Third Quarter 2022 Highlights

• Loan growth of $300.9 million (up 19.9% annualized) including $151.0 million for commercial loans excluding PPP (up 15.2% annualized) and $114.2 million for residential loans including held for sale (up 28.3% annualized)
• Customer deposits growth of $146.3 million (up 9.0% annualized) including $40.0 million of non-interest-bearing (up 9.0% annualized)
• Net interest income (tax equivalent) of $63.5 million or $62.9 million excluding PPP and acquisition marks accretion, up 7.1% and 7.6%, respectively, from 2022 second quarter
• Net interest margin (tax equivalent) of 3.40% or 3.36% excluding PPP and acquisition marks accretion, up four basis points each from 2022 second quarter
• Asset quality improved with non-performing loans down 4.6% and classified loans down 7.8% from 2022 second quarter
• Declared dividend of $0.30 per share, up 7.1% from prior year comparable period

Premier Financial Corp. (Nasdaq: PFC) (“Premier” or the “Company”) announced today 2022 third quarter results. Net income for the third quarter of 2022 was $28.2 million, or $0.79 per diluted common share, compared to $28.4 million, or $0.76 per diluted common share, for the third quarter of 2021.

“We are very pleased to post another strong quarter in terms of earnings and growth,” said Gary Small, President and CEO of Premier. “Year-to-date loan and deposit growth stand at 17% and 7%, respectively, while total revenue growth for the quarter totaled 8.9%, outstanding results by any historical comparison. As has been the case all year, robust commercial and consumer business segment performance continues to offset a difficult residential mortgage environment. With a number of economic factors currently affecting our clients’ financial decision-making, it is gratifying to see households continuing to thrive. Deposits continue to grow, credit quality figures continue to improve, and consumer spending is responsibly on the rise. A strong employment market is clearly helping all maneuver through these less certain times.”

Quarterly results

Strong loan and deposit growth

Gross loans including those held for sale increased $300.9 million (up 19.9% annualized) on a linked quarter basis. Loan growth occurred in each category including $151.0 million from commercial loans excluding PPP (up 15.2% annualized), $114.2 million from residential loans including held for sale (up 28.3% annualized) and $38.5 million from consumer/home equity loans (up 34.5% annualized). PPP loans decreased $3.4 million and were only $1.2 million as of September 30, 2022.

Customer deposits increased $146.3 million (up 9.0% annualized) on a linked quarter basis. Deposit growth occurred in each customer category, including $40.0 million from non-interest bearing deposits (up 9.0% annualized) and $106.3 million from interest-bearing deposits (up 9.0% annualized). Brokered deposits also added $69.9 million.

Net interest income and margin expansion

Net interest income of $63.5 million on a tax equivalent (“TE”) basis in the third quarter of 2022 was up 7.1% from $59.3 million in the second quarter of 2022 and up 10.9% from $57.3 million in the third quarter of 2021. TE net interest margin of 3.40% in the third quarter of 2022 increased four basis points from 3.36% in the second quarter of 2022 and two basis points from 3.38% in the third quarter of 2021. Results for all periods include the impact of PPP as well as acquisition marks and related accretion for the UCFC acquisition. Third quarter 2022 includes $376 thousand of accretion in interest income, $232 thousand of accretion in interest expense and $26 thousand of interest income on average balances of $1.9 million for PPP. Excluding the impact of acquisition marks accretion and PPP loans, TE net interest income was $62.9 million, up 7.6% from $58.5 million in the second quarter of 2022 and up 17.5% from $53.5 million in the third quarter of 2021. Additionally, TE net interest margin was 3.36% for the third quarter of 2022, up four basis points from 3.32% for the second quarter of 2022 and up nine basis points from 3.27% for the third quarter of 2021. These improved results are primarily due to the combination of loan growth excluding PPP as discussed above and higher loan yields excluding PPP and acquisition marks accretion, which were 4.24% for the third quarter of 2022 compared to 3.94% in the second quarter of 2022 and 3.98% in the third quarter of 2021. The third quarter increase of 30 basis points represents a beta of 21% compared to the change in the quarterly average effective Federal Funds rate that increased 141 basis points to 2.18% for the third quarter of 2022 as reported by the Federal Reserve Economic Data. The cost of funds in the third quarter of 2022 was 0.55%, up 31 basis points from both the second quarter of 2022 and the third quarter of 2021. The year-over-year increase is largely due to utilization of higher cost FHLB borrowings in support of loan growth in excess of deposit growth. The linked quarter increase is due to higher rates on FHLB borrowings, utilization of brokered deposits and higher average deposit costs. Excluding brokered deposits and acquisition marks accretion, average deposit costs increased 24 basis points to 0.39% for the third quarter of 2022, which represents a beta of 17% compared to the change in the quarterly average effective Federal Funds rate.

