $0.6 million (10%) from 2020 fourth quarter
• Increased dividend 7% to $0.30 per share

Full Year 2021 Highlights

• Net income of $126.1 million compared to $63.1 million (or $99.3 million excluding merger-related expenses) for 2020
• Earnings per share of $3.39 compared to $1.75 (or $2.76 excluding merger-related expenses) for 2020
• Loan growth of $133 million excluding PPP (up 2.6%) including $106 million for commercial loans (up 3.1%) during 2021
• Deposit growth of $234 million (up 3.9%) for 2021
• Pre-tax pre-provision ROAA of 2.00% compared to 1.87% (or 2.17% excluding merger-related expenses) for 2020
• ROA, ROE and ROTE of 1.68%, 12.49% and 18.99% for 2021 

Premier Financial Corp. (Nasdaq: PFC) (“Premier” or the “Company”) today announced 2021 fourth quarter and full year results. Net income for the fourth quarter of 2021 was $25.3 million, or $0.69 per diluted common share, compared to $30.8 million, or $0.82 per diluted common share, for the fourth quarter of 2020. The prior year’s results include the impact of $2.2 million of acquisition-related charges for the three months ended December 31, 2020, which had an after-tax cost of $1.7 million, or $0.05 per diluted common share. Net income for the year ended December 31, 2021, was $126.1 million, or $3.39 per diluted common share, compared to $63.1 million, or $1.75 per diluted common share, for the year ended December 31, 2020. The year-over-year comparison is substantially impacted by the acquisition of United Community Financial Corp. (“UCFC”) on January 31, 2020, with the prior year’s provision expense of $44.3 million that included $25.9 million related to acquisition accounting for an after-tax cost of $20.5 million, or $0.57 per diluted common share. 2021 included a provision recovery of $7.1 million, which had an after-tax benefit of $5.6 million, or $0.15 per diluted common share, and no acquisition impact. Additionally, the prior year’s results include the impact of $19.5 million of acquisition-related charges, which had an after-tax cost of $15.8 million, or $0.44 per diluted common share. Excluding the impact of the acquisition-related provision and charges, earnings for 2020 were $99.3 million, or $2.76 per diluted common share.

“Strong loan growth continues to be the theme as we close out a successful 2021,” said Gary Small, President and CEO of Premier. “PPP adjusted growth for the fourth quarter totaled 8.7% on an annualized basis. And similar to the third quarter, each loan category grew with commercial lending leading the way at 10.3%. Premier’s core loan growth for the second half of 2021 totaled 7.0% on an annualized basis. When combined with the strong fundamentals in margin management and continued solid residential origination and fee income activity, we are entering 2022 with a great deal of momentum.”

Business client support efforts

As a part of the CARES Act, the Small Business Administration created the Paycheck Protection Program (“PPP”) to provide small businesses with loans as a direct incentive to keep their workers on the payroll. Premier Bank actively participated in PPP for clients and made 2,880 loans for a total of $443.3 million during the year ended December 31, 2020. Total gross fees for these loans equaled $14.8 million. To date, Premier Bank has recognized $14.7 million as loan interest income, including $27,000 and $8.4 million during the three and twelve months ended December 31, 2021, respectively. Additionally, a total of $435.8 million in loans have been extinguished to date, including $2.4 million and $379.3 million during the three and twelve months ended December 31, 2021, respectively.

Beginning in January 2021, Premier Bank participated in the second round of PPP lending and made 2,231 loans for a total of $193.6 million during the year ended December 31, 2021. Total gross fees for these loans were $7.8 million, and Premier Bank has recognized $3.0 million and $6.2 million in loan interest income during the three and twelve months ended December 31, 2021, respectively. Additionally, a total of $82.6 million and $142.2 million in loans have been extinguished during the three and twelve months ended December 31, 2021, respectively. Total PPP loans were $58.9 million at December 31, 2021.

Quarterly results

Strong loan growth

Gross loans receivable were $5.30 billion at December 31, 2021, compared to $5.27 billion at September 30, 2021. Gross loans receivable increased $26.6 million on a linked quarter basis despite an $85.0 million decrease in PPP loans. Excluding PPP, loans grew $111.6 million organically, or 8.7% annualized. Commercial loans excluding PPP increased $88.5 million from September 30, 2021, or 10.3% annualized.

