Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~April 30,~~July 31, 2021, the registrant had ~~37,303,971~~37,179,134 shares of common stock, $.01 par value per share, outstanding.

	March 31, 2021		December 31, 2020		June 30, 2021		December 31, 2020
Assets
Cash and cash equivalents:
Cash and amounts due from depository institutions	$	68,689	$	79,593	$	63,790	$	79,593
Interest-bearing deposits		235,058		79,673		67,718		79,673
		303,747		159,266		131,508		159,266
Securities available-for-sale, carried at fair value		918,590		736,654		1,279,128		736,654
Equity securities		13,753		1,090		12,945		1,090
Loans held for sale, carried at fair value		215,945		221,616		199,070		221,616
Loans receivable, net of allowance for credit losses of $74,754 at March 31, 2021 and $82,079 at December 31, 2020, respectively		5,384,929		5,409,161
Loans receivable, net of allowance for credit losses of $71,367 at June 30, 2021 and $82,079 at December 31, 2020, respectively						5,277,033		5,409,161
Mortgage servicing rights		18,503		13,153		18,041		13,153
Accrued interest receivable		24,762		25,434		23,459		25,434
Federal Home Loan Bank stock		9,328		16,026		12,747		16,026
Bank owned life insurance		145,060		144,784		145,919		144,784
Premises and equipment		57,358		58,665		56,259		58,665
Real estate and other assets held for sale		54		343		45		343
Goodwill		317,948		317,948		317,948		317,948
Core deposit and other intangibles		28,714		30,337		27,140		30,337
Other assets		91,771		77,257		92,478		77,257
Total assets	$	7,530,462	$	7,211,734	$	7,593,720	$	7,211,734

	March 31, 2021			December 31, 2020			June 30, 2021			December 31, 2020
Liabilities and stockholders’ equity
Liabilities:
Deposits	$	6,351,919		$	6,047,841		$	6,291,459		$	6,047,841
Advances from the Federal Home Loan Bank		—			—			105,000			—
Subordinated debentures		84,881			84,860			84,913			84,860
Advance payments by borrowers		20,773			21,748			19,474			21,748
Reserve for credit losses - unfunded commitments		5,901			5,350			5,613			5,350
Other liabilities		68,802			69,659			59,558			69,659
Total liabilities		6,532,276			6,229,458			6,566,017			6,229,458

Stockholders’ equity:
Preferred stock, $.01 par value per share: 37,000 shares authorized; 0 shares issued		—		—				—		—
Preferred stock, $.01 par value per share: 4,963,000 shares authorized; 0 shares issued	—			—			—			—
Common stock, $.01 par value per share: 50,000,000 shares authorized; 43,297,260 and 43,297,260 shares issued and 37,274,844 and 37,291,480 shares outstanding at March 31, 2021 and December 31, 2020, respectively		306			306
Common stock, $.01 par value per share: 50,000,000 shares authorized; 43,297,260 and 43,297,260 shares issued and 37,177,605 and 37,291,480 shares outstanding at June 30, 2021 and December 31, 2020, respectively								306			306
Additional paid-in capital		689,747			689,390			689,785			689,390
Accumulated other comprehensive (loss) income, net of tax of $133 and $3,988, respectively		(502	)		15,004
Accumulated other comprehensive income, net of tax of $2,911 and $3,988, respectively								10,953			15,004
Retained earnings		388,467			356,414			410,153			356,414
Treasury stock, at cost, 6,022,416 shares at March 31, 2021 and 6,005,780 shares at December 31, 2020		(79,832	)		(78,838	)
Treasury stock, at cost, 6,119,655 shares at June 30, 2021 and 6,005,780 shares at December 31, 2020								(83,494	)		(78,838	)
Total stockholders’ equity		998,186			982,276			1,027,703			982,276
Total liabilities and stockholders’ equity	$	7,530,462		$	7,211,734		$	7,593,720		$	7,211,734

	Three Months Ended March 31,						Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020			2021			2020
Interest Income
Loans	$	57,565		$	51,460		$	55,772		$	58,796		$	113,338		$	110,256
Investment securities:
Taxable		2,782			1,834			3,939			2,047			6,720			3,914
Non-taxable		900			883			1,055			876			1,954			1,727
Interest-bearing deposits		66			230			42			79			108			309
FHLB stock dividends		59			115			56			651			115			766
Total interest income		61,372			54,522			60,864			62,449			122,235			116,972
Interest Expense
Deposits		4,164			7,771			3,559			7,435			7,723			15,206
FHLB advances and other		—			1,006			12			516			12			1,523
Subordinated debentures		695			273			674			179			1,369			452
Notes payable		—			9			—			15			—			24
Total interest expense		4,859			9,059			4,245			8,145			9,104			17,205
Net interest income		56,513			45,463			56,619			54,304			113,131			99,767
Credit (benefit) loss expense - loans and leases		(7,514	)		43,786			(3,631	)		1,868			(11,145	)		45,655
Credit loss expense - unfunded commitments		551			1,458			(288	)		1,107			263			2,565
Net interest income after credit loss expense		63,476			219			60,538			51,329			124,013			51,547
Non-interest Income
Service fees and other charges		5,469			5,318			6,282			5,614			11,751			10,797
Insurance commissions		4,882			5,155			4,059			4,005			8,940			9,160
Mortgage banking income		10,533			848			2,157			9,868			12,691			10,716
Gain on sale of non-mortgage loans		—			234			—			—			—			234
Gain on sale of securities available for sale		516			—			1,469			(2	)		1,985			(2	)
Gain on equity securities		1,610			—			(808	)		—			802			—
Wealth management income		1,757			1,091			1,566			1,802			3,322			2,893
Income from Bank Owned Life Insurance		1,168			781			859			838			2,028			1,619
Other non-interest income		340			572			1,961			890			2,301			1,597
Total non-interest income		26,275			13,999			17,545			23,015			43,820			37,014
Non-interest Expense
Compensation and benefits		21,997			17,585			21,046			19,575			43,044			37,160
Occupancy		4,112			3,731			3,837			4,128			7,949			7,859
FDIC insurance premium		898			492			522			411			1,420			903
Financial institutions tax		1,190			834			1,177			1,116			2,367			1,950
Data processing		3,382			3,040			3,334			3,805			6,716			6,845
Acquisition related charges		—			11,486			—			2,099			—			13,585
Amortization of intangibles		1,623			1,245			1,575			1,809			3,197			3,054
Other non-interest expense		5,601			3,897			6,884			5,041			12,485			8,937
Total non-interest expense		38,803			42,310			38,375			37,984			77,178			80,293
Income (loss) before income taxes		50,948			(28,092	)		39,708			36,360			90,655			8,268
Income tax expense (benefit)		9,952			(5,610	)		8,323			7,303			18,274			1,693
Net income (loss)	$	40,996		$	(22,482	)	$	31,385		$	29,057		$	72,381		$	6,575
Earnings (loss) per common share
Basic	$	1.10		$	(0.71	)	$	0.84		$	0.78		$	1.94		$	0.19
Diluted	$	1.10		$	(0.71	)	$	0.84		$	0.78		$	1.94		$	0.19

	Three Months Ended March 31,						Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020			2021			2020
Net income (loss)	$	40,996		$	(22,482	)
Net income							$	31,385		$	29,057		$	72,381		$	6,575

Other comprehensive (loss) income:
Unrealized (losses) gains on securities available for sale		(19,112	)		9,458			11,985			3,160			(7,127	)		12,618
Reclassification adjustment for securities gains included in net income		(516	)		—
Reclassification adjustment for securities gains (losses) included in net income								(1,469	)		2			(1,985	)		2
Income tax effect		4,122			(1,985	)		(2,208	)		(666	)		1,914			(2,651	)
Net of tax amount		(15,506	)		7,473			8,308			2,496			(7,198	)		9,969

Change in unrealized gain/(loss) on postretirement benefit:
Reclassification adjustment for deferred tax on defined benefit postretirement medical plan		—			—
Change in unrealized gain/(loss) on balance sheet swap								4,434			—			4,434			—
Reclassification adjustment for cash flow hedge derivatives gain included in net income								(450	)					(450	)
Income tax effect								(837	)		—			(837	)		—
Net of tax amount		—			—			3,147			—			3,147			—

Total other comprehensive income (loss)		(15,506	)		7,473			11,455			2,496			(4,051	)		9,969

Comprehensive income (loss)	$	25,490		$	(15,009	)	$	42,840		$	31,553		$	68,330		$	16,544

	Preferred Stock		Common Stock Shares			Common Stock		Additional Paid-In Capital			Accumulated Other Comprehensive Income			Retained Earnings			Treasury Stock			Total Stockholders Equity			Preferred Stock		Common Stock Shares			Common Stock		Additional Paid-In Capital			Accumulated Other Comprehensive Income			Retained Earnings			Treasury Stock			Total Stockholders Equity
Balance at January 1, 2021	$	—		37,291,480		$	306	$	689,390		$	15,004		$	356,414		$	(78,838	)	$	982,276		$	—		37,291,480		$	306	$	689,390		$	15,004		$	356,414		$	(78,838	)	$	982,276
Net income															40,996						40,996																40,996						40,996
Other comprehensive loss												(15,506	)								(15,506	)												(15,506	)								(15,506	)
Deferred compensation plan				7,911					51									(51	)		—					7,911					51									(51	)		—
Stock based compensation expenses									551												551										551												551
Vesting of incentive plans				6,124					(82	)								82			—					6,124					(82	)								82			—
Shares issued under stock option plan				600														8			8					600														8			8
Restricted share issuance				13,708					(183	)								183			—					13,708					(183	)								183			—
Restricted share forfeitures				(5,779	)				20									(138	)		(118	)				(5,779	)				20									(138	)		(118	)
Shares repurchased				(39,200	)													(1,078	)		(1,078	)				(39,200	)													(1,078	)		(1,078	)
Common stock dividend payment ($0.24 per share)															(8,943	)					(8,943	)															(8,943	)					(8,943	)
Balance at March 31, 2021	$	—		37,274,844		$	306	$	689,747		$	(502	)	$	388,467		$	(79,832	)	$	998,186		$	—		37,274,844		$	306	$	689,747		$	(502	)	$	388,467		$	(79,832	)	$	998,186
Net income																																					31,385						31,385
Other comprehensive income																																		11,455									11,455
Deferred compensation plan																															(26	)								26			—
Stock based compensation expenses																															656												656
Vesting of incentive plans																										21,834					(291	)								291			—
Shares issued under stock option plan																																											—
Restricted share issuance																										22,550					(301	)								301			—
Restricted share forfeitures																										(15,257	)													(507	)		(507	)
Shares repurchased																										(126,366	)													(3,773	)		(3,773	)
Common stock dividend payment ($0.26 per share)																																					(9,699	)					(9,699	)
Balance at June 30, 2021																							$	—		37,177,605		$	306	$	689,785		$	10,953		$	410,153		$	(83,494	)	$	1,027,703

	Preferred Stock		Common Stock Shares			Common Stock		Additional Paid-In Capital			Accumulated Other Comprehensive Income		Retained Earnings			Treasury Stock			Total Stockholders Equity
Balance at January 1, 2020	$	—		19,729,886		$	127	$	161,955		$	4,595	$	329,175		$	(69,685	)	$	426,167
Net income (loss)														(22,482	)					(22,482	)
Other comprehensive income												7,473								7,473
Adoption of ASC 326														(2,566	)					(2,566	)
Deferred compensation plan				7,524					(94	)							94			—
Stock based compensation expenses									1,230								6			1,236
Capital stock issuance related to acquisition				17,927,017			179		526,696											526,875
Vesting of incentive plans				39,548					(1,989	)							493			(1,496	)
Restricted share issuance				13,349					198					(374	)		176			—
Restricted share forfeitures				(750	)															—
Shares repurchased				(430,000	)												(10,078	)		(10,078	)
Common stock dividend payment ($0.22 per share)														(8,286	)					(8,286	)
Balance at March 31, 2020	$	—		37,286,574		$	306	$	687,996		$	12,068	$	295,467		$	(78,994	)	$	916,843
Net income														29,057						29,057
Other comprehensive income												2,496								2,496
Deferred compensation plan									166								(166	)		—
Stock based compensation expenses									356											356
Adjustment for capital stock issuance				(843	)				(25	)										(25	)
Fair value of option exchange from merger									461											461
Prior period adjustments									(258	)							258			—
Shares issued under stock option plan				11,408					(122	)							122			—
Shares repurchased				(1,070	)												(17	)		(17	)
Common stock dividend payment ($0.22 per share)														(8,203	)					(8,203	)
Balance at June 30, 2020	$	—		37,296,069		$	306	$	688,574		$	14,564	$	316,321		$	(78,797	)	$	940,968

	Three Months Ended March 31,						Six Months Ended June 30,
	2021			2020			2021			2020
Operating Activities
Net income (loss)	$	40,996		$	(22,482	)	$	72,381		$	6,575
Items not requiring (providing) cash:
Provision (benefit) for credit losses		(6,963	)		43,786			(10,882	)		48,220
Depreciation		1,647			1,631			3,256			3,105
Amortization of premium and discounts on loans, securities, deposits and debt obligations		143			(1,112	)		1,888			(2,607	)
Amortization of mortgage servicing rights, net of impairment charges/recoveries		(2,976	)		5,648			(575	)		9,198
Amortization of intangibles		1,623			1,245			3,197			3,054
Change in deferred taxes		—			77			2,582			(10,418	)
Proceeds from the sale of loans held for sale		258,544			101,090			467,067			331,341
Originations of loans held for sale		(249,607	)		(110,026	)		(440,523	)		(406,074	)
Gain from sale of loans		(5,640	)		(5,136	)
Mortgage banking gain, net								(8,311	)		(16,666	)
Gain/loss on sale / write-down of real estate and other assets held for sale		6			10			(11	)		17
Gain on sale of available for sale securities		(516	)		—
Unrealized gain on equity securities		(1,610	)		—
Stock option expense		551			1,236
Gain/loss on sale of available for sale securities								(1,985	)		2
Gain on equity securities								(802	)		—
Stock based compensation expense								1,207			1,592
Restricted stock forfeitures for taxes and option exercises		(110	)		(1,496	)		(617	)		(1,496	)
Income from bank owned life insurance		(1,168	)		(781	)		(2,028	)		(1,619	)
Changes in:
Accrued interest receivable and other assets		(9,833	)		(2,854	)		(10,767	)		(20,255	)
Other liabilities		(744	)		2,525			(10,101	)		22,123
Net cash provided by operating activities		24,343			13,361
Net cash provided by (used by) operating activities								64,976			(33,908	)

Investing Activities
Proceeds from maturities of held-to maturity securities		—			—
Proceeds from maturities, calls and pay-downs of available-for-sale securities		41,123			19,389			81,930			50,544
Proceeds from sale of available-for-sale securities		22,380			—			105,064			622
Proceeds from sale of premises and equipment, real estate and other assets held for sale		117			481			209			509
Proceeds from sale of non-mortgage loans		—			3,241			—			5,241
Purchases of available-for-sale securities		(267,079	)		—			(740,534	)		(61,725	)
Purchases of equity securities		(11,053	)		—			(11,053	)		—
Net change in Federal Home Loan Bank stock		6,698			(64,584	)		3,279			(21,287	)
Net cash received (paid) from acquisition (Reference Footnote 17 Business Combinations)		—			52,448			—			52,448
Purchases of premises and equipment, net		(120	)		(722	)		(630	)		(2,822	)
Proceeds from bank owned life insurance		892			—			893			—
Net increase in loans receivable		33,669			(44,623	)		144,510			(386,945	)
Net cash used by investing activities		(173,373	)		(34,370	)		(416,332	)		(363,415	)
Financing Activities
Net increase in deposits and advance payments by borrowers		303,532			34,437			242,091			808,121
Net change in Federal Home Loan Bank advances		—			19,937			105,000			(326,736	)
Decrease in securities sold under repurchase agreements		—			(1,038	)		—			3,949
Net cash paid for repurchase of common stock		(1,078	)		(10,078	)		(4,851	)		(10,095	)
Cash dividends paid on common stock		(8,943	)		(8,286	)		(18,642	)		(16,489	)
Net cash provided by financing activities		293,511			34,972			323,598			458,750
Increase in cash and cash equivalents		144,481			13,963
Increase (decrease) in cash and cash equivalents								(27,758	)		61,427
Cash and cash equivalents at beginning of period		159,266			131,254			159,266			131,254
Cash and cash equivalents at end of period	$	303,747		$	145,217		$	131,508		$	192,681
Supplemental cash flow information:
Interest paid	$	5,425		$	9,028		$	9,176		$	17,751
Income taxes paid	$	—		$	—			3			-
Initial recognition of right-of-use asset	$	500		$	8,994			500			10,100
Initial recognition of lease liability	$	500		$	9,143			500			10,249
Initial recognition of ASC 326	$	—		$	2,566			-			2,566
Transfers from loans to real estate and other assets held for sale	$	54		$	37			120			97

On June 19, 2020, First Defiance Financial Corp. changed its name to Premier Financial Corp. (“Premier” or the “Company”). In connection with the name change, Premier’s stock continued to be traded on the NASDAQ Global Select Market, but under the new ticker PFC. On this same date, First Federal Bank of the Midwest, a wholly-owned subsidiary of the Company, changed its name to Premier Bank (the “Bank”).

Premier is a financial holding company that conducts business through its wholly-owned subsidiaries, the Bank, First Insurance Group of the Midwest, Inc. (“First Insurance”), ~~First Defiance~~PFC Risk Management Inc. (“~~First Defiance~~PFC Risk Management”) and HSB Capital, LLC (“HSB Capital”). All significant intercompany transactions and balances are eliminated in consolidation.

On January 31, 2020, Premier completed its previously announced acquisition of United Community Financial Corp., an Ohio corporation (“UCFC”), pursuant to the Agreement and Plan of Merger (the “Merger Agreement”), dated as of September 9, 2019, by and between Premier and UCFC. At the effective time of the merger (the “Merger”), UCFC merged with and into Premier, with Premier surviving the Merger. Simultaneously with the completion of the Merger, Premier converted from a unitary thrift holding company to a bank holding company, making an election to be a financial holding company.

Immediately following the Merger, the Bank acquired UCFC’s wholly-owned bank subsidiary, Home Savings Bank (“Home Savings”). Immediately prior to the merger of the banks, the Bank converted from a federal thrift into an Ohio state-chartered bank. In addition, immediately following the merger of the banks, UCFC’s wholly-owned insurance subsidiaries, HSB Insurance, LLC, and United American Financial Services, Inc., each merged into First Insurance, with First Insurance surviving the mergers. Premier acquired 2 additional subsidiaries in the Merger, HSB Capital and HSB Insurance, Inc. HSB Insurance, Inc. was dissolved in September 2020.

The Bank is primarily engaged in community banking. It attracts deposits from the general public through its offices and website, and uses those and other available sources of funds to originate residential real estate loans, commercial real estate loans, commercial loans, home improvement and home equity loans and consumer loans. In addition, the Bank invests in U.S. Treasury and federal government agency obligations, obligations of states and political subdivisions, mortgage-backed securities that are issued by federal agencies, collateralized mortgage obligations (“CMOs”), and corporate bonds. The Bank’s deposits are insured by the Federal Deposit Insurance Corporation (“FDIC”). The Bank is a member of the Federal Home Loan Bank (“FHLB”) System.

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

First Insurance is an insurance agency that conducts business throughout Premier’s markets. First Insurance offers property and casualty insurance, life insurance and group health insurance.

PFC Risk Management, formerly known as First Defiance 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. ~~First Defiance~~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.

The COVID-19 pandemic has continued to create ~~extensive~~ disruptions to the global economy and to the lives of individuals throughout the world. Business and consumer customers of the Bank are experiencing varying degrees of financial distress, which is expected to continue over the coming months and will likely adversely affect their ability to pay interest and principal on their loans. Further, value of the collateral securing their obligations may decline. These uncertainties may negatively impact the Statement of Financial Condition, the Statement of Income and the Statement of Cash Flows of the Company.

The consolidated condensed statement of financial condition at December 31, 2020, was derived from the audited financial statements at that date, which were included in Premier’s Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Form 10-K”).

