Company Quick10K Filing
Quick10K
Premier Financial Bancorp
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$16.28 15 $238
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-08-07 Quarter: 2017-08-07
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
8-K 2018-11-27 Regulation FD, Exhibits
8-K 2018-10-12 M&A, Exhibits
8-K 2018-09-24 Off-BS Arrangement, Exhibits
8-K 2018-09-05 Amend Bylaw, Exhibits
8-K 2018-09-05 Shareholder Vote
8-K 2018-08-17 Regulation FD, Exhibits
8-K 2018-06-29 Enter Agreement, Exhibits
8-K 2018-06-20 Shareholder Vote
8-K 2018-05-21 Amend Bylaw, Regulation FD, Exhibits
8-K 2018-05-02 Earnings, Exhibits
8-K 2018-04-18 Enter Agreement, Regulation FD, Exhibits
8-K 2018-03-01 Regulation FD, Exhibits
8-K 2018-02-27 Earnings, Exhibits
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PFBI 2018-09-30
Part I - Financial Information
Item 1. Financial Statements
Note 1 - Basis of Presentation
Note 2 -Securities
Note 3 - Loans
Note 4- Stockholders' Equity and Regulatory Matters
Note 5 - Stock Compensation Expense
Note 6 - Earnings per Share
Note 7 - Fair Value
Note 8 - Subsequent Event
Item 2. Management's Discussion and Analysis
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
EX-3.1 exhibit3-1.htm
EX-31.1 exhibit31-1.htm
EX-31.2 exhibit31-2.htm
EX-32 exhibit32.htm

Premier Financial Bancorp Earnings 2018-09-30

PFBI 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 pfbi10q093018.htm PREMIER FINANCIAL BANCORP, INC. FORM 10Q, SEPTEMBER 30, 2018

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2018
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 000-20908

PREMIER FINANCIAL BANCORP, INC.
(Exact name of registrant as specified in its charter)

Kentucky
 
61-1206757
(State or other jurisdiction of incorporation organization)
 
(I.R.S. Employer Identification No.)
     
2883 Fifth Avenue
Huntington, West Virginia
 
 
25702
(Address of principal executive offices)
 
(Zip Code)
     
Registrant's telephone number    (304) 525-1600

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      No .

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§230.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes    No .

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.  See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer  
 
Accelerated filer 
Non-accelerated filer 
Smaller reporting company 
Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act).  Yes     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, no par value, – 14,618,648 shares outstanding at November 5, 2018
PREMIER FINANCIAL BANCORP, INC.
SEPTEMBER 30, 2018
INDEX TO REPORT
 

 
3
 
43
 
55
 
55
 
56
 
56
 
56
 
56
 
56
 
56
 
56
 
56
 
57
 

PREMIER FINANCIAL BANCORP, INC.
SEPTEMBER 30, 2018


PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

The accompanying information has not been audited by an independent registered public accounting firm; 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.  Premier Financial Bancorp, Inc.'s ("Premier's") accounting and reporting policies are in accordance with accounting principles generally accepted in the United States of America.  Certain accounting principles used by Premier involve a significant amount of judgment about future events and require the use of estimates in their application.  The following policies are particularly sensitive in terms of judgments and the extent to which estimates are used: allowance for loan losses, the identification and evaluation of impaired loans, and the impairment of goodwill.  These estimates are based on assumptions that may involve significant uncertainty at the time of their use.  However, the policies, the estimates and the estimation process as well as the resulting disclosures are periodically reviewed by the Audit Committee of the Board of Directors and material estimates are subject to review as part of the external audit by the independent registered public accounting firm.

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 accounting principles generally accepted in the United States of America or those normally made in the registrant's annual report on Form 10-K.  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, 2017 for further information in this regard.

Index to consolidated financial statements:

   
4
 
   
5
 
   
6
 
   
6
 
   
7
 
   
8
 


PREMIER FINANCIAL BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2018 AND DECEMBER 31, 2017
(DOLLARS IN THOUSANDS)


   
(UNAUDITED)
       
   
September 30,
2018
   
December 31,
2017
 
ASSETS
           
Cash and due from banks
 
$
22,048
   
$
40,814
 
Interest bearing bank balances
   
85,568
     
37,191
 
Federal funds sold
   
7,589
     
4,658
 
Cash and cash equivalents
   
115,205
     
82,663
 
Time deposits with other banks
   
2,086
     
2,582
 
Securities available for sale
   
315,225
     
278,466
 
Loans
   
1,037,066
     
1,049,052
 
Allowance for loan losses
   
(13,483
)
   
(12,104
)
Net loans
   
1,023,583
     
1,036,948
 
Federal Home Loan Bank stock, at cost
   
3,173
     
3,185
 
Premises and equipment, net
   
25,184
     
23,815
 
Real estate acquired through foreclosure
   
14,379
     
19,966
 
Interest receivable
   
4,109
     
4,043
 
Goodwill
   
35,371
     
35,371
 
Other intangible assets
   
2,800
     
3,375
 
Other assets
   
3,355
     
3,010
 
Total assets
 
$
1,544,470
   
$
1,493,424
 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
               
Deposits
               
Non-interest bearing
 
$
365,629
   
$
332,588
 
Time deposits, $250,000 and over
   
63,173
     
63,905
 
Other interest bearing
   
890,821
     
876,182
 
Total deposits
   
1,319,623
     
1,272,675
 
Securities sold under agreements to repurchase
   
24,728
     
23,310
 
Other borrowed funds
   
3,350
     
5,000
 
Subordinated debt
   
5,398
     
5,376
 
Interest payable
   
497
     
393
 
Other liabilities
   
3,296
     
3,315
 
Total liabilities
   
1,356,892
     
1,310,069
 
                 
Stockholders' equity
               
Common stock, no par value; 30,000,000 shares authorized; 13,369,600 shares issued and outstanding at September 30, 2018, and 13,345,535 shares issued and outstanding at December 31, 2017
   
110,830
     
110,445
 
Retained earnings
   
83,888
     
74,983
 
Accumulated other comprehensive income (loss)
   