Net interest income up compared to fourth quarter of 2020

Net interest income of $57.2 million in the fourth quarter of 2021 was up from $55.0 million in the fourth quarter of 2020. The increase over the prior year was attributable to loan growth, PPP fees, and an 18 basis point decrease in average cost of funds. Net interest margin was 3.41% for the fourth quarter of 2021, up from 3.38% in the third quarter of 2021, but down from 3.47% in the fourth quarter of 2020. Yield on interest-earning assets was 3.61% in the fourth quarter of 2021, consistent with 3.61% in the third quarter of 2021. Loan yields increased 2 basis points to 4.11% in the fourth quarter of 2021 from 4.09% in the third quarter of 2021. The improvement from third quarter to fourth quarter was primarily due to $112 million of non-PPP loan growth (9% annualized). Total cost of funds decreased 3 basis points in the fourth quarter of 2021 to 0.21% from the third quarter of 2021, while the total cost of interest-bearing liabilities decreased 4 basis points to 0.28%. The 2021 fourth quarter results include the impact of acquisition marks and related accretion for the UCFC acquisition. Interest income includes $1.3 million of accretion and interest expense includes $0.3 million of accretion, which combined added 9 basis points of net interest margin. The fourth quarter results also include the impact of PPP loans. Interest income includes $2.7 million on average balances of $101.8 million, which increased net interest margin by 11 basis points. Excluding the impact of acquisition marks and PPP loans, net interest margin would be 3.21% for the fourth quarter of 2021 compared to 3.27% for the third quarter of 2021 and 3.36% for the fourth quarter of 2020.

Non-interest income down from fourth quarter of 2020

Premier’s non-interest income in the fourth quarter of 2021 was $17.8 million, compared with $18.7 million in the fourth quarter of 2020. Total mortgage banking income decreased to $3.1 million in the fourth quarter of 2021 from $5.4 million in the fourth quarter of 2020. Mortgage gains decreased to $2.8 million in the fourth quarter of 2021 from $6.1 million in the fourth quarter of 2020. Total mortgage loan production has been consistently strong compared to prior year, while gains have declined primarily due to compressed margins and less favorable marks on the in-process portfolio. Mortgage loan servicing revenue of $1.9 million in the fourth quarter of 2021 was consistent with $1.9 million in the fourth quarter of 2020. Amortization of mortgage servicing rights decreased to $1.8 million in the fourth quarter of 2021 from $2.2 million in the fourth quarter of 2020. Premier also had a positive change in the valuation adjustment for mortgage servicing assets of $151,000 in the fourth quarter of 2021 compared with a negative adjustment of $0.5 million in the fourth quarter of 2020. This item closely follows the trend in USTN-10, which was flat during the quarter at 1.52% on December 31, 2021.

For the fourth quarter of 2021, service fees and other charges were $6.4 million, up 10% from $5.8 million in the fourth quarter of 2020 primarily due to higher ATM and interchange related fees. BOLI income increased $1.3 million from the fourth quarter of 2020, primarily due to a $20 million premium purchase during the third quarter of 2021 and $1.1 million of claim gains compared with no claim gains in the fourth quarter of 2020. This was mostly offset by a combined $1.3 million decrease in wealth management, insurance commissions, and other income. Securities gains were $1.1 million in the fourth quarter of 2021 compared to a gain of $76 thousand in the fourth quarter of 2020 due to increased valuations in our trading securities portfolio.

“Residential mortgage new business volume experienced a more traditional seasonal softening in the fourth quarter combined with lower gain on sale margins in a very competitive market,” said Small. “For the year as a whole, origination volume was only slightly less than the record pace of 2020. As we look forward, we expect margins to trend back to normal levels as the industry addresses excess capacity and see upside in mortgage servicing rights valuations given the current interest rate forecast.”

Non-interest expenses up from fourth quarter of 2020

Total non-interest expense was $41.7 million in the fourth quarter of 2021, up from $41.3 million in the fourth quarter of 2020 and up from $39.1 million excluding $2.2 million of acquisition related charges. Compensation and benefits increased to $24.2 million in the fourth quarter of 2021, compared to $19.9 million in the fourth quarter of 2020. Occupancy expense was $3.9 million in the fourth quarter of 2021, down from $4.5 million in the fourth quarter of 2020. Data processing cost was $3.4 million in the fourth quarter of 2021, down from $3.8 million in the fourth quarter of 2020. Amortization of intangibles was $1.5 million in the fourth quarter of 2021, down from $1.7 million in the fourth quarter of 2020. Other non-interest expense was $7.4 million in the fourth quarter of 2021, mostly consistent with $7.3 million in the fourth quarter of 2020. Total expenses for the fourth quarter of 2021 include one-time costs related to executive office realignment and operational enhancement projects of approximately $2 million. In addition, healthcare costs were elevated due to the on-going COVID environment.

