Declared dividend of $0.31 per share

Fourth Quarter 2023 Highlights

• Deposit growth of $77 million (up 4% annualized), including $128 million for core customer deposits excluding brokered (up 8% annualized)
• Loan growth of $43 million (up 3% annualized), including $63 million for commercial loan (up 6% annualized)
• Expenses declined $0.2 million (down 2% annualized) from third quarter 2023
• Non-performing assets decreased $4 million (or 10%) from prior quarter and six basis points to 0.41% of total assets
• Equity up $56 million or $1.57 per share (both up 24% annualized) with tangible equity up $57 million or $1.60 per share (both up 37% annualized) to $18.69 per share and tangible equity ratio up to 8.03%

Full Year 2023 Highlights

• Completed sale of insurance agency at a significant gain that strengthened capital without diluting future earnings
• Deposit growth of $236 million (up 3%), including $38 million for core customer deposits excluding brokered (up 1%)
• Loan growth of $279 million (up 4%) including $179 million for commercial loans (up 4%)
• Equity up $88 million or $2.37 per share (both up 10%) with tangible equity up $117 million or $3.22 per share (both up 21%) and tangible equity ratio up 1.25%
• Launched new digital banking platform to improve clients’ banking experience in October

Premier Financial Corp. (Nasdaq: PFC) (“Premier” or the “Company”) announced today 2023 fourth quarter and full year results. Net income for the fourth quarter of 2023 was $20.1 million, or $0.56 per diluted common share, compared to $25.3 million, or $0.71 per diluted common share, for the fourth quarter of 2022. Net income for 2023 was $111.3 million, or $3.11 per diluted common share, compared to $102.2 million, or $2.85 per diluted common share, for 2022. Full year 2023 results include the impact of the disposition of the Company’s insurance agency, First Insurance Group (“FIG”), for a net gain on sale after transaction costs of $32.6 million pre-tax or $0.67 per diluted share after-tax. Excluding the impact of this transaction, 2023 earnings would be $2.44 per diluted share.

“In the fourth quarter, we saw a continuation of performance improvement on many topics outlined in our third quarter release,” said Gary Small, President and CEO of Premier. “Positive elements include purposefully moderate loan growth, excellent deposit growth, strong wealth management revenue growth, deliberate cost containment, and a decline in non-performing assets. Total loans grew 4.3% in 2023 with full year commercial loan growth totaling 4.2%. We remain focused on servicing existing clients and are well positioned to expand our new business outreach efforts in the upcoming year. We are pleased with our trend in customer deposit gathering over the past two quarters that delivered growth of $220 million, or 6.7% annualized growth. Over the same period, non-interest bearing deposit balances stabilized with annualized growth of 2.3%.”

“Net interest margin management continues to remain our top financial priority,” Small continued. “While we reduced our dependency on wholesale funds by $109 million during the fourth quarter, the impact of continued deposit mix migration and persistent high yield alternatives in the market are reflected in our higher cost of funds for the quarter. I will also note the fourth quarter mortgage banking income was affected by the downward movement in 10 year Treasury yields during the quarter, triggering unfavorable valuation marks on the mortgage servicing rights asset and hedges on the in-process mortgage construction book. Credit metrics remained steady with non-performing asset levels slightly lower for the quarter. Consumer and residential mortgage delinquencies were up but well in check versus historical performance.”

“As we enter 2024, we anticipate continued moderate earning assets growth and a relentless focus on deposit growth resulting in low-to-moderate year-over-year net interest income growth,” added Small. “Strong expense management and solid credit performance round out the story.”

Quarterly results

Capital, deposits and liquidity

Regulatory ratios all improved during the fourth quarter of 2023, including CET1 of 11.70%, Tier 1 of 12.20% and Total Capital of 14.04%. All of these ratios also exceed well-capitalized guidelines pro forma for including accumulated other comprehensive income (“AOCI”), including CET1 of 9.53%, Tier 1 of 10.02% and Total Capital of 11.87%.