The accompanying consolidated condensed financial statements as of ~~March 31,~~June 30, 2021, and for the three and six months ended ~~March 31,~~June 30, 2021 and 2020 have been prepared by the Company without audit and do not include information or footnotes necessary for the complete presentation of financial condition, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States (“GAAP”). These consolidated condensed financial statements should be read in conjunction with the financial statements and notes thereto included in the 2020 Form 10-K. However, in the opinion of management, all adjustments, consisting of only normal recurring items, necessary for the fair presentation of the financial statements have been made. The results for the three and six month ~~period~~periods ended ~~March 31,~~June 30, 2021, are not necessarily indicative of the results that may be expected for the entire year.

ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments: Issued in June 2016, ASU 2016-13 will add FASB ASC Topic 326, “Financial Instruments-Credit Losses” and finalizes amendments to FASB ASC Subtopic 825-15, “Financial Instruments-Credit Losses.” The amendments of ASU 2016-13 are intended to provide financial statement users with more decision-useful information related to expected credit losses on financial instruments and other commitments to extend credit by replacing the current incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to determine credit loss estimates. The amendments of ASU 2016-13 eliminate the probable initial recognition threshold and, in turn, reflect an entity’s current estimate of all expected credit losses. ASU 2016-13 does not specify the method for measuring expected credit losses, and an entity is allowed to apply methods that reasonably reflect its expectations of the credit loss estimate. The amendments of ASU 2016-13, and all subsequent ASUs issued by FASB to provide additional guidance and clarification related to this Topic, became effective for the Company on January 1, 2020.

As a result of adopting the amendments of ASU 2016-13, the Company recorded an increase to its allowance for credit losses of $2.4 million and an increase to its allowance for credit losses on off-balance sheet credit exposures of $0.9 million resulting in a one-time cumulative effect adjustment through retained earnings of $2.6 million net of $0.7 million tax at the date of adoption. This adjustment included a qualitative adjustment to the allowance for credit losses related to loans and an allowance on off-balance sheet credit exposures. 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.

ASU No. 2020-04: Reference Rate Reform – Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848): This guidance provides temporary options to ease the potential burden in accounting for reference rate reform. It is intended to help stakeholders during the global market-wide reference rate transition period. The guidance is effective as of March 12, 2021, through December 31, 2022. The Company anticipates being fully prepared to implement a replacement for the reference rate and has determined that any change will not have a material impact to the consolidated financial statements.

FASB ASC Topic 820, Fair Value Measurements, defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. The price in the principal (or most advantageous) market used to measure the fair value of the asset or liability shall not be adjusted for transaction costs. An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets and liabilities; it is not a forced transaction. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact and (iv) willing to transact.

FASB ASC Topic 820 requires the use of valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities. The income approach uses valuation techniques to convert future amounts, such as cash flows or earnings, to a single present amount on a discounted basis. The cost approach is based on the amount that currently would be required to replace the service capacity of an asset (replacement cost). Valuation techniques should be consistently applied. Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on the best information available. In that regard, FASB ASC Topic 820 established a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:

A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.

Available-for-sale securities - Securities classified as available for sale are generally reported at fair value utilizing Level 2 inputs where the Company obtains fair value measurements from an independent pricing service that uses matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs). The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows and the bonds’ terms and conditions, among other things. Securities in Level 2 include U.S. federal government agencies, mortgage-backed securities, asset-backed securities, corporate bonds and municipal securities.

Equity securities – These securities are reported at fair value utilizing Level 1 inputs where the Company obtains fair value measurements from a broker.

Loans held for sale, carried at fair value – The Company elected the fair value option for all conventional residential one-to four-family loans held for sale and all permanent construction loans held for sale that were acquired from UCFC in the Merger. In addition, the Company has elected the fair value option for all loans held for sale originated after January 31, 2020.

The fair value of conventional loans held for sale is determined using the current 15 day forward contract price for either 15 or 30 year conventional mortgages (Level 2). The fair value of permanent construction loans held for sale is determined using the current 60 day forward contract price for 15 or 30 years conventional mortgages which is then adjusted for unobservable market data such as estimated fall out rates and estimated time from origination to completion of construction (Level 3).

Collateral dependent loans - Fair values for individually analyzed collateral dependent loans are generally based on appraisals obtained from licensed real estate appraisers and in certain circumstances consideration of offers obtained to purchase properties prior to foreclosure. Appraisals for commercial real estate generally use three methods to derive value: cost, sales or market comparison and income approach. The cost method bases value on the cost to replace the current property. Value of market comparison approach evaluates the sales price of similar properties in the same market area. The income approach considers net operating income generated by the property and an investor’s required return. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Comparable sales adjustments are based on known sales prices of similar type and similar use properties and duration of time that the property has been on the market to sell. Such adjustments made in the appraisal process are typically significant and result in a Level 3 classification of the inputs for determining fair value.

Real estate held for sale - Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. These assets are then reviewed monthly by members of the asset review committee for valuation changes and are accounted for at lower of cost or fair value less estimated costs to sell. Fair value is commonly based on recent real estate appraisals which may utilize a single valuation approach or a combination of approaches including cost, comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments may be significant and typically result in a Level 3 classification of the inputs for determining fair value.

Appraisals for both individually analyzed collateral-dependent loans and other real estate owned are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company. Once received, a member of the Company’s asset quality or collections department reviews the assumptions and approaches utilized in the appraisal. Appraisal values are discounted from 0% to 30% to account for other factors that may impact the value of collateral. In determining the value of individually analyzed collateral dependent loans and other real estate owned, significant unobservable inputs may be used, which include but are not limited to: physical condition of comparable properties sold, net operating income generated by the property and investor rates of return.

Mortgage servicing rights - On a quarterly basis, mortgage servicing rights are evaluated for impairment based upon the fair value of the rights as compared to the carrying amount. If the carrying amount of an individual tranche exceeds fair value, impairment is recorded on that tranche so that the servicing asset is carried at fair value. Fair value is determined at a tranche level based on a model that calculates the present value of estimated future net servicing income. The valuation model utilizes assumptions that market participants would use in estimating future net servicing income and are validated against available market data (Level 2).

Mortgage banking derivative - The fair value of mortgage banking derivatives are evaluated monthly based on derivative valuation models using quoted prices for similar assets adjusted for specific attributes of the commitments and other observable market data at the valuation date (Level 2).

Purchased and written certificate of deposit option – The Company acquired purchased and written certificate of deposit options in its Merger with UCFC. These written and purchased options are mirror derivative instruments that are carried at fair value on the statement of financial condition. The Company uses an independent third party to perform a market valuation analysis for purchased and written certificate of deposit options (Level 2).

Interest rate swaps – The Company periodically enters into interest rate swap agreements with its commercial customers who desire a fixed rate loan term that is longer than the Company is willing to extend. The Company then enters into a reciprocal swap agreement with a third party that offsets the interest rate risk from the interest rate swap extended to the customer. The interest rate swaps are derivative instruments which are carried at fair value on the statement of financial condition. The Company uses an independent third party to perform a market valuation analysis for both swap positions (Level 2).

The Company also enters into cash flow hedge derivative instrumentsto hedge the risk of variability in cash flows (future interest payments) attributable to changes in the contractually specified LIBOR benchmark interest rate on the Company’s floating rate loan pool.The Company uses an independent third party to perform a market valuation analysis for these derivatives (Level 2).

The following table summarizes the financial assets measured at fair value on a recurring basis segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

March 31, 2021	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
June 30, 2021									Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
	(In Thousands)								(In Thousands)
Assets:
Available for sale securities:
Obligations of U.S. federal government corporations and agencies	$	—	$	38,793	$	—	$	38,793	$	—	$	177,643	$	—	$	177,643
Mortgage-backed securities		—		243,022		—		243,022		—		197,794		—		197,794
Collateralized mortgage obligations		—		110,227		—		110,227		—		294,419		—		294,419
Asset-backed securities		—		191,913		—		191,913		—		229,703		—		229,703
Corporate bonds		—		55,258		—		55,258		—		69,935		—		69,935
Obligations of state and political subdivisions		—		279,377		—		279,377		—		309,634		—		309,634
Equity securities		13,753		—		—		13,753		12,945		—		—		12,945
Loans held for sale, at fair value		—		81,307		134,638		215,945		—		50,411		148,659		199,070
Purchased certificate of deposit option		—		59		—		59		—		48		—		48
Interest rate swaps		—		406		—		406		—		1,223		—		1,223
Cash flow hedge derivatives										—		3,984		—		3,984
Mortgage banking derivative		—		7,957		—		7,957		—		4,157		—		4,157
Liabilities:
Written certificate of deposit option		—		59		—		59		—		48		—		48
Interest rate swaps		—		375		—		375		—		1,264		—		1,264

December 31, 2020	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
	(In Thousands)								(In Thousands)
Assets:
Available for sale securities:
Obligations of U.S. federal government corporations and agencies	$	—	$	40,940	$	—	$	40,940	$	—	$	40,940	$	—	$	40,940
Mortgage-backed securities		—		277,182		—		277,182		—		277,182		—		277,182
Collateralized mortgage obligations		—		106,299		—		106,299		—		106,299		—		106,299
Asset-backed securities		—		30,546		—		30,546		—		30,546		—		30,546
Corporate bonds		—		44,169		—		44,169		—		44,169		—		44,169
Obligations of state and political subdivisions		—		237,518		—		237,518		—		237,518		—		237,518
Equity securities		1,090		—		—		1,090		1,090		—		—		1,090
Loans held for sale, at fair value		—		98,587		123,029		221,616		—		98,587		123,029		221,616
Purchased certificate of deposit option		—		56		—		56		—		56		—		56
Interest rate swaps		—		1,870		—		1,870		—		1,870		—		1,870
Mortgage banking derivative - asset		—		3,833		—		3,833
Mortgage banking derivative										—		3,833		—		3,833
Liabilities:
Written certificate of deposit option		—		56		—		56		—		56		—		56
Interest rate swaps		—		2,036		—		2,036		—		2,036		—		2,036

The tables below present a reconciliation of all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and six month periods ended ~~March 31,~~June 30, 2021 and 2020.

	Construction loans held for sale						Construction loans held for sale
	Three Months Ended March 31,						Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020			2021			2020
Balance of recurring Level 3 assets at beginning of period	$	123,029		$	—		$	134,638		$	44,420		$	123,029		$	—
Total gains (losses) for the period
Included in change in fair value of loans held for sale		(5,568	)		4,962			1,814			2,238			(3,754	)		7,201
Originations		34,003			9,581			30,924			32,685			64,928			42,265
Acquired in acquisition		—			37,711			—			—			—			37,711
Sales		(16,826	)		(7,834	)		(18,717	)		(3,604	)		(35,544	)		(11,438	)
Balance of recurring Level 3 assets at end of period	$	134,638		$	44,420		$	148,659		$	75,739		$	148,659		$	75,739

	Securities available-for-sale				Securities available-for-sale
	Three Months Ended March 31,				Three Months Ended June 30,					Six Months Ended June 30,
	2021		2020		2021		2020			2021		2020
Balance of recurring Level 3 assets at beginning of period	$	—	$	3,411	$	—	$	5,830		$	—	$	3,411
Balance of assets classified as Level 3 assets during the period		—		2,419		—		(5,830	)	$	—	$	(3,411	)
Balance of recurring Level 3 assets at end of period	$	—	$	5,830	$	—	$	—		$	—	$	—

For Level 3 assets and liabilities measured at fair value on a recurring basis, the significant unobservable inputs used in the fair value measurements were as follows:

March 31, 2021

Fair Value

Valuation Technique

Unobservable Inputs

Range of

Inputs

June 30, 2021

Fair Value

Valuation Technique

Unobservable Inputs

Range of

Inputs

(Dollars in Thousands)

Construction loans held for sale

134,638

Comparable sales

Time discount using the 60 day forward contract

0.00% - 2.18%

148,659

Comparable sales

Time discount using the 60 day forward contract

0.00% - 2.18%

December 31, 2020

Fair Value

Valuation Technique

Unobservable Inputs

Range of

Inputs

Fair Value

Valuation Technique

Unobservable Inputs

Range of

Inputs

(Dollars in Thousands)

Construction loans held for sale

123,029

Comparable sales

Time discount using the 60 day forward contract

0.00% - 0.24%

123,029

Comparable sales

Time discount using the 60 day forward contract

0.00% - 0.24%

The following table summarizes the financial assets measured at fair value on a non-recurring basis segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

March 31, 2021	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
June 30, 2021									Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
	(In Thousands)								(In Thousands)
Individually analyzed loans
Commercial real estate	$	-	$	-	$	7,617	$	7,617	$	-	$	-	$	3,131	$	3,131
Commercial		—		—		4,781		4,781		—		—		4,021		4,021
Total individually analyzed loans		—		—		12,398		12,398		—		—		7,152		7,152
Mortgage servicing rights		—		13,868		—		13,868		—		14,973		—		14,973

For Level 3 assets and liabilities measured at fair value on a non-recurring basis as of ~~March 31,~~June 30, 2021, the significant unobservable inputs used in the fair value measurements were as follows:

For Level 3 assets and liabilities measured at fair value on a non-recurring basis as of December 31, 2020, the significant unobservable inputs used in the fair value measurements were as follows:

The Company has elected the fair value option for new applications accepted after January 31, 2020, and subsequently originated for residential mortgage and permanent construction loans held for sale. These loans are intended for sale and the Company believes that fair value is the best indicator of the resolution of these loans. Interest income is recorded based on the contractual terms of the loan and in accordance with the Company’s policies.

The aggregate fair value of the residential mortgage loans held for sale at ~~March 31,~~June 30, 2021 and December 31, 2020 was ~~$81.3~~$50.4 million and $98.6 million, respectively, and they had a contractual balance of ~~$80.2~~$48.7 million and $93.2 million, respectively, for these same periods. The difference between the fair value and the contractual balance is recorded in gains and losses on the sale of loans held for sale. For the three and six months ended ~~March 31,~~June 30, 2021, ~~and 2020, ($4.3)~~$1.0 million and ~~$31,000,~~($3.3) million, respectively, was recorded in gains on the sale of loans held for sale for the change in fair value. For the three and six months ended June 30, 2020, $3.7 million and $4.3 million, respectively, was recorded in gains on the sale of loans held for sale for the change in fair value.

The aggregate fair value of the permanent construction loans held for sale at ~~March 31,~~June 30, 2021 and December 31, 2020, was ~~$134.6~~$148.6 million and $123.0 million, respectively, and they had a contractual balance of ~~$126.7~~$138.9 million and $109.5 million, respectively, for these same periods. The difference between the fair value

and the contractual balance is recorded in gains and losses on the sale of loans held for sale. For the three

and six months ended ~~March 31,~~June 30, 2021, $1.8 million and ~~2020,~~ ($~~5.6)~~3.8) million, respectively, were recorded in gains on the sale of loans held for sale for the change in fair value. For the three and ~~$5.0~~six months ended June 30, 2020, $1.6 million and $7.2 million, respectively, were recorded in gains on the sale of loans held for sale for the change in fair value.

In accordance with FASB ASC Topic 825, the Fair Value Measurements tables are a comparative condensed consolidated statement of financial condition based on carrying amount and estimated fair values of financial instruments as of ~~March 31,~~June 30, 2021, and December 31, 2020. Accordingly, the aggregate fair value amounts presented do not represent the underlying value to Premier.

Much of the information used to arrive at “fair value” is highly subjective and judgmental in nature and therefore the results may not be precise. Subjective factors include, among other things, estimated cash flows, risk characteristics and interest rates, all of which are subject to change. With the exception of investment securities, the Company’s financial instruments are not readily marketable and market prices do not exist. Since negotiated prices for the instruments, which are not readily marketable, depend greatly on the motivation of the buyer and seller, the amounts that will actually be realized or paid per settlement or maturity of these instruments could be significantly different.

The carrying amount of cash and cash equivalents, ~~and notes payable,~~ as a result of their short-term nature, is considered to be equal to fair value and are classified as Level 1.

It was not practicable to determine the fair value of FHLB stock due to restrictions placed on its transferability.

The Company’s loans were valued on an individual basis, with consideration given to the loans’ underlying characteristics, including account types, remaining terms (in months), annual interest rates or coupons, interest types, past delinquencies, timing of principal and interest payments, current market rates, loss exposures, and remaining balances. The model utilizes a discounted cash flow (“DCF”) approach to estimate the fair value of the loans using assumptions for the coupon rates, remaining maturities, prepayment speeds, projected default probabilities, losses given defaults, and estimates of prevailing discount rates. The DCF approach models the credit losses directly in the projected cash flows. The model applies various assumptions regarding credit, interest, and prepayment risks for the loans based on loan types, payment types and fixed or variable classifications. The estimated fair value of individually analyzed loans is based on the fair value of the collateral, less estimated cost to sell, or the present value of the loan’s expected future cash flows (discounted at the loan’s effective interest rate). All individually analyzed loans are classified as Level 3 within the valuation hierarchy.

The fair value of non-interest bearing deposits are considered equal to the amount payable on demand at the reporting date (i.e. carrying value) and are classified as Level 1. The fair value of savings, checking and certain money market accounts are equal to their carrying amounts and are a Level 1 classification. Fair values of fixed rate certificates of deposit are estimated using a DCF calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits resulting in a Level 2 classification.

The fair values of securities sold under repurchase agreements are equal to their carrying amounts resulting in a Level 1 classification. The carrying value of floating rate subordinated debentures was considered to be the carrying value as the debt is floating rate and can be prepaid at any time without penalty. The carrying value of fixed rate subordinated debt is estimated using a DCF calculation that applies interest rates currently being offered in the market to the expected maturity of the debt.

FHLB advances with maturities greater than 90 days are valued based on a DCF analysis, using interest rates currently being quoted for similar characteristics and maturities resulting in a Level 2 classification. The cost or value of any call or put options is based on the estimated cost to settle the option at ~~March~~June 30, 2021.

The carrying value and estimated fair values of financial instruments at June 30, 2021 and December 31, ~~2021.~~2020, were as follows:

			Fair Value Measurements at March 31, 2021										Fair Value Measurements at June 30, 2021
			(In Thousands)										(In Thousands)
	Carrying Value		Total		Level 1		Level 2		Level 3		Carrying Value		Total		Level 1		Level 2		Level 3
Financial Assets:
Cash and cash equivalents	$	303,747	$	303,747	$	303,747	$	—	$	—	$	131,508	$	131,508	$	131,508	$	—	$	—
Securities available for sale		918,590		918,590		—		918,590		—		1,279,128		1,279,128		—		1,279,128		—
Equity securities		13,753		13,753		13,753		—		—		12,945		12,945		12,945		—		—
Federal Home Loan Bank Stock		9,328	N/A		N/A		N/A		N/A			12,747	N/A		N/A		N/A		N/A
Loans receivable, net		5,384,929		5,428,651		—		—		5,428,651		5,277,033		5,335,575		—		—		5,335,575
Loans held for sale, carried at fair value		215,945		215,945		—		81,307		134,638		199,070		199,070		—		50,411		148,659

Financial Liabilities:
Deposits	$	6,351,919	$	6,358,858	$	5,297,065	$	1,061,793	$	—	$	6,291,459	$	6,295,489	$	5,318,295	$	977,194	$	—
Advances from Federal Home Loan Bank												105,000		105,000		—		105,000		—
Subordinated debentures		84,881		83,707		—		83,707		—		84,913		83,533		—		83,533		—

Premier has established equity based compensation plans for its directors and employees. On February 27, 2018, the Board adopted, and the shareholders approved at the 2018 Annual Shareholders Meeting, the Premier Financial Corp. 2018 Equity Incentive Plan (the “2018 Equity Plan”). The 2018 Equity Plan replaced all existing plans, although the Company’s former equity plans remain in existence to the extent there were outstanding grants thereunder at the time the 2018 Equity Plan was approved. In addition, as a result of the Merger, Premier assumed certain outstanding stock options granted under UCFC’s Amended and Restated 2007 Long-Term Incentive Plan and UCFC’s 2015 Long Term Incentive Plan (the “UCFC 2015 Plan”). Premier also assumed the UCFC 2015 Plan with respect to the available shares under the UCFC 2015 Plan as of the effective date of the Merger, with appropriate adjustments to the number of shares available to reflect the Merger. The stock options assumed from UCFC in the Merger will become exercisable solely to purchase shares of Premier, with appropriate adjustments to the number of shares subject to the assumed stock options and the exercise price of such stock options. All awards currently outstanding under prior plans will remain in effect in accordance with their respective terms. Any new awards will be made under the 2018 Equity Plan or the UCFC 2015 Plan. The 2018 Equity Plan allows for issuance of up to 900,000 common shares through the award of options, stock grants, restricted stock units (“RSU”), stock appreciation rights or other stock-based awards. The UCFC 2015 Plan had 126,758 Premier common shares available for issuance immediately after the effective time of the Merger.