(7,140
)
   
(2,073
)
Total stockholders' equity
   
187,578
     
183,355
 
Total liabilities and stockholders' equity
 
$
1,544,470
   
$
1,493,424
 

Shares have been adjusted to reflect the 5 for 4 stock split issued on June 8, 2018 to shareholders of record on June 4, 2018.
PREMIER FINANCIAL BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)


   
Three Months Ended
September 30,
   
Nine Months Ended
September 30,
 
   
2018
   
2017
   
2018
   
2017
 
Interest income
                       
Loans, including fees
 
$
13,731
   
$
13,469
   
$
41,449
   
$
41,667
 
Securities available for sale
                               
Taxable
   
1,745
     
1,427
     
4,787
     
4,236
 
Tax-exempt
   
52
     
62
     
166
     
198
 
Federal funds sold and other
   
473
     
176
     
1,151
     
515
 
Total interest income
   
16,001
     
15,134
     
47,553
     
46,616
 
                                 
Interest expense
                               
Deposits
   
1,355
     
954
     
3,583
     
2,854
 
Repurchase agreements and other
   
10
     
7
     
25
     
21
 
Other borrowings
   
37
     
68
     
125
     
234
 
Subordinated debt
   
90
     
74
     
257
     
218
 
Total interest expense
   
1,492
     
1,103
     
3,990
     
3,327
 
                                 
Net interest income
   
14,509
     
14,031
     
43,563
     
43,289
 
Provision for loan losses
   
275
     
891
     
1,890
     
2,033
 
Net interest income after provision for loan losses
   
14,234
     
13,140
     
41,673
     
41,256
 
                                 
Non-interest income
                               
Service charges on deposit accounts
   
1,183
     
1,136
     
3,343
     
3,201
 
Electronic banking income
   
968
     
811
     
2,677
     
2,424
 
Secondary market mortgage income
   
29
     
67
     
142
     
173
 
Other
   
257
     
163
     
572
     
530
 
     
2,437
     
2,177
     
6,734
     
6,328
 
Non-interest expenses
                               
Salaries and employee benefits
   
4,846
     
4,760
     
14,667
     
14,703
 
Occupancy and equipment expenses
   
1,570
     
1,511
     
4,660
     
4,481
 
Outside data processing
   
1,315
     
1,344
     
3,841
     
4,019
 
Professional fees
   
526
     
196
     
1,261
     
721
 
Taxes, other than payroll, property and income
   
217
     
189
     
669
     
589
 
Write-downs, expenses, sales of other real estate owned, net
   
26
     
346
     
(335
)
   
1,139
 
Amortization of intangibles
   
190
     
252
     
575
     
768
 
FDIC insurance
   
171
     
159
     
443
     
506
 
Other expenses
   
1,306
     
1,168
     
3,833
     
3,401
 
     
10,167
     
9,925
     
29,614
     
30,327
 
Income before income taxes
   
6,504
     
5,392
     
18,793
     
17,257
 
Provision for income taxes
   
1,483
     
1,925
     
4,264
     
6,207
 
                                 
Net income
 
$
5,021
   
$
3,467
   
$
14,529
   
$
11,050
 
                                 
Net income per share:
                               
Basic
 
$
0.38
   
$
0.26
   
$
1.09
   
$
0.83
 
Diluted
   
0.37
     
0.26
     
1.08
     
0.82
 

Per share data has been adjusted to reflect the 5 for 4 stock split issued on June 8, 2018 to shareholders of record on June 4, 2018.
PREMIER FINANCIAL BANCORP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)



   
Three Months Ended
September 30,
   
Nine Months Ended
September 30,
 
   
2018
   
2017
   
2018
   
2017
 
Net income
 
$
5,021
   
$
3,467
   
$
14,529
   
$
11,050
 
                                 
Other comprehensive income (loss):
                               
Unrealized gains (losses) arising during the period
   
(1,451
)
   
(68
)
   
(6,414
)
   
3,658
 
Reclassification of realized amount
   
-
     
-
     
-
     
-
 
Net change in unrealized gain (loss) on securities
   
(1,451
)
   
(68
)
   
(6,414
)
   
3,658
 
Less tax impact
   
305
     
24
     
1,347
     
(1,281
)
Other comprehensive income (loss)
   
(1,146
)
   
(44
)
   
(5,067
)
   
2,377
 
                                 
Comprehensive income
 
$
3,875
   
$
3,423
   
$
9,462
   
$
13,427
 



PREMIER FINANCIAL BANCORP, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 2018
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)



   
Common
Stock
   
Retained
Earnings
   
Accumulated
Other
Comprehensive
Income (loss)
   
Total
 
Balances, January 1, 2018
 
$
110,445
   
$
74,983
   
$
(2,073
)
 
$
183,355
 
     Net income
   
-
     
14,529
     
-
     
14,529
 
     Other comprehensive income (loss)
   
-
     
-
     
(5,067
)
   
(5,067
)
     Cash dividends paid ($0.42 per share)
   
-
     
(5,611
)
   
-
     
(5,611
)
     Cash in lieu of fractional share for 5 for 4 stock split
   
-
     
(13
)
   
-
     
(13
)
     Stock options exercised
   
168
     
-
     
-
     
168
 
     Stock based compensation expense
   
217
     
-
     
-
     
217
 
Balances, September 30, 2018
 
$
110,830
   
$
83,888
   
$
(7,140
)
 
$
187,578
 

Per share data has been adjusted to reflect the 5 for 4 stock split issued on June 8, 2018 to shareholders of record on June 4, 2018.
PREMIER FINANCIAL BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017
(UNAUDITED, DOLLARS IN THOUSANDS)


   
2018
   
2017
 
Cash flows from operating activities
           
Net income
 
$
14,529
   
$
11,050
 
Adjustments to reconcile net income to net cash from operating activities
               
Depreciation
   
1,274
     
1,303
 
Provision for loan losses
   
1,890
     
2,033
 
Amortization (accretion), net
   
984
     
1,166
 
Writedowns (gains on the sale) of other real estate owned, net
   
(909
)
   