Total deposits increased 4.4% annualized, or $77.4 million, during the fourth quarter of 2023, due to a $127.6 million increase in customer deposits (up 7.7% annualized), offset partly by a decrease of $50.2 million in brokered deposits. Total average interest-bearing deposit costs increased 29 basis points to 2.83% for the fourth quarter of 2023. This increase was primarily due to new customer acquisitions and the migration of customers from non-interest bearing deposits into interest-bearing deposits, including higher cost time deposits, as customers continue to seek better yields. Total average customer deposit costs including non-interest and excluding brokered deposits and acquisition marks were 2.09% during the month of December, representing a cumulative beta of 37% compared to the change in the monthly average effective Federal Funds rate that increased 525 basis points to 5.33% since December 2021, as reported by the Federal Reserve Economic Data.

At December 31, 2023, uninsured deposits were 33.1% of total deposits, or 18.9% adjusting for collateralized deposits, other insured deposits and internal company accounts. Total quantifiable liquidity sources totaled $2.97 billion, or 218.3% of adjusted uninsured deposits.

Net interest income and margin

Net interest income of $52.6 million on a tax equivalent (“TE”) basis in the fourth quarter of 2023 was down 3.2% from $54.3 million in the third quarter of 2023 and down 16.2% from $62.8 million in the fourth quarter of 2022. The TE net interest margin of 2.65% in the fourth quarter of 2023 decreased eight basis points from 2.73% in the third quarter of 2023 and 63 basis points from 3.28% in the fourth quarter of 2022. Results for all periods include the impact of the Paycheck Protection Program (“PPP”) as well as acquisition marks and related accretion. Fourth quarter 2023 includes $108 thousand of accretion in interest income, $144 thousand of accretion in interest expense, and $5 thousand of interest income on average balances of $495 thousand for PPP.

Excluding the impact of acquisition marks accretion and PPP loans, core net interest income was $52.3 million, down 3.1% from $54.0 million in the third quarter of 2023 and down 15.9% from $62.2 million in the fourth quarter of 2022. Additionally, the core net interest margin was 2.64% for the fourth quarter of 2023, down seven basis points from 2.71% for the third quarter of 2023 and 61 basis points from 3.25% for the fourth quarter of 2022. These results are positively impacted by the combination of loan growth and higher loan yields, which were 5.21% for the fourth quarter of 2023 compared to 5.12% in the third quarter of 2023 and 4.54% in the fourth quarter of 2022. Excluding the impact of PPP, balance sheet hedges and acquisition marks accretion, loan yields were 5.24% in December 2023, up 149 basis points since December 2021, which represents a cumulative beta of 28% compared to the change in the monthly average effective Federal Funds rate for the same period.

Total earning asset yields in the fourth quarter of 2023 were 4.86%, up nine basis points from the third quarter of 2023 and up 63 basis points from the fourth quarter of 2022. The increases are largely due to loan growth and higher average yields for loans and securities. Excluding the impact of PPP, balance sheet hedges and acquisition marks accretion, earning asset yields were 4.91% in December 2023, up 157 basis points since December 2021, which represents a cumulative beta of 30% compared to the change in the monthly average effective Federal Funds rate for the same period. The cost of funds in the fourth quarter of 2023 was 2.35%, up 18 basis points from the third quarter of 2023 and up 135 basis points from the fourth quarter of 2022. The increases are largely due to the higher average deposit costs discussed above. Excluding the impact of balance sheet hedges and acquisition marks accretion, cost of funds were 2.40% in December 2023 for an increase of 219 basis points since December 2021, which represents a cumulative beta of 42% compared to the change in the monthly average effective Federal Funds rate for the same period.

“The decline in net interest margin experienced during the fourth quarter in part reflected the impact of expanded ‘new money’ deposit attraction promotions introduced in select markets across the network,” said Small. “The programs are short in duration and designed as a household gathering catalyst for these specific locations. The successful effort contributed to the 7.7% annualized customer deposit growth achieved during the quarter.”