As of ~~March 31,~~June 30, 2021, 35,661 options to acquire Premier shares were outstanding at option prices based on the market value of the underlying shares on the date the options were granted. On the date of the Merger, 39,983 Premier options were exchanged for all of the outstanding stock options on the books of UCFC at the same conversion price and ratio applied to UCFC common shares at January 31, 2020. All of these options were fully vested at the time of acquisition. All options expire ten years from the date of grant. Vested options of retirees expire on the earlier of the scheduled expiration date or three months after the retirement date.

The Company has approved a Short-Term Incentive Plan (“STIP”) and a Long-Term Equity Incentive Plan (“LTIP”) for selected members of management. There are two types of LTIP awards: an Executive LTIP and a Key LTIP.

Under the STIPs, the participants can earn a cash payout. The final amount of benefits under the STIPs is determined as of December 31 of the same year and paid out in cash in the first quarter of the following year.

Under each Executive LTIP, the participants may earn between 20% to 50% of their salary for potential payout in the form of equity awards based on the achievement of certain corporate performance targets over a three-year period. The Company granted 86,058 performance stock units to the participants for the 2021 Executive LTIP during the first quarter of 2021. The amount of benefit under the 2020 and 2021 Executive LTIPs will be determined individually at the end of the 36 month performance period ending December 31. The benefits earned under these LTIPs will be paid out in equity in the first quarter following the end of the performance period. The participants are required to be employed on the day of payout in order to receive the payment.

Under each Key LTIP, the participants are granted shares based upon the achievement of certain targets in the prior year. The participants can earn from 5% to 10% of their salary in restricted stock units that vest three years from the date of grant. The Company granted 17,542 RSU’s in the first quarter of 2021 under the 2021 Key LTIP.

In the ~~three~~six months ending ~~March 31,~~June 30, 2021, the Company also granted ~~3,122~~16,846 discretionary RSUs that vest three years from the date of grant and ~~13,708~~36,258 restricted stock grants. Of the ~~13,708~~36,258 restricted stock grants, ~~all~~13,708 were issued to directors and have a one-year vesting period. The remaining shares have a five year tiered vesting schedule. The fair value of all granted restricted shares was determined by the stock price at the date of the grant.

Following is stock option activity under the plans during the ~~three~~six months ended ~~March 31,~~June 30, 2021:

	Options Outstanding			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in 000’s)		Options Outstanding			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in 000’s)
Options outstanding, January 1, 2021		36,261		$	21.59						36,261		$	21.59
Forfeited or cancelled											—			—
Exercised		(600	)		13.80						(600	)		13.80
Granted		—			—						—			—
Options outstanding, March 31, 2021		35,661		$	21.72		5.57	$	411
Exercisable at March 31, 2021		35,661		$	21.72		5.57	$	411
Options outstanding, June 30, 2021											35,661		$	21.72		5.32	$	247
Exercisable at June 30, 2021											35,661		$	21.72		5.32	$	247

Proceeds, related tax benefits realized from options exercised and intrinsic value of options exercised were as follows (in thousands):

	Three Months Ended March 31,				Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020		2021		2020
Proceeds of options exercised	$	8	$	—	$	—	$	—	$	8	$	—
Related tax benefit recognized		—		—		—		40		—		40
Intrinsic value of options exercised		11		—		—		189		11		189

At ~~March 31,~~June 30, 2021, 176,949 PSUs, ~~46,324~~59,758 RSUs and ~~34,416~~56,966 restricted stock grants were unvested. Compensation expense related to PSUs, RSUs, restricted stock grants and the STIP is recognized over the performance period based on the achievements of targets as established under the plan documents or according to a vesting schedule. Total expense of ~~$1.0~~$1.4 million and $2.5 million was recorded during each of the three and six months ended ~~March~~June 31, 2021 compared to expense of $974,000 and $2.0 million for the three and six months ended June 30, 2020. There was approximately ~~$2.3~~$2.8 million and $3.2 million included within other liabilities at ~~March 31,~~June 30, 2021, and December 31, 2020, respectively, related to the STIP.

	Performance Stock Units				Restricted Stock Units					Restricted Stock Grants					Performance Stock Units				Restricted Stock Units					Restricted Stock Grants
Unvested Shares	Shares		Weighted- Average Grant Date Fair Value		Shares			Weighted- Average Grant Date Fair Value		Shares			Weighted- Average Grant Date Fair Value		Shares		Weighted- Average Grant Date Fair Value		Shares			Weighted- Average Grant Date Fair Value		Shares			Weighted- Average Grant Date Fair Value
Unvested at January 1, 2021		90,891	$	26.48		55,759		$	25.18		41,057		$	26.93		90,891	$	26.48		55,759		$	25.18		41,057		$	26.93
Granted		86,058		30.32		20,664			29.11		13,708			29.37		86,058		30.32		34,388			30.77		36,258			31.79
Vested		—		—		(30,099	)		26.15		(20,349	)		26.75		—		—		(27,958	)		26.21		(20,349	)		26.75
Forfeited		—		—		—			—		—			—		—		—		(2,431	)		25.99		—			—
Unvested at March 31, 2021		176,949	$	28.35		46,324		$	26.29		34,416		$	28.01
Unvested at June 30, 2021																176,949	$	28.35		59,758		$	27.87		56,966		$	30.09

The maximum amount of compensation expense that may be earned for the PSUs at ~~March 31,~~June 30, 2021, is approximately $4.9 million in the aggregate. However, the estimated expense that is expected to be earned as

of ~~March 31,~~June 30, 2021, is $3.3 million of which $~~2.4~~$2.1 million is unrecognized at ~~March 31,~~June 30, 2021, and will be recognized over the remaining performance periods.

Premier declared and paid a ~~$0.24~~$0.26 per common stock dividend in the ~~first~~second quarter of 2021 and declared and paid a $0.22 per common stock dividend in the ~~first~~second quarter of 2020.

Basic earnings (loss) per share are calculated using the two-class method. The two-class method is an earnings allocation formula under which earnings (loss) per share is calculated from common stock and participating securities according to dividends declared and participation rights in undistributed earnings. Under this method, all earnings (losses) distributed and undistributed, are allocated to participating securities and common shares based on their respective rights to receive dividends. Unvested share-based payment awards that contain non-forfeitable rights to dividends are considered participating securities (i.e., unvested restricted stock), not subject to performance based measures.

The following table sets forth the computation of basic and diluted earnings (loss) per common share:

	Three Months Ended March 31,					Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020			2021		2020		2021		2020
	(In Thousands, except per share data)					(In Thousands, except per share data)
Basic Earnings (Loss) Per Share:
Net income (loss) available to common shareholders	$	40,996	$	(22,482	)	$	31,385	$	29,057	$	72,381	$	6,575
Less: income (loss) allocated to participating securities		43		(39	)		39		44		104		10
Net income (loss) allocated to common shareholders		40,953		(22,443	)		31,346		29,013		72,277		6,565

Weighted average common shares outstanding including participating securities		37,332		31,721			37,322		37,347		37,327		34,534
Less: Participating securities		39		55			46		57		53		50
Average common shares		37,293		31,666			37,276		37,290		37,274		34,484

Basic earnings (loss) per common share	$	1.10	$	(0.71	)	$	0.84	$	0.78	$	1.94	$	0.19
Diluted Earnings (Loss) Per Share:
Net income (loss) allocated to common shareholders	$	40,953	$	(22,443	)	$	31,346	$	29,013	$	72,277	$	6,565
Weighted average common shares outstanding for basic earnings (loss) per common share		37,293		31,666			37,276		37,290		37,274		34,484
Add: Dilutive effects of stock options and restricted stock units		64		—			82		33		77		42
Average shares and dilutive potential common shares		37,357		31,666			37,358		37,323		37,351		34,526

Diluted earnings (loss) per common share	$	1.10	$	(0.71	)	$	0.84	$	0.78	$	1.94	$	0.19

There were 0 shares for the three and six month period ending ~~March 31,~~June 30, 2021 that were excluded from the diluted earnings per common share calculation as no shares were anti-dilutive during this period. ~~Since net income allocated to common shareholders was negative~~There were 17,100 and 15,411 shares for the ~~quarter ended March 31,~~three and six month periods ending June 30, 2020, ~~there was 0~~respectively, that were excluded from the dilutive ~~effect from stock options or restricted stock units included in the diluted (loss)~~earnings per common share ~~calculation.~~calculation as they were anti-dilutive.

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(In Thousands)									(In Thousands)
At March 31, 2021
At June 30, 2021
Available-for-Sale Securities:
Obligations of U.S. government corporations and agencies	$	38,868	$	771	$	(846	)	$	38,793	$	175,135	$	2,851	$	(343	)	$	177,643
Mortgage-backed securities		243,126		3,284		(3,388	)		243,022		197,517		1,551		(1,274	)		197,794
Collateralized mortgage obligations		109,552		1,225		(550	)		110,227		293,852		1,604		(1,037	)		294,419
Asset-backed securities		191,788		484		(359	)		191,913		228,942		969		(208	)		229,703
Corporate bonds		55,049		524		(315	)		55,258		68,943		1,049		(57	)		69,935
Obligations of state and political subdivisions		280,743		6,051		(7,417	)		279,377		304,760		7,847		(2,973	)		309,634
Total Available-for-Sale	$	919,126	$	12,339	$	(12,875	)	$	918,590	$	1,269,149	$	15,871	$	(5,892	)	$	1,279,128

~~As a result of the Merger, securities with a fair value of $262.8 million were acquired on January 31, 2020.~~

The amortized cost and fair value of the investment securities portfolio at ~~March 31,~~June 30, 2021, are shown below by contractual maturity. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. For purposes of the maturity table, mortgage-backed securities (“MBS”), CMOs and asset-backed securities (“ABS”), which are not due at a single maturity date, have not been allocated over the maturity groupings. These securities may mature earlier than their weighted-average contractual maturities because of principal prepayments.

	Available-for-Sale				Available-for-Sale
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In Thousands)				(In Thousands)
Due in one year or less	$	5,853	$	5,869	$	3,760	$	3,789
Due after one year through five years		29,787		30,284		34,048		34,708
Due after five years through ten years		93,585		95,386		202,616		206,616
Due after ten years		245,435		241,889		308,414		312,099
MBS/CMO/ABS		544,466		545,162		720,311		721,916
	$	919,126	$	918,590	$	1,269,149	$	1,279,128

Investment securities with a carrying amount of ~~$388.9~~$603.0 million at ~~March 31,~~June 30, 2021, were pledged as collateral on public deposits.

The following tables summarize Premier’s securities that were in an unrealized loss position at ~~March 31,~~June 30, 2021, and December 31, 2020:

	Duration of Unrealized Loss Position															Duration of Unrealized Loss Position
	Less than 12 Months					12 Months or Longer					Total					Less than 12 Months					12 Months or Longer					Total
	Fair Value		Gross Unrealized Loss			Fair Value		Gross Unrealized Loss			Fair Value		Unrealized Losses			Fair Value		Gross Unrealized Loss			Fair Value		Gross Unrealized Loss			Fair Value		Unrealized Losses
	(In Thousands)															(In Thousands)
At March 31, 2021
At June 30, 2021
Available-for-sale securities:
Obligations of U.S. government corporations and agencies	$	9,520	$	(846	)	$	-	$	-		$	9,520	$	(846	)	$	9,997	$	(343	)	$	-	$	-		$	9,997	$	(343	)
Mortgage-backed securities		152,648		(3,388	)		—		—			152,648		(3,388	)		125,714		(1,274	)		—		—			125,714		(1,274	)
Collateralized mortgage obligations		26,477		(550	)		—		—			26,477		(550	)		147,592		(1,037	)		—		—			147,592		(1,037	)
Asset-backed securities		76,023		(359	)		—		—			76,023		(359	)		36,749		(208	)		—		—			36,749		(208	)
Corporate bonds		24,995		(256	)		2,528		(59	)		27,523		(315	)		18,006		(53	)		506		(4	)		18,512		(57	)
Obligations of state and political subdivisions		132,120		(7,417	)		—		—			132,120		(7,417	)		119,870		(2,973	)		—		—			119,870		(2,973	)
Total available-for-sale	$	421,783	$	(12,816	)	$	2,528	$	(59	)	$	424,311	$	(12,875	)	$	457,928	$	(5,888	)	$	506	$	(4	)	$	458,434	$	(5,892	)

The Company realized gains from the sale of available-for-sale securities totaling ~~$516,000~~$1.5 million and $2.0 million in the three and six month ~~period~~periods ending ~~March 31,~~June 30, 2021. For the three and six months ended ~~March 31,~~June 30, 2020, the Company had ~~0 gains or~~$2,000 in realized losses from the sale of ~~available-for-sale~~investment securities.

ASU 2016-13 makes targeted improvements to the accounting for credit losses on securities available- for-sale. The concept of other than-temporarily impaired has been replaced with the allowance for credit losses. Unlike securities held to maturity, securities available-for-sale are evaluated on an individual level and pooling of securities is not allowed.

Quarterly, the Company evaluates if any security has a fair value less than its amortized cost. Once these securities are identified, in order to determine whether a decline in fair value resulted from a credit loss or other factors, the Company performs further analysis as outlined below:

At ~~March 31,~~June 30, 2021 and December 31, 2020, the Company held preferred and common stock of various bank holding companies totaling ~~$13.8~~$12.9 million and $1.1 million, respectively. During the three and six months ended ~~March 31,~~June 30, 2021, ~~$1.6 million~~$808,000 of unrealized losses and $802,000 of unrealized gains were recorded within Gain on equity securities on the Consolidated Condensed Statements of Income. During the three and six months ended ~~March 31,~~June 30, 2020, there were 0 unrealized gains or losses recognized.

Loan segments have been identified by evaluating the portfolio based on collateral and credit risk characteristics. Loans receivable consist of the following:

	March 31, 2021			December 31, 2020			June 30, 2021			December 31, 2020
	(In Thousands)						(In Thousands)
Real Estate:
Residential	$	1,168,559		$	1,201,051		$	1,138,433		$	1,201,051
Commercial		2,402,067			2,383,001			2,405,653			2,383,001
Construction		749,190			667,649			830,822			667,649
		4,319,816			4,251,701			4,374,908			4,251,701
Other Loans:
Commercial		1,172,910			1,202,353			1,051,972			1,202,353
Home equity and improvement		257,764			272,701			261,842			272,701
Consumer finance		117,539			120,729			118,526			120,729
		1,548,213			1,595,783			1,432,340			1,595,783
Loans before deferred loan origination fees and costs		5,868,029			5,847,484			5,807,248			5,847,484
Deduct:
Undisbursed construction loan funds		(405,983	)		(355,065	)		(458,156	)		(355,065	)
Net deferred loan origination fees and costs		(2,363	)		(1,179	)		(692	)		(1,179	)
Allowance for credit losses		(74,754	)		(82,079	)		(71,367	)		(82,079	)
Total loans	$	5,384,929		$	5,409,161		$	5,277,033		$	5,409,161

The Company has responded to the pandemic in numerous ways, including by actively participating in the Paycheck Protection Program (“PPP”) and distributing over $600 million to small businesses in our markets. As of ~~March 31,~~June 30, 2021, the company had ~~$443.8~~$287 million in PPP loans, which remained unpaid and were included in other commercial loans in the above loan table.

The following table discloses allowance for credit loss (“ACL”) activity for the three and six months ended ~~March 31,~~June 30, 2021 and 2020 by portfolio segment (in thousands):

Three Months Ended March 31, 2021	1-4 Family Residential Real Estate			Commercial Real Estate			Construction		Commercial			Home Equity and Improvement			Consumer Finance			Total
Three Months Ended June 30, 2021																					Residential Real Estate			Commercial Real Estate			Construction			Commercial			Home Equity and Improvement			Consumer Finance			Total
Beginning Allowance	$	17,534		$	43,417		$	2,741	$	11,665		$	4,739		$	1,983		$	82,079		$	17,508		$	35,272		$	2,776		$	12,191		$	5,181		$	1,826		$	74,754
Charge-Offs		—			—			—		(70	)		(3	)		(36	)		(109	)		—			(605	)		—			—			—			(106	)		(711	)
Recoveries		8			36			—		198			29			27			298			82			153			12			505			165			38			955
Provisions		(34	)		(8,181	)		35		398			416			(148	)		(7,514	)		(2,322	)		(359	)		(49	)		(485	)		(358	)		(58	)		(3,631	)
Ending Allowance	$	17,508		$	35,272		$	2,776	$	12,191		$	5,181		$	1,826		$	74,754		$	15,268		$	34,461		$	2,739		$	12,211		$	4,988		$	1,700		$	71,367

The following table presents the amortized cost basis of collateral-dependent loans by class of loans and collateral type as of ~~March 31,~~June 30, 2021 and December 31, 2020 (in thousands):

	March 31, 2021										June 30, 2021
	Real Estate		Equipment and Machinery		Inventory and Receivables		Vehicles		Total		Real Estate		Equipment and Machinery		Inventory and Receivables		Vehicles		Total
Real Estate:
Residential	$	1,008	$	—	$	—	$	—	$	1,008	$	1,061	$	—	$	—	$	—	$	1,061
Commercial		30,419		—		—		—		30,419		21,444		—		—		—		21,444
Construction		—		—		—		—		—		—		—		—		—		—

Other Loans:
Commercial		2,530		672		6,613		33		9,848		1,912		164		5,432		314		7,822
Home equity and improvement		—		—		—		—		—		—		—		—		—		—
Consumer finance		—		—		—		—		—		—		—		—		—		—

Total	$	33,957	$	672	$	6,613	$	33	$	41,275	$	24,417	$	164	$	5,432	$	314	$	30,327

Non-performing loans include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually analyzed loans. All loans greater than 90 days past due are placed on non-accrual status. The following table presents the current balance of the aggregate amounts of non-performing assets, comprised of non-performing loans and real estate owned as of the dates indicated:

	March 31, 2021		December 31, 2020		June 30, 2021		December 31, 2020
	(In Thousands)				(In Thousands)
Non-accrual loans with reserve	$	35,835	$	35,234	$	32,059	$	35,234
Non-accrual loans without reserve	$	13,463	$	16,448	$	9,237	$	16,448
Loans over 90 days past due and still accruing		—		—		—		—
Total non-performing loans		49,298		51,682		41,296		51,682
Real estate and other assets held for sale		54		343		45		343
Total non-performing assets	$	49,352	$	52,025	$	41,341	$	52,025
Troubled debt restructuring, still accruing	$	6,068	$	7,173	$	5,939	$	7,173

The following table presents the aging of the amortized cost in past due and non-accrual loans as of ~~March 31,~~June 30, 2021, by class of loans (in thousands):

	Current		30 - 59 days		60 - 89 days		90 + days		Total Past Due		Total Non- Accrual		Current		30 - 59 days		60 - 89 days		90 + days		Total Past Due		Total Non- Accrual
Real Estate:
Residential		1,145,380		757		4,624		8,182		13,563		9,197		1,116,334		460		4,533		7,203		12,196		8,337
Commercial		2,381,959		216		574		957		1,747		11,799		2,395,039		142		167		1,404		1,713		11,706
Construction		342,379		21		564		243		828		243		372,086		—		580		—		580		—

Other Loans:
Commercial		1,145,483		235		63		389		687		1,686		1,028,840		717		—		441		1,158		2,253
Home equity and improvement		250,442		727		233		1,647		2,607		2,173		254,069		1,474		380		1,696		3,550		2,114
Consumer finance		114,402		878		461		1,577		2,916		1,676		115,555		1,087		368		1,528		2,983		1,633
PCD		41,778		728		344		14,440		15,512		22,524		35,181		126		1,010		7,980		9,116		15,253

Total Loans	$	5,421,823	$	3,562	$	6,863	$	27,435	$	37,860	$	49,298	$	5,317,104	$	4,006	$	7,038	$	20,252	$	31,296	$	41,296

The following table presents the aging of the recorded investment in past due and non-accrual loans as of December 31, 2020, by class of loans (in thousands):

As of ~~March 31,~~June 30, 2021, and December 31, 2020, the Company had a recorded investment in troubled debt restructurings (“TDRs”) of ~~$12.5~~$11.9 million and $16.6 million, respectively. The Company allocated ~~$697,000~~$616,000 and $883,000 of specific reserves to those loans at ~~March 31,~~June 30, 2021, and December 31, 2020, respectively, and had committed to lend additional amounts totaling up to ~~$277,000~~$352,000 and $303,000 at ~~March 31,~~June 30, 2021, and December 31, 2020, respectively.