Non-interest income impacted mortgage banking and securities

Service fees in the third quarter of 2022 were $6.5 million, a 2.0% decrease from $6.7 million in the second quarter of 2022 but a 7.9% increase from $6.1 million in the third quarter of 2021, primarily due to fluctuations in consumer activity for interchange and ATM/NSF charges. However, total non-interest income in the third quarter of 2022 of $16.7 million was up 16.3% from $14.4 million in the second quarter of 2022 but down 9.1% from $18.4 million in the third quarter of 2021 due to fluctuations in mortgage banking and gains/losses on securities. Mortgage banking income increased $2.0 million on a linked quarter basis due to a $2.2 million increase in gains partially offset by a $0.2 million lower MSR valuation gain. Mortgage banking income for the third quarter decreased $2.2 million year-over-year due to a $2.0 million decrease in gains primarily from compressed margins and lower saleable mix and a $0.7 million lower MSR valuation gain offset by a $0.5 million benefit from lower MSR amortization. Securities gains were $43 thousand in the third quarter of 2022 from increased valuations on equity securities, compared to $1.2 million of losses on equity securities in the second quarter of 2022 and compared to $253 thousand of gains in the third quarter of 2021, comprised of $233 thousand from available-for-sale security sales gains and $20 thousand of gains on equity securities.

“Premier’s outstanding loan growth over the year has driven net interest income performance,” said Small. “Every effort was made to capture business earlier in the year as uncertainty loomed over the horizon for the later portion of 2022. The excellent pace of business through the end of Q3 has necessitated the use of more non-core funding. The combination of core and non-core funding has enabled the organization to manage deposit betas effectively while positioning us to grow deposits across all of our markets in a thoughtful manner. The velocity of rate hikes brought about by the Fed is both understandable and challenging. We at Premier are determined to create a deposit rate offering that will both reward existing clients for their business and continue to attract new business.”

Managing non-interest expenses and efficiency

Non-interest expenses in the third quarter of 2022 were $41.1 million, a 5.2% increase from $39.1 million in the second quarter of 2022 and the third quarter of 2021, primarily due to fluctuations in compensation and benefit expenses. Compensation and benefits were $24.5 million in the third quarter of 2022, compared to $22.3 million in the second quarter of 2022 and $23.4 million in the third quarter of 2021. The linked quarter increase was primarily due to lower deferred costs related to decreased loan production. The year-over-year increase was primarily due to costs related to higher staffing levels for our growth initiatives. All other non-interest expenses decreased a net $0.2 million on a linked quarter basis and increased a net $0.8 million on a year-over-year basis. The efficiency ratio for the third quarter 2022 of 51.26% improved from 52.23% in the second quarter of 2022 and from 51.85% in the third quarter of 2021, primarily due to higher revenues.

Credit quality

Non-performing assets totaled $33.6 million, or 0.41% of assets, at September 30, 2022, a decrease from $35.2 million at June 30, 2022, and from $60.1 million at September 30, 2021. Loan delinquencies increased to $13.2 million, or 0.2% of loans, at September 30, 2022, from $11.2 million at June 30, 2022, and September 30, 2021. Classified loans totaled $45.0 million, or 0.7% of loans, as of September 30, 2022, a decrease from $48.8 million at June 30, 2022, and from $90.1 million at September 30, 2021.

