Financial Market

PREMIER FINANCIAL CORP Management’s Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

Forward-Looking Information


This quarterly report, as well as other publicly available documents, including
those incorporated herein by reference, may contain certain forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), 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 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 quarterly report 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 are 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 and its subsidiaries operate; 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, 2021, (the "2021 Form
10-K"). Any 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.

All forward-looking statements made in this quarterly report 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.

Non-GAAP Financial Measures


In addition to results presented in accordance with GAAP, this report includes
non-GAAP financial measures. The Company believes these non-GAAP financial
measures provide additional information that is useful to investors in helping
to understand the underlying performance and trends of the Company. The Company
monitors the non-GAAP financial measures and the Company's management believes
they are helpful to investors because they provide an additional tool to use in
evaluating the Company's financial and business trends and operating results. In
addition, the Company's management uses these non-GAAP measures to compare the

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Company’s performance to that of prior periods for trend analysis and for
budgeting and planning purposes. Fully taxable-equivalent (“FTE”) is an
adjustment to net interest income to reflect tax-exempt income on an equivalent
before-tax basis.


Non-GAAP financial measures have inherent limitations, which are not required to
be uniformly applied and are not audited. Readers should be aware of these
limitations and should be cautious with respect to the use of such measures. To
mitigate these limitations, the Company has practices in place to ensure that
these measures are calculated using the appropriate GAAP or regulatory
components in their entirety and to ensure that our performance is properly
reflected to facilitate consistent period-to-period comparisons. The Company's
method of calculating these non-GAAP measures may differ from methods used by
other companies. Although the Company believes the non-GAAP financial measures
disclosed in this report enhance investors' understanding of our business and
performance, these non-GAAP measures should not be considered in isolation, or
as a substitute for those financial measures prepared in accordance with GAAP.

The following tables present a reconciliation of non-GAAP measures to their
respective GAAP measures for the three and six months ended June 30, 2022 and
2021.


Reconciliations of Net Interest Income on an FTE basis, Net Interest Margin and
Efficiency Ratio


                                             Three Months Ended               Six Months Ended
                                                  June 30,                        June 30,
                                            2022            2021            2022            2021
                                                               (In Thousands)
Net interest income (GAAP)               $    59,096     $    56,619     $   116,990     $   113,131
Add: FTE adjustment                              225             270             453             507

Net interest income on a FTE basis (1) $ 59,321 $ 56,889 $

117,443 $ 113,638


Non-interest income-less securities
gains/losses (2)                         $    15,526     $    16,884          33,032     $    41,033
Non-interest expense (3)                      39,089          38,375          80,384          77,178
Average interest-earning assets net of
average
unrealized gains/losses on securities
(4)                                        7,051,661       6,806,275       6,904,082       6,709,348

Ratios:
Net interest margin (1) / (4)                   3.36 %          3.34 %          3.40 %          3.39 %
Efficiency ratio (3) / (1) + (2)               52.23 %         52.02 %         53.42 %         49.90 %



Critical Accounting Policies

Premier has established various accounting policies that govern the application
of GAAP in the preparation of its consolidated financial statements. The
significant accounting policies of Premier are described in the notes to the
consolidated financial statements. Certain accounting policies involve
significant judgments and assumptions by management, which have a material
impact on the carrying value of certain assets and liabilities and management
considers such accounting policies to be critical accounting policies. The
judgments and assumptions used by management are based on historical experience
and other factors, which are believed to be reasonable under the circumstances.
Because of the nature of the judgments and assumptions made by management,
actual results could differ from these judgments and estimates, which could have
a material impact on the carrying value of assets and liabilities and the
results of operations of Premier.

General

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Premier is a financial holding company that conducts business through its
wholly-owned subsidiaries, the Bank, First Insurance, PFC Risk Management and
PFC Capital.


The Bank is an Ohio state-chartered bank headquartered in Youngstown, Ohio. It
conducts operations through 74 banking center offices, 12 loan offices and
serves clients through a team of wealth professionals. These operations are
located in Ohio, Michigan, Indiana, Pennsylvania and West Virginia. The Bank
provides a broad range of financial services including checking accounts,
savings accounts, certificates of deposit, real estate mortgage loans,
commercial loans, consumer loans, home equity loans and trust and wealth
management services through its extensive branch network.

First Insurance is a wholly-owned subsidiary of the Company. First Insurance is
an insurance agency that conducts business throughout the Company's markets.
First Insurance offers property and casualty insurance, life insurance and group
health insurance.

PFC Risk Management is a wholly-owned insurance company subsidiary of the
Company that insures the Company and its subsidiaries against certain risks
unique to the operations of the Company and for which insurance may not be
currently available or economically feasible, in today's insurance marketplace.
PFC Risk Management pools resources with several other similar insurance company
subsidiaries of financial institutions to help minimize the risk allocable to
each participating insurer.

PFC Capital was formed as an Ohio limited liability company in 2016 for the
purpose of providing mezzanine funding for customers of Home Savings. Mezzanine
loans are offered by PFC Capital to customers in the Company's market area and
are expected to be repaid from the cash flow from operations of the business.

Regulation - The Company is subject to regulation, examination and oversight by
the Federal Reserve Board ("Federal Reserve") and the SEC. The Bank is subject
to regulation, examination and oversight by the FDIC and the Division of
Financial Institutions of the Ohio Department of Commerce ("ODFI"). In addition,
the Bank is subject to regulations of the Consumer Financial Protection Bureau
("CFPB"), which was established by the 2010 Dodd-Frank Wall Street Reform and
Consumer Protection Act ("Dodd-Frank Act") and has broad powers to adopt and
enforce consumer protection regulations. The Company and the Bank must file
periodic reports with the Federal Reserve, and examinations are conducted
periodically by the Federal Reserve, the FDIC and the ODFI to determine whether
the Company and the Bank are in compliance with various regulatory requirements
and are operating in a safe and sound manner. The Company is also subject to
various Ohio laws which restrict takeover bids, tender offers and control-share
acquisitions involving public companies which have significant ties to Ohio.

