Second Quarter 2021 Highlights

• Net income of $31.4 million, up $2.3 million (8.0%) or up $0.7 million (2.2%) excluding merger-related provision and expenses from 2020 second quarter
• Earnings per share of $0.84, up $0.06 (7.7%) or up $0.02 (2.4%) excluding merger-related provision and expenses from 2020 second quarter
• Service fee income of $6.3 million, up $0.7 million (11.9%) from 2020 second quarter
• Loan growth of $45 million excluding PPP (up 3.6% annualized) including $36 million for commercial loans (up 4.4% annualized) during 2021 second quarter
• Average deposit costs down 4 basis points to 0.23% from first quarter 2021
• Asset quality improved with non-performing assets down to 0.54% of assets, classifieds down to 1.7% of loans and effectively 100% of COVID deferrals return to pay for 2021 second quarter
• Allowance to Loans ratio of 1.33%, or 1.41% excluding PPP loans for 2021 second quarter
• Pre-tax pre-provision ROAA of 1.90% for 2021 second quarter
• ROA, ROE and ROTE of 1.67%, 12.50% and 19.05% for 2021 second quarter
• Increased dividend $0.01 to $0.27 per share, up 23% year to date

Premier Financial Corp. (Nasdaq: PFC) (“Premier” or the “Company”) today announced 2021 second quarter results. Net income for the second quarter of 2021 was $31.4 million, or $0.84 per diluted common share, compared to $29.1 million, or $0.78 per diluted common share, for the second quarter of 2020. The prior year’s results include the impact of $2.1 million of acquisition-related charges for the three months ended June 30, 2020, which had an after-tax cost of $1.7 million or $0.04 per diluted common share. Net income for the six months ended June 30, 2021, was $72.4 million, or $1.94 per diluted common share, compared to $6.6 million, or $0.19 per diluted common share, for the six months ended June 30, 2020. The six-month year-over-year comparison is substantially impacted by the acquisition of United Community Financial Corp. (“UCFC”) on January 31, 2020, with the prior year’s provision expense of $48.2 million that included $25.9 million related to acquisition accounting for an after-tax cost of $20.5 million, or $0.59 per diluted common share. The first half of 2021 included a provision recovery of $10.9 million, which had an after-tax benefit of $8.6 million, or $0.23 per diluted common share, and no acquisition impact. Additionally, the prior year’s six-month results include the impact of $13.6 million of acquisition-related charges, which had an after-tax cost of $11.1 million, or $0.32 per diluted common share. Excluding the impact of the acquisition-related provision and charges, earnings for the first half of 2020 were $38.2 million, or $1.11 per diluted common share.

“Results for the second quarter reflect the continued economic resurgence of our business and consumer clients across all markets,” said Gary Small, President and CEO of Premier. “The Premier team drove excellent new business generation and delivered solid loan growth during the quarter in our core commercial, consumer and residential mortgage business lines. Household deposits remain high, debt levels have improved and a double-digit increase in debit card and ATM revenue suggests that our clients are more confident and well on their way to a brighter future.”

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 $13.0 million as loan interest income, including $2.8 million and $6.8 million during the three and six months ended June 30, 2021, respectively. Additionally, a total of $349.6 million in loans have been extinguished to date, including $178.4 million and $293.2 million during the three and six months ended June 30, 2021, respectively.

Beginning in January 2021, Premier Bank participated in the second round of PPP lending and made 2,229 loans for a total of $193.6 million during the six months ended June 30, 2021. Total gross fees for these loans were $7.8 million and Premier Bank has recognized $0.4 million and $0.6 million in loan interest income during the three and six months ended June 30, 2021, respectively.

Net interest income up compared to second quarter of 2020

Net interest income of $56.6 million in the second quarter of 2021 was up from $54.3 million in the second quarter of 2020. The increase over the prior year’s second quarter was attributable to growth in interest-earning assets, PPP fees and a 53% decrease in average costs of funds. Net interest margin was 3.34% for the second quarter of 2021, down from 3.43% in the first quarter of 2021, and down from 3.51% in the second quarter of 2020. Yield on interest earning assets decreased to 3.59% in the second quarter of 2021, down 14 basis points from 3.73% in the first quarter of 2021. Total cost of funds decreased 5 basis points in the second quarter of 2021 to 0.26% from 0.31% in the first quarter of 2021 while the total cost of interest-bearing liabilities decreased 6 basis points to 0.36% from 0.42%. The 2021 second quarter results include the impact of acquisition marks and related accretion for the UCFC acquisition. Interest income includes $1.3 million of accretion and interest expense includes $0.3 million of accretion, which combined added 9 basis points of net interest margin. The second quarter results also include the impact of PPP loans. Interest income includes $3.95 million on average balances of $378.5 million, which increased net interest margin by 5 basis points. Excluding the impact of acquisition marks and PPP loans, net interest margin would be 3.20% for the second quarter of 2021 compared to 3.25% for the first quarter of 2021 and 3.34% for the second quarter of 2020.

