Premier Financial (PFC) - 2024 Q4 - Annual Report

Credit Losses and Loan Performance - As of December 31, 2024, Premier's allowance for credit losses totaled $75.7 million, a slight decrease from $76.5 million at December 31, 2023[55] - The provision for credit losses for 2024 was $3.89 million, down from $7.74 million in 2023, primarily due to lower volume[57] - Total charge-offs for 2024 amounted to $5.96 million, compared to $6.76 million in 2023, indicating a decrease in loan losses[56] - The allowance for credit losses to total loans ratio at the end of 2024 was 1.17%, slightly up from 1.14% in 2023[56] - Net charge-offs for the year represented 0.10% of average loans, an increase from 0.06% in 2023[56] - The allowance for credit losses to total non-performing loans ratio was 93.45% at the end of 2024, down from 215.58% in 2023[56] Deposits and Funding - Premier had $54.7 million in brokered deposits as of December 31, 2024, compared to $341.9 million in 2023[62] - The bank had $507.0 million in advances outstanding from the FHLB at December 31, 2024, up from $280.0 million in 2023[64] - Premier's total deposits increased to $7.1 billion in 2024, with an average rate of 2.41% compared to 1.77% in 2023[63] Employment and Dividends - The company employed 938 individuals as of December 31, 2024, with 94.7% being full-time employees[69] - The Bank paid $60 million in dividends in 2024 and $26.5 million in dividends in 2023, with an additional cash contribution of $29.8 million from Premier in 2023[94] - Premier's ability to pay dividends is primarily dependent on receiving dividends from its subsidiaries, and the Federal Reserve may require Premier to retain capital for further investment in the Bank[95] Regulatory Environment - The FDIC insures deposit accounts of the Bank up to a maximum amount of $250,000 per separately insured depositor[96] - The Bank's primary federal regulator is the FDIC, and it is also subject to regulations from the Ohio Division of Financial Institutions[72] - Premier became a financial holding company in 2020, allowing it to engage in a wider variety of financial activities[73] - The Basel III Capital Rules require a minimum common equity tier 1 (CET1) capital ratio of 4.5%, a minimum tier 1 capital ratio of 6.0%, and a minimum total capital ratio of 8.0%[85] - As of December 31, 2024, the Bank met the capital ratio requirements to be deemed "well-capitalized" according to regulatory guidelines[92] - The Economic Growth, Regulatory Relief and Consumer Protection Act eased regulations for bank holding companies with consolidated assets of less than $100 billion, including Premier[82] - The Federal Reserve has the authority to impose limitations on the activities of financial holding companies if they fail to meet capital requirements[78] Deposit Insurance and Risk Management - The FDIC set a Designated Reserve Ratio (DRR) target of 2.0% for the Deposit Insurance Fund (DIF) to withstand future crises[98] - As of June 30, 2020, the DRR declined below the statutory minimum of 1.35% due to extraordinary growth in insured deposits[98] - The FDIC projected in June 2022 that the DRR was at risk of not reaching the statutory minimum of 1.35% by the September 30, 2028 deadline[98] - An amended restoration plan was approved, proposing a uniform increase in initial base deposit insurance assessment rates by two basis points, effective January 1, 2023[98] Community Reinvestment and Compliance - The CRA requires banks to meet the credit needs of their entire community, including low- and moderate-income neighborhoods, with a satisfactory rating received by the Bank[109] - The final rule issued on October 24, 2023, aims to strengthen CRA regulations, with applicability starting January 1, 2026[109] - The Volcker Rule exempts community banks with total consolidated assets of $10 billion or less from certain trading restrictions[111] - The Bank has established policies to comply with the Patriot Act, which requires enhanced due diligence and identification procedures for new accounts[110] Interest Rate Risk Management - The Company monitors interest rate risk quarterly through simulation analysis, assessing the impact of a 100 basis point shift in interest rates on net interest income[292] - As of December 31, 2024, the sensitivity of net interest income to a +400 basis point change in interest rates is projected to decrease by 7.1% compared to a decrease of 9.9% as of December 31, 2023[294] - The estimated change in economic value of equity (EVE) for a +400 basis point increase in rates is a decrease of 30.3% as of December 31, 2024, compared to a decrease of 30.7% for the previous year[296] - For a -100 basis point change in interest rates, the projected increase in net interest income is 2.1% for December 31, 2024, down from 2.5% for December 31, 2023[294] - The EVE analysis indicates a 5.5% increase for a -100 basis point change in rates as of December 31, 2024, compared to 7.1% for the previous year[296] - The company utilizes a dynamic model for deposit beta assumptions, which incorporates historical experience and market rates[295] - The analysis of net interest income sensitivity shows a decrease in both rising and falling rate environments compared to the previous year, primarily due to changes in re-pricing expectations on deposits[293] - The company’s simulation scenarios for interest rate changes remain within Board mandated guidelines as of December 31, 2024[294] - The EVE analysis incorporates key assumptions such as asset prepayments and loan and deposit volumes, which can significantly impact modeled results[295] - The company assumes a static balance sheet for simulation analysis, with new asset and liability pricing based on recent production results[295] - The results of the interest rate risk evaluation highlight potential discrepancies in asset and liability reactions to market interest rate changes[296]