Changes in Financial Condition


At June 30, 2022, the Company's total assets amounted to $8.0 billion compared
to $7.5 billion at December 31, 2021. The increase is primarily attributable to
growth in net loans of $594.0 million from $5.2 billion at December 31, 2021 to
$5.8 billion at June 30, 2022. The increase was due to increases in all loan
categories. Residential loans increased as the Company sold fewer loans due to
higher yields on holding loans than selling loans. Loans held for sale decreased
from $162.9 million at December 31, 2021, to $145.1 million at June 30, 2022 as
a result of sales activity. The increases in loans was funded by advances from
the FHLB and deposit growth. Deposits increased $234.3 million from $6.3 billion
at December 31, 2021, to $6.5 billion as of June 30, 2022. Non-interest bearing
deposits grew $61.7 million since December 31, 2021 to $1.8 billion during the
six months ended June 30, 2022, while interest-bearing deposits grew $172.6
million to $4.7 billion during the same period.

Stockholders' equity decreased $122.3 million from $1.0 billion at December 31,
2021, to $901.1 million at June 30, 2022. The decrease in stockholders' equity
was primarily due to a decrease in accumulated other

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comprehensive income ("AOCI") and stock buybacks. The decrease in AOCI is
primarily related to an after-tax $100.7 million negative valuation adjustment
on the available-for-sale securities portfolio. The Company also completed the
repurchase of 884,036 common shares for $26.9 million during the first half of
the year. At June 30, 2022, 1,200,130 common shares remained available for
repurchase under the Company's existing repurchase program.

Average Balances, Net Interest Income and Yields Earned and Rates Paid


The following table presents for the periods indicated the total dollar amount
of interest from average interest-earning assets and the resultant yields, as
well as the interest expense on average interest-bearing liabilities, expressed
both in thousands of dollars and rates, and the net interest margin. The table
reports interest income from tax-exempt loans and investment on a fully
tax-equivalent basis. All average balances are based upon daily balances
(dollars in thousands).

                                                                        Three Months Ended June 30,
                                                          2022                                               2021
                                        Average                            Yield/         Average                            Yield/
                                        Balance        Interest (1)       Rate (2)        Balance        Interest (1)       Rate (2)
Interest-earning assets:
Loans receivable                      $ 5,667,853     $       56,573           3.99 %   $ 5,495,782     $       55,786            4.06 %
Securities                              1,288,073              6,416           1.99       1,193,363              5,250            1.76
Interest bearing deposits                  76,401                120           0.63         106,025                 42            0.16
FHLB stock                                 19,334                174           3.60          11,105                 56            2.02
Total interest-earning assets           7,051,661             63,283           3.59       6,806,275             61,134            3.59
Non-interest-earning assets               690,889                                           743,256
Total assets                          $ 7,742,550                                       $ 7,549,531

Interest-bearing liabilities:
Deposits                              $ 4,614,223     $        2,671           0.23 %   $ 4,640,196     $        3,559            0.31 %
FHLB advances and other                   234,945                527           0.90          30,165                 12            0.16
Subordinated debentures                    85,020                763           3.59          84,893                674            3.18
Notes payable                                 428                  1           0.93               -                  -               -
Total interest-bearing liabilities      4,934,616              3,962           0.32       4,755,254              4,245            0.36
Non-interest bearing deposits           1,771,634                  -              -       1,699,477                  -               -
Total including non-interest
bearing demand deposits                 6,706,250              3,962           0.24       6,454,731              4,245            0.26
Other non-interest-bearing
liabilities                               114,453                                            88,043
Total liabilities                       6,820,703                                         6,542,774
Stockholders' equity                      921,847                                         1,006,757
Total liabilities and stockholders'
equity                                $ 7,742,550                                       $ 7,549,531
Net interest income; interest rate
spread                                                $       59,321           3.27 %                   $       56,889            3.23 %
Net interest margin (3)                                                        3.36 %                                             3.34 %
Average interest-earning assets to
average
  interest-bearing liabilities                                                  143 %                                              143 %



(1)

Interest on certain tax-exempt loans and securities is not taxable for federal
income tax purposes. In order to compare the tax-exempt yields on these assets
to taxable yields, the interest earned on these assets is adjusted to a pre-tax
equivalent amount based on the marginal corporate federal income tax rate of
21%.

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(2)
Annualized

(3)

Net interest margin is net interest income divided by average interest-earning
assets. See Non-GAAP Financial Measure discussion for further details.


                                                                         Six Months Ended June 30,
                                                          2022                                               2021
                                        Average                            Yield/         Average                            Yield/
                                        Balance        Interest (1)       Rate (2)        Balance        Interest (1)       Rate (2)
Interest-earning assets:
Loans receivable                      $ 5,526,127     $      111,821           4.05 %   $ 5,562,379     $      113,366            4.08 %
Securities                              1,269,301             12,116           1.91       1,009,695              9,153            1.81
Interest bearing deposits                  92,987                233           0.50         125,732                108            0.17
FHLB stock                                 15,667                166           2.12          11,542                115            1.99
Total interest-earning assets           6,904,082            124,336           3.60       6,709,348            122,742            3.66
Non-interest-earning assets               722,806                                           735,443
Total assets                          $ 7,626,888                                       $ 7,444,791

