Premier Financial Corp. Announces First Quarter 2024 Results

Declared dividend of $0.31 per share

First Quarter 2024 Highlights

• Deposit average balances up 2.6% annualized
• Earning asset average balances up 1.0% annualized
• Loans/Deposits ratio down 110 basis points
• Non-interest income up 6.0%
• Non-interest expenses down 7% from first quarter 2023 or flat excluding insurance agency expenses
• Delinquent loans down 12% and net charge-offs down 11 basis points to 0.02%
• All regulatory capital ratios up including Tier 1 up 30 basis points to 12.49%

Premier Financial Corp. (NASDAQ:PFC) ("Premier" or the "Company") announced today 2024 first quarter results. Net income for the first quarter of 2024 was $17.8 million, or $0.50 per diluted common share, compared to $18.1 million, or $0.51 per diluted common share, for the first quarter of 2023.

"Premier's overall financial performance for the first quarter was generally in line with our expectations," said Gary Small, President and CEO of Premier. "Many elements of the business are off to a strong start, and there are clearly areas of opportunity to focus on."

"The commercial business got off to a slow start in January and February as clients seemed to pause to evaluate interest rate expectations, macroeconomic environmental factors, etc." Small continued. "Our clients showed a preference for using their cash on hand to finance capital expenditures and larger working capital needs versus traditional borrowing habits or drawing down on lines of credit. March saw a return to more typical commercial activity for the bank, with stronger new business numbers and an expanded business pipeline."

"Our consumer households continue to manage their finances effectively," continued Small. Delinquencies declined for the quarter, net charge-off levels remain low, and average consumer deposits grew 7.5% annualized from December to March."

"Overall, we saw very positive average linked quarter deposit growth while average loan totals were flat on a linked quarter basis," Small continued. "We have projected modest loan and deposit growth for the year and remain confident in our ability to deliver on the full year growth objectives."

"Non-interest income was boosted by continued strong asset management revenue, and the residential mortgage team posted better than anticipated results," continued Small. "The ‘new build' housing market, a strength for the organization, remains active and represented approximately 50% of our origination activity during the quarter. The organization's quarterly expense run rate was favorable and we anticipate continued favorable expense performance over the course of the year."

"Credit costs were favorable for the quarter," added Small. "Net charge-offs are running lower than our initial full year assumption. A strong economy, continued low unemployment, and modest loan growth targets combined with low delinquencies and non-performing asset levels support our expectation for continued favorable credit results."

Quarterly results

Net interest income and margin

Net interest income of $49.6 million on a tax equivalent ("TE") basis in the first quarter of 2024 was down 5.6% from $52.6 million in the fourth quarter of 2023 and down 12.0% from $56.3 million in the first quarter of 2023. The TE net interest margin of 2.50% in the first quarter of 2024 decreased 15 basis points from 2.65% in the fourth quarter of 2023 and 40 basis points from 2.90% in the first quarter of 2023. These results are primarily impacted by deposit balance/cost increases and loan balance/yield decreases.

Total deposits increased 2.3% annualized, or $40.3 million, during the first quarter of 2024, due to a $13.5 million increase in customer deposits (up 0.8% annualized) and an increase of $26.8 million in brokered deposits. Total average interest-bearing deposit costs increased 18 basis points to 3.01% for the first quarter of 2024. This increase was primarily due to new customer acquisitions and the migration of customers from non-interest-bearing deposits into interest-bearing deposits, including higher cost time deposits, as customers continue to seek better yields. Total average customer deposit costs including non-interest bearing and excluding brokered deposits and acquisition marks were 2.29% during the month of March, representing a cumulative beta of 40% compared to the change in the monthly average effective Federal Funds rate that increased 525 basis points to 5.33% since December 2021, as reported by the Federal Reserve Economic Data.

Total loans including held-for-sale decreased 3.1% annualized, or $53.8 million, during the first quarter of 2024, primarily due to a $28.8 million decrease in commercial loans and a $15.8 million decrease in mortgage loans including held-for-sale. Total average loan yields decreased two basis points to 5.19% for the first quarter of 2024. This decrease was primarily due to paydowns of floating-rate commercial lines of credit and payoffs of certain higher yielding fixed-rate loans. Total average loan yields excluding PPP, balance sheet hedges and acquisition marks were 5.29% during the month of March (up 5 basis points from 5.24% in December), representing a cumulative beta of 29% compared to the change in the monthly average effective Federal Funds rate for the same period.