434
 
Stock compensation expense
   
217
     
194
 
Changes in:
               
Interest receivable
   
(66
)
   
(198
)
Other assets
   
1,002
     
(24
)
Interest payable
   
104
     
(6
)
Other liabilities
   
(19
)
   
(1,045
)
Net cash from operating activities
   
19,006
     
14,907
 
                 
Cash flows from investing activities
               
Net change on time deposits with other banks
   
496
     
(250
)
Purchases of securities available for sale
   
(92,644
)
   
(49,210
)
Proceeds from maturities and calls of securities available for sale
   
48,355
     
50,787
 
Redemption of FHLB stock
   
12
     
15
 
Net change in loans
   
11,156
     
(30,865
)
Purchases of premises and equipment, net
   
(2,643
)
   
(654
)
Proceeds from sales of other real estate acquired through foreclosure
   
7,562
     
1,827
 
Net cash from (used in) investing activities
   
(27,706
)
   
(28,350
)
                 
Cash flows from financing activities
               
Net change in deposits
   
46,930
     
(10,020
)
Net change in agreements to repurchase securities
   
1,418
     
1,296
 
Repayment of other borrowed funds
   
(1,650
)
   
(2,859
)
Proceeds from stock option exercises
   
168
     
248
 
Cash in lieu of fractional shares
   
(13
)
   
-
 
Common stock dividends paid
   
(5,611
)
   
(4,796
)
Net cash from (used in) financing activities
   
41,242
     
(16,131
)
                 
Net change in cash and cash equivalents
   
32,542
     
(29,574
)
                 
Cash and cash equivalents at beginning of period
   
82,663
     
104,718
 
                 
Cash and cash equivalents at end of period
 
$
115,205
   
$
75,144
 

Supplemental disclosures of cash flow information:
           
Cash paid during period for interest
 
$
3,886
   
$
3,333
 
                 
    Cash paid during period for income taxes
   
2,807
     
6,395
 
                 
Loans transferred to real estate acquired through foreclosure
   
1,066
     
983
 
                 
Premises transferred to other real estate owned
   
-
     
71
 
PREMIER FINANCIAL BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)


NOTE  1 - BASIS OF PRESENTATION

The consolidated financial statements include the accounts of Premier Financial Bancorp, Inc. (the Company) and its wholly owned subsidiaries (the "Banks"):
 
                 
September 30, 2018
 
        Year   Total     Net Income  
Subsidiary
 
Location
 
Acquired
 
Assets
   
Qtr
   
YTD
 
Citizens Deposit Bank & Trust
 
Vanceburg, Kentucky
 
1991
 
$
437,154
   
$
1,470
   
$
4,154
 
Premier Bank, Inc.
 
Huntington, West Virginia
 
1998
   
1,100,317
     
4,162
     
12,240
 
Parent and Intercompany Eliminations
           
6,999
     
(611
)
   
(1,865
)
  Consolidated Total
          
$
1,544,470
   
$
5,021
   
$
14,529
 
All significant intercompany transactions and balances have been eliminated.
On June 8, 2018, Premier issued a 5 for 4 stock split to shareholders of record on June 4, 2018.  Each shareholder received 1 additional share of common stock for every 4 shares of common stock already owned on the record date.  Outstanding shares and per share amounts prior to the payment date have been restated to reflect the additional shares issued as a result of the stock split to aid in the comparison to current period results.
During the first three months of 2018, management updated its policies regarding estimation of probable incurred losses.  The updates included incorporating a common estimated loss ratio for all pass credits within a given loan classification, adding an additional qualitative factor for document exceptions on collectively impaired loans, and reallocating the qualitative portion of the allowance to align more closely to the inputs used to determine the qualitative portion.  The previous methodology allocated a higher loss ratio to loans graded "Watch" to estimate a higher credit risk on these loans due to risk downgrades resulting from document exceptions.  Loans graded "Watch" are considered pass credits.  The changes did not have a material impact on the overall allowance for loan losses or the provision for loan losses for the three and nine months ended September 30, 2018.

Recently Issued Accounting Pronouncements

In May 2014, FASB issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606). The ASU creates a new topic, Topic 606, to provide guidance on revenue recognition for entities that enter into contracts with customers to transfer goods or services or enter into contracts for the transfer of nonfinancial assets. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  The guidance provides the following steps to achieve the core principle (1) Identify the contract(s) with the customer, (2) Identify the performance obligations in the contract, (3) Determine the transaction price, (4) Allocate the transaction price to the performance obligations in the contract, and (5) Recognize revenue when (or as) the entity satisfies a performance obligation.   Additional disclosures are required to provide quantitative and qualitative information regarding the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The new guidance, as amended, is effective for annual reporting periods, and interim reporting periods within those annual periods, beginning after December 15, 2017, including interim periods within those reporting periods.

PREMIER FINANCIAL BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)


NOTE  1 - BASIS OF PRESENTATION - continued

Management's assessment on revenue recognition by following the five steps resulted in no material changes from the current revenue recognition because the majority of revenues earned by the Company are not within the scope of ASU 2014-09.  As interest income on loans and securities are both excluded from Topic 606, the majority of revenue earned is not subject to the new guidance.  Service charges on deposit accounts, debit card interchange fees, and ATM fees are services provided that fall within the scope of Topic 606 and are presented within non-interest income as revenue when the obligation to the customer is satisfied.  Gains on the sale of OREO fall within the scope of Topic 606 and are recognized as a credit to non-interest expense as an offset to writedowns of carrying value and losses on the sale of OREO, as permitted.  The Company adopted Topic 606 as of January 1, 2018 with no material change in how revenues are recognized in the Company's financial statements.  Significant items of non-interest income are described below.