Interest-bearing liabilities:
Deposits                              $ 4,607,549     $        4,893           0.21 %   $ 4,593,493     $        7,723            0.34 %
FHLB advances                             126,215                540           0.86          15,166                 12            0.16
Subordinated debentures                    85,004              1,459           3.43          84,881              1,369            3.23
Notes payable                                 215                  1           0.93               -                  -               -
Total interest-bearing liabilities      4,818,983              6,893           0.29       4,693,540              9,104            0.39
Non-interest bearing deposits           1,742,686                  -              -       1,671,901                  -               -
Total including non-interest
bearing demand deposits                 6,561,669              6,893           0.21       6,365,441              9,104            0.29
Other non-interest-bearing
liabilities                               103,346                                            89,550
Total liabilities                       6,665,015                                         6,454,991
Stockholders' equity                      961,873                                           989,800
Total liabilities and
stock-holders' equity                 $ 7,626,888                                       $ 7,444,791
Net interest income; interest rate
spread                                                $      117,443           3.31 %                   $      113,638            3.27 %
Net interest margin (3)                                                        3.40 %                                             3.39 %
Average interest-earning assets to
average
  interest-bearing liabilities                                                  143 %                                              143 %



(1)

Interest on certain tax-exempt loans and securities is not taxable for federal
income tax purposes. In order to compare the tax-exempt yields on these assets
to taxable yields, the interest earned on these assets is adjusted to a pre-tax
equivalent amount based on the marginal corporate federal income tax rate of
21%.

(2)
Annualized

(3)

Net interest margin is net interest income divided by average interest-earning
assets. See Non-GAAP Financial Measure discussion for further details.

Results of Operations

Three months ended June 30, 2022 and 2021


For the three months ended June 30, 2022, the Company reported net income of
$22.4 million compared to net income of $31.4 million for the quarter ended June
30, 2021. On a per share basis, basic and diluted earnings per common share were
$0.63 for the three months ended June 30, 2022 and basic and diluted income per
common share were $0.84 for the three months ended June 30, 2021. The changes
from 2021 to 2022 are primarily due to fluctuations in provision for credit
losses, mortgage banking income and security gains/losses, which are described
in further detail below.

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Net Interest Income

The Company’s net interest income is determined by its interest rate spread
(i.e. the difference between the yields on its interest-earning assets and the
rates paid on its interest-bearing liabilities) and the relative amounts of
interest-earning assets and interest-bearing liabilities.


Net interest income was $59.1 million for the quarter ended June 30, 2022, up
from $56.6 million for the same period in 2021. Average earning assets for the
quarter ended June 30, 2022 were $7.1 billion compared to $6.8 billion for the
quarter ended June 30, 2021. The tax-equivalent net interest margin was 3.36%
for the quarter ended June 30, 2022, an increase from 3.34% for the same period
in 2021. The slight increase in margin between the 2022 and 2021 quarters was
due to a decrease in the cost of funds. The yield on interest-earning assets was
3.59% for the quarters ended June 30, 2022 and 2021. The cost of
interest-bearing liabilities between the two periods declined 4 basis points to
0.32% in the second quarter of 2022 from 0.36% in the second quarter of 2021.

Interest income increased $2.2 million to $63.1 million for the quarter ended
June 30, 2022, from $60.9 million for the quarter ended June 30, 2021. This
increase is due to an increase in interest on loans and securities. Income from
loans increased to $56.6 million for the quarter ended June 30, 2022, compared
to $55.8 million for the same period in 2021 due to an increase in average loan
balances to $5.7 billion for the three months ended June 30, 2022 from $5.5
billion for the second quarter of 2021. Interest income from investments
increased $1.2 million in the second quarter of 2022 to $6.2 million compared to
$5.0 million in the same period in 2021 primarily due to an increase in average
security balances of $94.7 million. The yield increased 23 basis points to 1.99%
for the three months ended June 30, 2022, compared to 1.76% for the same period
in 2021. Income from interest-earning deposits increased to $120,000 in the
second quarter of 2022 compared to $42,000 for the same period in 2021. Average
balances on interest-earning deposits decreased $29.6 million to $76.4 million
in the second quarter of 2022 from $106.0 million for the same period in 2021.
The yield earned on interest-earning deposits increased 47 basis points in the
second quarter of 2022 compared to the same period in 2021.

Interest expense decreased $283,000 to $4.0 million in the second quarter of
2022 compared to $4.2 million for the same period in 2021. This decrease was due
to a decline in the cost of interest-bearing liabilities of 4 basis points.
Interest expense related to interest-bearing deposits was $2.7 million in the
second quarter of 2022 compared to $3.6 million for the same period in 2021.
Interest expense recognized by the Company related to FHLB advances was $527,000
in the second quarter of 2022 compared to $12,000 for the same period in 2021.
Expenses on subordinated debentures and notes payable increased to $763,000 in
the second quarter of 2022 compared to $674,000 for the same period in 2021 due
to increased rates on the variable-rate junior subordinated debentures.

Allowance for Credit Losses


The ACL represents management's assessment of the estimated credit losses the
Company will receive over the life of the loan. ACL requires a projection of
credit losses over the contract lifetime of the credit adjusted for prepayment
tendencies. Management analyzes the adequacy of the ACL regularly through
reviews of the loan portfolio. Consideration is given to economic conditions,
changes in interest rates and the effect of such changes on collateral values
and borrower's ability to pay, changes in the composition of the loan portfolio
and trends in past due and non-performing loan balances. The ACL is a material
estimate that is susceptible to significant fluctuation and is established
through a provision for credit losses based on management's evaluation of the
inherent risk in the loan portfolio. In addition to extensive in-house loan
monitoring procedures, the Company utilizes an outside party to conduct an
independent loan review of commercial loan and commercial real estate loan
relationships. The Company's goal is to have 45-50% of the portfolio reviewed
annually using a risk based approach. Management utilizes the results of this
outside loan review to assess the effectiveness of its internal loan grading
system as well as to assist in the assessment of the overall adequacy of the ACL
associated with these types of loans.