“We are pleased by the quarter’s net interest income growth that was driven by core loan growth across the board and diligent efforts to reduce our deposit funding costs,” said Small. “We anticipate the current, robust deposit environment will be with us for the foreseeable future along with a corresponding expanded securities portfolio. In this difficult rate environment, we will continue to prioritize delivering income growth while taking steps to maintain margins.”

Non-interest income down from second quarter of 2020

Premier’s non-interest income in the second quarter of 2021 was $17.5 million compared with $23.0 million in the second quarter of 2020. Total mortgage banking income decreased to $2.2 million in the second quarter of 2021 from $9.9 million in the second quarter of 2020. Gains from the sale of mortgage loans decreased to $2.7 million in the second quarter of 2021 from $11.5 million in the second quarter of 2020. While total mortgage loan production has been consistently strong compared to prior year, gains have declined due to compressed margins, a lower saleable mix and less favorable marks on the in-process portfolio. Mortgage loan servicing revenue of $1.9 million in the second quarter of 2021 was consistent with $1.9 million in the second quarter of 2020. Amortization of mortgage servicing rights decreased to $2.0 million in the second quarter of 2021 from $2.2 million in the second quarter of 2020. Premier also had a negative change in the valuation adjustment for mortgage servicing assets of $0.4 million in the second quarter of 2021 compared with a negative adjustment of $1.4 million in the second quarter of 2020. This item closely follows the trend in USTN-10, which declined 29 basis points during the quarter to 1.45% at June 30, 2021.

For the second quarter of 2021, service fees and other charges were $6.3 million, up 12% from $5.6 million in the second quarter of 2020 primarily due to higher ATM and interchange related fees. Revenues from insurance commissions, wealth management and BOLI were generally consistent with prior year totaling $6.5 million in second quarter 2021 compared to $6.6 million in second quarter 2020. Securities gains were $0.7 million in the second quarter of 2021 compared to a loss of $2,000 in the second quarter of 2020. Other non-interest income was $2.0 million in the second quarter of 2021, up from $0.9 million in the second quarter of 2020 primarily due to a $1.3 million non-recurring settlement payment this quarter.

“Residential mortgage new business activity for the quarter continued at the accelerated pace experienced over the past few quarters,” said Small. “However, mortgage banking income for the quarter was tempered by a higher percentage of the new business being held in portfolio, tighter pricing and unfavorable marks for the sizable in-process portfolio generated by the very robust production activity of the past two quarters. As we closed the quarter, the percentage of salable business began returning to expected levels, in-process loans were trending down and pricing stabilized leaving us better positioned for the remainder of the year.”

Core non-interest expenses up from second quarter of 2020

Total non-interest expense was $38.4 million in the second quarter of 2021, up from $38.0 million in the second quarter of 2020, or up from $35.9 million excluding $2.1 million of acquisition related charges. Compensation and benefits increased to $21.0 million in the second quarter of 2021, compared to $19.6 million in the second quarter of 2020. Occupancy expense was $3.8 million in the second quarter of 2021, down from $4.1 million in the second quarter of 2020. Data processing cost was $3.3 million in the second quarter of 2021, down from $3.8 million in the second quarter of 2020. Amortization of intangibles was $1.6 million in the second quarter of 2021, down from $1.8 million in the second quarter of 2020. Other non-interest expense was $6.9 million in the second quarter of 2021, up from $5.0 million in the second quarter of 2020 partly due to higher costs related to ATM and interchange volumes, loan volumes and travel and entertainment costs.

Credit quality

Non-performing assets totaled $41.3 million, or 0.54% of assets, at June 30, 2021, a decrease from $49.4 million at March 31, 2021, but an increase from $40.0 million at June 30, 2020. Accruing troubled debt restructured loans were $5.9 million at June 30, 2021, compared with $7.9 million at June 30, 2020. Loan delinquencies increased to $9.9 million, or 0.2% of loans, at June 30, 2021, from $9.5 million at March 31, 2021, but decreased from $11.0 million at June 30, 2020.