The Company is working with borrowers impacted by the COVID-19 pandemic by providing modifications to include either interest only deferral or principal and interest deferral. These modifications

range from one to nine months. As of ~~March 31,~~June 30, 2021, the Company had approximately ~~$35.8 million~~$13,000 in active deferrals compared to December 31, 2020 at $53.5~~53.4~~ million. A majority of these modifications are excluded from TDR classification under Section 4013 of the CARES Act or under applicable interagency guidance of the federal banking regulators. A modified loan will be considered current and will continue to accrue interest during the deferral period unless repayment of the loan under contractual terms is not expected and thereby loans will be placed in non-accrual.

~~The following table is a breakout of commercial deferrals by expiration (in thousands):~~

The Company offers various types of concessions when modifying a loan, however, forgiveness of principal is rarely granted. Each TDR is uniquely designed to meet the specific needs of the borrower. Commercial and industrial loans modified in a TDR often involve temporary interest-only payments, term extensions and converting revolving credit lines to term loans. Additional collateral or an additional guarantor is often requested when granting a concession. Commercial mortgage loans modified in a TDR often involve temporary interest-only payments, re-amortization of remaining debt in order to lower payments and sometimes reducing the interest rate lower than the current market rate. Residential mortgage loans modified in a TDR are comprised of loans where monthly payments are lowered, either through interest rate reductions or principal only payments for a period of time, to accommodate the borrowers’ financial needs, interest is capitalized into principal, or the term and amortization are extended. Home equity modifications are made infrequently and usually involve providing an interest rate that is lower than the borrower would be able to obtain due to credit issues. All retail loans where the borrower is in bankruptcy are classified as TDRs regardless of whether or not a concession is made.

Of the loans modified in a TDR as of ~~March 31,~~June 30, 2021, ~~$6.5~~$5.9 million were on non-accrual status and partial charge-offs have in some cases been taken against the outstanding balance. Loans modified as a TDR may have the financial effect of increasing the allowance associated with the loan. If the loan is determined to be collateral dependent, the estimated fair value of the collateral, less any selling costs is used to determine if there is a need for a specific allowance or charge-off. If the loan is determined to be cash flow dependent, the allowance is measured based on the present value of expected future cash flows discounted at the loan’s pre-modification effective interest rate.

The following tables present loans by class modified as TDRs that occurred during the three and six months ended ~~March 31,~~June 30, 2021, and ~~March 31,~~June 30, 2020:

The loans described above increased the ACL by ~~$6,000~~$367,000 and $373,000 in the three and six months ended ~~March 31,~~June 30, 2021.

	Loans Modified as a TDR for the Three Months Ended March 31, 2020 ($ in thousands)				Loans Modified as a TDR for the Three Months Ended June 30, 2020 ($ in thousands)				Loans Modified as a TDR for the Six Months Ended June 30, 2020 ($ in thousands)
Troubled Debt Restructurings	Number of Loans		Recorded Investment (as of period end)		Number of Loans		Recorded Investment (as of period end)		Number of Loans		Recorded Investment (as of period end)
Real Estate:
Residential		2	$	378		3	$	231		5	$	609
Commercial		1		93		3		6,783		4		6,876
Construction		—		—		—		—		—		—

Other Loans:
Commercial		5		156		—		—		5		156
Home equity and improvement		1		26		—		—		1		26
Consumer finance		—		—		—		—		—		—

Total		9	$	653		6	$	7,014		15	$	7,667

The loans described above increased the ACL by ~~$29,000~~$3,000 and $32,000 in the three and six months ended ~~March 31,~~June 30, 2020.

In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed on the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification.

There were 0 TDRs that subsequently defaulted as of ~~March 31,~~June 30, 2021. The following table presents loans by class modified as TDRs for which there was a payment default within twelve months following the modification during the three and six months ended ~~March 31,~~June 30, 2020:

	Three Months Ended March 31, 2020				Three Months Ended June 30, 2020				For the Six Months Ended June 30, 2020
	($ in thousands)				($ in thousands)				($ in thousands)
Troubled Debt Restructurings That Subsequently Defaulted	Number of Loans		Recorded Investment (as of period end)		Number of Loans		Recorded Investment (as of period end)		Number of Loans		Recorded Investment (as of period end)
Real Estate:
Residential		3	$	268		3	$	168		6	$	436
Commercial		1		172		1		22		2		194
Construction		—		—		—		—		—		—

Other Loans:
Commercial		1		132		1		118		2		250
Home equity and improvement		1		146		2		180		3		326
Consumer finance		—		—		1		21		1		21

Total		6	$	718		8	$	509		14	$	1,227

The TDRs that subsequently defaulted described above increased the ACL by $~~15,000~~30,000 and $45,000 for the three and six months ended ~~March 31,~~June 30, 2020.

Loans are categorized into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. Loans are analyzed individually by classifying the loans by credit risk. This analysis includes all non-homogeneous loans, such as commercial and commercial real estate loans and certain homogenous mortgage, home equity and consumer loans. This analysis is performed on a quarterly basis. Premier uses the following definitions for risk ratings:

Special Mention. Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution's credit position at some future date.

Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans. As of ~~March 31,~~June 30, 2021, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows (in thousands):

Class	Unclassified		Special Mention		Substandard		Doubtful		Total classified		Total		Unclassified		Special Mention		Substandard		Doubtful		Total classified		Total
Real Estate:
Residential		1,150,158		1,173		7,612		—		7,612		1,158,943	$	1,117,652	$	1,117	$	9,761	$	-	$	9,761	$	1,128,530
Commercial		2,219,717		115,758		48,231		—		48,231		2,383,706		2,221,019		132,099		43,634		—		43,634		2,396,752
Construction		321,838		21,126		243		—		243		343,207		357,273		15,393		—		—		—		372,666

Other Loans:
Commercial		1,097,603		25,400		23,167		—		23,167		1,146,170		982,960		24,898		22,140		—		22,140		1,029,998
Home equity and improvement		250,944		—		2,105		—		2,105		253,049		255,498		—		2,121		—		2,121		257,619
Consumer finance		115,639		—		1,679		—		1,679		117,318		116,911		—		1,627		—		1,627		118,538
PCD		23,956		1,748		31,586		—		31,586		57,290		21,328		905		22,064		—		22,064		44,297

Total Loans	$	5,179,855	$	165,205	$	114,623	$	—	$	114,623	$	5,459,683	$	5,072,641	$	174,412	$	101,347	$	—	$	101,347	$	5,348,400

As of December 31, 2020, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows (in thousands):

Class	Unclassified		Special Mention		Substandard		Doubtful		Total classified		Total		Unclassified		Special Mention		Substandard		Doubtful		Total classified		Total
Real Estate:
Residential		1,187,923		795		2,363		—		2,363		1,191,081	$	1,187,923	$	795	$	2,363	$	-	$	2,363	$	1,191,081
Commercial		2,203,652		111,039		45,464		—		45,464		2,360,155		2,203,652		111,039		45,464		—		45,464		2,360,155
Construction		299,866		12,718		—		—		—		312,584		299,866		12,718		—		—		—		312,584

Other Loans:
Commercial		1,142,289		23,907		6,847		—		6,847		1,173,043		1,142,289		23,907		6,847		—		6,847		1,173,043
Home equity and improvement		267,350		—		439		—		439		267,789		267,350		—		439		—		439		267,789
Consumer finance		120,682		—		105		—		105		120,787		120,682		—		105		—		105		120,787
PCD		26,829		3,813		35,159		—		35,159		65,801		26,829		3,813		35,159		—		35,159		65,801

Total Loans	$	5,248,591	$	152,272	$	90,377	$	—	$	90,377	$	5,491,240	$	5,248,591	$	152,272	$	90,377	$	—	$	90,377	$	5,491,240

The tables below presents the amortized cost basis of loans by credit quality indicator and class of loans as of ~~March 31,~~June 30, 2021 and December 31, 2020 (in thousands):

	Term of loans by origination																Term of loans by origination
	2021		2020		2019		2018		2017		Prior		Revolving Loans		Total		2021		2020		2019		2018		2017		Prior		Revolving Loans		Total
As of March 31, 2021
As of June 30, 2021

Real Estate
Residential:
Risk Rating
Pass	$	24,792	$	315,724	$	163,589	$	114,232	$	110,887	$	419,110	$	1,824	$	1,150,158	$	95,942	$	334,920	$	139,418	$	80,775	$	91,380	$	373,205	$	2,012	$	1,117,652
Special Mention		—		197		—		—		61		222		693		1,173		—		194		—		—		61		147		715		1,117
Substandard		—		—		812		957		816		5,027		—		7,612		—		213		1,478		1,230		1,749		5,091		—		9,761
Doubtful		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Total	$	24,792	$	315,921	$	164,401	$	115,189	$	111,764	$	424,359	$	2,517	$	1,158,943	$	95,942	$	335,327	$	140,896	$	82,005	$	93,190	$	378,443	$	2,727	$	1,128,530

Commercial:
Risk Rating
Pass	$	94,527	$	524,710	$	451,219	$	284,383	$	279,152	$	570,348	$	15,378	$	2,219,717	$	217,467	$	497,381	$	429,829	$	272,889	$	260,478	$	528,595	$	14,380	$	2,221,019
Special Mention		—		5,992		6,768		13,063		59,870		29,170		895		115,758		366		6,560		6,717		19,197		65,663		32,645		951		132,099
Substandard		—		439		6,967		16,886		1,106		20,703		2,130		48,231		—		436		6,834		15,871		1,772		17,352		1,369		43,634
Doubtful		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Total	$	94,527	$	531,141	$	464,954	$	314,332	$	340,128	$	620,221	$	18,403	$	2,383,706	$	217,833	$	504,377	$	443,380	$	307,957	$	327,913	$	578,592	$	16,700	$	2,396,752

Construction:
Risk Rating
Pass	$	25,201	$	121,539	$	89,755	$	71,267	$	10,548	$	3,528	$	-	$	321,838	$	83,204	$	124,839	$	89,442	$	49,145	$	10,497	$	146	$	-	$	357,273
Special Mention		—		6,767		—		13,302		1,057		—		—		21,126		—		8,310		—		6,036		1,047		—		—		15,393
Substandard		—		—		243		—		—		—		—		243		—		—				—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Total	$	25,201	$	128,306	$	89,998	$	84,569	$	11,605	$	3,528	$	-	$	343,207	$	83,204	$	133,149	$	89,442	$	55,181	$	11,544	$	146	$	-	$	372,666

Other Loans
Commercial:
Risk Rating
Pass	$	191,460	$	431,081	$	118,396	$	73,640	$	35,277	$	34,149	$	213,600	$	1,097,603	$	274,168	$	242,844	$	105,501	$	65,309	$	32,406	$	27,628	$	235,104	$	982,960
Special Mention		—		999		5,546		2,363		1,849		5,095		9,548		25,400		—		999		4,691		2,458		1,743		5,004		10,003		24,898
Substandard		100		16,676		1,290		429		812		467		3,393		23,167		100		16,436		1,788		289		735		472		2,320		22,140
Doubtful		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Total	$	191,560	$	448,756	$	125,232	$	76,432	$	37,938	$	39,711	$	226,541	$	1,146,170	$	274,268	$	260,279	$	111,980	$	68,056	$	34,884	$	33,104	$	247,427	$	1,029,998

Home equity and Improvement:
Risk Rating
Pass	$	4,768	$	8,419	$	6,740	$	4,014	$	7,113	$	35,013	$	184,877	$	250,944	$	12,376	$	7,923	$	5,795	$	3,438	$	6,504	$	33,765	$	185,697	$	255,498
Special Mention		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Substandard		—		—		28		52		19		552		1,454		2,105		—		—		28		50		28		498		1,517		2,121
Doubtful		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Total	$	4,768	$	8,419	$	6,768	$	4,066	$	7,132	$	35,565	$	186,331	$	253,049	$	12,376	$	7,923	$	5,823	$	3,488	$	6,532	$	34,263	$	187,214	$	257,619

Consumer Finance:
Risk Rating
Pass	$	8,784	$	33,962	$	33,007	$	16,542	$	8,571	$	5,926	$	8,847	$	115,639	$	23,134	$	31,069	$	29,068	$	13,982	$	6,953	$	4,645	$	8,060	$	116,911
Special Mention		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Substandard		—		639		696		111		42		164		27		1,679		—		669		698		125		26		104		5		1,627
Doubtful		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Total	$	8,784	$	34,601	$	33,703	$	16,653	$	8,613	$	6,090	$	8,874	$	117,318	$	23,134	$	31,738	$	29,766	$	14,107	$	6,979	$	4,749	$	8,065	$	118,538

PCD:
Risk Rating
Pass	$	-	$	-	$	219	$	2,236	$	1,907	$	16,895	$	2,699	$	23,956	$	-	$	-	$	214	$	1,855	$	2,085	$	13,543	$	3,631	$	21,328
Special Mention		—		—		—		—		—		1,748		—		1,748		—		—		—		—		28		644		233		905
Substandard		—		—		35		90		14,766		10,551		6,144		31,586		—		—		35		57		9,320		9,206		3,446		22,064
Doubtful		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Total	$	-	$	-	$	254	$	2,326	$	16,673	$	29,194	$	8,843	$	57,290	$	-	$	-	$	249	$	1,912	$	11,433	$	23,393	$	7,310	$	44,297

	Term of loans by origination
	2020		2019		2018		2017			2016		Prior		Revolving Loans		Total
As of December 31, 2020

Real Estate
Residential:
Risk Rating
Pass	$	250,979	$	196,158	$	136,247	$	130,759		$	137,581	$	333,572	$	2,627	$	1,187,923
Special Mention		199		—		—		62			116		211		207		795
Substandard		—		74		289		252			136		1,612				2,363
Doubtful		—		—		—		—			—		—		—		—
Total	$	251,178	$	196,232	$	136,536	$	131,073		$	137,833	$	335,395	$	2,834	$	1,191,081

Commercial:
Risk Rating
Pass	$	517,691	$	457,905	$	299,072	$	300,573		$	198,247	$	414,082	$	16,082	$	2,203,652
Special Mention		6,014		7,239		10,452		60,712			7,977		17,723		922		111,039
Substandard		—		279		18,851		1,937			3,143		19,107		2,147		45,464
Doubtful		—		—		—		—			—		—		—		—
Total	$	523,705	$	465,423	$	328,375	$	363,222		$	209,367	$	450,912	$	19,151	$	2,360,155

Construction:
Risk Rating
Pass	$	101,616	$	100,553	$	82,972	$	11,666		$	2,911	$	148	$	-	$	299,866
Special Mention		5,587		—		7,131		—			—		—		—		12,718
Substandard		—		—		—		—			—		—		—		—
Doubtful		—		—		—		—			—		—		—		—
Total	$	107,203	$	100,553	$	90,103	$	11,666		$	2,911	$	148	$	-	$	312,584

Other Loans
Commercial:
Risk Rating
Pass	$	568,678	$	144,977	$	82,492	$	42,421		$	21,262	$	21,969	$	260,490	$	1,142,289
Special Mention		1,180		2,026		2,514		2,109			37		5,121		10,920		23,907
Substandard		148		201		497		543			257		269		4,932		6,847
Doubtful		—		—		—		—			—		—		—		—
Total	$	570,006	$	147,204	$	85,503	$	45,073		$	21,556	$	27,359	$	276,342	$	1,173,043

Home equity and Improvement:
Risk Rating
Pass	$	8,736	$	7,483	$	4,508	$	7,963		$	7,748	$	31,382	$	199,530	$	267,350
Special Mention		—		—		—		—			—		—		—		—
Substandard		—		—		—		—			—		86		353		439
Doubtful		—		—		—		—			—		—		—		—
Total	$	8,736	$	7,483	$	4,508	$	7,963		$	7,748	$	31,468	$	199,883	$	267,789

Consumer Finance:
Risk Rating
Pass	$	38,665	$	37,601	$	19,401	$	10,607		$	4,393	$	3,272	$	6,743	$	120,682
Special Mention		—		—		—		—	��		—		—		—		—
Substandard		—		98		3		—			4		—		—		105
Doubtful		—		—		—		—			—		—		—		—
Total	$	38,665	$	37,699	$	19,404	$	10,607		$	4,397	$	3,272	$	6,743	$	120,787

PCD:
Risk Rating
Pass	$	-	$	45	$	2,378	$	2,547		$	1,524	$	18,998	$	1,337	$	26,829
Special Mention		—		—		—		1,160			509		1,758		386		3,813
Substandard		—		—		—		14,371			2,502		7,207		11,079		35,159
Doubtful		—		—		—		—			—		—		—		—
Total	$	-	$	45	$	2,378	$	18,078		$	4,535	$	27,963	$	12,802	$	65,801

The Company has adopted ASU 2016-13 (Topic 326 – Credit Losses) to calculate the ACL, which requires a projection of credit loss over the contract lifetime of the credit adjusted for prepayment tendencies. This valuation account is deducted from the loans amortized cost basis to present the net amount expected to be collected on the loan. The ACL is adjusted through the provision for credit losses and reduced by net charge offs of loans.

The credit loss estimation process involves procedures that consider the unique characteristics of the Company’s portfolio segments. These segments are further disaggregated into the loan pools for monitoring. When computing allowance levels, a model of risk characteristics, such as loss history and delinquency status, along with current conditions and a supportable forecast is used to determine credit loss assumptions.

The Company is generally utilizing two methodologies to analyze loan pools, DCF and probability of default/loss given default (“PD/LGD”).

A default can be triggered by one of several different asset quality factors including past due status, non-accrual status, TDR status or if the loan has had a charge-off. The PD/LGD utilizes charge off data from the Federal Financial Institutions Examination Council to construct a default rate. This default rate is further segmented based on the risk of the credit assigning a higher default rate to riskier credits.

The DCF methodology was selected as the most appropriate for loan segments with longer average lives and regular payment structures. The DCF model has two key components, the loss driver analysis combined with a cash flow analysis. The contractual cash flow is adjusted for PD/LGD and prepayment speed to establish a reserve level. The prepayment studies are updated quarterly by a third-party for each applicable pool. 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 remaining life method was selected for the consumer loan segment since the pool contains loans with many different structures and payment streams and collateral. The weighted average remaining life uses an average annual charge-off rate applied to the contractual term, further adjusted for estimated prepayments to determine the unadjusted historical charge-off rate for the remaining balance of assets.

According to the accounting standard an entity may make an accounting policy election not to measure an allowance for credit losses for accrued interest receivable if the entity writes off the applicable accrued interest receivable balance in a timely manner. The Company has made the accounting policy election not to measure an allowance for credit losses for accrued interest receivables for all loan segments. Current policy dictates that a loan will be placed on nonaccrual status, with the current accrued interest receivable balance being written off, upon the loan being 90 days delinquent or when the loan is deemed to be collateral dependent and the collateral analysis shows less than 1.2 times discounted collateral coverage based on a current assessment of the value of the collateral.

In addition to the ASC Topic 326 requires the Company to establish a liability for anticipated credit losses for unfunded commitments. To accomplish this, the company must first establishes a loss expectation for extended (funded) commitments. This loss expectation, expressed as a ratio to the amortized cost basis, is then applied to the portion of unfunded commitments not considered unilaterally cancelable, and considered by the company’s management as likely to fund over the life of the instrument. At ~~March 31,~~June 30, 2021, the Company had $1.4 billion in unfunded commitments and set aside ~~$6.0~~$5.6 million in anticipated credit losses. This reserve is recorded in other liabilities as opposed to the ACL.

The determination of ACL is complex and the Company makes decisions on the effects of matters that are inherently uncertain. Evaluations of the loan portfolio and individual credits require certain estimates, assumptions and judgements as to the facts and circumstances related to particular situations or credits. There may be significant changes in the ACL in future periods determined by prevailing factors at that point in time along with future forecasts.