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The ACL is made up of two basic components. The first component of the allowance
for credit loss is the specific reserve in which the Company sets aside reserves
based on the analysis of individual analyzed credits. In establishing specific
reserves, the Company analyzes all substandard, doubtful and loss graded loans
quarterly and makes judgments about the risk of loss based on the cash flow of
the borrower, the value of any collateral and the financial strength of any
guarantors. If the loan is individually analyzed and cash flow dependent, then a
specific reserve is established for the discount on the net present value of
expected future cash flows. If the loan is individually analyzed and collateral
dependent, then any shortfall is either charged off or a specific reserve is
established. The Company also considers the impacts of any Small Business
Administration or Farm Service Agency guarantees. The specific reserve portion
of the ACL was $1.8 million as of June 30, 2022, and $7.1 million as of December
31, 2021.

The second component is a general reserve, which is used to record loan loss
reserves for groups of homogenous loans in which the Company estimates the
potential losses over the contractual lifetime of the loan adjusted for
prepayment tendencies. In addition, the future economic environment is
incorporated in projection with loss expectations to revert to the long-run
historical mean after such time as management can no longer make or obtain a
reasonable and supportable forecast. For purposes of the general reserve
analysis, the six loan portfolio segments are further segregated into fifteen
different loan pools to allocate the ACL. Residential real estate is further
segregated into owner occupied and nonowner occupied for ACL. Commercial real
estate is split into owner occupied, nonowner occupied, multifamily, agriculture
land and other commercial real estate. Commercial credits are comprised of
commercial working capital, agriculture production and other commercial credits.
Construction is broken out into construction other and residential construction
and consumer is broken out into consumer direct, consumer indirect and home
equity. The Company utilizes three different methodologies to analyze loan
pools.

The DCF methodology was selected as the appropriate method for loan segments
with longer average lives and regular payment structures. This method is applied
to a majority of the Company's real estate loans. DCF generates cash flow
projections at the instrument level where payment expectations are adjusted for
prepayment and curtailment to produce an expected cash flow stream that is net
of estimated credit losses. This expected cash flow stream net of estimated
credit losses is compared to the net present value of expected cash flows to
establish a valuation account for these loans.

The PD/LGD methodology was selected as most appropriate for loan segments with
average lives of three years or less and/or irregular payment structures. This
methodology was used for home equity and commercial portfolios. A loan is
considered to default if one of the following is detected:

Becomes 90 days or more past due;

•
Is placed on nonaccrual;

•
Is marked as a TDR; or

•

Is partially or wholly charged-off.


The default rate is measured on the current life of the loan segment using a
weighted average of the maximum possible quarters that fall within the defined
unemployment rate range. PD/LGD is determined on a dollar-ratio basis, measuring
the ratio of net charged off principal to defaulted principal.

The consumer portfolio contains loans with many different payment structures,
payment streams and collateral. The remaining life method was deemed most
appropriate for consumer direct loans and DCF for consumer indirect. The
weighted average remaining life uses an annual charge-off rate over several
vintages to estimate credit losses. The average annual charge-off rate is
applied to the contractual term adjusted for prepayments. The DCF method was
selected for consumer indirect due to the loan segments' longer average
remaining life in addition to regular payment structure.

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Additionally, CECL requires a reasonable and supportable forecast when
establishing the ACL. The Company estimates losses over an approximate one-year
forecast period using Moody's baseline economic forecasts, and then reverts to
longer term historical loss experience over a three-year period.

The quantitative general allowance increased to $18.8 million at June 30, 2022,
up from $12.3 million at December 31, 2021. As a part of the CECL model in
certain calculations, especially discounted cash flows, projected loan losses
are correlated to the levels of the unemployment rate over the life of the loans
in addition to the fluctuation of loan balances. The increase in the
quantitative general allowance during 2022 is attributed to loan growth.

In addition to the quantitative analysis, a qualitative analysis is performed
each quarter to provide additional general reserves on loan portfolios that are
not individually analyzed for various factors. The overall qualitative factors
are based on nine sub-factors. The nine sub-factors have been aggregated into
three qualitative factors: economic, environment and risk.

ECONOMIC

1)

Changes in international, national and local economic business conditions and
developments, including the condition of various market segments.

2)

Changes in the value of underlying collateral for collateral dependent loans.


ENVIRONMENT

3)

Changes in the nature and volume in the loan portfolio.

4)

The existence and effect of any concentrations of credit and changes in the
level of such concentrations.

5)

Changes in lending policies and procedures, including underwriting standards and
collection, charge-off and recovery practices.

6)

Changes in the quality and breadth of the loan review process.

7)

Changes in the experience, ability and depth of lending management and staff.


RISK

8)

Changes in the trends of the volume and severity of delinquent and classified
loans, and changes in the volume of non-accrual loans, TDRs, and other loan
modifications.

9)

Changes in other external factors, such as regulatory, legal and technological
environments.


The qualitative analysis indicated a general reserve of $46.5 million at June
30, 2022, compared to $47.1 million at December 31, 2021. Overall, the factors
decreased slightly in the second quarter as a result of favorable trends in the
environmental and risk factors listed above and were partially offset by an
increase in the economic factors.

The Company’s general reserve percentages for main loan segments, not otherwise
classified, ranged from 0.64% for consumer indirect loans to 1.41% for home
equity/ home improvement loans at June 30, 2022.


Under ASU Topic 326, when loans are purchased with evidence of more than
insignificant deterioration of credit, they are accounted for as purchase credit
deteriorated ("PCD"). PCD loans acquired in a transaction are marked to fair
value and a mark on yield is recorded. In addition, an adjustment is made to the
ACL for the expected loss through retained earnings on the acquisition date.
These loans are assessed on a regular basis and

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subsequent adjustments to the ACL are recorded on the income statement. The
outstanding balance and related allowance on these loans as of June 30, 2022, is
$23.8 million and $1.2 million, respectively.