The 2022 third quarter results include net loan charge-offs of $153 thousand and a total provision expense of $4.0 million, compared with net loan recoveries of $256 thousand and a total provision benefit of $1.8 million for the same period in 2021. The current year provision is primarily due to higher non-PPP loan growth in the third quarter of 2022 compared to the third quarter of 2021. The allowance for credit losses as a percentage of total loans was 1.14% at September 30, 2022, compared with 1.14% at June 30, 2022, and 1.39% at September 30, 2021. The allowance for credit losses as a percentage of total loans excluding PPP and including unaccreted acquisition marks was 1.19% at September 30, 2022, compared with 1.21% at June 30, 2022, and 1.57% at September 30, 2021. The continued economic improvement following the 2020 pandemic-related downturn has resulted in a year-over-year decrease in the allowance percentages.

“We had another quarter of asset quality improvement with non-performing loans and classified loans declining 5% and 8% respectively,” said Paul Nungester, CFO of Premier. “Net charge-offs were only 0.01% of average loans and our allowance coverage level of non-performing loans increased to 213%.”

Year to date results

For the nine-month period ended September 30, 2022, net income totaled $76.9 million, or $2.15 per diluted common share, compared to $100.7 million, or $2.70 per diluted common share for the nine months ended September 30, 2021. The year-over-year comparison is primarily impacted by fluctuations in the provision for credit losses, which was an expense of $11.5 million or $0.25 per diluted share in 2022 compared to a benefit of $9.1 million or $0.19 per share in 2021. The current year’s provision expense is primarily due to loan growth, whereas the prior year’s provision benefit was primarily due to the improving economic environment following the COVID-19 pandemic-induced economic recession and reserve increase in 2020.

TE net interest income of $181.0 million in the first nine months of 2022 was up 5.9% from $170.9 million in the first nine months of 2021. TE net interest margin of 3.40% in the first nine months of 2022 increased by one basis point from 3.39% in the first nine months of 2021. Results for each period include the impact of PPP as well as acquisition marks and related accretion for the UCFC acquisition. The first nine months of 2022 include $1.3 million of accretion in interest income, $1.0 million of accretion in interest expense and $3.8 million of interest income on average balances of $15.8 million for PPP. Excluding the impact of acquisition marks accretion and PPP loans, TE net interest income was $175.1 million, up 13.1% from $154.8 million in the first nine months of 2021. Additionally, TE net interest margin was 3.29% for the first nine months of 2022, up six basis points from 3.23% for first nine months of 2021. These improved results are primarily due to loan growth excluding PPP partially offset by lower PPP income and accretion from acquisition marks. Cost of funds in the first nine months of 2022 was 0.33%, up six basis points from the first nine months of 2021. The year-over-year increase is primarily due to an increased utilization of higher cost FHLB borrowings in support of loan growth in excess of deposit growth.

Service fees in the first nine months of 2022 were $19.2 million, a 7.9% increase from $17.8 million in the first nine months of 2021, primarily due to increased consumer activity for interchange and ATM/NSF charges. However, total non-interest income in the first nine months of 2022 of $47.9 million was down from $61.7 million in the first nine months of 2021 due to fluctuations in mortgage banking, gains/losses on securities and other income. Mortgage banking income decreased $8.7 million from 2021 due to a $6.6 million decrease in gains primarily from compressed margins and lower saleable mix and a $4.0 million decrease from lower MSR valuation gains, partially offset by a $2.0 million benefit from lower MSR amortization. Securities losses were $1.8 million in the first nine months of 2022 from decreased valuations on equity securities compared to $3.0 million of net gains in the first nine months of 2021 comprised of $2.2 million from available-for-sale security sales gains and $0.8 million of gains on equity securities. Other income for the first nine months decreased $1.0 million from 2021, primarily due to a $1.3 million non-recurring settlement payment in the first nine months of 2021.

Non-interest expenses in the first nine months of 2022 were $121.5 million, a 4.9% increase from $115.8 million in the first nine months of 2021, primarily due to fluctuations in compensation and benefit expenses. Compensation and benefits were $72.4 million in the first nine months of 2022 compared to $66.4 million in the first nine months of 2021. The year-over-year increase was primarily due to costs related to higher staffing levels for our growth initiatives. All other non-interest expenses decreased a net $0.4 million on a year-over-year basis due to cost cutting initiatives. The efficiency ratio for the first nine months of 2022 was 52.67% compared to 50.44% in the first nine months of 2021, partly due to higher expenses but primarily due to lower non-interest income discussed above.