“Our expense run rate for the fourth quarter ran higher than normal as we executed a number of initiatives geared to improve performance in 2022 and beyond,” said Small. “We remain, as always, very focused on expense management even as we expand revenue efforts around the organization.”

Credit quality

Non-performing assets totaled $48.2 million, or 0.64% of assets, at December 31, 2021, a decrease from $60.1 million at September 30, 2021, and from $52.3 million at December 31, 2020. Accruing troubled debt restructured loans were $7.8 million at December 31, 2021, compared with $7.2 million at December 31, 2020. Loan delinquencies increased to $12.3 million, or 0.2% of loans, at December 31, 2021, from $11.2 million at September 30, 2021, and from $18.5 million at December 31, 2020. Classified loans totaled $69.5 million, or 1.2% of loans, as of December 31, 2021, a decrease from $90.1 million at September 30, 2021, and from $90.4 million at December 30, 2020.

The 2021 fourth quarter results include net loan charge-offs of $9.6 million and a total provision expense of $2.0 million, compared with net loan charge-offs of $0.7 million and a total provision credit of $6.8 million for the same period in 2020. The increase in charge-offs and provision expense were primarily due to a single commercial credit relationship that was placed on non-accrual in the third quarter of 2021. Total charge-offs for 2021 were $8.9 million, or 0.16% of average loans, compared to $2.4 million, or 0.05% of average loans, in 2020. The allowance for credit losses as a percentage of total loans excluding PPP was 1.27% at December 31, 2021, compared with 1.43% at September 30, 2021, and 1.61% at December 31, 2020. The continued economic improvement after the 2020 pandemic-related downturn has led to the year-over-year decrease in the allowance percentages. As of December 31, 2021, Premier Bank had no pandemic-related deferrals.

“We are pleased with this quarter’s improvement in asset quality, which includes 20% reductions in both non-performing assets and classified loans,” said Paul Nungester, CFO of Premier. “Our allowance coverage of 1.27% excluding PPP, or 1.37% including unamortized purchase accounting marks, is approaching pre-pandemic levels.”

“The fourth quarter charge-off activity reflects our commitment to address issues quickly and thoroughly with the goal of maintaining a conservative balance sheet,” said Small. “Our leading credit indicators remain very strong and I remain very confident in the quality of our overall portfolio.”

Annual results

For the year ended December 31, 2021, net income totaled $126.1 million, or $3.39 per diluted common share, compared to $63.1 million, or $1.75 per diluted common share, for the year ended December 31, 2020. Results for the 2020 period included eleven months of income and expenses from UCFC, compared to twelve months in 2021. The year-over-year comparison is also substantially impacted by the prior year’s provision expense of $44.3 million, which included $25.9 million related to acquisition accounting for an after-tax cost of $20.5 million, or $0.57 per diluted common share. The 2021 period included a provision credit of $7.1 million, which had an after-tax benefit of $5.6 million, or $0.15 per diluted common share, and no acquisition impact. Additionally, the prior year’s results include the impact of $19.5 million of acquisition-related charges, which had an after-tax cost of $15.8 million, or $0.44 per diluted common share. Excluding the impact of acquisition-related provision and charges, earnings for 2020 were $99.3 million, or $2.76 per diluted common share.

Net interest income was $227.4 million for 2021, compared with $208.0 million in 2020. Average interest-earning assets increased to $6.7 billion in 2021, compared to $5.9 billion in 2020. Net interest margin for 2021 was 3.39%, down 13 basis points from the 3.52% margin in 2020. Results include the impact of acquisition marks and related accretion for the UCFC acquisition. For 2021, interest income includes $4.6 million of accretion and interest expense includes $1.3 million of accretion, which combined added 8 basis points of net interest margin. The results for 2021 also include the impact of PPP loans. Interest income includes $14.6 million on average balances of $282.7 million, which increased net interest margin by 7 basis points. Excluding the impact of acquisition marks and PPP loans, net interest margin was 3.24% for 2021, compared to 3.42% for 2020.