Non-interest income

Total non-interest income in the fourth quarter of 2023 of $11.8 million was down 11% from $13.3 million in the third quarter of 2023, but up 10.7% from $10.7 million in the fourth quarter of 2022, excluding insurance commissions, primarily due to fluctuations in mortgage banking and gains/losses on securities. Mortgage banking income decreased $2.5 million on a linked quarter basis but increased $1.1 million year-over-year, primarily as a result of fluctuations in gain margins.

Security gains were $675 thousand in the fourth quarter of 2023, compared to gains of $256 thousand in the third quarter of 2023 and $1.2 million in the fourth quarter of 2022, primarily due to valuation changes on equity securities. Service fees in the fourth quarter of 2023 were $6.8 million, a 2.7% decrease from $6.9 million in the third quarter of 2023, but a 1.9% increase from $6.6 million in the fourth quarter of 2022. This change was primarily due to fluctuations in loan fees, including commercial customer swap activity. Due to the insurance agency sale in the second quarter of 2023, there were no insurance commissions in the fourth quarter of 2023, compared to $3.6 million in the fourth quarter of 2022. Wealth management income of $1.8 million in the fourth quarter of 2023 was 18.7% higher than $1.5 million in the third quarter of 2023 and 13.2% higher than $1.6 million in the fourth quarter of 2022. BOLI income of $1.5 million in the fourth quarter of 2023 included $453 thousand of claim gains, compared to $1.0 million in each of the third quarter of 2023 and fourth quarter of 2022, neither of which included any claim gains.

Non-interest expenses

Non-interest expenses in the fourth quarter of 2023 were $37.9 million, a 0.4% decrease from $38.1 million in the third quarter of 2023, and an 11.9% decrease from $43.0 million in the fourth quarter of 2022. Compensation and benefits were $21.0 million in the fourth quarter of 2023, compared to $21.8 million in the third quarter of 2023 and $25.0 million in the fourth quarter of 2022. The linked quarter decrease was primarily due to cost saving initiatives that began during the second quarter of 2023. The year-over-year decrease was primarily due to the insurance agency sale, partially offset by costs related to higher staffing levels for our 2022 growth initiatives and higher base compensation, including 2022 mid-year adjustments and 2023 annual adjustments. Data processing costs were $4.7 million in the fourth quarter of 2023, compared to $4.0 million in the third quarter of 2023 and $3.9 million in the fourth quarter of 2022, with the increases primarily due to the new digital platform launched in October 2023. All other non-interest expenses increased only a net $23 thousand on a linked quarter basis and decreased a net $1.9 million on a year-over-year basis due to the insurance agency sale and cost saving initiatives. The efficiency ratio for the fourth quarter of 2023 was 59.5% compared to 56.5% in the third quarter of 2023 and 56.8% in the fourth quarter of 2022.

“Expense containment remains a high priority for us as we continue to manage the net interest margin challenges,” said Paul Nungester, CFO of Premier. “The successful implementation of cost saving initiatives enabled us to reduce our ratio of expenses to average assets to 1.76% for the last two quarters of 2023, representing a 30 basis point improvement from the fourth quarter of 2022.”

Credit quality

Non-performing assets totaled $35.7 million, or 0.41% of assets, at December 31, 2023, a decrease from $39.9 million at September 30, 2023, but an increase from $34.4 million at December 31, 2022. Loan delinquencies increased to $20.9 million, or 0.30% of loans, at December 31, 2023, from $17.2 million at September 30, 2023, and from $18.3 million at December 31, 2022. Classified loans totaled $69.7 million, or 0.99% of loans, as of December 31, 2023, an increase from $63.5 million at September 30, 2023, and from $43.8 million at December 31, 2022.

