First Quarter 2021 Highlights

• Declared dividend increase of $0.02 to $0.26 per share, up 18% from 2020 first quarter
• Net income of $41.0 million, up from a loss of $22.5 million, or income of $7.5 million excluding merger-related provision and expenses, for 2020 first quarter
• Earnings per share of $1.10, up from ($0.71), or $0.24 excluding merger-related provision and expenses, for 2020 first quarter
• Allowance to Loans ratio of 1.37%, or 1.49% excluding PPP loans
• Average interest earnings assets growth of $248.0 million, or 15.6% annualized growth, for 2021 first quarter
• Average deposit growth of $233.7 million, or 15.7% annualized growth, for 2021 first quarter
• Mortgage banking income of $10.5 million, up from $0.8 million for 2020 first quarter
• Pre-tax pre-provision ROAA of 2.43%, compared to 1.29%, or 2.15% excluding merger-related expenses, for 2020 first quarter
• Efficiency ratio of 48.0%, compared to 70.9%, or 51.6% excluding merger-related expenses, for 2020 first quarter
• ROE and ROTE of 17.09% and 26.60% for 2021 first quarter

Premier Financial Corp. (Nasdaq: PFC) (“Premier” or the “Company”) announced today 2021 first quarter results including solid core profitability. Net income for the first quarter of 2021 was $41.0 million, or $1.10 per diluted common share, compared to a net loss of $22.5 million, or $0.71 per diluted common share, for the first quarter of 2020. The year-over-year comparison is impacted by the acquisition of United Community Financial Corp. (“UCFC”) on January 31, 2020, with 2020 first quarter results including two months of operations from UCFC compared to three in first quarter of 2021. The prior year’s results include the impact of $11.5 million of acquisition-related charges for the three months ended March 31, 2020, which had an after-tax cost of $9.5 million or $0.30 per diluted common share. Additionally, the prior year’s provision expense of $45.2 million included $25.9 million related to acquisition accounting for an after-tax cost of $20.5 million, or $0.65 per diluted common share. The first quarter of 2021 included a provision credit of $7.0 million and no acquisition impact. Excluding the impact of the acquisition-related provision and charges, earnings for the three months ended March 31, 2020, were $7.5 million, or $0.24 per diluted common share.

“We are very pleased to deliver an excellent start for 2021,” said Gary M. Small, CEO of Premier. “While the banking industry is currently facing challenges in terms of the low interest rate environment and modest loan demand, Premier’s business mix continues to provide opportunities to perform and our team is taking full advantage. Our disciplined approach to credit and the continued outstanding performance from fee income businesses allowed us to move confidently with a meaningful 18% dividend increase year to date, consistent with our expectations for sustainably strong performance going forward.”

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 for the year ended December 31, 2020. Total gross fees for these loans equaled $14.8 million. To date, Premier Bank has recognized $10.2 million as loan interest income, including $4.0 million during the three months ended March 31, 2021. Additionally, a total of $171.2 million in loans have been extinguished to date, including $114.8 million during the three months ended March 31, 2021.

Beginning in January 2021, Premier Bank participated in the second round of PPP lending and made 1,645 loans for a total of $171.7 million during the three months ended March 31, 2021. Total gross fees for these loans were $6.7 million and Premier Bank recognized $0.2 million in loan interest income during the three months ended March 31, 2021.

Net interest income up compared to first quarter of 2020

Net interest income of $56.5 million in the first quarter of 2021 was up from $45.5 million in the first quarter of 2020. The increase over the prior year’s first quarter was attributable to organic growth and three months of income from UCFC compared to two months in 2020. Net interest margin was 3.43% for the first quarter of 2021, down from 3.47% in the fourth quarter of 2020, and down from 3.78% in the first quarter of 2020. Yield on interest earning assets decreased to 3.73% in the first quarter of 2021, down 11 basis points from 3.84% in the fourth quarter of 2020. Total cost of funds decreased 8 basis points in the first quarter of 2021 to 0.31% from 0.39% in the fourth quarter of 2020 while the total cost of interest-bearing liabilities decreased 10 basis points to 0.42% from 0.52%. The 2021 first 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 $0.4 million of accretion, which combined added 10 basis points of net interest margin. The first quarter results also include the impact of PPP loans. Interest income includes $5.0 million on average balances of $435.4 million, which increased net interest margin by 8 basis points. Excluding the impact of acquisition marks and PPP loans, net interest margin would be 3.25% for the first quarter of 2021 compared to 3.36% for the fourth quarter of 2020 and 3.68% for the first quarter of 2020.

“We produced net interest income growth despite margin compression for the quarter,” said Small. “The success of the multiple COVID related economic programs enacted over the past year has driven tremendous liquidity and deposit growth to the benefit of all our clients. Reinvesting these funds in a prudent manner recognizing the volatility of these deposits over time has never been more critical. We remain focused on continued reduction of our funding costs while optimizing our reinvestment yield for the appropriate time horizon.”