As a result of the quantitative and qualitative analyses, along with the change
in specific reserves and the change in net charge-offs in the quarter, the
Company's provision for credit losses for the three and six months ended June
30, 2022 was an expense of $5.2 million and $5.8 million respectively. This is
compared to a recovery of $3.6 million and $11.1 million, respectively, for the
three and six months ended June 30, 2021. The ACL was $67.1 million at June 30,
2022, and $66.5 million at December 31, 2021. The ACL represented 1.14% of
loans, net of undisbursed loan funds and deferred fees and costs at June 30,
2022, compared to 1.26% at December 31, 2021. In management's opinion, the
overall ACL of $67.1 million as of June 30, 2022, is adequate to cover current
estimated credit losses.

Management also assesses the value of OREO as of the end of each accounting
period and recognizes write-downs to the value of that real estate in the income
statement if conditions dictate. In the six months ended June 30, 2022, total
write-downs of real estate held for sale was $9,000. Management believes that
the values recorded at June 30, 2022, for OREO and repossessed assets represent
the realizable value of such assets.

Total classified loans decreased to $48.8 million at June 30, 2022, compared to
$69.5 million at December 31, 2021, a decrease of $20.7 million. Management
monitors collateral values of all loans included on the watch list that are
collateral dependent and believes that allowances for such loans at June 30,
2022, were appropriate. Of the $34.7 million in non-accrual loans at June 30,
2022, $5.6 million or 16.1% are less than 90 days past due. Non-performing
assets include loans that are on non-accrual, OREO and other assets held for
sale. Non-performing assets at June 30, 2022, and December 31, 2021, by
category, were as follows:

                                                         June 30,         December 31,
                                                           2022               2021
                                                                (In Thousands)
Non-performing loans:
Residential real estate                                $       6,237     $        9,034
Commercial real estate                                        14,316             14,621
Construction                                                       -                  -
Commercial                                                     5,199             11,531
Home equity and improvement                                    1,798              2,051
Consumer finance                                               1,818              1,873
PCD                                                            5,367              8,904
Total non-performing loans                                    34,735             48,014

Real estate owned                                                462                171
Total repossessed assets                                         462                171

Total Nonperforming assets                             $      35,197     $  

48,185

TDR loans, accruing                                    $       5,899     $  

7,768

Total nonperforming assets as a percentage of total
assets

                                                          0.44 %      

0.64 %
Total nonperforming assets as a percentage of total
loans plus OREO*

                                                0.60 %             0.91 %
ACL as a percent of total nonperforming assets                190.57 %      

137.94 %

* Total loans are net of undisbursed loan funds and deferred fees and costs.


PCD loans account for 13.4% of non-performing loans. Excluding non-performing
PCD loans, non-performing loans in the commercial loan category represented
0.52% of the total loans in that category at June 30, 2022, compared to 1.29%
for the same category at December 31, 2021. Non-performing loans in the
non-residential and multi-family residential real estate loan category were
0.54% of the total loans in this category at June 30, 2022, compared to 0.60% at
December 31, 2021. Non-performing loans in the residential loan category

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represented 0.45% of the total loans in that category at June 30, 2022, compared
to 0.77% for the same category at December 31, 2021.


The Bank's Special Assets Committee meets monthly to review the status of
work-out strategies for all criticized relationships, which include all
non-accrual loans. Based on such factors as anticipated collateral values in
liquidation scenarios, cash flow projections, assessment of net worth of
guarantors and all other factors which may mitigate risk of loss, the Special
Assets Committee makes recommendations regarding proposed charge-offs which are
then approved by the Committee.

The following tables detail net charge-offs/recoveries and non-accrual loans by
loan type.

                                     For the Six Months Ended June 30, 2022             As of June 30, 2022
                                           Net                     % of                                 % of
                                       Charge-offs              Total Net          Nonaccrual        Total Non-
                                       (Recovery)              Charge-offs           Loans          Accrual Loans
                                                 (In Thousands)                            (In Thousands)
Residential                         $             244                   4.72 %    $      6,237               17.96 %
Commercial real estate                           (369 )                (7.14 )%         14,316               41.21 %
Construction                                       13                   0.25 %               -                   -
Commercial                                      5,032                  97.31 %           5,199               14.97 %
Home equity and improvement                       124                   2.40 %           1,798                5.18 %
Consumer finance                                  120                   2.32 %           1,818                5.23 %
PCD                                                 7                   0.14 %           5,367               15.45 %
Total                               $           5,171                 100.00 %    $     34,735              100.00 %



                                     For the Six Months Ended June 30, 2021             As of June 30, 2021
                                           Net                 % of Total                              % of Total
                                       Charge-offs                Net               Nonaccrual         Non-Accrual
                                       (Recovery)             Charge-offs             Loans               Loans
                                     (In Thousands)                               (In Thousands)
Residential                          $           (48 )                11.09 %    $          8,337             20.19 %
Commercial real estate                          (184 )                42.49 %              11,706             28.35 %
Construction                                       -                      -                     -                 -
Commercial                                      (137 )                31.64 %               2,253              5.46 %
Home equity and improvement                     (191 )                44.11 %               2,114              5.12 %
Consumer finance                                  73                 (16.86 )%              1,633              3.95 %
PCD                                               54                 (12.47 )%             15,253             36.93 %
Total                                $          (433 )               100.00 %    $         41,296            100.00 %




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                                                                          For the Quarter Ended
                                         2nd Qtr 2022       1st Qtr 2022   

4th Qtr 2021 3rd Qtr 2021 2nd Qtr 2021

                                                                                       (In Thousands)

Allowance at beginning of period $ 67,195 $ 66,468

$ 73,217 $ 71,367 $ 74,754
Provision (benefit) for credit losses

            5,151                626              2,818              1,594             (3,631 )
Charge-offs:
Residential                                        832                140                 83                 27                  -
Commercial real estate                             137                  7              3,087                 84                  -
Construction                                        16                  -                  -                  -                  -
Commercial                                       5,303                 10              6,513                372                  -
Home equity and improvement                        216                 20                 13                 47                  -
Consumer finance                                   136                102                249                 85                106
 PCD                                                63                 10                  2                  3                605
Total charge-offs                                6,703                289              9,947                618                711
Recoveries                                       1,431                390                380                874                955
Net charge-offs (recoveries)                     5,272               (101 )            9,567               (256 )             (244 )
Ending allowance                        $       67,074     $       67,195     $       66,468     $       73,217     $       71,367

The following table sets forth information concerning the allocation of the
Company’s ACL by loan categories at the dates indicated.