The 2023 fourth quarter results include net charge-offs of $2.1 million and a total provision expense of $1.8 million, compared with net loan charge-offs of $830 thousand and a total provision expense of $2.8 million for the same period in 2022. The allowance for credit losses as a percentage of total loans was 1.14% at December 31, 2023, compared with 1.14% at September 30, 2023, and 1.13% at December 31, 2022. The allowance for credit losses as a percentage of total loans excluding PPP and including unaccreted acquisition marks was 1.15% at December 31, 2023, compared with 1.17% at September 30, 2023, and December 31, 2022. The continued economic improvement following the 2020 pandemic-related downturn has resulted in a year-over-year decrease in the allowance percentages.

Full year results

For the year ended December 31, 2023, net income totaled $111.3 million, or $3.11 per diluted common share, compared to $102.2 million, or $2.85 per diluted common share for the year ended December 31, 2022. 2023 results include the impact of the insurance agency sale for a net gain on sale after transaction costs of $32.6 million pre-tax, or $0.67 per diluted share after-tax. Excluding the impact of this item, full year 2023 core net income was $87.1 million, or $2.44 per diluted share.

Net interest income of $217.4 million on a TE basis for 2023 was down 10.8% from $243.7 million for 2022. The TE net interest margin of 2.75% in 2023 decreased 62 basis points from 3.37% in 2022. Results for all periods include the impact of PPP as well as acquisition marks and related accretion. 2023 includes $583 thousand of accretion in interest income, $757 thousand of accretion in interest expense, and $20 thousand of interest income on average balances of $670 thousand for PPP. Excluding the impact of acquisition marks accretion and PPP loans, core net interest income was $216.0 million, down 9.0% from $237.3 million in 2022. Additionally, the core net interest margin was 2.73% for 2023, down 55 basis points from 3.28% for of 2022. These results are positively impacted by the combination of loan growth and higher loan yields, which were 4.96% for 2023 compared to 4.24% for 2022. The cost of funds in 2023 was 1.99%, up 148 basis points from 0.51% in 2022. The year-over-year increase is largely due to utilization of higher cost wholesale fundings in support of loan growth in excess of deposit growth during late 2022 and early 2023.

Excluding insurance commissions and the $36.3 million gain on the sale of the insurance agency, total non-interest income in 2023 of $45.7 million was down 0.5% from $45.9 million for 2022. Insurance commissions were $8.9 million in 2023, down from $16.2 million in 2022 due to the insurance agency sale on June 30, 2023. Mortgage banking income decreased $3.1 million year-over-year as a result of a $1.4 million decrease in gains primarily from lower production and margins, as well as a $69 thousand mortgage servicing rights (“MSR”) valuation loss in 2023 compared to a $2.0 million gain for 2022.

Security losses were $0.4 million in 2023, compared to a loss of $0.6 million, primarily due to decreased valuations on equity securities. The company also sold $24 million of available-for-sale (“AFS”) securities for a $37 thousand gain with average yields less than FHLB borrowing rates during 2023. Service fees in 2023 were $27.3 million, a 5.7% increase from $25.9 million in 2022, primarily due to fluctuations in loan fees including commercial customer swap activity and consumer activity for interchange and ATM/NSF charges. Wealth management income of $6.3 million in 2023 was up 8.5% from $5.8 million in 2022. Bank owned life insurance income of $5.0 million in 2023 increased from $3.9 million in 2022 with $0.9 million of claim gains in 2023 compared to none in 2022.