Non-interest income up from first quarter of 2020

Premier’s non-interest income in the first quarter of 2021 was $26.3 million compared with $14.0 million in the first quarter of 2020. Results for the first quarter of 2021 included three months of income from UCFC compared to two months in 2020.

Mortgage banking income increased to $10.5 million in the first quarter of 2021 from $0.8 million in the first quarter of 2020. Gains from the sale of mortgage loans increased to $5.6 million in the first quarter of 2021 from $4.9 million in the first quarter of 2020. Mortgage loan servicing revenue increased to $1.9 million in the first quarter of 2021 from $1.6 million in the first quarter of 2020. Amortization of mortgage servicing rights increased to $2.3 million in the first quarter of 2021 from $1.2 million in the first quarter of 2020. Premier had a positive change in the valuation adjustment in mortgage servicing assets of $5.3 million in the first quarter of 2021 compared with a negative adjustment of $4.5 million in the first quarter of 2020 with the year-over-year change primarily due to rates. In the first quarter of 2020, the rate on the 10 Year Treasury declined to 0.70% as a result of the pandemic and economic recession thus negatively impacting prepay speeds and the MSR valuation. In the first quarter of 2021, the rate on the 10 Year Treasury increased to 1.74% due to improving economic conditions and the vaccine rollout which resulted in slowing prepay speeds and the positive valuation adjustment.

For the first quarter of 2021, service fees and other charges were $5.5 million, up from $5.3 million in the first quarter of 2020. Commissions from the sale of insurance products were $4.9 million, down from $5.2 million in the first quarter of 2020. The first quarter typically includes contingent revenues, bonuses paid by insurance carriers when the Company achieves certain loss ratios or growth targets. In the first quarter of 2021, Premier’s insurance subsidiary, First Insurance Group, earned $1.1 million of contingent income, compared to $1.3 million during the first quarter of 2020. Wealth management income was $1.8 million in the first quarter of 2021, up from $1.1 million in the first quarter of 2020. Securities gains were $2.1 million in the first quarter of 2021 compared to none in the first quarter of 2020. Approximately $0.5 million of the gain was related to the sale of $24 million of mortgage-backed securities where the Company took advantage of Fed pricing to realize a gain and was reinvested in a mix of new securities that will generate the same income over the next three years. The other $1.6 million related to unrealized gains on our trading securities due to the improved market for these financial institution equities. BOLI income increased to $1.2 million in the first quarter of 2021, including $0.3 million of death benefits, compared to $0.8 million in the first quarter of 2020 and no death benefits. Other non-interest income for the first quarter of 2021 was $0.3 million compared to $0.6 million in 2020, which included $1.1 million for the reversal of an earn-out accrual that was not achieved related to a prior acquisition.

“The advantages of our diversified revenue sources was on display again this quarter,” said Small. “Benefits from mortgage and security gains added to solid contributions from insurance, wealth and service fees to drive outperformance on non-interest income and overall bottom-line results.”

Core non-interest expenses up from first quarter of 2020

Total non-interest expense was $38.8 million in the first quarter of 2021, down from $42.3 million in the first quarter of 2020, or up from $30.8 million excluding $11.5 million of acquisition related charges. Results for the first quarter of 2021 included three months of expenses from UCFC compared to two months in 2020. Compensation and benefits increased to $22.0 million in the first quarter of 2021, compared to $17.6 million in the first quarter of 2020. Occupancy expense was $4.1 million in the first quarter of 2021, up from $3.7 million in the first quarter of 2020. Data processing cost was $3.4 million in the first quarter of 2021, up from $3.0 million in the first quarter of 2020. Amortization of intangibles was $1.6 million in the first quarter of 2021, up from $1.2 million in the first quarter of 2020. Other non-interest expense was $5.6 million in the first quarter of 2021, up from $3.9 million in the first quarter of 2020.

FDIC insurance premiums were a $0.9 million expense in the first quarter of 2021, up from a $0.5 million expense in the first quarter of 2020. The increase in expense from prior year is largely due to the increased size of Premier Bank post-merger and the impact of PPP. Although PPP loan balances are excludable from the asset-based component, they are not excludable from the leverage ratio component because the Company did not borrow from the PPP Liquidity Facility and any loan funds that were in deposits would also increase the asset-based component.

Credit quality

Non-performing assets totaled $49.4 million at March 31, 2021, a decrease from $52.3 million at December 31, 2020, and an increase from $33.2 million at March 31, 2020. Accruing troubled debt restructured loans were $6.1 million at March 31, 2021, compared with $7.5 million at March 31, 2020. Loan delinquencies decreased to $9.5 million at March 31, 2021, from $18.5 million at December 31, 2020, and $10.6 million at March 31, 2020.