Service charges on deposit accounts – Fees are earned from our deposit customers for transaction-based, account maintenance, and overdraft services. Transaction-based fees and overdraft fees are recognized at a point in time, since the customer generally has a right to cancel the depository arrangement at any time. The arrangement is considered a day-to-day contract with ongoing renewals and optional purchases, so the duration of the contract does not extend beyond the services already performed. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of a month, representing the period over which we satisfy our performance obligation.
Debit card interchange fees - Revenue earned from a portion of the fee charged to merchants for the immediate approval of credit for funds (whether debit or credit card usage) is recognized on a daily cash basis and the commission is paid through Premier's third-party processor.  The revenue is earned on a transaction basis determined by customer activity.  Premier records this revenue on a gross revenue basis and expenses the processing charges incurred as a non-interest expense.
Non-customer ATM fees – Fees charged to non-deposit customers for using bank owned automated teller machines are charged on a transaction basis and withdrawn from the user's deposit account at another financial institution upon completion of the transaction.
Gain on sale of OREO – A gain is recognized upon the sale of OREO when a contract exists between the seller and purchaser and the control of the asset is transferred to the buyer.  The gain is then reported as a reduction of non-interest expense under the heading "Write-downs, expenses, sales of other real estate owned, net."

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.  The ASU makes several targeted improvement modifications to Subtopic 825-10, which (1) Require equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income, (2) Simplify the impairment assessment of equity investments without readily

PREMIER FINANCIAL BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)


NOTE  1 - BASIS OF PRESENTATION - continued

determinable fair values by requiring a qualitative assessment to identify impairment and when an impairment exists, an entity is required to measure the investment at fair value, (3) Eliminate the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet, (4) Use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, (5) Present separately in other comprehensive income the portion of the total changes in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option of financial instruments, (6) Require separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial instruments, and (7) Clarify that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity's other deferred tax assets.  The Company adopted subtopic 825-10 on January 1, 2018 which resulted in the use of an exit price rather than an entrance price to determine the fair value of loans not measured at fair value on a non-recurring basis.  See footnote 7 for additional information on fair value.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This standard requires organizations to recognize lease assets and lease liabilities on the balance sheet and disclose key information about leasing requirements for leases that were historically classified as operating leases under previous generally accepted accounting principles. This ASU will become effective for the Company for interim and annual periods beginning after December 15, 2018.  The Company leases some of its branch locations.  Upon adoption of this standard, an asset will be recorded to recognize the right of the Company to use the leased facilities and a liability will be recorded representing the obligation to make all future lease payments on those facilities.  Management is currently evaluating the amounts to be recognized upon the adoption of this guidance in the Company's financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses: Measurement of Credit Losses on Financial Instruments.  This ASU replaces the measurement for credit losses from a probable incurred estimate with an expected future loss estimate, which is referred to as the "current expected credit loss" or "CECL".  The standard pertains to financial assets measured at amortized cost such as loans, debt securities classified as held-to-maturity, and certain other contracts, in which organizations will now use forward-looking information to enhance their credit loss estimates on these assets.  The largest impact will be on the allowance for loan and lease losses.  This ASU will become effective for the Company for interim and annual periods beginning after December 15, 2019, although early adoption is permitted beginning after December 15, 2018. The company has formed a committee to oversee the steps required in the adoption of the new current expected credit loss method.  The committee has selected a third-party vendor to assist in data analysis and modeling as well as the required disclosures.

PREMIER FINANCIAL BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)


NOTE  1 - BASIS OF PRESENTATION - continued

Management is currently evaluating the impact of the adoption of this guidance on the Company's financial statements.  Upon adoption, an initial cumulative increase in the allowance for loan losses is currently anticipated by management along with a corresponding decrease in capital as permitted by the standard but management cannot yet determine the one-time adjustment.

In February 2018, the FASB issued ASU No. 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.  This ASU amends Topic 220, Income Statement – Reporting Comprehensive Income to permit the reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act and any future change in corporate income tax rates.  The update does not affect the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations.  The Company adopted ASU 2018-02 retroactively to December 31, 2017 as permitted by the guidance.


PREMIER FINANCIAL BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)


NOTE  2 –SECURITIES

Amortized cost and fair value of investment securities, by category, at September 30, 2018 are summarized as follows:

2018
 
Amortized Cost
   
Unrealized Gains
   
Unrealized Losses
   
Fair Value
 
Available for sale
                       
Mortgage-backed securities
                       
U. S. sponsored agency MBS - residential
 
$
229,307
   
$
42
   
$
(7,192
)
 
$
222,157
 
U. S. sponsored agency CMO's - residential
   
72,971
     
13
     
(1,604
)
   
71,380
 
Total mortgage-backed securities of government sponsored agencies
   
302,278
     
55
     
(8,796
)
   
293,537
 
U. S. government sponsored agency securities
   
13,246
     
-
     
(244
)
   
13,002
 
Obligations of states and political subdivisions
   
8,739
     
23
     
(76
)
   
8,686
 
Total available for sale
 
$
324,263
   
$
78
   
$
(9,116
)
 
$
315,225
 
 
 
Amortized cost and fair value of investment securities, by category, at December 31, 2017 are summarized as follows:

2017
 
Amortized Cost
   
Unrealized Gains
   
Unrealized Losses
   
Fair Value
 
Available for sale
                       
Mortgage-backed securities
                       
U. S. sponsored agency MBS - residential
 
$
198,631
   
$
175
   
$
(2,216
)
 
$
196,590
 
U. S. sponsored agency CMO's - residential
   
51,548
     
241
     
(681
)
   
51,108
 
Total mortgage-backed securities of government sponsored agencies
   
250,179
     
416
     
(2,897
)
   
247,698
 
U. S. government sponsored agency securities
   
19,312
     
1
     
(179
)
   
19,134
 
Obligations of states and political subdivisions
   
11,599
     
61
     
(26
)
   
11,634
 
Total available for sale
 
$
281,090
   
$
478
   
$
(3,102
)
 
$
278,466
 

PREMIER FINANCIAL BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)


NOTE  2–SECURITIES - continued

The amortized cost and fair value of securities at September 30, 2018 by contractual maturity are shown below.  Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