Excluding transaction costs for the insurance agency sale, non-interest expenses in 2023 were $159.6 million, down 3.0% from $164.5 million in 2022. Compensation and benefits were $92.6 million in 2023, compared to $97.4 million in 2022. The year-over-year decrease was primarily due to the insurance agency sale on June 30, 2023, and cost saving initiatives that began during the second quarter of 2023 partially offset by costs related to higher staffing levels from our 2022 growth initiatives and higher base compensation, including 2022 mid-year adjustments and 2023 annual adjustments. FDIC premiums increased $2.2 million on a year-over-year basis primarily due to higher rates and our 2022 growth initiatives. Data processing costs were $16.2 million in 2023, compared to $13.8 million in 2022 with the increase primarily due to year-over-year growth. All other non-interest expenses decreased a net $4.7 million on a year-over-year basis primarily due to cost saving initiatives. The efficiency ratio (excluding transaction costs and the insurance agency gain on sale) for 2023 of 58.6% worsened from 53.7% in 2022 due to lower revenues partly offset by cost saving initiatives that began during the second quarter of 2023.

Results for 2023 include net loan charge-offs of $4.0 million and a total provision expense of $5.2 million, compared with net loan charge-offs of $6.2 million and a total provision expense of $14.3 million for 2022. The provision expense for both years is primarily due to relative loan growth.

Total assets at $8.63 billion

Total assets at December 31, 2023, were $8.63 billion, compared to $8.56 billion at September 30, 2023, and $8.46 billion at December 31, 2022. Loans receivable were $6.74 billion at December 31, 2023, compared to $6.70 billion at September 30, 2023, and $6.46 billion at December 31, 2022. At December 31, 2023, loans receivable increased $278.8 million on a year-over-year basis, or 4.3%. Core commercial loans excluding PPP increased by $179.7 million from December 31, 2022, or 4.2%. Securities at December 31, 2023, were $0.95 billion, compared to $0.92 billion at September 30, 2023, and $1.05 billion at December 31, 2022. All securities are either AFS or trading and are reflected at fair value on the balance sheet. Also, at December 31, 2023, goodwill and other intangible assets totaled $307.8 million compared to $308.8 million at September 30, 2023, and $337.1 million at December 31, 2022, with the year-over-year decrease primarily due to the insurance agency sale.

Total non-brokered deposits at December 31, 2023, were $6.80 billion, compared with $6.67 billion at September 30, 2023, and $6.76 billion at December 31, 2022. At December 31, 2023, customer deposits increased $127.6 million on a linked quarter basis, or 7.7% annualized. Brokered deposits were $341.9 million at December 31, 2023, compared to $392.2 million at September 30, 2023 and $143.7 million at December 31, 2022.

Total stockholders’ equity was $975.6 million at December 31, 2023, compared to $919.6 million at September 30, 2023, and $887.7 million at December 31, 2022. The quarterly increase in stockholders’ equity was primarily due to an increase in AOCI, which included $37.7 million for a positive valuation adjustment on the AFS securities portfolio, plus net earnings after dividends. The year-over-year increase was primarily due to net earnings after dividends including the impact the insurance agency sale offset plus an increase in AOCI, which included $15.2 million for positive valuation adjustments on the AFS securities portfolio. At December 31, 2023, 1,199,634 common shares remained available for repurchase under the Company’s existing repurchase program.

“2023 was a successful year of strengthening capital amidst a challenging interest rate environment,” said Nungester. “Across-the-board we enhanced book equity, tangible equity and regulatory capital. Year-over-year ratio improvements include book equity/assets up 81 basis points to 11.31%, tangible equity/tangible assets up 125 basis points to 8.03% and total risk-based capital up 190 basis points to 14.04%.”

Dividend to be paid February 16

The Board of Directors declared a quarterly cash dividend of $0.31 per common share payable February 16, 2024, to shareholders of record at the close of business on February 9, 2024. The dividend represents an annual dividend of 5.2 percent based on the Premier common stock closing price on January 22, 2024. Premier has approximately 35,732,000 common shares outstanding.

Conference call

Premier will host a conference call at 10:00 a.m. ET on Wednesday, January 24, 2024, to discuss the earnings results and business trends. The conference call may be accessed by calling 1-833-470-1428 and using access code 540476. Internet access to the call is also available (in listen-only mode) at the following URL: https://events.q4inc.com/attendee/656800446. The webcast replay of the conference call will be available at www.PremierFinCorp.com for one year.