The 2021 second quarter results include net loan recoveries of $0.2 million and a total provision credit of $3.9 million compared with net loan recoveries of $0.8 million and a total provision expense of $3.0 million for the same period in 2020. The allowance for credit losses on loans as a percentage of total loans was 1.33% at June 30, 2021, or 1.41% excluding PPP loans, compared with 1.37% at March 31, 2021, or 1.49% excluding PPP loans, and 1.62%, or 1.76% excluding PPP loans, at June 30, 2020. The continued economic improvement from the 2020 pandemic-related downturn led to the year-over-year decrease in the provision expense and allowance percentage. As of June 30, 2021, Premier Bank had no commercial loan pandemic-related deferrals, down from $32.4 million at March 31, 2021, and only one retail loan for $13,000, down from $3.4 million at March 31, 2021.

“We are delighted with this quarter’s improved asset quality, which included a 16% reduction in non-performing assets,” said Paul Nungester, CFO of Premier. “These enhancements along with a second consecutive quarter of recoveries and an even better economic forecast led to a further reduction in our reserve levels. We committed to supporting our clients during the pandemic through our COVID deferral program and are glad to see that they are confident and gaining momentum with essentially all now back in return-to-pay status.”

Year to date results

For the six-month period ended June 30, 2021, net income totaled $72.4 million, or $1.94 per diluted common share, compared to $6.6 million, or $0.19 per diluted common share for the six months ended June 30, 2020. Results for the first half of 2020 included five months of income and expenses from UCFC compared to six months in 2021. The year-over-year comparison is also substantially impacted by the prior year’s provision expense of $48.2 million, which included $25.9 million related to acquisition accounting for an after-tax cost of $20.5 million, or $0.59 per diluted common share. The first half of 2021 included a provision credit of $10.9 million, which had an after-tax benefit of $8.6 million, or $0.23 per diluted common share, and no acquisition impact. Additionally, the prior year’s results include the impact of $13.6 million of acquisition-related charges, which had an after-tax cost of $11.1 million, or $0.32 per diluted common share. Excluding the impact of acquisition-related provision and charges, earnings for the first half of 2020 were $38.2 million, or $1.11 per diluted common share.

Net interest income was $113.1 million for the first six months of 2021 compared with $99.8 million in the first six months of 2020. Average interest-earning assets increased to $6.71 billion in the first six months of 2021 compared to $5.56 billion in the first six months of 2020. Net interest margin for the first six months of 2021 was 3.39%, down 24 basis points from the 3.63% margin reported in the six-month period ended June 30, 2020. Results include the impact of acquisition marks and related accretion for the UCFC acquisition. For the first six months of 2021, interest income includes $2.6 million of accretion and interest expense includes $0.7 million of accretion, which combined added 10 basis points of net interest margin. The results in the first half of 2021 also include the impact of PPP loans. Interest income includes $9.0 million on average balances of $406.8 million, which increased net interest margin by 7 basis points. Excluding the impact of acquisition marks and PPP loans, net interest margin was 3.22% for the first half of 2021 compared to 3.48% for the first half of 2020.

Non-interest income for the first six months of 2021 was $43.8 million compared to $37.0 million during the same period of 2020. Service fees and other charges were $11.8 million for the first six months of 2021, up from $10.8 million during the same period of 2020. Mortgage banking income was $12.7 million for the first six months of 2021, up from $10.7 million during the same period of 2020. Insurance commissions were $8.9 million for the first six months of 2021 compared with $9.2 million for the same period of 2020. Wealth management income was $3.3 million for the first six months of 2021, up from $2.9 million during the same period of 2020. Securities gains were $2.8 million for the first six months of 2021 compared to a loss of $2,000 for the same period in 2020. Approximately $2.0 million of the gain was related to the sale of securities where the Company took advantage of pricing to realize gains and reinvested in a mix of new securities that will generate the higher income over the next three years. The other $0.8 million was related to unrealized gains on our trading securities due to the improved market for these financial institution equities. BOLI income increased to $2.0 million in the first half of 2021, including $0.3 million of claim gains, compared to $1.6 million and no claim gains in the first half of 2020. Other non-interest income for the first half of 2021 was $2.3 million compared to $1.6 million in 2020.

Non-interest expense was $77.2 million for the first six months of 2021 compared to $80.3 million, or $66.7 million excluding acquisition-related charges, for the same period of 2020. Compensation and benefits expense was $43.0 million for the first six months of 2021 compared with $37.2 million during the same period of 2020. Expenses also included net increases of $1.0 million for occupancy, FDIC insurance premiums, financial institution taxes, data processing and amortization of intangibles and $3.5 million for other expenses.