   
Amortized
Cost
   
Fair
Value
 
Available for sale
           
Due in one year or less
 
$
8,669
   
$
8,644
 
Due after one year through five years
   
10,820
     
10,658
 
Due after five years through ten years
   
2,496
     
2,386
 
Mortgage-backed securities of government sponsored agencies
   
302,278
     
293,537
 
Total available for sale
 
$
324,263
   
$
315,225
 

Securities with unrealized losses at September 30, 2018 aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position are as follows:

   
Less than 12 Months
   
12 Months or More
   
Total
 
Description of Securities
 
Fair Value
   
Unrealized Loss
   
Fair Value
   
Unrealized Loss
   
Fair Value
   
Unrealized Loss
 
                                     
U.S government sponsored agency securities
 
$
-
   
$
-
   
$
13,001
   
$
(244
)
 
$
13,001
   
$
(244
)
U.S government sponsored agency MBS – residential
   
110,405
     
(2,186
)
   
110,867
     
(5,006
)
   
221,272
     
(7,192
)
U.S government sponsored agency CMO – residential
   
51,733
     
(597
)
   
17,710
     
(1,007
)
   
69,443
     
(1,604
)
Obligations of states and political subdivisions
   
2,920
     
(45
)
   
1,456
     
(31
)
   
4,376
     
(76
)
Total temporarily impaired
 
$
165,058
   
$
(2,828
)
 
$
143,034
   
$
(6,288
)
 
$
308,092
   
$
(9,116
)

PREMIER FINANCIAL BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)


NOTE  2–SECURITIES - continued

Securities with unrealized losses at December 31, 2017 aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position are as follows:

   
Less than 12 Months
   
12 Months or More
   
Total
 
Description of Securities
 
Fair Value
   
Unrealized Loss
   
Fair Value
   
Unrealized Loss
   
Fair Value
   
Unrealized Loss
 
                                     
U.S government sponsored agency securities
 
$
6,780
   
$
(41
)
 
$
10,335
   
$
(138
)
 
$
17,115
   
$
(179
)
U.S government sponsored agency MBS – residential
   
134,211
     
(1,076
)
   
47,682
     
(1,140
)
   
181,893
     
(2,216
)
U.S government sponsored agency CMO's – residential
   
8,306
     
(64
)
   
17,868
     
(617
)
   
26,174
     
(681
)
Obligations of states and political subdivisions
   
3,512
     
(20
)
   
474
     
(6
)
   
3,986
     
(26
)
Total temporarily impaired
 
$
152,809
   
$
(1,201
)
 
$
76,359
   
$
(1,901
)
 
$
229,168
   
$
(3,102
)

The investment portfolio is predominately high credit quality interest-bearing bonds with defined maturity dates backed by the U.S. Government or Government sponsored entities.  The unrealized losses at September 30, 2018 and December 31, 2017 are price changes resulting from changes in the interest rate environment and are considered to be temporary declines in the value of the securities.  Management does not intend to sell and it is likely that management will not be required to sell the securities prior to their anticipated recovery.  Their fair value is expected to recover as the bonds approach their maturity date and/or market conditions improve.


NOTE  3 - LOANS

Major classifications of loans at September 30, 2018 and December 31, 2017 are summarized as follows:

   
2018
   
2017
 
Residential real estate
 
$
340,478
   
$
338,829
 
Multifamily real estate
   
54,602
     
62,151
 
Commercial real estate:
               
Owner occupied
   
135,884
     
136,048
 
Non-owner occupied
   
226,710
     
230,702
 
Commercial and industrial
   
85,585
     
78,259
 
Consumer
   
28,129
     
28,293
 
Construction and land
   
132,141
     
139,012
 
All other
   
33,537
     
35,758
 
Total  
$
1,037,066
   
$
1,049,052
 

PREMIER FINANCIAL BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)


NOTE  3–LOANS - continued

Activity in the allowance for loan losses by portfolio segment for the nine months ended September 30, 2018 was as follows:

Loan Class
 
Balance
Dec 31, 2017
   
Provision (credit) for loan losses
   
Loans
charged-off
   
Recoveries
   
Balance
Sept 30, 2018
 
                               
Residential real estate
 
$
2,986
   
$
(509
)
 
$
(229
)
 
$
30
   
$
2,278
 
Multifamily real estate
   
978
     
(504
)
   
(11
)
   
-
     
463
 
Commercial real estate:
                                       
Owner occupied
   
1,653
     
174
     
(21
)
   
1
     
1,807
 
Non-owner occupied
   
2,313
     
500
     
(16
)
   
2
     
2,799
 
Commercial and industrial
   
1,101
     
1,108
     
(525
)
   
40
     
1,724
 
Consumer
   
328
     
90
     
(105
)
   
50
     
363
 
Construction and land
   
2,408
     
651
     
(20
)
   
400
     
3,439
 
All other
   
337
     
380
     
(203
)
   
96
     
610
 
Total
 
$
12,104
   
$
1,890
   
$
(1,130
)
 
$
619
   
$
13,483
 
 
 
Activity in the allowance for loan losses by portfolio segment for the nine months ended September 30, 2017 was as follows:

Loan Class
 
Balance
Dec 31, 2016
   
Provision (credit) for loan losses
   
Loans
charged-off
   
Recoveries
   
Balance
Sept 30, 2017
 
                               
Residential real estate
 
$
2,948
   
$
363
   
$
(362
)
 
$
52
   
$
3,001
 
Multifamily real estate
   
785
     
451
     
-
     
-
     
1,236
 
Commercial real estate:
                                       
Owner occupied
   
1,543
     
(161
)
   
(7
)
   
242
     
1,617
 
Non-owner occupied
   
2,350
     
265
     
(8
)
   
-
     
2,607
 
Commercial and industrial
   
1,140
     
3
     
(138
)
   
95
     
1,100
 
Consumer
   
347
     
148
     
(214
)
   
86
     
367
 
Construction and land
   
1,397
     
683
     
(127
)
   
10
     
1,963
 
All other
   
326
     
281
     
(246
)
   
107
     
468
 
Total
 
$
10,836
   
$
2,033
   
$
(1,102
)
 