Total assets at $8.24 billion

Total assets at September 30, 2022, were $8.24 billion, compared to $8.01 billion at June 30, 2022, and $7.47 billion at September 30, 2021. Gross loans receivable were $6.21 billion at September 30, 2022, compared to $5.90 billion at June 30, 2022, and $5.27 billion at September 30, 2021. At September 30, 2022, gross loans receivable increased $938.1 million from a year ago, despite a $142.8 million decrease in PPP loans. Excluding PPP, loans grew $1.08 billion organically, or 21.1% from a year ago. Commercial loans excluding PPP increased by $651.7 million from September 30, 2021, to 2022, or 18.8%. Securities at September 30, 2022, were $1.08 billion, compared to $1.15 billion at June 30, 2022, and $1.26 billion at September 30, 2021. Also, at September 30, 2022, goodwill and other intangible assets totaled $337.9 million compared to $339.3 million at June 30, 2022, and $343.6 million at September 30, 2021, with the decreases attributable to intangibles amortization.

Total non-brokered deposits at September 30, 2022, were $6.66 billion, compared with $6.52 billion at June 30, 2022, and $6.25 billion at September 30, 2021. At September 30, 2022, customer deposits grew $146.3 million organically, or 9.0% annualized from the prior quarter and $414.0 million or 6.6% from September 30, 2021. Brokered deposits were $69.9 million at September 30, 2022, compared to none at June 30, 2022 and September 30, 2021.

Total stockholders’ equity was $0.86 billion at September 30, 2022, compared to $0.90 billion at June 30, 2022, and $1.03 billion at September 30, 2021. The quarterly decrease in stockholders’ equity was primarily due to a decrease in accumulated other comprehensive income (“AOCI”), which was primarily related to a $43.7 million negative valuation adjustment on the available-for-sale securities portfolio. No buybacks were completed during the quarter and at September 30, 2022, 1,200,130 common shares remained available for repurchase under the Company’s existing repurchase program.

Dividend to be paid November 18

The Board of Directors declared a quarterly cash dividend of $0.30 per common share payable November 18, 2022, to shareholders of record at the close of business on November 11, 2022. The dividend represents an annual dividend of 4.3 percent based on the Premier common stock closing price on October 24, 2022. Premier has approximately 35,563,000 common shares outstanding.

Conference call

Premier will host a conference call at 11:00 a.m. ET on Wednesday, October 26, 2022, to discuss the earnings results and business trends. The conference call may be accessed by calling 1-844-200-6205 and using access code 581026. Internet access to the call is also available (in listen-only mode) at the following URL: https://events.q4inc.com/attendee/880671221. The webcast replay of the conference call will be available at www.PremierFinCorp.com for one year.

About Premier Financial Corp.

Premier Financial Corp. (Nasdaq: PFC), headquartered in Defiance, Ohio, is the holding company for Premier Bank and First Insurance Group. Premier Bank, headquartered in Youngstown, Ohio, operates 74 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, 2021 and any further amendments thereto. All forward-looking statements made in this presentation are based on information presently available to the management of Premier and speak only as of the date on which they are made. We assume no obligation to update any forward-looking statements, whether as a result of new information, future developments or otherwise, except as may be required by law. As required by U.S. GAAP, Premier will evaluate the impact of subsequent events through the issuance date of its September 30, 2022, consolidated financial statements as part of its Quarterly Report on Form 10-Q to be filed with the SEC. Accordingly, subsequent events could occur that may cause Premier to update its critical accounting estimates and to revise its financial information from that which is contained in this news release.

Non-GAAP Reporting Measures

We believe that net income, as defined by U.S. GAAP, is the most appropriate earnings measurement. However, we consider core net interest income to be a useful supplemental measure of our operating performance. We define core net interest income as net interest income on a tax-equivalent basis excluding income from PPP loans and purchase accounting marks accretion. We believe that this metric is a useful supplemental measure of operating performance because investors and equity analysts may use this measure to compare the operating performance of the Company between periods or as compared to other financial institutions or other companies on a consistent basis without having to account for income from PPP loans and purchase accounting marks accretion. 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.