Non-interest income for 2021 was $80.0 million, compared to $80.7 million in 2020. Service fees and other charges were $24.2 million for 2021, up from $21.4 million during 2020. Mortgage banking income was $21.9 million for 2021, down from $28.2 million during 2020. Insurance commissions were $15.8 million for 2021, compared with $16.8 million for 2020. Wealth management income was $6.0 million for 2021, down from $6.2 million during 2020. Securities gains were $4.2 million for 2021, compared to $1.6 million for 2020. Approximately $2.2 million of the 2021 gain was related to the sale of securities where the Company took advantage of pricing to realize gains and reinvested in a mix of new securities that will generate higher income over the next three years. The other $2.0 million is related to unrealized gains on our trading securities due to the improved market for these financial institution equities. BOLI income increased to $5.1 million in 2021, including $1.4 million of claim gains, compared to $3.3 million and no claim gains in 2020. Other non-interest income for 2021 was $2.8 million, compared to $3.0 million in 2020.

Non-interest expense was $158.0 million for 2021, compared to $165.2 million, or $145.7 million excluding acquisition-related charges, for 2020. Compensation and benefits expense was $90.6 million for 2021, compared with $77.2 million during the same period of 2020. Expenses also included net decreases of $2.9 million for occupancy, FDIC insurance premiums, financial institution taxes, data processing and amortization of intangibles and an increase of $1.8 million for other expenses. Total expenses for 2021 were impacted by the fourth quarter items discussed above.

Total assets at $7.48 billion

Total assets at December 31, 2021, were $7.48 billion, compared to $7.47 billion at September 30, 2021, and $7.21 billion at December 31, 2020. Gross loans receivable were $5.30 billion at December 31, 2021, compared to $5.27 billion at September 30, 2021, and $5.49 billion at December 31, 2020. At December 31, 2021, gross loans receivable decreased $195.1 million from a year ago due to a $328.0 million decrease in PPP loans. Excluding PPP, loans grew $132.9 million organically, or 2.6% from a year ago. Commercial loans excluding PPP increased $106.1 million from December 31, 2020, to 2021, or 3.1%. Securities at December 31, 2021, were $1.22 billion, compared to $1.26 billion at September 30, 2021, and $737.7 million at December 31, 2020. Also, at December 31, 2021, goodwill and other intangible assets totaled $342.1 million compared to $343.6 million at September 30, 2021, and $348.3 million at December 31, 2020, with the decrease attributable to intangibles amortization.

Total deposits at December 31, 2021, were $6.28 billion, compared with $6.25 billion at September 30, 2021, and $6.05 billion at December 31, 2020. At December 31, 2021, total deposits grew $234.2 million organically, or 3.9% from a year ago.

Total stockholders’ equity was $1.02 billion at December 31, 2021, compared to $1.03 billion at September 30, 2021, and $982.3 million at December 31, 2020. The increase in stockholders’ equity from the prior year was primarily due to net earnings. The Company also completed the repurchase of 595,285 common shares for $18.8 million during the fourth quarter of 2021 and 967,136 common shares for $29.6 million during the year ended December 31, 2021.

Buybacks authorization

At December 31, 2021, 1,032,864 common shares remained available for repurchase under the Company’s existing repurchase program. On January 25, 2021, the Company’s Board of Directors approved an increase in the Company’s repurchase authorization to 2,000,000 shares of common stock, or approximately 5.5% of current outstanding shares.

Dividend to be paid February 18

The Board of Directors declared a quarterly cash dividend of $0.30 per common share payable February 18, 2022, to shareholders of record at the close of business on February 11, 2022. The dividend represents an annual dividend of 4.01 percent based on the Premier common stock closing price on January 24, 2022. Premier has approximately 36,318,000 common shares outstanding.

Conference call

Premier will host a conference call at 11:00 a.m. ET on Wednesday, January 26, 2022, to discuss the earnings results and business trends. The conference call may be accessed by calling 1-844-200-6205. Internet access to the call is also available (in listen-only mode) at the following URL: https://events.q4inc.com/attendee/417140500. The replay of the conference call will be available at www.PremierFinCorp.com for one year.

About Premier Financial Corp.