$
592
   
$
12,359
 
PREMIER FINANCIAL BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)


NOTE  3–LOANS - continued

Activity in the allowance for loan losses by portfolio segment for the three months ended September 30, 2018 was as follows:

Loan Class
 
Balance
June 30, 2018
   
Provision (credit) for loan losses
   
Loans
charged-off
   
Recoveries
   
Balance
Sept 30, 2018
 
                               
Residential real estate
 
$
2,254
   
$
100
   
$
(81
)
 
$
5
   
$
2,278
 
Multifamily real estate
   
557
     
(94
)
   
-
     
-
     
463
 
Commercial real estate:
                                       
Owner occupied
   
1,917
     
(92
)
   
(18
)
   
-
     
1,807
 
Non-owner occupied
   
2,437
     
360
     
-
     
2
     
2,799
 
Commercial and industrial
   
1,599
     
132
     
(21
)
   
14
     
1,724
 
Consumer
   
354
     
39
     
(42
)
   
12
     
363
 
Construction and land
   
3,253
     
(213
)
   
(1
)
   
400
     
3,439
 
All other
   
611
     
43
     
(73
)
   
29
     
610
 
Total
 
$
12,982
   
$
275
   
$
(236
)
 
$
462
   
$
13,483
 
 
 
Activity in the allowance for loan losses by portfolio segment for the three months ended September 30, 2017 was as follows:

Loan Class
 
Balance
June 30, 2017
   
Provision (credit) for loan losses
   
Loans
charged-off
   
Recoveries
   
Balance
Sept 30, 2017
 
                               
Residential real estate
 
$
2,973
   
$
170
   
$
(163
)
 
$
21
   
$
3,001
 
Multifamily real estate
   
1,337
     
(101
)
   
-
     
-
     
1,236
 
Commercial real estate:
                                       
Owner occupied
   
1,618
     
5
     
(7
)
   
1
     
1,617
 
Non-owner occupied
   
2,334
     
276
     
(3
)
   
-
     
2,607
 
Commercial and industrial
   
1,093
     
(6
)
   
(4
)
   
17
     
1,100
 
Consumer
   
373
     
10
     
(49
)
   
33
     
367
 
Construction and land
   
1,675
     
292
     
(4
)
   
-
     
1,963
 
All other
   
292
     
245
     
(106
)
   
37
     
468
 
Total
 
$
11,695
   
$
891
   
$
(336
)
 
$
109
   
$
12,359
 
PREMIER FINANCIAL BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)


NOTE  3–LOANS - continued

Purchased Impaired Loans

The Company holds purchased loans for which there was, at their acquisition date, evidence of deterioration of credit quality since their origination and it was probable, at acquisition, that all contractually required payments would not be collected.  The carrying amount of those loans is as follows at September 30, 2018 and December 31, 2017.

   
2018
   
2017
 
Residential real estate
 
$
1,099
   
$
1,321
 
Commercial real estate
               
Owner occupied
   
1,385
     
1,508
 
Commercial and industrial
   
3
     
211
 
Construction and land
   
1,274
     
1,450
 
All other
   
284
     
286
 
Total carrying amount
 
$
4,045
   
$
4,776
 
Contractual principal balance
 
$
5,646
   
$
6,728
 
                 
Carrying amount, net of allowance
 
$
4,045
   
$
4,676
 

For those purchased loans disclosed above, the Company did not increase the allowance for loan losses during the nine months ended September 30, 2018, but did increase the allowance for loan losses by $50,000 during the nine-months ended September 30, 2017.

For those purchased loans disclosed above, where the Company can reasonably estimate the cash flows expected to be collected on the loans, a portion of the purchase discount is allocated to an accretable yield adjustment based upon the present value of the future estimated cash flows versus the current carrying value of the loan and the accretable yield portion is being recognized as interest income over the remaining life of the loan.

Where the Company cannot reasonably estimate the cash flows expected to be collected on the loans, it has continued to account for those loans using the cost recovery method of income recognition.  As such, no portion of a purchase discount adjustment has been determined to meet the definition of an accretable yield adjustment on those loans accounted for using the cost recovery method.  If, in the future, cash flows from the borrower(s) can be reasonably estimated, a portion of the purchase discount would be allocated to an accretable yield adjustment based upon the present value of the future estimated cash flows versus the current carrying value of the loan and the accretable yield portion would be recognized as interest income over the remaining life of the loan.  Until such accretable yield can be calculated, under the cost recovery method of income recognition, all payments will be used to reduce the carrying value of the loan and no income will be recognized on the loan until the carrying value is reduced to zero.  Any loan accounted for under the cost recovery method is also still included as a non-accrual loan in the amounts presented in the tables below.
PREMIER FINANCIAL BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)


NOTE  3–LOANS - continued

The accretable yield, or income expected to be collected, on the purchased loans above is as follows at September 30, 2018 and September 30, 2017.

   
2018
   
2017
 
Balance at January 1
 
$
754
   
$
1,208
 
New loans purchased
   
-
     
-
 
Accretion of income
   
(141
)
   
(201
)
Loans placed on non-accrual
   
(52
)
   
-
 
Income recognized upon full repayment
   
(38
)
   
(197
)
Reclassifications from non-accretable difference
   
-
     
-
 
Disposals
   
-
     
-
 
Balance at September 30
 
$
523
   
$
810
 

PREMIER FINANCIAL BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)


NOTE  3–LOANS - continued

Past Due and Non-performing Loans

The following tables present the recorded investment in nonaccrual and loans past due over 90 days still on accrual by class of loans as of September 30, 2018 and December 31, 2017.  The recorded investment in non-accrual loans is less than the principal owed on non-accrual loans due to discounts applied to the carrying value of the loan at time of their acquisition and interest payments made by the borrower which have been used to reduce the recorded investment in the loan rather than recognized as interest income.