Total assets at $7.59 billion

Total assets at June 30, 2021, were $7.59 billion compared to $7.53 billion at March 31, 2021, and $7.01 billion at June 30, 2020. Gross loans receivable (including loans held for sale) were $5.55 billion at June 30, 2021, compared to $5.68 billion at March 31, 2021, and $5.62 billion at June 30, 2020. At June 30, 2021, gross loans receivable decreased $70.2 million from a year ago due to a $147.2 million decrease in PPP loans. Excluding PPP, loans grew $77.0 million organically, or 1.5% from a year ago. Commercial loans excluding PPP increased $113.2 million from June 30, 2020, to 2021, or 3.4%, despite a $45.4 million decrease in lines of credit. Securities at June 30, 2021, were $1.29 billion compared to $932.3 million at March 31, 2021, and $567.5 million at June 30, 2020. Also, at June 30, 2021, goodwill and other intangible assets totaled $345.1 million compared to $346.7 million at March 31, 2021, and $351.7 million at June 30, 2020, with the decrease attributable to intangibles amortization.

Total deposits at June 30, 2021, were $6.29 billion compared with $6.35 billion at March 31, 2021, and $5.76 billion at June 30, 2020. At June 30, 2021, total deposits grew $0.53 billion organically, or 9.2% from a year ago.

Total stockholders’ equity was $1.03 billion at June 30, 2021, compared to $998.2 million at March 31, 2021, and $941.0 million at June 30, 2020. The increase in stockholders’ equity from the prior year was primarily due to net earnings. The Company also completed the repurchase of 126,366 common shares for $3.8 million during the second quarter of 2021. At June 30, 2021, 1,834,434 common shares remained available for repurchase under the Company’s existing authorization.

Dividend to be paid August 27

The Board of Directors declared a quarterly cash dividend of $0.27 per common share payable August 27, 2021, to shareholders of record at the close of business on August 20, 2021. The dividend represents an annual dividend of 4.0 percent based on the Premier common stock closing price on July 28, 2021. Premier has approximately 37,179,000 common shares outstanding.

Conference call

Premier will host a conference call at 11:00 a.m. ET on Friday, July 30, 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/pfc210730.html. The replay of the conference call will be available at www.PremierFinCorp.com for one year.

About Premier Financial Corp.

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

Financial Statements and Highlights Follow-

Safe Harbor Statement

This document may contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. These statements may include, but are not limited to, statements regarding projections, forecasts, goals and plans of Premier Financial Corp. and its management, future movements of interests, loan or deposit production levels, future credit quality ratios, future strength in the market area, and growth projections. These statements do not describe historical or current facts and may be identified by words such as “intend,” “intent,” “believe,” “expect,” “estimate,” “target,” “plan,” “anticipate,” or similar words or phrases, or future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” “may,” “can,” or similar verbs. There can be no assurances that the forward-looking statements included in this presentation will prove to be accurate. In light of the significant uncertainties in the forward-looking statements, the inclusion of such information should not be regarded as a representation by Premier or any other persons, that our objectives and plans will be achieved. Forward-looking statements involve numerous risks and uncertainties, any one or more of which could affect Premier’s business and financial results in future periods and could cause actual results to differ materially from plans and projections. These risks and uncertainties include, but not limited to: impacts from the novel coronavirus (COVID-19) pandemic on the economy, financial markets, our customers, and our business and results of operation; changes in interest rates; disruptions in the mortgage market; risks and uncertainties inherent in general and local banking, insurance and mortgage conditions; political uncertainty; uncertainty in U.S. fiscal or monetary policy; uncertainty concerning or disruptions relating to tensions surrounding the current socioeconomic landscape; competitive factors specific to markets in which Premier operates; increasing competition for financial products from other financial institutions and nonbank financial technology companies; legislative or regulatory rulemaking or actions; capital market conditions; security breaches or unauthorized disclosure of confidential customer or Company information; interruptions in the effective operation of information and transaction processing systems of Premier or Premier’s vendors and service providers; failures or delays in integrating or adopting new technology; the impact of the cessation of LIBOR interest rates and implementation of a replacement rate; and other risks and uncertainties detailed from time to time in our Securities and Exchange Commission (SEC) filings, including our Annual Report on Form 10-K for the year ended December 31, 2020. 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 June 30, 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.