                           June 30, 2022                March 31, 2022                December 31, 2021               September 30, 2021                June 30, 2021
                                   Percent of                    Percent of                      Percent of                       Percent of                    Percent of
                                     total                         total                           total                            total                         total
                                    loans by                      loans by                        loans by                         loans by                      loans by
                      Amount        category        Amount        category 

Amount category Amount category Amount category

                                                                                     (Dollars In Thousands)
Residential          $ 14,113             21.0 %   $ 11,640             20.7 %   $   12,029             20.2 %   $    13,749             19.7 %   $ 15,268             19.6 %
Commercial real
estate                 34,952             40.4 %     34,201             42.3 %       32,399             42.5 %        34,092             41.6 %     34,461             41.4 %
Construction            2,999             16.7 %      2,613             15.0 %        3,004             15.0 %         3,621             15.4 %      2,739             14.3 %
Commercial              9,762             15.1 %     13,821             15.4 %       13,410             15.5 %        15,428             16.6 %     12,211             18.1 %
Home equity and
improvement             4,003              4.1 %      3,919              4.4 %        4,221              4.6 %         4,688              4.6 %      4,988              4.5 %
Consumer finance        1,245              2.7 %      1,001              2.2 %        1,405              2.2 %         1,639              2.2 %      1,700              2.0 %
                     $ 67,074            100.0 %   $ 67,195            100.0 %   $   66,468            100.0 %   $    73,217            100.0 %   $ 71,367            100.0 %


Key Asset Quality Ratio Trends


                                   2nd Qtr       1st Qtr       4th Qtr      

3rd Qtr 2nd Qtr

                                     2022         2022           2021         2021           2021
Allowance for credit losses /
loans*                                 1.14 %        1.25 %        1.26 %        1.39 %         1.33 %
Allowance for credit losses /
loans excluding PPP loans              1.14 %        1.25 %        1.27 %        1.43 %         1.41 %
Allowance for credit losses /
non-performing assets                190.57 %      141.31 %      137.94 %      121.77 %       172.63 %
Allowance for credit losses /
non-performing loans                 193.10 %      142.07 %      138.43 %      122.30 %       172.82 %
Non-performing assets / loans
plus OREO*                             0.60 %        0.88 %        0.91 %        1.14 %         0.77 %
Non-performing assets / total
assets                                 0.44 %        0.63 %        0.64 %        0.81 %         0.54 %
Net charge-offs / average loans
(annualized)                           0.37 %       (0.01 )%       0.71 %       (0.02 )%       (0.02 )%


* Total loans are net of undisbursed funds and deferred fees and costs.

Non-Interest Income

Total non-interest income decreased $2.9 million in the second quarter of 2022
to $14.4 million from $17.3 million for the same period in 2021.

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Service Fees. Service fees and other charges increased by $394,000 from $6.3
million for the three months ended June 30, 2021, to $6.7 million for the same
period in 2022. This increase is due primarily to higher ATM and interchange
related fees in the second quarter of 2022 compared to the same quarter in 2021.

Mortgage Banking Activity. Mortgage banking income decreased to $1.9 million in
the second quarter of 2022 from $2.2 million in the second quarter of 2021.
Mortgage banking gains decreased to $1.2 million in the second quarter of 2022
from $2.7 million in the second quarter of 2021. This decrease was primarily due
to compressed margins and lower saleable mix. Mortgage loan servicing revenue
was $1.9 million in the second quarter of both 2022 and 2021. Amortization of
mortgage servicing rights decreased to $1.4 million in the second quarter of
2022 from $2.0 million in the second quarter of 2021. The Company benefited from
a decrease in the valuation adjustment in mortgage servicing assets of $295,000
in the second quarter of 2022 compared with a negative adjustment of $448,000 in
the second quarter of 2021. These fluctuations have primarily resulted from
changes in the level of interest rates and prepayment speeds.

Gain on Sale of Available-for-Sale Securities. The Company sold
available-for-sale securities during the second quarter of 2021 resulting in a
gain of $1.5 million compared to no activity for the same period in 2022. The
Company sold the securities to exit from fast paying mortgage-backed securities
and take advantage of favorable pricing.

Gain (loss) on Equity Securities. The Company recognized an unrealized loss on
equity securities of $1.2 million for the second quarter of 2022 compared to an
unrealized loss of $808,000 in the second quarter of 2021. These amounts are
attributable to changes in valuations in the equity securities portfolio as a
result of market conditions.

Insurance Commissions. Insurance commissions increased slightly from $4.1
million
in the second quarter of 2021 to $4.3 million in the second quarter of
2022.


Wealth Management Income. Income from wealth management was $1.4 million for the
second quarter of 2022 compared to $1.6 million in the second quarter of 2021
due to the impact of stock market on market-based fees.

Bank-Owned Life Insurance (BOLI). Income from bank owned life insurance
increased from $859,000 in the second quarter of 2021 to $983,000 for the same
period in 2022 due to income being recognized for the entire year in 2022 from
an additional investment in BOLI in the third quarter of 2021.

Other Non-Interest Income. Other non-interest income declined to $171,000 in the
second quarter of 2022 from $1.7 million in the same period in 2021 primarily
due to a $1.3 million non-recurring settlement payment in the second quarter of
2021.

Non-Interest Expense

Non-interest expense increased $1.0 million to $39.1 million for the second
quarter of 2022 compared to $38.1 million for the same period in 2021. The
increase is mainly attributable to compensation and benefits.