As a result of the Merger, the Company acquired $2.2 billion in loans. Par value of purchased loans follows (in thousands):

Under ASU Topic 326, when loans are purchased with evidence of more than insignificant deterioration of credit, they are accounted for as 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 on the acquisition date. These loans are assessed on a regular basis and subsequent adjustments to the ACL are recorded on the income statement. On January 31, 2020, the Company acquired PCD loans with a fair value of $79.1 million, credit discount $7.7 million and a noncredit discount of $4.1 million. The outstanding balance and related allowance on these loans as of ~~March 31,~~June 30, 2021 and December 31, 2020 is as follows (in thousands):

	As of March 31, 2021				As of December 31, 2020				As of June 30,2021				As of December 31, 2020
	Loan Balance		ACL Balance		Loan Balance		ACL Balance		Loan Balance		ACL Balance		Loan Balance		ACL Balance
	(In Thousands)				(In Thousands)				(In Thousands)				(In Thousands)
Real Estate:
Residential	$	14,418	$	278	$	14,895	$	201	$	13,336	$	228	$	14,895	$	201
Commercial		21,380		2,098		24,334		2,286		12,063		772		24,334		2,286
Construction		—		—		—		—		—		—		—		—
		35,798		2,376		39,229		2,487		25,399		1,000		39,229		2,487
Other Loans:
Commercial		15,962		2,149		20,990		1,896		13,912		1,419		20,990		1,896
Home equity and improvement		4,715		235		4,912		214		4,223		217		4,912		214
Consumer finance		815		15		670		20		763		14		670		20
		21,492		2,399		26,572		2,130		18,898		1,650		26,572		2,130
Total	$	57,290	$	4,775	$	65,801	$	4,617	$	44,297	$	2,650	$	65,801	$	4,617

Consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure totaled ~~$835,000~~$910,000 as of ~~March 31,~~June 30, 2021, and $784,000 as of December 31, 2020.

Net revenues from the sales and servicing of mortgage loans consisted of the following:

	Three Months Ended March 31,						Three Months Ended June 30,					Six Months Ended June 30,
	2021			2020			2021		2020			2021		2020
	(In Thousands)						(In Thousands)
Gain from sale of mortgage loans	$	5,640		$	4,902
Mortgage banking gain, net							$	2,670	$	11,530		$	8,311	$	16,432
Mortgage loans servicing revenue (expense):
Mortgage loans servicing revenue		1,917			1,594			1,888		1,888			3,805		3,482
Amortization of mortgage servicing rights		(2,344	)		(1,163	)		(1,953)		(2,181	)		(4,297)		(3,344	)
Mortgage servicing rights valuation adjustments		5,320			(4,485	)		(448)		(1,369	)		4,872		(5,854	)
		4,893			(4,054	)		(513)		(1,662	)		4,380		(5,716	)

Net revenue from sale and servicing of mortgage loans	$	10,533		$	848		$	2,157	$	9,868		$	12,691	$	10,716

The unpaid principal balance of residential mortgage loans serviced for third parties was $2.9 billion at ~~March 31,~~June 30, 2021, and ~~$3.0~~$2.9 billion at December 31, 2020.

Activity for capitalized mortgage servicing rights and the related valuation allowance follows for the three and six months ended ~~March 31,~~June 30, 2021 and 2020:

	Three Months Ended March 31,						Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021		2020			��	2021		2020
	(In Thousands)						(In Thousands)
Mortgage servicing assets:
Balance at beginning of period	$	21,666		$	10,801		$	21,696	$	20,761			$	21,666	$	10,801
Loans sold, servicing retained		2,374			1,376			1,939		2,454				4,313		3,830
Mortgage servicing rights acquired		—			9,747			—		—				—		9,747
Amortization		(2,344	)		(1,163	)		(1,953)		(2,181	)			(4,297)		(3,344	)
Carrying value before valuation allowance at end of period		21,696			20,761			21,682		21,034				21,682		21,034

Valuation allowance:
Balance at beginning of period		(8,513	)		(534	)		(3,193)		(5,019	)			(8,513)		(534	)
Impairment recovery (charges)		5,320			(4,485	)		(448)		(1,369	)			4,872		(5,854	)
Balance at end of period		(3,193	)		(5,019	)		(3,641)		(6,388	)			(3,641)		(6,388	)
Net carrying value of MSRs at end of period	$	18,503		$	15,742		$	18,041	$	14,646			$	18,041	$	14,646
Fair value of MSRs at end of period	$	18,695		$	16,105		$	18,054	$	14,646			$	18,054	$	14,646

Amortization of mortgage servicing rights is computed based on payments and payoffs of the related mortgage loans serviced. Estimates of future amortization expense are not easily estimable.

The Company has no accrual for secondary market buy-back activity at ~~March 31,~~June 30, 2021 based on management’s estimate of potential losses from this activity. A liability of $43,000 was accrued at December 31, 2020. The Company recognized a credit of $43,000 and $43,000 related to the reduction of the accrual in the three and six months ended ~~March 31,~~June 30, 2021. There was 0 expense or credit recognized in the three and six months ended ~~March 31,~~June 30, 2020.

The Company’s lease agreements have maturity dates ranging from April 2021 to September 2044, some of which include options for multiple five and ten year extensions. The weighted average remaining life of the lease term for these leases was ~~14.84~~14.96 years as of ~~March 31,~~June 30, 2021 and 15.09 years as of December 31, 2020. The weighted average discount rate for leases was ~~2.59%~~2.62% as of ~~March 31,~~June 30, 2021 and 2.61% as of December 31, 2020.

The total operating lease costs were $664,000 and $1.2 million for the three and six months ended ~~March 31,~~June 30, 2021, and ~~$517,000~~$592,000 and $1.1 million for the three and six months ended ~~March 31,~~June 30, 2020. The right-of-use asset, included in other assets, was ~~$16.9~~$16.4 million and $16.9 million at ~~March 31,~~June 30, 2021 and December 31, 2020, respectively. The lease liabilities, included in other liabilities, were ~~$17.7~~$17.1 million and $17.8 million as of ~~March 31,~~June 30, 2021 and December 31, 2020, respectively.

Undiscounted cash flows included in lease liabilities have expected contractual payments as follows:

(in thousands)	March 31, 2021			June 30, 2021
2021	$	1,764		$	2,367
2022		2,020			1,830
2023		1,638			1,497
2024		1,412			1,312
2025		1,259			1,158
Thereafter		13,761			13,753
Total undiscounted minimum lease payments	$	21,854			21,917
Present value adjustment		(4,132	)		(4,862	)
Total lease liabilities	$	17,722		$	17,055

	March 31, 2021		December 31, 2020		June 30, 2021		December 31, 2020
	(In Thousands)				(In Thousands)
Non-interest-bearing checking accounts	$	1,728,895	$	1,597,262	$	1,649,664	$	1,597,262
Interest-bearing checking and money market accounts		2,806,271		2,627,669		2,890,769		2,627,669
Savings deposits		761,899		700,480		777,862		700,480
Retail certificates of deposit less than $250,000		842,624		912,006		720,317		912,006
Retail certificates of deposit greater than $250,000		212,230		210,424		252,847		210,424
	$	6,351,919	$	6,047,841	$	6,291,459	$	6,047,841

~~Premier had 0~~Premier’s FHLB advances ~~outstanding at either March 31, 2021 or December 31, 2020. Premier’s~~and junior subordinated debentures owed to unconsolidated subsidiary trusts and subordinated debentures are comprised of the ~~following:~~following:

	March 31, 2021		December 31, 2020		June 30, 2021		December 31, 2020
	(In Thousands)				(In Thousands)
FHLB Advances:
Overnight advances					$	105,000		—
Total					$	105,000	$	—
Junior subordinated debentures owed to unconsolidated subsidiary trusts	$	36,083	$	36,083	$	36,083	$	36,083
Subordinated debentures		48,798		48,777	$	48,830	$	48,777

In September 2020, the Company completed the issuance of $50.0 million aggregate principal amount, fixed-to-floating rate subordinated notes due September 30, 2030 in a private offering exempt from the registration requirements under the Securities Act of 1933, as amended. The notes carry a fixed rate of 4.0% for five years at which time they will convert to a floating rate based on the secured overnight borrowing rate, plus a spread of 388.5 basis points. The Company may, at its option, beginning September 30, 2025, redeem the notes, in whole or in part, from time to time, subject to certain conditions. The net proceeds from the sale were approximately $48.7 million, after deducting the estimated offering expenses. The Company intends to use the net proceeds for general corporate purposes, which may include, without limitation, providing capital to support its growth organically or through strategic acquisitions, repaying indebtedness, in financing investments, capital expenditures, repurchasing its common shares and for investments in the Bank as regulatory capital. The subordinated debentures are included in Total Capital under current regulatory guidelines and interpretations.

In March 2007, the Company sponsored an affiliated trust, First Defiance Statutory Trust II (“Trust Affiliate II”) that issued $15.0 million of Guaranteed Capital Trust Securities (“Trust Preferred Securities”). In connection with this transaction, the Company issued $15.5 million of Junior Subordinated Deferrable Interest Debentures (Subordinated Debentures) to Trust Affiliate II. The Company formed Trust Affiliate II for the purpose of issuing Trust Preferred Securities to third-party investors and investing the proceeds from the sale of these capital securities solely in Subordinated Debentures of the Company. The Subordinated Debentures held by Trust Affiliate II are the sole assets of that trust. The Company is not considered the primary beneficiary of Trust Affiliate II (variable interest entity), therefore the trust is not consolidated in the Company’s financial statements, but rather the subordinated debentures are shown as a liability. Distributions on the Trust Preferred Securities issued by Trust Affiliate II are payable quarterly at a variable rate equal to the three-month LIBOR rate plus 1.5%. The coupon rate payable on the Trust Preferred Securities issued by Trust Affiliate II was ~~1.68%~~1.62% as of ~~March 31,~~June 30, 2021, and 1.72% as of December 31, 2020.

The Trust Preferred Securities issued by Trust Affiliate II are subject to mandatory redemption, in whole or part, upon repayment of the Subordinated Debentures. The Company has entered into an agreement that fully and unconditionally guarantees the Trust Preferred Securities subject to the terms of the guarantee.

The Trust Preferred Securities and Subordinated Debentures mature on September 15, 2037, but can be redeemed at the Company’s option at any time now.

The Company also sponsored an affiliated trust, First Defiance Statutory Trust I (“Trust Affiliate I”) that issued $20.0 million of Trust Preferred Securities in 2005. In connection with this transaction, the Company issued $20.6 million of Subordinated Debentures to Trust Affiliate I. Trust Affiliate I was formed for the purpose of issuing Trust Preferred Securities to third-party investors and investing the proceeds from the sale of these capital securities solely in Subordinated Debentures of the Company. The Junior Debentures held by Trust Affiliate I are the sole assets of the trust. The Company is not considered the primary beneficiary of Trust Affiliate I (variable interest entity), therefore the trust is not consolidated in the Company’s financial statements, but rather the subordinated debentures are shown as a liability. Distributions on the Trust Preferred Securities issued by Trust Affiliate I are payable quarterly at a variable rate equal to the three-month LIBOR rate plus 1.38%. The coupon rate payable on the Trust Preferred Securities issued by Trust Affiliate I was ~~1.56%~~1.50% and 1.60% on ~~March 31,~~June 30, 2021 and December 31, 2020, respectively.

The Trust Preferred Securities issued by Trust Affiliate I are subject to mandatory redemption, in whole or in part, upon repayment of the Subordinated Debentures. The Company has entered into an agreement that fully and unconditionally guarantees the Trust Preferred Securities subject to the terms of the guarantee. The Trust Preferred Securities and Subordinated Debentures mature on December 15, 2035, but can be redeemed at the Company’s option at any time now.

The Subordinated Debentures related to the Trust Preferred Securities may be included in Tier 1 capital (with certain limitations applicable) under current regulatory guidelines and interpretations.

Interest on both issues of Trust Preferred Securities may be deferred for a period of up to five years at the option of the issuer.

Loan commitments are made to accommodate the financial needs of Premier’s customers commitments that result in market risk. Standby letters of credit commit the Company to make payments on behalf of customers when certain specified future events occur. They primarily are issued to facilitate customers’ trade transactions.

Both arrangements have credit risk, essentially the same as that involved in extending loans to customers, and are subject to the Company’s normal credit policies. Collateral (e.g., securities, receivables, inventory and equipment) is obtained based on a credit assessment of the customer.

The Company’s maximum obligation to extend credit for loan commitments (unfunded loans and unused lines of credit) and standby letters of credit outstanding as of the periods stated below were as follows (in thousands):


	March 31, 2021		December 31, 2020		June 30, 2021		December 31, 2020
Commitments to make loans	$	773,625	$	702,103	$	892,684	$	702,103
Unused lines of credit		927,333		918,470		910,201		918,470
Standby letters of credit		23,268		22,250		23,293		22,250
Total	$	1,724,226	$	1,642,823	$	1,826,178	$	1,642,823

The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax in the state of Indiana and West Virginia. The Company is no longer subject to examination by taxing authorities for years before 2017. The Company currently operates primarily in the states of Ohio, Michigan and Pennsylvania which tax financial institutions based on their equity rather than their income.

	For the Three Months Ended March 31,					For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2021		2020			2021			2020			2021		2020
	(In Thousands)					(In Thousands)						(In Thousands)
Current:
Federal	$	6,362	$	(5,140	)	$	9,239		$	16,092		$	15,600	$	10,952
State and local		163		75			165			75			328		150
Deferred		3,427		(545	)		(1,081	)		(8,864	)		2,346		(9,409	)
	$	9,952	$	(5,610	)	$	8,323		$	7,303		$	18,274	$	1,693

The effective tax rates differ from federal statutory rate applied to income due to the following:

	For the Three Months Ended March 31,						For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2021			2020			2021			2020			2021			2020
	(In Thousands)						(In Thousands)						(In Thousands)
Tax expense (benefit) at statutory rate (21%)	$	10,699		$	(5,899	)	$	8,287		$	7,635		$	19,036		$	1,736
Increases (decreases) in taxes from:
State income tax - net of federal tax benefit		128			59			131			59			259			118
Tax exempt interest income, net of TEFRA		(200	)		(198	)		(228	)		(194	)		(428	)		(391	)
Bank owned life insurance		(245	)		(164	)		(181	)		(176	)		(426	)		(339	)
Captive insurance		(90	)		(92	)		(102	)		(97	)		(192	)		(189	)
Other		(340	)		684			416			76			25			758
Totals	$	9,952		$	(5,610	)	$	8,323		$	7,303		$	18,274		$	1,693

At ~~March 31,~~June 30, 2021, the Company had approximately ~~$133.8~~$39.5 million of interest rate lock commitments and ~~$322.0~~$232.0 million of forward sales of mortgage backed securities. These commitments are considered derivatives. The Company had $135.7 million of interest rate lock commitments and $265.0 million of forward commitments at December 31, 2020.

The fair value of these mortgage banking derivatives are reflected by a derivative asset recorded in other assets in the Consolidated Statements of Financial Condition. The table below provides data about the carrying values of these derivative instrument assets:

March 31, 2021

December 31, 2020

June 30, 2021

December 31, 2020

Assets

Carrying

Value

(In Thousands)

Derivatives not designated as hedging instruments

Mortgage Banking Derivatives

7,957

3,833

4,157

3,833

The table below provides data about the amount of gains and losses recognized in income on derivative instruments not designated as hedging instruments. The difference in derivative carrying value at ~~March 31,~~June 30, 2021 and 2020 represents a fair value adjustment that runs through mortgage banking income.

	Three Months Ended March 31,				Three Months Ended June 30,					Six Months Ended June 30,
	2021		2020		2021			2020		2021		2020
	(In Thousands)				(In Thousands)
Derivatives not designated as hedging instruments
Mortgage Banking Derivatives – Gain (Loss)	$	4,124	$	471	$	(3,780	)	$	3,279	$	324	$	6,361

The Company maintains an interest rate protection program for commercial loan customers that were acquired in the Merger. Under this program, the Company provides a customer with a fixed rate loan while creating a variable rate asset for the Company by the customer entering into an interest rate swap with terms that match the loan. The Company offsets its risk exposure by entering into an offsetting interest rate swap with an unaffiliated institution. The Company had interest rate swaps associated with commercial loans with a notional value of ~~$87.2~~$78.3 million and fair value of ~~$406,000~~$1.2 million in other assets and ~~$375,000~~$1.2 million in other liabilities at ~~March 31,~~June 30, 2021. As of December 31, 2020, the Company had interest rate swaps associated with commercial loans with a notional value of $87.8 million and fair value of $1.9 million in other assets and $2.0 million in other liabilities. The difference in fair value of ~~$31,000~~$18,000 between the asset and liability at ~~March 31,~~June 30, 2021 represents a credit valuation adjustment that flows through noninterest income. For the three and six months ended ~~March 31,~~June 30, 2021, $(55,000) and $143,000 flowed through noninterest income. For the three and six months ended June 30, 2020, ~~$198,000~~$32,000 and ~~$(108,000)~~$197,000 flowed through noninterest income.

In May 2021 the Company entered into derivative instruments designated as cash flow hedges. For a derivative instrument that is designated and qualifies as a cash flow hedge, the change in fair value of the derivative instrument is reported as a component of other comprehensive income (loss) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings.

Interest rate swaps with notional amount totaling $250.0 million as of June 30, 2021 were designated as cash flow hedges to hedge the risk of variability in cash flows (future interest receipts) attributable to changes in the contractually specified LIBOR benchmark interest rate on the Company’s floating rate loan pool and were determined to be highly effective during the period. The gross aggregate fair value of the swaps of $4.0 million is recorded in other assets in the unaudited Consolidated Balance Sheets at June 30, 2021, with changes in fair value recorded net of tax in other comprehensive income (loss). The Company expects the hedges to remain highly effective during the remaining terms of the swaps. A summary of the interest-rate swaps designated as cash flow hedges is presented below (dollars in thousands):

The Company also acquired time deposits in its acquisition of UCFC that have written and purchased option derivatives to facilitate an equity linked time deposit product. The time deposit provides the purchaser a guaranteed return of principal at maturity plus a potential equity return (a written option), while the Bank receives a known stream of funds based on the equity return (a purchase option). The written and purchased options are mirror derivative instruments which are carried at fair value on the consolidated statement of financial condition. At ~~March 31,~~June 30, 2021 and December 31, 2020, the balance of the equity linked time deposits was ~~$3.2~~$1.5 million and $5.7 million, respectively, and the written and purchased options each had a fair value of $~~59,000~~$48,000 and $56,000, respectively.

The before and after tax amounts allocated to each component of other comprehensive income (loss) are presented in the table below. Reclassification adjustments related to securities available for sale are included in gains on sale of securities in the accompanying consolidated condensed statements of income.