"Net interest income remains the most challenging profitability component we face," said Small. "For the quarter, we experienced a sharper decline than anticipated. There were three primary drivers of the decline: lower commercial non-interest-bearing deposit balances tied to increased client utilization of cash on hand, continued mix migration from lower to higher yielding deposit products, and slightly below plan average loan balances for the quarter. We anticipate recovering a good portion of commercial non-interest-bearing deposit balances as clients rebuild their liquidity, and we expect average loan balances to rebound in the near term. Regarding mix migration, we initiated actions in early March designed to lower our deposit portfolio funding costs. Results to-date have been encouraging, and the effort will be expanded. While Premier's performance will clearly benefit from future rate cuts initiated by the Federal Reserve, we are committed to managing the business issues within our control to achieve a better outcome today."

Non-interest income

Total non-interest income in the first quarter of 2024 of $12.5 million was up 6.0% from $11.8 million in the fourth quarter of 2023, and up 61.5% from $7.7 million in the first quarter of 2023, excluding insurance commissions, primarily due to fluctuations in mortgage banking and gains/losses on securities. Mortgage banking income increased $1.5 million on a linked quarter basis and $2.6 million year-over-year, primarily as a result of fluctuations in gain margins and MSR valuation adjustments.

Security losses were $37 thousand in the first quarter of 2024, compared to gains of $675 thousand in the fourth quarter of 2023 and losses of $1.4 million in the first quarter of 2023, primarily due to valuation changes on equity securities. Service fees in the first quarter of 2024 were $6.5 million, a 4.3% decrease from $6.8 million in the fourth quarter of 2023, but a 0.6% increase from $6.4 million in the first quarter of 2023. This change was primarily due to fluctuations in loan fees, including commercial customer swap activity. Due to the insurance agency sale in the second quarter of 2023, there were no insurance commissions in the first quarter of 2024, compared to $4.7 million in the first quarter of 2023. Wealth management income of $1.7 million in the first quarter of 2024 was down slightly from $1.8 million in the fourth quarter of 2023 and 15.4% higher than $1.5 million in the first quarter of 2023. BOLI income of $1.7 million in the first quarter of 2024 included $0.5 million of claim gains, compared to $1.5 million in the fourth quarter of 2023, including $0.5 million of claim gains, and $1.4 million in the first quarter of 2023, including $0.4 million of claim gains.

Non-interest expenses

Non-interest expenses in the first quarter of 2024 were $39.9 million, a 5.3% increase from $37.9 million in the fourth quarter of 2023, but a 6.8% decrease from $42.8 million in the first quarter of 2023. Compensation and benefits were $23.4 million in the first quarter of 2024, compared to $21.0 million in the fourth quarter of 2023 and $25.7 million in the first quarter of 2023. The linked quarter increase was primarily due to annual merit increases and lower deferred costs as a result of lower loan production. The year-over-year decrease was primarily due to the insurance agency sale, partially offset by costs related to higher staffing levels and higher base compensation, including 2024 annual adjustments. Data processing costs were $4.7 million in the first quarter of 2024, compared to $4.7 million in the fourth quarter of 2023 and $3.9 million in the first quarter of 2023, with the year-over-year increase primarily due to the new digital platform launched in October 2023. All other non-interest expenses decreased a net $0.4 million on a linked quarter basis due to cost saving initiatives and decreased a net $1.4 million on a year-over-year basis due to the insurance agency sale and cost saving initiatives. The efficiency ratio for the first quarter of 2024 was 64.2% compared to 59.5% in the fourth quarter of 2023 and 60.9% in the first quarter of 2023.

"Our cost containment efforts continue to be successful with first quarter expenses coming in less than expected," said Paul Nungester, CFO of Premier. "Similar to 2023, we are committed to cost saving initiatives to help alleviate on-going net interest income challenges."

Credit quality

Non-performing assets totaled $39.3 million, or 0.46% of assets, at March 31, 2024, an increase from $35.7 million at December 31, 2023, and from $34.8 million at March 31, 2023. Loan delinquencies decreased to $18.3 million, or 0.27% of loans, at March 31, 2024, from $20.9 million at December 31, 2023, but increased from $11.1 million at March 31, 2023. Criticized loans totaled $191.5 million, or 2.78% of loans, as of March 31, 2024, an increase from $186.4 million at December 31, 2023, and from $123.9 million at March 31, 2023.

The 2024 first quarter results include net charge-offs of $0.4 million and a total provision benefit of $0.1 million, compared with net loan charge-offs of $2.5 million and a total provision expense of $3.7 million for the same period in 2023. The change in provision is due to both lower charge-offs and a decrease in loans during the first quarter of 2024 compared to an increase in loans during the first quarter of 2023. The allowance for credit losses as a percentage of total loans was 1.15% at March 31, 2024, compared with 1.14% at December 31, 2023, and 1.13% at March 31, 2023.