Compensation and Benefits. Compensation and benefits increased to $22.3 million
in the second quarter of 2022, compared to $21.0 million in the second quarter
of 2021. This is primarily due to higher costs related to higher staffing levels
for our growth initiatives.

Occupancy. Occupancy expense decreased to $3.5 million in the second quarter of
2022 compared to $3.8 million in the second quarter of 2021. This decrease was
due to the closure of three branches in 2021 and one in 2022.

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FDIC Insurance Premium. The premiums on FDIC insurance increased to $802,000 for
the three months ended June 30, 2022 compared to $522,000 for the second quarter
of 2021 primarily due to growth.

Financial Institutions Tax. The Company's financial institutions tax decreased
slightly to $1.1 million in the second quarter of 2022 compared to $1.2 million
in the second quarter of 2021.

Data Processing. Data processing costs were mostly flat at $3.4 million in the
second quarter of 2022, an increase of $108,000 from $3.3 million in the second
quarter of 2021.

Amortization of Intangibles. Expense from the amortization of intangibles
decreased to $1.4 million in the second quarter of 2022 from $1.6 million in the
second quarter of 2021. The decrease is primarily related to the amortization of
core deposit intangibles over the past year.

Other Non-Interest Expenses. Other non-interest expenses was consistent at $6.6
million
for the three months ended June 30, 2022 and 2021.

Six Months Ended June 30, 2022 and 2021


On a consolidated basis, the Company's net income for the six months ended June
30, 2022 was $48.7 million compared to income of $72.4 million for the same
period in 2021. On a per share basis, basic and diluted earnings per common
share for the six months ended June 30, 2022 were both $1.36, compared to basic
and diluted earnings per common share of $1.94 for the same period in 2021.

Net Interest Income


Net interest income was $117.0 million for the first six months of 2022 compared
to $113.1 million in the first six months of 2021. Average interest-earning
assets increased to $6.9 billion in the first six months of 2022 compared to
$6.7 billion in the first six months of 2021. This increase was primarily due to
organic loan growth and an increase in average securities.

For the six months ended June 30, 2022, total interest income was $123.9 million
compared to $122.2 million for the same period in 2021. Interest expense
decreased by $2.2 million to $6.9 million for the six months ended June 30,
2022
, compared to $9.1 million for the same period in 2021.


Net interest margin for the first six months of 2022 was 3.40%, up 1 basis
points from the 3.39% margin reported for the six months ended June 30, 2021.
The increase in net interest margin was primarily due to lower cost of funds as
a result of the fall in interest rates year over year.

Provision for Credit Losses


The provision for credit losses on loans and unfunded commitments was $7.5
million for the six months ended June 30, 2022, compared to a recovery of $10.9
million for the six months ended June 30, 2021. Charge-offs for the first six
months of 2022 were $7.0 million and recoveries of previously charged off loans
totaled $1.8 million for net charge-offs of $5.2 million. By comparison,
$820,000 of charge-offs were recorded in the same period of 2021 and $1.3
million of recoveries were realized for net recoveries of $433,000. The current
year provision expense is primarily due to loan growth, whereas the prior year
recovery was primarily due to the improving economic environment following the
COVID-19 pandemic-induced economic recession and reserve increase in 2020.

Non-Interest Income

Total non-interest income decreased $12.1 to $31.2 million for the six months
ended June 30, 2022, from $43.4 million recognized for the same period in 2021.

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Service Fees. Service fees and other charges were $12.7 million for the first
six months of 2022, an increase of $925,000 from the same period in 2021.


Mortgage Banking Activity. Total revenue from the sale and servicing of mortgage
loans decreased $6.5 million to $6.2 million for the six months ended June 30,
2022, down from $12.7 million for the same period in 2021, which was primarily
attributable to compressed margins and lower saleable mix. Mortgage banking
gains decreased $4.6 million to $3.7 million for the first six months of 2022
from $8.3 million for the same period in 2021. Mortgage loan servicing revenue
decreased slightly to $3.7 million in the first six months of 2022 from $3.8
million for the first six months of 2021. The amortization of mortgage servicing
rights decreased from an expense of $4.3 million for the first six months of
2021 to an expense of $2.8 million for the first six months of 2022. The Company
recorded a positive valuation adjustment of $1.5 million in the first six months
of 2022 compared to a positive adjustment of $4.9 million in the first six
months of 2021.

Insurance Commission Income. Income from the sale of insurance and investment
products was $9.0 million in the first six months of both 2022 and 2021.

Wealth Management Income. Income in this category was $2.9 million in the first
six months of 2022, compared to $3.3 million in the first six months of 2021.

Income from Bank Owned Life Insurance. Income from BOLI was $2.0 million in the
first six months of each of 2022, and 2021. In 2021, the Company received
$334,000 in death benefits in the first half of 2021.


Other Non-Interest Income. Other non-interest income for the first six months of
2022 was $313,000, compared to $1.9 million in the first six months of 2021.
This change is primarily attributable to a $1.3 million non-recurring settlement
payment in the second quarter of 2021.

Non-Interest Expense

Non-interest expense was $80.4 million for the first six months of 2022, up from
$76.7 million for the same period in 2021.


Compensation and Benefits. Compensation and benefits increased to $47.9 million
for the six months ended June 30, 2022, compared to $43.0 million for the same
period in 2021 primarily due to costs related to higher staffing levels to meet
the Company's growth initiatives.

Occupancy. Occupancy expense decreased by $755,000 to $7.2 million for the six
months ended June 30, 2022, compared to the same period in 2021. This can be
primarily attributed to the closure of three branches in 2021 and one branch in
2022.

Data Processing. Data processing costs were $6.8 million in the first six months
of 2022, up from $6.7 million in same period for 2021.


Amortization of Intangibles. Intangible amortization decreased by $379,000 to
$2.8 million in the six months ended June 30, 2022, compared to $3.2 million for
the same period in 2021.