	Before Tax Amount			Tax (Expense) Benefit		Net of Tax Amount			Before Tax Amount			Tax (Expense) Benefit			Net of Tax Amount
	(In Thousands)								(In Thousands)
Three months ended March 31, 2021:
Three months ended June 30, 2021:
Securities available for sale and transferred securities:
Change in net unrealized gain/loss during the period									$	11,985		$	(2,517	)	$	9,468
Reclassification adjustment for net losses included in net income										(1,469	)		309			(1,160	)
Cash flow hedge derivatives
Change in net unrealized gain/loss during the period										4,434			(932	)		3,502
Reclassification adjustment for net gains included in net income										(450	)		95			(355	)
Total other comprehensive gain									$	14,500		$	(3,045	)	$	11,455

Six months ended June 30, 2021:
Securities available for sale:
Change in net unrealized gain/loss during the period	$	(19,112	)	$	4,014	$	(15,098	)	$	(7,127	)	$	1,497		$	(5,630	)
Reclassification adjustment for net gains included in net income		(516	)		108		(408	)		(1,985	)		417			(1,568	)
Cash flow hedge derivatives
Change in net unrealized gain/loss during the period										4,434			(932	)		3,502
Reclassification adjustment for net gains included in net income										(450	)		95			(355	)
Total other comprehensive loss	$	(19,628	)	$	4,122	$	(15,506	)	$	(5,128	)	$	1,077		$	(4,051	)

	Before Tax Amount		Tax (Expense) Benefit			Net of Tax Amount		Before Tax Amount		Tax (Expense) Benefit			Net of Tax Amount
	(In Thousands)							(In Thousands)
Three months ended March 31, 2020:
Three months ended June 30, 2020:
Securities available for sale:
Change in net unrealized gain/loss during the period	$	9,458	$	(1,985	)	$	7,473	$	3,160	$	(665	)	$	2,495
Reclassification adjustment for net gains included in net income		—		—			—		2		(1	)		1
Total other comprehensive loss	$	9,458	$	(1,985	)	$	7,473	$	3,162	$	(666	)	$	2,496

Six months ended June 30, 2020
Securities available for sale:
Change in net unrealized gain/loss during the period								$	12,618	$	(2,650	)	$	9,968
Reclassification adjustment for net gains included in net income									2		(1	)		1
Postretirement medical plan									—					—
Total other comprehensive loss								$	12,620	$	(2,651	)	$	9,969

Activity in accumulated other comprehensive income (loss), net of tax, was as follows:

	Securities Available For Sale			Post- retirement Benefit			Accumulated Other Comprehensive Income (Loss)			Securities Available For Sale			Post- retirement Benefit			Cash Flow Hedge Derivatives			Accumulated Other Comprehensive Income (Loss)
	(In Thousands)									(In Thousands)
Balance January 1, 2021	$	15,083		$	(79	)	$	15,004		$	15,083		$	(79	)	$	—		$	15,004
Other comprehensive income/(loss) before reclassifications		(15,098	)		—			(15,098	)		(5,630	)		—			3,502			(2,128	)
Amounts reclassified from accumulated other comprehensive income		(408	)		—			(408	)		(1,568	)		—			(355	)		(1,923	)

Net other comprehensive income/(loss) during period		(15,506	)		—			(15,506	)		(7,198	)		—			3,147			(4,051	)

Balance March 31, 2021	$	(423	)	$	(79	)	$	(502	)
Balance June 30, 2021										$	7,885		$	(79	)	$	3,147		$	10,953

Balance January 1, 2020	$	4,839		$	(244	)	$	4,595		$	4,839		$	(244	)	$	—		$	4,595
Other comprehensive income (loss) before reclassifications		7,473			—			7,473			9,968			—			—			9,968
Amounts reclassified from accumulated other comprehensive income		—			—			0			1			—			—			1

Net other comprehensive income during period		7,473			—			7,473			9,969			—			—			9,969

Balance March 31, 2020	$	12,312		$	(244	)	$	12,068
Balance June 30, 2020										$	14,808		$	(244	)	$	—		$	14,564

The Merger became effective January 31, 2020. Immediately following the Merger, Home Savings was merged with and into the Bank, with the Bank surviving. In addition, UCFC’s wholly-owned insurance subsidiaries, HSB Insurance, LLC, and United American Financial Services, Inc., each merged with and into First Insurance. UCFC’s consolidated assets and equity (unaudited) as of January 31, 2020 totaled $2.8 billion and $324.5 million, respectively. The Company accounted for the transaction under the acquisition method of accounting, which means that the acquired assets and liabilities were recorded at fair value at the date of acquisition. The fair value estimates included in these financial statements are based on preliminary valuations.

In accordance with ASC 805, the Company expensed approximately ~~$11.5~~$2.1 million and $13.6 million of direct acquisition costs during the three and six months ended ~~March 31,~~June 30, 2020, respectively. The Company recorded $217.9 million of goodwill and $33.0 million of intangible assets in 2020 as a result of the combination. Goodwill represents the future economic benefits arising from net assets acquired that are not individually identified and separately recognized and is attributable to synergies expected to be derived from the combination of the 2 entities. The Merger was consistent with the Company’s strategy to enhance and expand its presence in northern Ohio. The Merger offers the Company the opportunity to increase profitability by introducing existing products and services to the acquired customer base as well as add new customers in the expanded market area. The intangible assets are related to core deposits, which are being amortized over 10 years on an accelerated basis, and customer relationships, which are being amortized over 10 years on a straight-line basis. For tax purposes, goodwill is non-deductible but will be evaluated annually for impairment.

The following table summarizes the fair value of the total consideration transferred as part of the Merger as well as the fair value of identifiable assets and liabilities assumed as of the effective date of the transaction.

	January 31, 2020			January 31, 2020
	(In Thousands)			(In Thousands)

Cash Consideration	$	132		$	132
Fair Value of Options Exchanged	$	461			461
Equity - Dollar Value of Issued Shares		526,850			526,850
Fair Value of Total Consideration Transferred		527,443			527,443

Recognized Amounts of Identifiable Assets Acquired and Liabilities Assumed:
Cash and Cash Equivalents		52,580			52,580
Securities available for sale		262,753			262,753
Net loans, including loans held for sale and allowance		2,340,701
Net loans, including loans held for sale					2,340,701
FHLB Stock		12,753			12,753
Office Properties and Equipment		20,253			20,253
Intangible Assets		33,014			33,014
Bank Owned Life Insurance		65,934			65,934
Mortgage Servicing Rights		9,747			9,747
Accrued Interest Receivable and Other Assets		35,943			35,943
Deposits - Non-Interest Bearing		(430,921	)		(430,921	)
Deposits - Interest Bearing		(1,651,669	)		(1,651,669	)
Advances from FHLB		(381,000	)		(381,000	)
Accrued Interest Payable and Other Liabilities		(60,524	)		(60,524	)
Total Identifiable Net Assets		309,564			309,564

Goodwill	$	217,879		$	217,879

As a result of the Merger and in accordance with the Merger Agreement, each share of UCFC common stock issued and outstanding immediately prior to the effective time was converted into 0.3715 share of Premier common stock. No fractional shares of Premier common stock were issued in the Merger, and UCFC’s shareholders became entitled to receive cash in lieu of fractional shares. The Company issued 17,926,174 common shares and paid approximately $132,000 to UCFC shareholders as a result of the Merger. The fair value of Premier common shares issued as part of the consideration paid for the UCFC common shares was determined based on the closing price of the Company’s common shares on the effective date of the Merger.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

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, and Section 21 B of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Those statements may include, but are not limited to, all statements regarding intent, beliefs, expectations, projections, forecasts and plans of Premier Financial Corp. (“Premier” or the “Company”) and its management, and specifically include statements regarding: changes in economic conditions; the nature, extent and timing of governmental actions and reforms; future movements of interest rates; the ability to benefit from a changing interest rate environment; the production levels of mortgage loan generation; the ability to continue to grow loans and deposits; the ability to sustain credit quality ratios at current or improved levels; continued strength in Premier’s market area; the ability to sell real estate owned properties; and the ability to grow in existing and adjacent markets. These forward-looking statements involve numerous risks and uncertainties, including, but not limited to: impacts from the novel coronavirus (“COVID-19”) pandemic on our business, operations, customers and capital position; higher default rates on loans made to our customers related to COVID-19 and its impact on our customers’ operations and financial condition; the impact of COVID-19 on local, national and global economic conditions; unexpected changes in interest rates or disruptions in the mortgage market related to COVID-19 or responses to the health crisis; the effects of various governmental responses to the COVID-19 pandemic; risks and uncertainties inherent in general and local banking, insurance and mortgage conditions; political uncertainty caused by, among other things, political parties and tensions surrounding the current socioeconomic landscape; competitive factors specific to markets in which Premier and its subsidiaries operate; future interest rate levels; legislative and regulatory decisions or capital market conditions; and other risks and uncertainties detailed from time to time in our Securities and Exchange Commission (“SEC”) filings, including our Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Form 10-K”). and our quarterly report on Form 10-Q for the quarter ended March 31, 2021. 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. Therefore, there can be no assurances that the forward-looking statements included in this quarterly report, as well as other publicly available documents, including those incorporated herein by reference, will prove to be accurate. In light of the significant uncertainties in the forward-looking statements included herein, 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. 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.

In addition to results presented in accordance with accounting principles generally accepted in the United States (“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 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 ~~three~~six month periods ended ~~March 31,~~June 30, 2021 and 2020.

Non-GAAP Financial Measures – Net Interest Income on an FTE basis, Net Interest Margin and Efficiency Ratio

	Three Months Ended March 31,						Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020			2021			2020
	(In Thousands)						(In Thousands)
Net interest income (GAAP)	$	56,513		$	45,463		$	56,619		$	54,304		$	113,131		$	99,767
Add: FTE adjustment		237			251			270			256			507			507
Net interest income on a FTE basis (1)	$	56,750		$	45,714		$	56,889		$	54,560		$	113,638		$	100,274

Non-interest income-less securities gains/losses (2)	$	24,149		$	13,999		$	16,884		$	23,017			41,033			37,016
Non-interest expense (3)		38,803			42,310			38,375			37,984			77,178			80,293
Average interest-earning assets(4)		6,611,343			4,862,532			6,806,275			6,247,037			6,709,348			5,559,542

Ratios:
Net interest margin (1) / (4)		3.43	%		3.78	%		3.34	%		3.51	%		3.39	%		3.63	%
Efficiency ratio (3) / (1) + (2)		47.96	%		70.86	%		52.02	%		48.96	%		49.90	%		58.48	%

The Company has established various accounting policies which govern the application of GAAP in the preparation of its financial statements. The significant accounting policies of the Company are described in the footnotes to the consolidated financial statements included in the 2020 Form 10-K and in Footnote 2 of this report. Certain accounting policies involve significant judgments and assumptions by management, which have a material impact on the carrying value of certain assets and liabilities; management considers such accounting policies to be critical accounting policies. Those policies which are identified and discussed in detail in the 2020 Form 10-K and in Footnote 2 of this report include the Allowance for Credit Losses, Goodwill, and the Valuation of Mortgage Servicing Rights.

Premier is a financial holding company that conducts business through its wholly-owned subsidiaries, Premier Bank (the “Bank”), First Insurance Group of the Midwest, Inc. (“First Insurance”), ~~First Defiance~~PFC Risk Management Inc. (“~~First Defiance~~PFC Risk Management”) and HSB Capital, LLC (HSB Capital”). Another subsidiary, HSB Insurance, Inc. (“HSB Insurance”), was dissolved during the quarter ended September 30, 2020.

On January 31, 2020, Premier completed its previously announced acquisition of United Community Financial Corp., an Ohio corporation (“UCFC”), pursuant to that certain Agreement and Plan of Merger (the “Merger Agreement”), dated as of September 9, 2019, by and between Premier and UCFC. At the effective time of the merger (the “Merger”), UCFC merged with and into Premier, with Premier surviving the Merger. Simultaneously with the completion of the Merger, Premier converted from a unitary thrift holding company to a bank holding company, making an election to be a financial holding company.

Immediately following the Merger, the Bank acquired UCFC’s wholly-owned bank subsidiary, Home Savings Bank (“Home Savings”). Immediately prior to the merger of the banks, the Bank converted from a federal thrift into an Ohio state-chartered bank. In addition, immediately following the merger of the banks, UCFC’s wholly-owned insurance subsidiaries, HSB Insurance, LLC, and United American Financial Services, Inc., each merged into First Insurance, with First Insurance surviving the mergers. The Company acquired two additional subsidiaries in the Merger, HSB Capital and HSB Insurance.

The Bank is an Ohio state-chartered bank headquartered in Youngstown, Ohio. It conducts operations through 75 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.

~~First Defiance~~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. ~~First Defiance~~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.

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 Federal Deposit Insurance Corporation (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.

At ~~March 31,~~June 30, 2021, the Company's total assets amounted to ~~$7.5~~$7.6 billion compared to $7.2 billion at December 31, 2020. The increase is primarily attributable to growth in ~~cash and cash equivalents of $144.5 million and growth in~~ securities available for sale of ~~$194.6 million. Cash and cash equivalents increased to $303.7~~$542.5 million ~~at March 31, 2021 compared to $159.3 million at December 31, 2020. Deposit growth was the primary reason for the increase in the Company’s cash balances.~~

Gross loans receivable, excluding loans held for sale, were $5.5 billion at March 31, 2021, compared to $5.5 billion at December 31, 2020. The $31.6 million decline was primarily due to a decline in one-to-four family residential mortgage loans. There was $443.8 million of PPP loan balances included in gross loans receivable at March 31, 2021 compared to $386.9 million at December 31, 2020. The increase in PPP loan balances for this period was offset by a decline in other categories of commercial loans. Loans held for sale decreased from $221.6 million at December 31, 2020, to $215.9 million at March 31, 2021. This decrease was primarily due to sales activity.

~~Available-for-sale securities increased~~ from $736.7 million at December 31, 2020 to ~~$918.6 million~~$1.3 billion at ~~March 31, 2021, an~~June 30, 2021. The increase ~~of $181.9 million. This increase was primarily due to~~in securities were funded by deposit growth and a decline in loan balances being invested in securities that offer a higher yield than what the Company could earn in an interest-bearing deposit.

Gross loans receivable, excluding loans held for sale, were $5.3 billion at June 30, 2021, compared to $5.5 billion at December 31, 2020. The $132.1 million decline was primarily due to a decline in other commercial loans resulting from a decline in PPP loans to $287.2 million at June 30, 2021 compared to $386.9 million at December 31, 2020. Loans held for sale decreased from $221.6 million at December 31, 2020, to $199.1 million at June 30, 2021 as a result of sales activity.

The Company held equity securities in the amount of ~~$13.8~~$12.9 million at ~~March 31,~~June 30, 2021, compared to $1.1 million at December 31, 2020. This portfolio consisted of the common and preferred stocks of various publicly traded bank holding companies, the majority of which are in the Company’s peer group.

Deposits increased ~~$304.1~~$243.6 million from $6.0 billion at December 31, 2020, to ~~$6.4~~$6.3 billion as of ~~March 31,~~June 30, 2021. The increase was mainly due to deposits accumulating due to stimulus funds being distributed to customers from the federal government and customer PPP loan proceeds being deposited with the Company. Non-interest bearing deposits grew ~~$131.6~~$52.4 million for the ~~quarter~~year while interest-bearing deposits grew ~~$172.5~~$191.2 million for the ~~quarter.~~year.

Stockholders’ equity increased ~~$15.9~~$45.4 million from $982.3 million at December 31, 2020, to ~~$998.2 million~~$1.0 billion at ~~March 31,~~June 30, 2021. The increase in stockholders’ equity was primarily the result of net income earned for the ~~quarter~~year to date offset by dividends paid on the Company’s common stock and a decline in accumulated other comprehensive income. The Company also repurchased ~~39,200~~165,566 shares of its common stock during the ~~quarter~~first half of the year which totaled ~~$1.1~~$4.9 million.

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 March 31,														Three Months Ended June 30,
	2021							2020							2021							2020
	Average				Yield/			Average				Yield/			Average				Yield/			Average				Yield/
	Balance		Interest(1)		Rate(2)			Balance		Interest(1)		Rate(2)			Balance		Interest(1)		Rate(2)			Balance		Interest(1)		Rate(2)
Interest-earning assets:
Loans receivable	$	5,629,715	$	57,579		4.09	%	$	4,317,857	$	51,485		4.80	%	$	5,495,782	$	55,786		4.06	%	$	5,389,805	$	58,819		4.39	%
Securities		823,986		3,905		1.90	%		449,744		2,943		2.69			1,193,363		5,250		1.76			523,360		3,156		2.48
Interest bearing deposits		145,658		66		0.18	%		68,980		230		1.34			106,025		42		0.16			260,586		79		0.12
FHLB stock		11,984		59		1.97	%		25,951		115		1.78			11,105		56		2.02			73,286		651		3.57
Total interest-earning assets		6,611,343		61,609		3.73	%		4,862,532		54,773		4.54			6,806,275		61,134		3.59			6,247,037		62,705		4.04
Non-interest-earning assets		727,543							495,066							743,256							758,746
Total assets	$	7,338,886						$	5,357,598						$	7,549,531						$	7,005,783

Interest-bearing liabilities:
Deposits	$	4,546,272	$	4,164		0.37	%	$	3,343,833	$	7,771		0.93	%	$	4,640,196	$	3,559		0.31	%	$	4,144,699	$	7,435		0.72	%
FHLB advances and other		—		—		—			209,508		1,006		1.93			30,165		12		0.16			420,784		516		0.49
Subordinated debentures		84,868		695		3.28	%		36,083		273		3.04			84,893		674		3.18			36,083		179		2.00
Securities sold under repurchase agreements		—		—		—			2,359		9		1.53			—		—		—			15,274		15		0.39
Total interest-bearing liabilities		4,631,140		4,859		0.42	%		3,591,783		9,059		1.01			4,755,254		4,245		0.36			4,616,840		8,145		0.71
Non-interest bearing deposits		1,644,020		—		—			896,220		—					1,699,477		—		—			1,346,287		—		—
Total including non-interest bearing demand deposits		6,275,160		4,859		0.31	%		4,488,003		9,059		0.81			6,454,731		4,245		0.26			5,963,127		8,145		0.55
Other non-interest-bearing liabilities		91,073							82,758							88,043							109,863
Total liabilities		6,366,233							4,570,761							6,542,774							6,072,990
Stockholders’ equity		972,653							786,837							1,006,757							932,793
Total liabilities and stockholders’ equity	$	7,338,886						$	5,357,598						$	7,549,531						$	7,005,783
Net interest income; interest rate spread			$	56,750		3.31	%			$	45,714		3.53	%			$	56,889		3.23	%			$	54,560		3.33	%
Net interest margin (3)						3.43	%						3.78	%						3.34	%						3.51	%
Average interest-earning assets to average interest-bearing liabilities						143	%						135	%						143	%						135	%

For the three months ended ~~March 31,~~June 30, 2021, the Company reported net income of ~~$41.0~~$31.4 million compared to ~~a loss~~income of ~~$22.5~~$29.1 million for the quarter ended ~~March 31,~~June 30, 2020. On a per share basis, basic and diluted earnings per common share were ~~$1.10~~$0.84 for the three months ended ~~March 31,~~June 30, 2021 and basic and diluted ~~loss~~income per common share were ~~$0.71~~$0.78 for the three months ended ~~March 31,~~June 30, 2020. The ~~first~~second quarter of

2020 was impacted by the Merger including ~~$25.9~~$2.1 million ~~and $11.5 million of~~ acquisition-related ~~provision and costs, respectively.~~ costs.

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 ~~$56.5~~$56.6 million for the quarter ended ~~March 31,~~June 30, 2021, up from ~~$45.5~~$54.3 million for the same period in 2020. Average earning assets for the quarter ended ~~March 31,~~June 30, 2021 were ~~$6.6~~$6.8 billion compared to ~~$4.9~~$6.2 billion for the quarter ended ~~March 31,~~June 30, 2020. ~~The increase in average earning assets was due to the acquisition of UCFC taking place on January 31, 2020 along with organic growth in the last year.~~ The tax-equivalent net interest margin was ~~3.43%~~3.34% for the quarter ended ~~March 31,~~June 30, 2021, a decrease from ~~3.78%~~3.51% for the same period in 2020. The decrease in margin between the 2021 and 2020 quarters was primarily due to a decrease in the yield on earning assets brought about by a decline in interest rates in the latter half of 2020 and through the first quarter of 2021. The yield on interest-earning assets was ~~3.73%~~3.59% for the quarter ended ~~March 31,~~June 30, 2021, down 8145 basis points from ~~4.54%~~4.04% for the same period in 2020. The cost of interest-bearing liabilities between the two periods declined 5935 basis points to ~~0.42%~~0.36% in the ~~first~~second quarter of 2021 from ~~1.01%~~0.71% in the ~~first~~second quarter of 2020.