Total assets at $8.63 billion

Total assets at March 31, 2024, were $8.63 billion, compared to $8.63 billion at December 31, 2023, and $8.56 billion at March 31, 2023. Loans receivable were $6.69 billion at March 31, 2024, compared to $6.74 billion at December 31, 2023, and $6.58 billion at March 31, 2023. Securities at March 31, 2024, were $1.02 billion, compared to $0.95 billion at December 31, 2023, and $1.00 billion at March 31, 2023. All securities are either AFS or trading and are reflected at fair value on the balance sheet. Also, at March 31, 2024, goodwill and other intangible assets totaled $306.8 million compared to $307.8 million at December 31, 2023, and $335.8 million at March 31, 2023, with the year-over-year decrease primarily due to the insurance agency sale.

Total non-brokered deposits at March 31, 2024, were $6.81 billion, compared with $6.80 billion at December 31, 2023, and $6.62 billion at March 31, 2023. At March 31, 2024, customer deposits increased $13.5 million on a linked quarter basis, or 0.8% annualized. Brokered deposits were $368.8 million at March 31, 2024, compared to $341.9 million at December 31, 2023 and $154.9 million at March 31, 2023. FHLB borrowings declined to $253.0 million at March 31, 2024, from $280.0 million at December 31, 2023, and from $658.0 million at March 31, 2023.

Total stockholders' equity was $974.3 million at March 31, 2024, compared to $975.6 million at December 31, 2023, and $914.5 million at March 31, 2023. The quarterly decrease in stockholders' equity was primarily due to a decrease in AOCI, which included $5.3 million for a negative valuation adjustment on the AFS securities portfolio, mostly offset by net earnings after dividends. The year-over-year increase was primarily due to net earnings after dividends including the impact the insurance agency sale offset partially offset by a decrease in AOCI, which included $4.6 million for negative valuation adjustments on the AFS securities portfolio. At March 31, 2024, 1,199,634 common shares remained available for repurchase under the Company's existing repurchase program.

Regulatory ratios all improved during the first quarter of 2024, including CET1 of 11.99%, Tier 1 of 12.49% and Total Capital of 14.35%. All of these ratios also exceed well-capitalized guidelines pro forma for including accumulated other comprehensive income ("AOCI"), including CET1 of 9.66%, Tier 1 of 10.16% and Total Capital of 12.03%.

"We continue to carefully manage capital levels in light of the current uncertain economic environment," said Nungester. "Tangible equity was essentially flat from prior quarter with net income offsetting dividends and a decrease in AOCI. Regulatory ratios each increased approximately 30 basis points to further enhance our capital foundation."

Dividend to be paid May 10

The Board of Directors declared a quarterly cash dividend of $0.31 per common share payable May 10, 2024, to shareholders of record at the close of business on May 3, 2024. The dividend represents an annual dividend of 6.16% percent based on the Premier common stock closing price on April 22, 2024. Premier has approximately 35,814,000 common shares outstanding.

Conference call

Premier will host a conference call at 10:00 a.m. ET on Wednesday, April 24, 2024, to discuss the earnings results and business trends. The conference call may be accessed by calling 1-833-470-1428 and using access code 477589. Internet access to the call is also available (in listen-only mode) at the following URL: https://events.q4inc.com/attendee/254838453. The webcast 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. Premier Bank, headquartered in Youngstown, Ohio, operates 76 branches and 9 loan offices in Ohio, Michigan, Indiana and Pennsylvania and also serves clients through a team of wealth professionals dedicated to each community banking branch. 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: financial markets, our customers, and our business and results of operation; 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 including interest rate policies of the Federal Reserve; uncertainty concerning or disruptions relating to tensions surrounding the current socioeconomic landscape; competitive factors specific to markets in which Premier and its subsidiaries operate; increasing competition for financial products from other financial institutions and nonbank financial technology companies; future interest rates and changes or volatility in interest rate levels; 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, 2023 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 March 31, 2024, consolidated financial statements as part of its Quarterly Report on Form 10-Q 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 interest income, core net income and core pre-tax pre-provision income to be a useful supplemental measure of our operating performance. We define core net interest income as net interest income on a tax-equivalent basis excluding income from PPP loans and purchase accounting marks accretion. We define core net income as net income excluding the after-tax impact of the insurance agency gain on sale and related transaction costs. We define core pre-tax pre-provision income as pre-tax pre-provision income excluding the pre-tax impact of the insurance agency gain on sale and related transaction costs. 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 income from PPP loans, purchase accounting marks accretion or the insurance agency sale. 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.