Other Non-Interest Expenses. Other non-interest expenses increased $17,000 to
$12.1 million for the first six months of 2022 from $12.0 million for the same
period in 2021.

Liquidity

As a regulated financial institution, the Company is required to maintain
appropriate levels of "liquid" assets to meet short-term funding requirements.
The Company's liquidity, primarily represented by cash and cash equivalents, is
a result of its operating, investing and financing activities.

The principal source of funds for the Company are deposits, loan repayments,
maturities of securities, borrowings from financial institutions and other funds
provided by operations. The Bank also has the ability to

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borrow from the FHLB. While scheduled loan repayments and maturing investments
are relatively predictable, deposit flows and early loan repayments are more
influenced by interest rates, general economic conditions and competition.
Investments in liquid assets maintained by the Company and the Bank are based
upon management's assessment of (i) the need for funds, (ii) expected deposit
flows, (iii) yields available on short-term liquid assets, and (iv) objectives
of the asset and liability management program.

The Bank's Asset/Liability Committee ("ALCO") is responsible for establishing
and monitoring liquidity guidelines, policies and procedures. ALCO uses a
variety of methods to monitor the liquidity position of the Bank including
liquidity analyses that measure potential sources and uses of funds over future
periods out to one year. ALCO also performs contingency funding analyses to
determine the Bank's ability to meet potential liquidity needs under stress
scenarios that cover varying time horizons ranging from immediate to longer
term.

At June 30, 2022, the Bank had $1.6 billion of on-hand liquidity, defined as
cash and cash equivalents, unencumbered securities and additional FHLB borrowing
capacity.

Liquidity risk arises from the possibility that the Company may not be able to
meet its financial obligations and operating cash needs or may become overly
reliant upon external funding sources. In order to manage this risk, the
Company's Board of Directors has established a Liquidity Policy that identifies
primary sources of liquidity, establishes procedures for monitoring and
measuring liquidity and quantifies minimum liquidity requirements. This policy
designates ALCO as the body responsible for meeting these objectives. ALCO
reviews liquidity on a monthly basis and approves significant changes in
strategies that affect balance sheet or cash flow positions.

Capital Resources


Capital is managed at the Bank and on a consolidated basis. Capital levels are
maintained based on regulatory capital requirements and the economic capital
required to support credit, market, liquidity and operational risks inherent in
the business, as well as flexibility needed for future growth and new business
opportunities.

In July 2013, the Federal Reserve and FDIC approved the final rules implementing
the Basel Committee on Banking Supervision's capital guidelines for U.S. banks
(commonly known as Basel III). The Company is in compliance with the Basel III
guidelines.

In the first quarter of 2020, the federal banking agencies approved the final
rules implementing CECL. Under the final rules the Company had the ability to
phase in the effects of the adoption of CECL, which it chose not to do. The full
effect of the adoption of CECL was absorbed in the Company's March 31, 2020
capital calculations. The Company met each of the well-capitalized ratio
guidelines at June 30, 2022. The following table indicates the capital ratios
for the Company (consolidated) and the Bank at June 30, 2022, and December 31,
2021 (in thousands):


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                                                                         June 30, 2022
                                                                                                    Minimum Required to be
                                                                 Minimum Required for                Well Capitalized for
                                        Actual                  Adequately Capitalized             Prompt Corrective Action
                                 Amount        Ratio           Amount            Ratio(1)           Amount              Ratio
CET1 Capital (to
Risk-Weighted Assets)
Consolidated                    $ 693,723         9.78 %   $      319,291               4.5 %               N/A             N/A
Premier Bank                    $ 726,342        10.28 %   $      318,015               4.5 %   $       459,355             6.5 %
Tier 1 Capital
Consolidated                    $ 728,723         9.66 %   $      301,625               4.0 %               N/A             N/A
Premier Bank                    $ 726,342         9.67 %   $      300,458               4.0 %   $       375,573             5.0 %
Tier 1 Capital (to Risk
Weighted Assets)
Consolidated                    $ 728,723        10.27 %   $      425,722               6.0 %               N/A             N/A
Premier Bank                    $ 726,342        10.28 %   $      424,020               6.0 %   $       565,360             8.0 %
Total Capital (to Risk
Weighted Assets)
Consolidated                    $ 851,371        12.00 %   $      567,629               8.0 %               N/A             N/A
Premier Bank                    $ 798,990        11.31 %   $      565,360               8.0 %   $       706,700            10.0 %


(1)

Excludes capital conservation buffer of 2.50%

                                                                 December 31, 2021
                                                                                              Minimum Required
                                                                                                 to be Well
                                                                Minimum Required              Capitalized for
                                                                 for Adequately              Prompt Corrective
                                         Actual                    Capitalized                     Action
                                   Amount        Ratio        Amount        Ratio(1)        Amount         Ratio
CET1 Capital (to Risk-Weighted
Assets)
Consolidated                      $ 689,930       10.92 %   $   284,394           4.5 %           N/A          N/A
Premier Bank                      $ 725,600       11.53 %   $   283,265           4.5 %   $   409,160          6.5 %

Tier 1 Capital
Consolidated                      $ 724,930       10.10 %   $   287,138           4.0 %           N/A          N/A
Premier Bank                      $ 725,600       10.16 %   $   285,664           4.0 %   $   357,080          5.0 %

Tier 1 Capital (to Risk
Weighted Assets)
Consolidated                      $ 724,930       11.47 %   $   379,192           6.0 %           N/A          N/A
Premier Bank                      $ 725,600       11.53 %   $   377,686           6.0 %   $   503,582          8.0 %

Total Capital (to Risk Weighted
Assets)
Consolidated                      $ 844,389       13.36 %   $   505,589           8.0 %           N/A          N/A
Premier Bank                      $ 795,059       12.63 %   $   503,582           8.0 %   $   629,477         10.0 %


(1)

Excludes capital conservation buffer of 2.50%.

© Edgar Online, source Glimpses

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