September 30, 2018
 
Principal Owed on Non-accrual Loans
   
Recorded Investment in Non-accrual Loans
   
Loans Past Due Over 90 Days, still accruing
 
                   
Residential real estate
 
$
4,015
   
$
3,265
   
$
917
 
Multifamily real estate
   
2,118
     
2,012
     
-
 
Commercial real estate
                       
Owner occupied
   
3,114
     
3,063
     
-
 
Non-owner occupied
   
4,373
     
4,285
     
75
 
Commercial and industrial
   
1,043
     
481
     
-
 
Consumer
   
373
     
342
     
-
 
Construction and land
   
4,842
     
4,669
     
-
 
All other
   
176
     
176
     
-
 
Total
 
$
20,054
   
$
18,293
   
$
992
 

December 31, 2017
 
Principal Owed on Non-accrual Loans
   
Recorded Investment in Non-accrual Loans
   
Loans Past Due Over 90 Days, still accruing
 
                   
Residential real estate
 
$
2,944
   
$
2,422
   
$
869
 
Multifamily real estate
   
2,128
     
2,128
     
334
 
Commercial real estate
                       
Owner occupied
   
2,623
     
2,483
     
134
 
Non-owner occupied
   
1,862
     
1,755
     
85
 
Commercial and industrial
   
1,313
     
544
     
1,139
 
Consumer
   
268
     
241
     
-
 
Construction and land
   
5,824
     
5,673
     
830
 
Total
 
$
16,962
   
$
15,246
   
$
3,391
 

Nonaccrual loans and impaired loans are defined differently. Some loans may be included in both categories, and some may only be included in one category.  Nonaccrual loans include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.
PREMIER FINANCIAL BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)


NOTE  3–LOANS - continued

The following table presents the aging of the recorded investment in past due loans as of September 30, 2018 by class of loans:

Loan Class
 
Total Loans
   
30-89 Days
Past Due
   
Greater than 90 days past due
   
Total
Past Due
   
Loans Not
Past Due
 
                               
Residential real estate
 
$
340,478
   
$
5,366
   
$
1,697
   
$
7,063
   
$
333,415
 
Multifamily real estate
   
54,602
     
-
     
1,165
     
1,165
     
53,437
 
Commercial real estate:
                                       
Owner occupied
   
135,884
     
1,719
     
1,343
     
3,062
     
132,822
 
Non-owner occupied
   
226,710
     
281
     
2,889
     
3,170
     
223,540
 
Commercial and industrial
   
85,585
     
328
     
237
     
565
     
85,020
 
Consumer
   
28,129
     
198
     
163
     
361
     
27,768
 
Construction and land
   
132,141
     
1,869
     
4,657
     
6,526
     
125,615
 
All other
   
33,537
     
9
     
176
     
185
     
33,352
 
Total
 
$
1,037,066
   
$
9,770
   
$
12,327
   
$
22,097
   
$
1,014,969
 
 
 
The following table presents the aging of the recorded investment in past due loans as of December 31, 2017 by class of loans:

Loan Class
 
Total Loans
   
30-89 Days
Past Due
   
Greater than 90 days past due
   
Total
Past Due
   
Loans Not
Past Due
 
                               
Residential real estate
 
$
338,829
   
$
5,242
   
$
1,835
   
$
7,077
   
$
331,752
 
Multifamily real estate
   
62,151
     
-
     
334
     
334
     
61,817
 
Commercial real estate:
                                       
Owner occupied
   
136,048
     
311
     
1,784
     
2,095
     
133,953
 
Non-owner occupied
   
230,702
     
12
     
225
     
237
     
230,465
 
Commercial and industrial
   
78,259
     
123
     
1,611
     
1,734
     
76,525
 
Consumer
   
28,293
     
492
     
87
     
579
     
27,714
 
Construction and land
   
139,012
     
144
     
2,508
     
2,652
     
136,360
 
All other
   
35,758
     
-
     
-
     
-
     
35,758
 
Total
 
$
1,049,052
   
$
6,324
   
$
8,384
   
$
14,708
   
$
1,034,344
 


PREMIER FINANCIAL BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)


NOTE  3–LOANS - continued

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of September 30, 2018:
 
   
Allowance for Loan Losses
   
Loan Balances
 
Loan Class
 
Individually Evaluated for Impairment
   
Collectively Evaluated for Impairment
   
Acquired with Deteriorated Credit Quality
   
Total
   
Individually Evaluated for Impairment
   
Collectively Evaluated for Impairment
   
Acquired with Deteriorated Credit Quality
   
Total
 
                                                 
Residential real estate
 
$
-
   
$
2,278
   
$
-
   
$
2,278
   
$
298
   
$
339,081
   
$
1,099
   
$
340,478
 
Multifamily real estate
   
6
     
457
     
-
     
463
     
1,906
     
52,696
     
-
     
54,602
 
Commercial real estate:
                                                               
Owner occupied
   
385
     
1,422
     
-
     
1,807
     
3,029
     
131,470
     
1,385
     
135,884
 
Non-owner occupied
   
256
     
2,543
     
-
     
2,799
     
7,415
     
219,295
     
-
     
226,710
 
Commercial and industrial
   
111
     
1,613
     
-
     
1,724
     
525
     
85,057
     
3
     
85,585
 
Consumer
   
-
     
363
     
-
     
363
     
-
     
28,129
     
-
     
28,129
 
Construction and land
   
1,195
     
2,244
             
3,439
     
4,423
     
126,444
     
1,274
     
132,141
 
All other
   
-
     
610
     
-
     
610
     
-
     
33,253
     
284
     
33,537
 
Total
 
$
1,953
   
$
11,530
   
$
-
   
$
13,483
   
$
17,596
   
$
1,015,425
   
$
4,045
   
$
1,037,066
 
 
 
The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of December 31, 2017:
 
   
Allowance for Loan Losses
   
Loan Balances
 
Loan Class
 
Individually Evaluated for Impairment
   
Collectively Evaluated for Impairment
   
Acquired with Deteriorated Credit Quality
   
Total
   
Individually Evaluated for Impairment
   
Collectively Evaluated for Impairment
   
Acquired with Deteriorated Credit Quality
   
Total
 
                                                 
Residential real estate
 
$
-
   
$
2,986
   
$
-
   
$
2,986
   
$
308
   
$
337,200
   
$
1,321
   
$
338,829
 
Multifamily real estate
   
218
     
760
     
-
     
978
     
2,462
     
59,689
     
-
     
62,151
 
Commercial real estate:
                                                               