Premier Financial Corp. (Nasdaq: PFC), headquartered in Defiance, Ohio, is the holding company for Premier Bank and First Insurance Group. Premier Bank, headquartered in Youngstown, Ohio, operates 75 branches and 12 loan offices in Ohio, Michigan, Indiana, Pennsylvania and West Virginia (West Virginia office operates as Home Savings Bank) and serves clients through a team of wealth professionals dedicated to each community banking branch. First Insurance Group is a full-service insurance agency with ten offices in Ohio. For more information, visit the company’s website at PremierFinCorp.com.

Financial Statements and Highlights Follow-

Safe Harbor Statement

This document may contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. These statements may include, but are not limited to, statements regarding projections, forecasts, goals and plans of Premier Financial Corp. and its management, future movements of interests, loan or deposit production levels, future credit quality ratios, future strength in the market area, and growth projections. These statements do not describe historical or current facts and may be identified by words such as “intend,” “intent,” “believe,” “expect,” “estimate,” “target,” “plan,” “anticipate,” or similar words or phrases, or future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” “may,” “can,” or similar verbs. There can be no assurances that the forward-looking statements included in this presentation will prove to be accurate. In light of the significant uncertainties in the forward-looking statements, the inclusion of such information should not be regarded as a representation by Premier or any other persons, that our objectives and plans will be achieved. Forward-looking statements involve numerous risks and uncertainties, any one or more of which could affect Premier’s business and financial results in future periods and could cause actual results to differ materially from plans and projections. These risks and uncertainties include, but not limited to: impacts from the novel coronavirus (COVID-19) pandemic on the economy, financial markets, our customers, and our business and results of operation; changes in interest rates; disruptions in the mortgage market; risks and uncertainties inherent in general and local banking, insurance and mortgage conditions; political uncertainty; uncertainty in U.S. fiscal or monetary policy; uncertainty concerning or disruptions relating to tensions surrounding the current socioeconomic landscape; competitive factors specific to markets in which Premier operates; increasing competition for financial products from other financial institutions and nonbank financial technology companies; legislative or regulatory rulemaking or actions; capital market conditions; security breaches or unauthorized disclosure of confidential customer or Company information; interruptions in the effective operation of information and transaction processing systems of Premier or Premier’s vendors and service providers; failures or delays in integrating or adopting new technology; the impact of the cessation of LIBOR interest rates and implementation of a replacement rate; and other risks and uncertainties detailed from time to time in our Securities and Exchange Commission (SEC) filings, including our Annual Report on Form 10-K for the year ended December 31, 2020, the Form 10-K/A filed September 28, 2021 and any further amendments thereto. All forward-looking statements made in this presentation are based on information presently available to the management of Premier and speak only as of the date on which they are made. We assume no obligation to update any forward-looking statements, whether as a result of new information, future developments or otherwise, except as may be required by law. As required by U.S. GAAP, Premier will evaluate the impact of subsequent events through the issuance date of its December 31, 2021, consolidated financial statements as part of its Annual Report on Form 10-K to be filed with the SEC. Accordingly, subsequent events could occur that may cause Premier to update its critical accounting estimates and to revise its financial information from that which is contained in this news release.

Non-GAAP Reporting Measures

We believe that net income, as defined by U.S. GAAP, is the most appropriate earnings measurement. However, we consider core net income and core pre-tax pre-provision income to be useful supplemental measures of our operating performance. We define core net income as net income excluding the after-tax impact of acquisition related charges. We define core pre-tax pre-provision income as pre-tax pre-provision income excluding the pre-tax impact of acquisition related charges. We believe that these metrics are useful supplemental measures of operating performance because investors and equity analysts may use these measures to compare the operating performance of the Company between periods or as compared to other financial institutions or other companies on a consistent basis without having to account for one-time acquisition related charges. Our supplemental reporting measures and similarly entitled financial measures are widely used by investors, equity and debt analysts and ratings agencies in the valuation, comparison, rating and investment recommendations of companies. Our management uses these financial measures to facilitate internal and external comparisons to historical operating results and in making operating decisions. Additionally, they are utilized by the Board of Directors to evaluate management. The supplemental reporting measures do not represent net income or cash flow provided from operating activities as determined in accordance with U.S. GAAP and should not be considered as alternative measures of profitability or liquidity. Finally, the supplemental reporting measures, as defined by us, may not be comparable to similarly entitled items reported by other financial institutions or other companies. Please see the exhibits for reconciliations of our supplemental reporting measures.