About Premier Financial Corp.

Premier Financial Corp. (Nasdaq: PFC), headquartered in Defiance, Ohio, is the holding company for Premier Bank. Premier Bank, headquartered in Youngstown, Ohio, operates 75 branches and 9 loan offices in Ohio, Michigan, Indiana and Pennsylvania and also serves clients through a team of wealth professionals dedicated to each community banking branch. For more information, visit the company’s website at PremierFinCorp.com.

Financial Statements and Highlights Follow

Safe Harbor Statement

This document may contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. These statements may include, but are not limited to, statements regarding projections, forecasts, goals and plans of Premier Financial Corp. and its management, future movements of interests, loan or deposit production levels, future credit quality ratios, future strength in the market area, and growth projections. These statements do not describe historical or current facts and may be identified by words such as “intend,” “intent,” “believe,” “expect,” “estimate,” “target,” “plan,” “anticipate,” or similar words or phrases, or future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” “may,” “can,” or similar verbs. There can be no assurances that the forward-looking statements included in this presentation will prove to be accurate. In light of the significant uncertainties in the forward-looking statements, the inclusion of such information should not be regarded as a representation by Premier or any other persons, that our objectives and plans will be achieved. Forward-looking statements involve numerous risks and uncertainties, any one or more of which could affect Premier’s business and financial results in future periods and could cause actual results to differ materially from plans and projections. These risks and uncertainties include, but not limited to: financial markets, our customers, and our business and results of operation; 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 and its subsidiaries operate; increasing competition for financial products from other financial institutions and nonbank financial technology companies; future interest rate levels; legislative or regulatory rulemaking or actions; capital market conditions; security breaches or unauthorized disclosure of confidential customer or Company information; interruptions in the effective operation of information and transaction processing systems of Premier or Premier’s vendors and service providers; failures or delays in integrating or adopting new technology; the impact of the cessation of LIBOR interest rates and implementation of a replacement rate; and other risks and uncertainties detailed from time to time in our Securities and Exchange Commission (SEC) filings, including our Annual Report on Form 10-K for the year ended December 31, 2022 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 December 31, 2023, consolidated financial statements as part of its Annual Report on Form 10-K to be filed with the SEC. Accordingly, subsequent events could occur that may cause Premier to update its critical accounting estimates and to revise its financial information from that which is contained in this news release.

Non-GAAP Reporting Measures

We believe that net income, as defined by U.S. GAAP, is the most appropriate earnings measurement. However, we consider core net interest income, core net income and core pre-tax pre-provision income to be a useful supplemental measure of our operating performance. We define core net interest income as net interest income on a tax-equivalent basis excluding income from PPP loans and purchase accounting marks accretion. We define core net income as net income excluding the after-tax impact of the insurance agency gain on sale and related transaction costs. We define core pre-tax pre-provision income as pre-tax pre-provision income excluding the pre-tax impact of the insurance agency gain on sale and related transaction costs. We believe that these metrics are useful supplemental measures of operating performance because investors and equity analysts may use these measures to compare the operating performance of the Company between periods or as compared to other financial institutions or other companies on a consistent basis without having to account for income from PPP loans, purchase accounting marks accretion or the insurance agency sale. Our supplemental reporting measures and similarly entitled financial measures are widely used by investors, equity and debt analysts and ratings agencies in the valuation, comparison, rating and investment recommendations of companies. Our management uses these financial measures to facilitate internal and external comparisons to historical operating results and in making operating decisions. Additionally, they are utilized by the Board of Directors to evaluate management. The supplemental reporting measures do not represent net income or cash flow provided from operating activities as determined in accordance with U.S. GAAP and should not be considered as alternative measures of profitability or liquidity. Finally, the supplemental reporting measures, as defined by us, may not be comparable to similarly entitled items reported by other financial institutions or other companies. Please see the exhibits for reconciliations of our supplemental reporting measures.