Owner occupied
   
307
     
1,346
     
-
     
1,653
     
3,314
     
131,226
     
1,508
     
136,048
 
Non-owner occupied
   
88
     
2,225
     
-
     
2,313
     
11,578
     
219,124
     
-
     
230,702
 
Commercial and industrial
   
104
     
897
     
100
     
1,101
     
1,304
     
76,744
     
211
     
78,259
 
Consumer
   
-
     
328
     
-
     
328
     
-
     
28,293
     
-
     
28,293
 
Construction and land
   
685
     
1,723
     
-
     
2,408
     
5,672
     
131,890
     
1,450
     
139,012
 
All other
   
-
     
337
     
-
     
337
     
293
     
35,179
     
286
     
35,758
 
Total
 
$
1,402
   
$
10,602
   
$
100
   
$
12,104
   
$
24,931
   
$
1,019,345
   
$
4,776
   
$
1,049,052
 
PREMIER FINANCIAL BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)


NOTE  3–LOANS - continued

In the tables below, total individually evaluated impaired loans include certain purchased loans that were acquired with deteriorated credit quality that are still individually evaluated for impairment.

The following table presents loans individually evaluated for impairment by class of loans as of September 30, 2018.  The table does not include any loans acquired with deteriorated credit quality.

   
Unpaid Principal Balance
   
Recorded Investment
   
Allowance for Loan Losses Allocated
 
With no related allowance recorded:
                 
Residential real estate
 
$
430
   
$
298
   
$
-
 
Commercial real estate
                       
Owner occupied
   
2,184
     
2,175
     
-
 
Non-owner occupied
   
4,022
     
4,022
     
-
 
Commercial and industrial
   
801
     
270
     
-
 
Construction and land
   
578
     
578
     
-
 
     
8,015
     
7,343
     
-
 
With an allowance recorded:
                       
Multifamily real estate
   
2,012
     
1,906
     
6
 
Commercial real estate
                       
Owner occupied
   
887
     
854
     
385
 
Non-owner occupied
   
3,474
     
3,393
     
256
 
Commercial and industrial
   
263
     
255
     
111
 
Construction and land
   
4,017
     
3,845
     
1,195
 
     
10,653
     
10,253
     
1,953
 
Total
 
$
18,668
   
$
17,596
   
$
1,953
 


PREMIER FINANCIAL BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)


NOTE  3–LOANS - continued

The following table presents loans individually evaluated for impairment by class of loans as of December 31, 2017.  The table includes $199,000 of loans acquired with deteriorated credit quality for which the Company cannot reasonably estimate cash flows such that they are accounted for on the cost recovery method and are still individually evaluated for impairment.

   
Unpaid Principal Balance
   
Recorded Investment
   
Allowance for Loan Losses Allocated
 
With no related allowance recorded:
                 
Residential real estate
 
$
446
   
$
308
   
$
-
 
Multifamily real estate
   
334
     
334
     
-
 
Commercial real estate
                       
Owner occupied
   
2,451
     
2,439
     
-
 
Non-owner occupied
   
9,602
     
9,506
     
-
 
Commercial and industrial
   
1,719
     
1,188
     
-
 
Construction and land
   
1,798
     
1,678
     
-
 
All other
   
293
     
293
     
-
 
     
16,643
     
15,746
     
-
 
With an allowance recorded:
                       
Multifamily real estate
 
$
2,128
   
$
2,128
   
$
218
 
Commercial real estate
                       
Owner occupied
   
895
     
875
     
307
 
Non-owner occupied
   
2,072
     
2,072
     
88
 
Commercial and industrial
   
466
     
315
     
204
 
Construction and land
   
4,024
     
3,994
     
685
 
     
9,585
     
9,384
     
1,502
 
Total
 
$
26,228
   
$
25,130
   
$
1,502
 


PREMIER FINANCIAL BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, DOLLARS IN TABLES IN THOUSANDS, EXCEPT PER SHARE DATA)


NOTE  3–LOANS - continued

The following table presents the average balance of loans individually evaluated for impairment and interest income recognized on these loans for the nine months ended September 30, 2018 and September 30, 2017.  The table includes loans acquired with deteriorated credit quality that are still individually evaluated for impairment.

   
Nine months ended Sept 30, 2018
   
Nine months ended Sept 30, 2017
 
Loan Class
 
Average Recorded Investment
   
Interest Income Recognized
   
Cash Basis Interest Recognized
   
Average Recorded Investment
   
Interest Income Recognized
   
Cash Basis Interest Recognized
 
                                     
Residential real estate
 
$
301
   
$
-
   
$
-
   
$
339
   
$
1
   
$
1
 
Multifamily real estate
   
2,192
     
11
     
11
     
13,605
     
196
     
181
 
Commercial real estate:
                                               
Owner occupied
   
3,163
     
54
     
54
     
3,340
     
49
     
49
 
Non-owner occupied
   
9,005
     
327
     
327
     
2,955
     
124
     
124
 
Commercial and industrial
   
990
     
21
     
21
     
1,474
     
114
     
114
 
Consumer
   
-
     
-
     
-
     
5
     
-
     
-
 
Construction and land
   
4,633
     
12
     
12
     
8,337
     
328
     
327
 
All other
   
216
     
10
     
10
     
304
     
14
     
14
 
Total
 
$
20,500
   
$
435
   
$
435
   
$
30,359
   
$
826
   
$
810
 
 
 
The following table presents the average balance of loans individually evaluated for impairment and interest income recognized on these loans for the three months ended September 30, 2018 and September 30, 2017.  The table includes loans acquired with deteriorated credit quality that are still individually evaluated for impairment.

   
Three months ended Sept 30, 2018
   
Three months ended Sept 30, 2017
 
Loan Class