Interest income ~~increased $6.9~~decreased $1.5 million to ~~$61.4~~$60.9 million for the quarter ended ~~March 31,~~June 30, 2021, from ~~$54.5~~$62.4 million for the quarter ended ~~March 31,~~June 30, 2020. This ~~increase~~decrease is due to ~~continued solid loan growth, primarily related to growth~~a decline in ~~PPP loan balances and a full quarter of impact of average~~ interest rates on earning ~~assets from the Merger compared to only two months impact from the Merger in 2020.~~assets. Income from loans ~~increased~~decreased to ~~$57.6~~$55.7 million for the quarter ended ~~March 31,~~June 30, 2021, compared to ~~$51.5~~$58.8 million for the same period in 2020 due to ~~an increase in average loan balances of $1.3 billion. The~~a decrease in ~~the loan portfolio~~ yield ~~to 4.09%~~from 4.39% for the three months ended ~~March 31, 2021, from 4.80%~~June 30, 2020 compared to 4.06% for the same period in ~~2020, was~~2021, due mainly to declining rates. Average loan balances increased to $5.5 billion for the three months ended June 30, 2021 from $5.4 billion for the second quarter of 2020. Interest income from investments increased ~~$965,000~~$2.1 million in the ~~first~~second quarter of 2021 to ~~$3.7~~$5.0 million compared to ~~$2.7~~$2.9 million in the same period in 2020 primarily due to an increase in average security balances of ~~$374.2~~$670.0 million. The yield decreased 7972 basis points to ~~1.90%~~1.76% for the three months ended ~~March 31,~~June 30, 2021, compared to ~~2.69%~~2.48% for the same period in 2020. Income from interest bearing deposits decreased to ~~$66,000~~$42,000 in the ~~first~~second quarter of 2021 compared to ~~$230,000~~$79,000 for the same period in ~~2020, even as average~~2020. Average balances ~~increased $76.7 million. This decline was primarily a result~~on interest earning deposits decreased $154.6 million to $106.0 million in the second quarter of 2021 from $260.6 million for the same period in 2020. The yield earned on interest bearing deposits ~~declining 1.16% to 18~~declined 4 basis points in the ~~first~~second quarter of ~~2021.~~2021 compared to 2020. Income from FHLB stock decreased to ~~$59,000~~$56,000 in the ~~first~~second quarter of 2021 from ~~$115,000~~$651,000 for the same period in 2020.

Interest expense decreased ~~$4.2~~$3.9 million to ~~$4.9~~$4.2 million in the ~~first~~second quarter of 2021 compared to ~~$9.1~~$8.1 million for the same period in 2020. This decrease was due to a decline in the yield on interest-bearing liabilities of 5935 basis points. Interest expense related to interest-bearing deposits was ~~$4.2~~$3.6 million in the ~~first~~second quarter of 2021 compared to ~~$7.8~~$8.1 million for the same period in 2020. Interest expense recognized by the Company related to FHLB advances was ~~zero~~$12,000 in the ~~first~~second quarter of 2021 compared to ~~$1.0 million~~$516,000 for the same period in 2020. Expenses on subordinated debentures and notes payable were ~~$695,000~~$674,000 in the ~~first~~second quarter of 2021 compared to ~~$273,000 respectively~~$179,000 for the same period in 2020. This increase was due to the issuance of $50.0 million of subordinated debt costing 4.0% during the third quarter of 2020.

The Company adopted ASU 2016-13, the Current Expected Credit Loss (“CECL”) model on January 1, 2020. Under CECL, a valuation reserve was established in the ACL and maintained through expense in the provision for credit losses. Upon adoption of CECL, the Company made a one-time adjustment, net of taxes, to retained earnings for $1.9 million. 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.

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 $4,291,000 at June 30, 2021, and $5,604,000 at March 31, ~~2021, and $4,274,000 at December 31, 2020.~~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 thirteen 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. The Company utilizes three different methodologies to analyze loan pools.

Discounted cash flows (“DCF”) 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. This expected cash flow stream is compared to the net present value of expected cash flows to establish a valuation account for these loans.

The probability of default/loss given default 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:

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 these loans. 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.

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 decreased to $15.1 million at June 30, 2021, down from $17.8 million at March 31, ~~2021, down from $29.2 million at December 31, 2020.~~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. A decline in current and forecasted unemployment rates resulted in a reduction in projected loan losses.

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.

The qualitative analysis indicated a general reserve of $52.1 million at June 30, 2021, compared to $51.4 million at March 31, ~~2021, compared to $48.8 million at December 31, 2020. The~~2021. This increase was ~~mainly due to residential lender turnover and the loosening~~primarily a result of ~~credit standards~~an increase in loan balances that general reserves are applied to. Overall these factors decreased slightly in the ~~external environment. Management reviewed~~second quarter as a result of favorable trends in the ~~overall~~ economic ~~environmental~~ and risk factors ~~and determined that it was appropriate to make adjustments to these sub-factors based on that review.~~

~~The economic factors for the residential loan segment increased~~listed above. These were slightly offset by an increase in the first three months of 2021, primarily due to the increasing trend of the Case-Shiller Index. The index indicates that housing prices have surpassed the high levels attained before the last downturn in the economy. Due to this trend, management feels there is potential for the current market values of real estate to be less stable going forward.environmental factors.

~~The environmental factors for the residential loan segment increased in the first three months of 2021, mainly due to the turnover in residential lending.~~

~~The risk factors for all loan segments have increased in the first three months of 2021 primarily due to loosened underwriting standards in the external environment, which leads to riskier lending.~~

The Company’s general reserve percentages for main loan segments, not otherwise classified, ranged from ~~0.80%~~0.72% for construction loans to ~~1.86%~~1.77% for ~~Home Equity~~home equity loans at ~~March 31,~~June 30, 2021.

Under CECL, 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 subsequent adjustments to the ACL are recorded on the income statement. On January 31, 2020, the Company acquired PCD loans with a fair value of $79.1 million, a recorded adjustment on yield of $4.1 million and an increase to the ACL of $7.7 million.

As a result of the quantitative and qualitative analyses, along with the change in specific reserves and the decrease in net charge-offs in the quarter, the Company’s provision for credit losses for the three and six months ended ~~March 31,~~June 30, 2021 was a recovery of ~~$7.5~~$3.6 million and $11.1 million. This is compared to an expense of ~~$43.8~~$1.9 million and $45.7 million for the three and six months ended ~~March 31,~~June 30, 2020, which included $25.9 million attributable to the Merger. The ACL was $71.4 million at June 30, 2021, and $74.8 million at March 31, ~~2021, and $82.1 million at December 31, 2020.~~2021. The ACL represented ~~1.37%~~1.33% of loans, net of undisbursed loan funds and deferred fees and costs, or ~~1.49%~~1.41% excluding PPP loans at June 30, 2021, compared to 1.37% at March 31, 2021, ~~compared to~~or 1.49% ~~at December 31, 2020, or 1.61%~~ excluding PPP loans. In management’s opinion, the overall ACL of ~~$74.8~~$71.4 million as of ~~March 31,~~June 30, 2021, is adequate to cover current estimated credit losses.

Management also assesses the value of other real estate owned (“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 ~~three~~six month period ended ~~March 31,~~June 30, 2021, there were no write-downs of real estate held for sale. Management believes that the values recorded at ~~March 31,~~June 30, 2021, for OREO and repossessed assets represent the realizable value of such assets.

Total classified loans ~~increased~~decreased to $101.3 million at June 30, 2021, compared to $114.6 million at March 31, 2021, ~~compared to $90.4 million at December 31, 2020, an increase~~a decrease of ~~$24.2~~$13.3 million primarily due to one large commercial relationship. Management monitors collateral values of all loans included on the watch list that are collateral dependent and believes that allowances for such loans at ~~March 31,~~June 30, 2021, were appropriate. Of the ~~$49.3~~$41.3 million in non-accrual loans at ~~March 31,~~June 30, 2021, ~~$21.9~~$21.0 million or ~~44.4%~~51.0% 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 ~~March 31,~~June 30, 2021, and December 31, 2020, by category were as follows:

	March 31,			December 31,			June 30,			December 31,
	2021			2020			2021			2020
	(In Thousands)						(In Thousands)
Non-performing loans:
Residential real estate	$	9,197		$	10,178		$	8,337		$	10,178
Commercial real estate		11,799			11,980			11,706			11,980
Construction		243			806			—			806
Commercial		1,686			1,365			2,253			1,365
Home equity and improvement		2,173			1,537			2,114			1,537
Consumer finance		1,676			1,624			1,633			1,624
PCD		22,524			24,192			15,253			24,192
Total non-performing loans		49,298			51,682			41,296			51,682

Real estate owned		54			343			45			343
Total repossessed assets		54			343			45			343

Total Nonperforming assets	$	49,352		$	52,025		$	41,341		$	52,025
TDR loans, accruing	$	6,068		$	7,173		$	5,939		$	7,173

Total nonperforming assets as a percentage of total assets		0.66	%		0.72	%		0.54	%		0.72	%
Total nonperforming assets as a percentage of total loans plus REO*		0.90	%		0.96	%		0.77	%		0.96	%
ACL as a percent of total nonperforming assets		151.47	%		157.77	%		172.63	%		157.77	%

PCD loans acquired in the Merger account for ~~45.7%~~36.3% of non-performing loans. Excluding non-performing PCD loans, non-performing loans in the commercial loan category represented ~~0.14%~~0.21% of the total loans in that category at ~~March 31,~~June 30, 2021, compared to ~~0.11%~~0.14% for the same category at ~~December~~March 31, ~~2020.~~2021. Non-performing loans in the non-residential and multi-family residential real estate loan category were ~~0.49%~~0.48% of the total loans in this category at ~~March 31,~~June 30, 2021, compared to ~~0.50%~~0.49% at ~~December~~March 31, ~~2020.~~2021. Non-performing loans in the residential loan category represented ~~0.79%~~0.73% of the total loans in that category at ~~March 31,~~June 30, 2021, compared to ~~0.85%~~0.79% for the same category at ~~December~~March 31, ~~2020.~~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 Asset Committee makes recommendations regarding proposed charge-offs which are then approved by the Committee.

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

	For the Three Months Ended March 31, 2021						As of March 31, 2021					For the Six Months Ended June 30, 2021						As of June 30, 2021
	Net Charge-offs (Recovery)			% of Total Net Charge-offs			Nonaccrual Loans		% of Total Non- Accrual Loans			Net Charge-offs (Recovery)			% of Total Net Charge-offs			Nonaccrual Loans		% of Total Non- Accrual Loans
	(In Thousands)						(In Thousands)					(In Thousands)						(In Thousands)
Residential	$	(8	)		4.23	%	$	9,197		18.66	%	$	(48	)		11.09	%	$	8,337		20.19	%
Commercial real estate		(36	)		19.05	%	$	11,799		23.93	%		(184	)		42.49	%		11,706		28.35	%
Construction		—			—		$	243		0.49	%		—			—			-		—
Commercial		(20	)		10.58	%	$	1,686		3.42	%		(137	)		31.64	%		2,253		5.46	%
Home equity and improvement		(26	)		13.76	%	$	2,173		4.41	%		(191	)		44.11	%		2,114		5.12	%
Consumer finance		5			(2.65	)%	$	1,676		3.40	%		73			(16.86	)%		1,633		3.95	%
PCD		(104	)		55.03	%	$	22,524		45.69	%		54			(12.47	)%		15,253		36.93	%
Total	$	(189	)		100.00	%	$	49,298		100.00	%	$	(433	)		100.00	%	$	41,296		100.00	%

	For the Three Months Ended March 31, 2020						As of March 31, 2020					For the Six Months Ended June 30, 2020						As of June 30, 2020
	Net Charge-offs (Recovery)			% of Total Net Charge-offs			Nonaccrual Loans		% of Total Non-Accrual Loans			Net Charge-offs (Recovery)			% of Total Net Charge-offs			Nonaccrual Loans		% of Total Non-Accrual Loans
	(In Thousands)						(In Thousands)					(In Thousands)						(In Thousands)
Residential	$	83			(10.67	)%	$	2,985		9.16	%	$	(111	)		6.92	%	$	4,961		12.27	%
Commercial real estate		(324	)		41.65	%		5,196		15.94	%		(416	)		25.92	%		4,468		11.05	%
Construction		—			—			—		—			1			(0.06	)%		-		—
Commercial		(573	)		73.65	%		3,961		12.15	%		(1,240	)		77.26	%		524		1.30	%
Home equity and improvement		48			(6.17	)%		—		—			69			(4.30	)%		943		2.33	%
Consumer finance		(12	)		1.54	%		728		2.23	%		(116	)		7.23	%		366		0.90	%
PCD		—			—			19,723		60.52	%		208			(12.96	)%		29,169		72.15	%
Total	$	(778	)		100.00	%	$	32,593		100.00	%	$	(1,605	)		100.00	%	$	40,431		100.00	%

	For the Quarter Ended														For the Quarter Ended
	1st 2021			4th 2020			3rd 2020		2nd 2020			1st 2020			2nd 2021			1st 2021			4th 2020			3rd 2020		2nd 2020
	(In Thousands)														(In Thousands)
Allowance at beginning of period	$	82,079		$	88,917		$	88,555	$	85,859		$	31,243		$	74,754		$	82,079		$	88,917		$	88,555	$	85,859
Impact of ASC 326 adoption		—			—			—		—			2,354			—			—			—			—		—
Acquisition related allowance for credit losses (PCD)		—			—			—		—			7,698			—			—			—			—		—
Provision (benefit) for credit losses		(7,514	)		(6,158	)		3,658		1,868			43,786			(3,631	)		(7,514	)		(6,158	)		3,658		1,868
Charge-offs:
Residential		—			45			—		73			184			—			—			45			—		73
Commercial real estate		—			—			—		49			16			—			—			—			—		49
Construction		—			—			—		1			—			—			—			—			—		1
Commercial		70			554			—		37			96			—			70			554			—		37
Home equity and improvement		3			43			12		79			30			—			3			43			12		79
Consumer finance		32			83			32		56			108			106			32			83			32		56
PCD		4			679			4,175		—			—			605			4			679			4,175		—
Total charge-offs		109			1,404			4,219		295			434			711			109			1,404			4,219		295
Recoveries		298			724			923		1,123			1,212			955			298			724			923		1,123
Net charge-offs (recoveries)		(189	)		680			3,296		(828	)		(778	)		(244	)		(189	)		680			3,296		(828	)
Ending allowance	$	74,754		$	82,079		$	88,917	$	88,555		$	85,859		$	71,367		$	74,754		$	82,079		$	88,917	$	88,555

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

	March 31, 2021					December 31, 2020					September 30, 2020					June 30, 2020					March 31, 2020					June 30, 2021					March 31, 2021					December 31, 2020					September 30, 2020					June 30, 2020
	Amount		Percent of total loans by category			Amount		Percent of total loans by category			Amount		Percent of total loans by category			Amount		Percent of total loans by category			Amount		Percent of total loans by category			Amount		Percent of total loans by category			Amount		Percent of total loans by category			Amount		Percent of total loans by category			Amount		Percent of total loans by category			Amount		Percent of total loans by category
	(Dollars In Thousands)																									(Dollars In Thousands)
Residential	$	17,508		19.91	%	$	17,534		20.54	%	$	18,168		20.68	%	$	23,783		21.58	%	$	23,324		23.78	%	$	15,268		19.60	%	$	17,508		19.91	%	$	17,534		20.54	%	$	18,168		20.68	%	$	23,783		21.58	%
Commercial real estate		35,272		40.93	%		43,417		40.75	%		48,575		40.31	%		44,057		39.87	%		42,515		41.32	%		34,461		41.43	%		35,272		40.93	%		43,417		40.75	%		48,575		40.31	%		44,057		39.87	%
Construction		2,776		12.77	%		2,741		11.42	%		2,489		10.04	%		1,137		8.97	%		884		9.79	%		2,739		14.31	%		2,776		12.77	%		2,741		11.42	%		2,489		10.04	%		1,137		8.97	%
Commercial		12,191		19.99	%		11,665		20.56	%		13,244		21.88	%		11,839		21.90	%		11,901		16.86	%		12,211		18.11	%		12,191		19.99	%		11,665		20.56	%		13,244		21.88	%		11,839		21.90	%
Home equity and improvement		5,181		2.00	%		4,739		2.06	%		4,393		4.86	%		3,523		5.11	%		3,954		5.66	%		4,988		4.51	%		5,181		4.40	%		4,739		4.67	%		4,393		4.86	%		3,523		5.11	%
Consumer finance		1,826		4.40	%		1,983		4.67	%		2,048		2.23	%		4,216		2.57	%		3,281		2.59	%		1,700		2.04	%		1,826		2.00	%		1,983		2.06	%		2,048		2.23	%		4,216		2.57	%
	$	74,754		100.00	%	$	82,079		100.00	%	$	88,917		100.00	%	$	88,555		100.00	%	$	85,859		100.00	%	$	71,367		100.00	%	$	74,754		100.00	%	$	82,079		100.00	%	$	88,917		100.00	%	$	88,555		100.00	%

	1st Qtr 2021			4th Qtr 2020			3rd Qtr 2020			2nd Qtr 2020			1st Qtr 2020			2nd Qtr 2021			1st Qtr 2021			4th Qtr 2020			3rd Qtr 2020			2nd Qtr 2020
Allowance for credit losses / loans*		1.37	%		1.49	%		1.63	%		1.62	%		1.68	%		1.33	%		1.37	%		1.49	%		1.63	%		1.62	%
Allowance for credit losses / loans excluding PPP loans		1.49	%		1.61	%		1.77	%		1.76	%		1.68	%		1.41	%		1.49	%		1.61	%		1.77	%		1.76	%
Allowance for credit losses / non-performing assets		151.47	%		157.77	%		181.90	%		221.70	%		259.07	%		172.63	%		151.47	%		157.77	%		181.90	%		221.70	%
Allowance for credit losses / non-performing loans		151.64	%		158.82	%		183.90	%		224.36	%		263.43	%		172.82	%		151.64	%		158.82	%		183.90	%		224.36	%
Non-performing assets / loans plus OREO*		0.90	%		0.96	%		0.89	%		0.73	%		0.65	%		0.77	%		0.90	%		0.96	%		0.89	%		0.73	%
Non-performing assets / total assets		0.66	%		0.72	%		0.70	%		0.57	%		0.51	%		0.54	%		0.66	%		0.72	%		0.70	%		0.57	%
Net charge-offs / average loans (annualized)		(0.01	)%		0.05	%		0.24	%		(0.06	)%		(0.07	)%		(0.02	)%		(0.01	)%		0.05	%		0.24	%		(0.06	)%

Total non-interest income ~~increased $12.3~~decreased $5.5 million in the ~~first~~second quarter of 2021 to ~~$26.3~~$17.5 million from ~~$14.0~~$23.0 million for the same period in 2020.

Service Fees. Service fees and other charges increased by ~~$151,000~~$668,000 from ~~$5.3~~$5.6 million for the three months ended ~~March 31,~~June 30, 2020, to ~~$5.5~~$6.3 million for the same period in 2021. This increase is due primarily to ~~three months~~higher ATM and interchange related fees in the second quarter of ~~activity from the Merger in~~ 2021 compared to ~~only two months~~the same quarter in 2020. ~~This increase was offset by lower service fee income on certain categories that have been negatively impacted by the pandemic.~~

Mortgage Banking Activity. Mortgage banking income ~~increased~~decreased to ~~$10.5~~$2.2 million in the ~~first~~second quarter of 2021 from ~~$848,000~~$9.9 million in the ~~first~~second quarter of 2020. ~~Gains from the sale of mortgage loans increased~~Mortgage banking gains decreased to ~~$5.6~~$2.7 million in the ~~first~~second quarter of 2021 from ~~$4.9~~$11.5 million in the ~~first~~second quarter of 2020. This ~~increase~~decrease was primarily due to ~~an increase in the margins earned on the sale of mortgage loans and higher~~lower saleable volume ~~which was due~~and hedge costs returning to ~~only two months of volume from UCFC~~normal after historically low levels in ~~the first quarter of~~ 2020. Mortgage loan servicing revenue ~~increased to~~was $1.9 million in the ~~first~~second quarter of both 2021 ~~from $1.6 million in the first quarter of 2020 due primarily to the extra month of results in 2021 from the Merger compared to~~and 2020. Amortization of mortgage servicing rights ~~increased~~decreased to ~~$2.3~~$2.0 million in the ~~first~~second quarter of 2021 from ~~$1.2~~$2.2 million in the ~~first~~second quarter of 2020. ~~Faster prepayment speeds in 2021 compared to 2020 is the primary reason for this increase.~~ The Company had a ~~positive~~negative change in the valuation adjustment in mortgage servicing assets of ~~$5.3 million~~$448,000 in the ~~first~~second quarter of 2021 compared with a negative adjustment of ~~$4.5~~$1.4 million in the ~~first~~second quarter of 2020. These fluctuations have been caused by 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 ~~first~~second quarter of 2021 resulting in a gain of ~~$516,000~~$1.5 million compared to nominimal activity for the same period in 2020. The Company sold the securities to exit from fast paying mortgage-backed securities and take advantage of favorable pricing.