The 2021 first quarter results include net loan recoveries of $0.2 million and a total provision credit of $7.0 million compared with net loan recoveries of $0.8 million and a total provision expense of $45.2 million, or $19.3 million excluding acquisition-related provision, for the same period in 2020. The allowance for credit losses on loans as a percentage of total loans was 1.37% at March 31, 2021, or 1.49% excluding PPP loans, compared with 1.49% at December 31, 2020, or 1.61% excluding PPP loans, and 1.68% at March 31, 2020. The year-over-year decrease in the provision expense and allowance percentage is primarily attributable to the impact of the economic deterioration that began in the first quarter of 2020 as a result of the COVID-19 pandemic but has subsequently improved. As of March 31, 2021, Premier Bank had pandemic-related deferrals for $32.4 million of commercial loans, down from $46.0 million at December 31, 2020, and $3.4 million of retail loans, down from $7.4 million at December 31, 2020.

“The continuing improvements to economic forecasts allowed us to further reduce allowance levels this quarter,” said Paul D. Nungester, CFO of Premier. “We are comfortable with an allowance level of 1.69% excluding PPP loans and including unamortized purchase accounting marks with net loan recoveries in the quarter despite some risk migration in the portfolio.”

Total assets at $7.53 billion

Total assets at March 31, 2021, were $7.53 billion compared to $7.21 billion at December 31, 2020, and $6.54 billion at March 31, 2020. Gross loans receivable (including loans held for sale) were $5.68 billion at March 31, 2021, compared to $5.71 billion at December 31, 2020, and $5.20 billion at March 31, 2020. At March 31, 2021, gross loans receivable grew $476.0 million organically, or 9.2% from a year ago, including $443.8 million of PPP loans. Commercial loans excluding PPP increased $74.0 million from March 31, 2020 to 2021, despite a $157.0 million decrease in lines of credit. Securities at March 31, 2021, were $932.3 million compared to $737.7 million at December 31, 2020, and $534.2 million at March 31, 2020. Also, at March 31, 2021, goodwill and other intangible assets totaled $346.7 million compared to $348.3 million at December 31, 2020, and $353.1 million at March 31, 2020, with the decrease attributable to intangibles amortization.

Total deposits at March 31, 2021, were $6.35 billion compared with $6.05 billion at December 31, 2020, and $4.99 billion at March 31, 2020. At March 31, 2021, total deposits grew $1.36 billion organically, or 27.2% from a year ago.

Total stockholders’ equity was $998.2 million at March 31, 2021, compared to $982.3 million at December 31, 2020, and $916.8 million at March 31, 2020. The increase in stockholders’ equity from the prior year was due to net earnings, offset partially by the Company’s repurchase of 39,200 common shares for $1.1 million during the first quarter of 2021. At March 31, 2021, 1,960,800 common shares remained available for repurchase under the Company’s existing authorization.

Dividend to be paid May 14

The Board of Directors declared a quarterly cash dividend of $0.26 per common share, an increase of $0.02 per common share, payable May 14, 2021, to shareholders of record at the close of business on May 7, 2021. The dividend represents an annual dividend of 3.14 percent based on the Premier common stock closing price on April 19, 2021. Premier has approximately 37,304,000 common shares outstanding.

Conference call

Premier will host a conference call at 11:00 a.m. ET on Wednesday, April 21, 2021, to discuss the earnings results and business trends. The conference call may be accessed by calling 1-877-444-1726. Internet access to the call is also available (in listen-only mode) at the following URL: https://services.choruscall.com/links/pfc210421.html. The replay of the conference call will be available at www.PremierFinCorp.com until April 21, 2022, at 9:00 a.m. ET.

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 news release may contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21 B of the Securities Exchange Act of 1934, as amended. Those statements may include, but are not limited to, all statements regarding intent, beliefs, expectations, projections, forecasts and plans of Premier Financial Corp. and its management, and specifically include statements regarding: changes in economic conditions; the nature, extent and timing of governmental actions and reforms; future movements of interest rates; the ability to benefit from a changing interest rate environment; the production levels of mortgage loan generation; the ability to continue to grow loans and deposits; the ability to sustain credit quality ratios at current or improved levels; continued strength in the market area for Premier Bank; the ability to sell real estate owned properties; and the ability to grow in existing and adjacent markets. These forward-looking statements involve numerous risks and uncertainties, including: impacts from the novel coronavirus (COVID-19) pandemic on our business, operations, customers and capital position; higher default rates on loans made to our customers related to COVID-19 and its impact on our customers’ operations and financial condition; the impact of COVID-19 on local, national and global economic conditions; unexpected changes in interest rates or disruptions in the mortgage market related to COVID-19 or responses to the health crisis; the effects of various governmental responses to the COVID-19 pandemic; those inherent in general and local banking, insurance and mortgage conditions; competitive factors specific to markets in which Premier Financial Corp. and its subsidiaries operate; future interest rate levels; legislative and regulatory decisions or capital market conditions; and other risks and uncertainties detailed from time to time in our Securities and Exchange Commission (SEC) filings, including in our Annual Report on Form 10-K for the year ended December 31, 2020. One or more of these factors have affected or could in the future affect Premier’s business and financial results in future periods and could cause actual results to differ materially from plans and projections. Therefore, there can be no assurances that the forward-looking statements included in this news release will prove to be accurate. In light of the significant uncertainties in the forward-looking statements included herein, 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. All forward-looking statements made in this news release 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, 2021, 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 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.