Gain on Equity Securities. The Company purchased a portfolio of bank stocks during the ~~first quarter of 2021. Subsequent to purchase, the equity securities appreciated~~year which recognized an $808,000 decline in value ~~resulting~~ in ~~a gain of $1.6 million for~~ the ~~first~~second quarter of 2021. The Company ~~did not own any~~owned a smaller equity securities portfolio in the ~~first~~second quarter of 2020.

Insurance Commissions. Insurance commissions ~~decreased~~increased slightly from ~~$5.2~~$4.0 million in the ~~first~~second quarter of 2020 to ~~$4.9~~$4.1 million in the ~~first~~second quarter of 2021. ~~This decrease was primarily due a decline in contingent revenue compared to the same period a year ago.~~

Wealth Management Income. Income from wealth management was ~~$1.8~~$1.6 million for the ~~first~~second quarter of 2021 compared to ~~$1.1~~$1.8 million in the ~~first~~second quarter of ~~2020. This increase was primarily a result of having three months of activity in 2021 from the Merger compared to two months in~~ 2020.

Bank-Owned Life Insurance. Income from bank owned life insurance (“BOLI”) increased from ~~$781,000~~$838,000 in the ~~first~~second quarter of 2020 to ~~$1.2 million~~$859,000 for the same period in 2021. ~~The increase was primarily due to the receipt of $334,000 in death benefits in the first quarter of 2021 compared to no such benefits received for the same period in 2020.~~

Other Non-Interest Income. Other non-interest income ~~decreased~~increased to ~~$340,000~~$2.0 million in the ~~first~~second quarter of 2021 from ~~$572,000~~$890,000 in the same period in 2020. This was primarily due to a settlement received in the second quarter of 2021.

Non-interest expense ~~decreased $3.5 million~~increased $391,000 to ~~$38.8~~$38.4 million for the ~~first~~second quarter of 2021 compared to ~~$42.3~~$38.0 million for the same period in 2020. The ~~decrease~~increase is mainly attributable to ~~$11.5 million~~increases in compensation and benefits and other expenses offset by a reduction in acquisition related charges from the Merger that occurred in 2020. There were no acquisition related expenses in 2021. This change was somewhat offset by the Company only having two months of expense from UCFC in 2020 compared to three months in 2021.

Compensation and Benefits. Compensation and benefits increased to ~~$22.0~~$21.0 million in the ~~first~~second quarter of 2021, compared to ~~$17.6~~$19.6 million in the ~~first~~second quarter of 2020. ~~The increase is primarily due~~Loan origination volume decreased in 2021compared to ~~only having two months of expense~~higher volume that included PPP loans, in ~~2020 from UCFC compared to three months~~2020. This decrease in ~~2021, which increase was partially offset by increased~~volume resulted in lower contra salary expense ~~from greater loan origination volume.~~in 2021.

Occupancy. Occupancy expense ~~increased~~decreased to $3.8 million in the second quarter of 2021 compared to $4.1 million in the ~~first quarter of 2021 compared to $3.7 million in the first~~second quarter of 2020. This ~~increase~~decrease was due to ~~only having two months~~the closure of ~~expense in 2020 for the Merger compared to~~ three ~~months~~branches in 2021.

FDIC Insurance Premium. The premiums on FDIC insurance increased to ~~$898,000~~$522,000 for the three months ended ~~March 31,~~June 30, 2021 compared to ~~$492,000~~$411,000 for the ~~first~~second quarter of 2020. The increase was due to a larger Balance sheet in 2021 compared to 2020 which is the basis for the insurance premium calculation.

Financial Institutions Tax. The Company’s financial institutions tax increased to $1.2 million in the ~~first~~second quarter of 2021 from ~~$834,000~~$1.1 for the ~~first~~second quarter of 2020. The increase iswas due to ~~only having two months of expense~~increased equity in 2021 compared to 2020 which is the basis for the ~~Merger compared to three months in 2021.~~tax calculation.

Data Processing.Data processing costs were ~~$3.4~~$3.3 million in the ~~first~~second quarter of 2021, ~~an increase~~a decrease of ~~$342,000~~$471,000 from ~~$3.0~~$3.8 million in the ~~first~~second quarter of 2020. The ~~increase~~decrease is primarily due to ~~only having two months~~the consolidation of ~~expense~~core systems in ~~2020 for~~ the ~~Merger compared to three months in 2021.~~ second half of 2020.

Amortization of Intangibles. Expense from the amortization of intangibles ~~increased~~decreased to $1.6 million in the ~~first~~second quarter of 2021 from ~~$1.2~~$1.8 million in the ~~first~~second quarter of 2020. The ~~increase~~decrease is primarily ~~due~~related to ~~only having two months~~the runoff of ~~expense in 2020 for~~core deposit intangibles over the ~~Merger compared to three months in 2021.~~past year.

Other Non-Interest Expenses. Other non-interest expenses increased ~~$1.7~~$1.8 million to ~~$5.6~~$6.9 million for the three months ended ~~March 31,~~June 30, 2021 from ~~$3.9~~$5.0 million for the same period in 2020. This increase was primarily a result of ~~having three~~volume based activity and increased accruals in 2021 compared to 2020.

On a consolidated basis, the Company’s net income for the six months ended June 30, 2021 was $72.4 million compared to income of $6.6 million for the same period in 2020. On a per share basis, basic and diluted earnings per common share for the six months ended June 30, 2021 were both $1.94, compared to basic and diluted earnings per common share of $0.19 for the same period in 2020.

Net interest income was $113.1 million for the first six months of ~~activity~~2021 compared with $99.8 million in the first six months of 2020. Average interest-earning assets increased to $6.7 billion in the first six months of 2021 compared to $5.6 billion in the first six months of 2019. This increase was primarily due to the Merger as well as organic loan growth.

For the six month period ended June 30, 2021, total interest income was $122.2 million compared to $117.0 million for the same period in 2020. Interest expense decreased by $8.1 million to $9.1 million for the six months ended June 30, 2021, compared to $17.2 million for the same period in 2020.

Net interest margin for the first six months of 2021 was 3.39%, down 24 basis points from the 3.63% margin reported in the six month period ended June 30, 2020. The decline in net interest margin was primarily due to the fall in interest rates year over year along with the Merger.

The provision for credit losses on loans and unfunded commitments was a recovery of $10.9 million for the six months ended June 30, 2021, compared to an expense of $48.2 million for the six months ended June 30, 2020. The increase in 2020 was primarily due to the Merger, which added $25.9 million to provision and an additional provision for the anticipated effects of COVID-19. Charge-offs for the first half of 2021 were $820,000 and recoveries of previously charged off loans totaled $1.3 million for net recoveries of $433,000. By comparison, $729,000 of charge-offs were recorded in the same period of 2020 and $2.3 million of recoveries were realized for net recoveries of $1.6 million.

Total non-interest income increased $6.8 million to $43.8 million for the six months ended June 30, 2021, from $37.0 million recognized for the same period in 2020. A full year of income from the Merger in 2021 compared to ~~two~~five months in 2020 was the primary reason for the increase.

Service Fees. Service fees and other charges were $11.8 million for the first six months of 2021, an increase of $954,000 for the same period in 2020. A full year of income from the Merger in 2021 compared to five months in 2020 was the primary reason for the increase.

Mortgage Banking Activity. Total revenue from the sale and servicing of mortgage loans increased $2.0 million to $12.7 million for the six months ended June 30, 2021, from $10.7 million for the same period in 2020. Mortgage banking gains decreased $8.1 million to $8.3 million for the first six months of 2021 from $16.4 million for the same period in 2020. Mortgage loan servicing revenue increased to $3.8 million in the first half of 2021 from $3.5 million for the first six months of 2020. The amortization of mortgage servicing rights increased from an expense of $3.3 million for the first six months of 2020 to an expense of $4.3 million

for the first six months of 2021. This increase was primarily due to the Merger and the fall in interest rates which has caused prepayment speeds to spike. The Company recorded a positive valuation adjustment of $4.9 million in the first six months of 2021 compared to a negative adjustment of $5.9 million in the first six months of 2020. This increase was mainly due to an increase in interest rates and the subsequent decrease in prepayment speeds.

Insurance Commission Income. Income from the sale of insurance and investment products was $8.9 million in the first six months of 2021, a decrease of $220,000 from $9.2 million in the first six months of 2020.

Wealth Management Income. Income in this category was $3.3 million in the first six months of 2021, compared to $2.9 million in the first six months of 2020. The increase was primarily attributable to a full year of income from the Merger in 2021 versus five months in 2020.

Income from Bank Owned Life Insurance. Income from BOLI increased to $2.0 million in the first six months of 2021, compared to $1.6 million in the first six months of 2020. The increase was primarily due to the receipt of $334,000 in death benefits in the first half of 2021 compared to no such benefits received in 2020.

Other Non-Interest Income. Other non-interest income for the first six months of 2021 was $2.3 million, up from $1.6 million in the first six months of 2020 primarily due to a full year of income from the Merger.

Non-interest expense was $77.2 million for the first six months of 2021, down from $80.3 million for the same period in 2020. Merger expenses of $13.6 million in 2020 are the primary factors in this decline.

Compensation and Benefits. Compensation and benefits increased to $43.0 million for the six months ended June 30, 2021, compared to $37.2 million for the same period in 2020. The increase is mainly related to a full year of expense from the Merger along with merit increases, which were offset by a higher level of deferred salary expense related to the increased level of mortgage originations.

Occupancy. Occupancy expense increased by $90,000 to $7.9 million for the six months ended June 30, 2021, compared to the same period in 2020. This can be primarily attributed a full year of expense from the Merger in 2021 compared to five months in 2020.

Data Processing. Data processing cost was $6.7 million in the first half of 2021, down slightly from $6.8 million in the first half of 2020.

Amortization of Intangibles. Intangible amortization increased by $143,000 to $3.2 million in the six months ended June 30, 2021. This increase was due to a full year of expense from the Merger in 2021 compared to five months in 2020.

Acquisition Related Charges. The Company recorded $13.6 million in acquisition related charges during the first six months of 2020. There were no similar charges in 2021.

Other Non-Interest Expenses. Other non-interest expenses increased $3.5 million to $12.5 million for the first six months of 2021 from $8.9 million for the same period in 2020. This increase is primarily related to volume based fees as a result of increased activity.

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 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 ~~March 31,~~June 30, 2021, the Bank had ~~$2.1~~$2.0 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 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 banking agencies approved the final rules implementing the Basel Committee on Banking Supervision’s capital guidelines for U.S. banks (commonly known as “Basel III”). Under the final

rules, which began for the Company and the Bank on January 1, 2015, and were subject to a phase-in period through January 1, 2019, minimum requirements increased for both quantity and quality of capital held by the Company and the Bank. The rules included a new minimum common equity Tier 1 (“CET1”) capital to risk-weighted assets ratio of 4.5% and a capital conservation buffer that began at 0.625% of risk-weighted assets during 2016 and increased each year until fully phased-in during 2020 at 2.50%, effectively resulting in a minimum CET1 ratio of 7.0%. Basel III raised the minimum ratio of Tier 1 capital to risk-weighted assets from 4.0% to 6.0% (which, with the capital conservation buffer, effectively results in a minimum Tier 1 capital ratio of 8.5% when fully phased-in), which effectively results in a minimum total capital to risk-weighted assets ratio of 10.5% (with the capital conservation buffer fully phased-in), and requires a minimum leverage ratio of 4.0%. Basel III also made changes to risk weights for certain assets and off-balance sheet exposures.

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, ~~2021~~2020 capital calculations. The Company met each of the well-capitalized ratio guidelines at ~~March 31,~~June 30, 2021. The following table indicates the capital ratios for the Company (consolidated) and the Bank at ~~March 31,~~June 30, 2021, and December 31, 2020. ~~(in~~(in thousands):

	March 31, 2021															June 30, 2021
	Actual					Minimum Required for Adequately Capitalized					Minimum Required to be Well Capitalized for Prompt Corrective Action					Actual					Minimum Required for Adequately Capitalized					Minimum Required to be Well Capitalized for Prompt Corrective Action
	Amount		Ratio			Amount		Ratio(1)			Amount		Ratio			Amount		Ratio			Amount		Ratio(1)			Amount		Ratio
CET1 Capital (to Risk-Weighted Assets)
Consolidated	$	657,108		10.88	%	$	271,661		4.5	%	N/A		N/A			$	676,745		10.93	%	$	278,590		4.5	%	N/A		N/A
Premier Bank	$	670,590		11.15	%	$	270,535		4.5	%	$	390,772		6.5	%	$	703,689		11.41	%	$	277,458		4.5	%	$	400,773		6.5	%
Tier 1 Capital
Consolidated	$	692,108		9.89	%	$	279,914		4.0	%	N/A		N/A			$	711,745		9.89	%	$	287,983		4.0	%	N/A		N/A
Premier Bank	$	670,590		9.60	%	$	279,397		4.0	%	$	349,247		5.0	%	$	703,689		9.81	%	$	286,976		4.0	%	$	358,721		5.0	%
Tier 1 Capital (to Risk Weighted Assets)
Consolidated	$	692,108		11.46	%	$	362,215		6.0	%	N/A		N/A			$	711,745		11.50	%	$	371,453		6.0	%	N/A		N/A
Premier Bank	$	670,590		11.15	%	$	360,713		6.0	%	$	480,951		8.0	%	$	703,689		11.41	%	$	369,945		6.0	%	$	493,260		8.0	%
Total Capital (to Risk Weighted Assets)
Consolidated	$	817,412		13.54	%	$	482,953		8.0	%	N/A		N/A			$	836,075		13.50	%	$	495,271		8.0	%	N/A		N/A
Premier Bank	$	745,748		12.40	%	$	480,951		8.0	%	$	601,188		10.0	%	$	778,019		12.62	%	$	493,260		8.0	%	$	616,574		10.0	%

As discussed in detail in the Company’s 2020 Form 10-K, Premier’s ability to maximize net income is dependent on management’s ability to plan and control net interest income through management of the pricing and mix of assets and liabilities. Because a large portion of assets and liabilities of Premier are monetary in nature, changes in interest rates and monetary or fiscal policy affect its financial condition and can have significant impact on the net income of the Company. Premier does not use off-balance sheet derivatives to manage its risk management, nor does it engage in trading activities beyond the sale of mortgage loans.

Premier monitors its exposure to interest rate risk on a quarterly basis through simulation analysis that measures the impact changes in interest rates can have on net interest income. The simulation technique analyzes the effect of a presumed 100 basis point shift in interest rates (which is consistent with management’s estimate of the range of potential interest rate fluctuations) and takes into account prepayment speeds on amortizing financial instruments, loan and deposit volumes and rates, non-maturity deposit assumptions and capital requirements.

The table below presents, for the twelve months subsequent to ~~March 31,~~June 30, 2021 and December 31, 2020, an estimate of the change in net interest income that would result from an immediate (shock) change in interest rates, moving in a parallel fashion over the entire yield curve, relative to the measured base case scenario. Based on our net interest income simulation as of ~~March 31,~~June 30, 2021, net interest income sensitivity to changes in interest rates for the twelve months subsequent to ~~March 31,~~June 30, 2021, ~~remained relatively stable~~decreased in the rising rate environment and increased in the falling rate environment for the shock compared to the sensitivity profile for the twelve months subsequent to December 31, 2020.

To analyze the impact of changes in interest rates in a more realistic manner, non-parallel interest rate scenarios are also simulated. These non-parallel interest rate scenarios indicate that net interest income may decrease from the base case scenario should the yield curve flatten or become inverted. Conversely, if the yield curve should steepen, net interest income may increase.

In addition to the simulation analysis, Premier also uses an economic value of equity (“EVE”) analysis to measure risk in the balance sheet incorporating all cash flows over the estimated remaining life of all balance sheet positions. The EVE analysis generally calculates the net present value of Premier’s assets and liabilities in rate shock environments that range from ~~-400~~-100 basis points to +400 basis points. The results of this analysis are reflected in the following tables for the quarter ended ~~March 31,~~June 30, 2021, and the year ended December 31, 2020.

	March 31, 2021								June 30, 2021
Change in Rates	$ Amount		$ Change			% Change			$ Amount		$ Change			% Change
	(Dollars in Thousands)								(Dollars in Thousands)
+400 bp	$	1,515,954	$	204,200			15.57	%	$	1,438,530	$	2,751			0.19	%
+ 300 bp		1,483,340		171,586			13.08	%		1,457,643		21,864			1.52	%
+ 200 bp		1,437,023		125,269			9.55	%		1,466,325		30,546			2.13	%
+ 100 bp		1,383,415		71,661			5.46	%		1,466,503		30,724			2.14	%
0 bp		1,311,754		—			—			1,435,779		—			—
- 100 bp		1,198,717		(113,037	)		(8.62	)%		1,379,604		(56,175	)		(3.91	)%

Disclosure controls and procedures are controls and other procedures designed to ensure that information required to be disclosed in the Company's reports filed under the Exchange Act, including this report, is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC, including those disclosure controls and procedures designed to ensure that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed or operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives, as ours are designed to do, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. An evaluation was carried out under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and the Chief Financial

Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of ~~March 31,~~June 30, 2021. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective. No changes occurred in the Company’s internal controls over financial reporting during the quarter ended ~~March 31,~~June 30, 2021, that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Neither Premier nor any of its subsidiaries is engaged in any legal proceedings of a material nature.

There are no material changes from the risk factors set forth under Part I, Item 1A, “Risk Factors” in the 2020 Form 10-K.

The Company had no unregistered sales of equity securities during the quarter ended ~~March 31,~~June 30, 2021.

The following table provides information regarding Premier’s purchases of its common stock during the three-month period ended ~~March 31,~~June 30, 2021:

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Ohio	34-1803915
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
601 Clinton Street Defiance, OH	43512
(Address of principal executive offices)	(Zip Code)


		Page Number

PART I - FINANCIAL INFORMATION

Item 1.	Consolidated Condensed Financial Statements (Unaudited):	2

	Consolidated Condensed Statements of Financial Condition – ~~March 31,~~June 30, 2021 and December 31, 2020	2

	Consolidated Condensed Statements of Income Three and six months ended ~~March 31,~~June 30, 2021 and 2020	4

	Consolidated Condensed Statements of Comprehensive Income – Three and six months ended ~~March 31,~~June 30, 2021 and 2020	5

	Consolidated Condensed Statements of Changes in Stockholders’ Equity – Three and six months ended ~~March 31,~~June 30, 2021 and 2020	6

	Consolidated Condensed Statements of Cash Flows -– Three and six months ended ~~March 31,~~June 30, 2021 and 2020	78

	Notes to Consolidated Condensed Financial Statements	89

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	4647

Item 3	Quantitative and Qualitative Disclosures about Market Risk	6165

Item 4	Controls and Procedures	6266

PART II - OTHER INFORMATION:

Item 1	Legal Proceedings	6366

Item 1A.	Risk Factors	6366

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	6366

Item 3	Defaults upon Senior Securities	6367

Item 4	Mine Safety Disclosures	6367

Item 5	Other Information	6467

Item 6	Exhibits	6467

	Signatures	6568

Large accelerated filer	☐	Accelerated filer	☒

Non-accelerated filer	☐	Smaller reporting company	☐

Emerging growth company	☐

			Fair Value Measurements at December 31, 2020
			(In Thousands)
	Carrying Value		Total		Level 1		Level 2		Level 3
Financial Assets:
Cash and cash equivalents	$	159,266	$	159,266	$	159,266	$	—	$	—
Securities available for sale		736,654		736,654		—		736,654		—
Equity securities		1,090		1,090		1,090		—		—
Federal Home Loan Bank Stock		16,026	N/A		N/A		N/A		N/A
Loans receivable, net		5,409,161		5,412,814		—		—		5,412,814
Loans held for sale, carried at fair value		221,616		221,616		—		98,587		123,029

Financial Liabilities:
Deposits	$	6,047,841	$	6,056,426	$	4,925,411	$	1,131,015	$	—
Subordinated debentures		84,860		83,237		—		—		83,237

Year-to-date Period Ended June 30, 2021	1-4 Family Residential Real Estate			Commercial Real Estate			Construction			Commercial			Home Equity and Improvement			Consumer Finance			Total
Beginning Allowance	$	17,534		$	43,417		$	2,741		$	11,665		$	4,739		$	1,983		$	82,079
Charge-Offs		—			(605	)		—			(70	)		(3	)		(142	)		(820	)
Recoveries		90			189			12			703			194			65			1,253
Provisions		(2,356	)		(8,540	)		(14	)		(87	)		58			(206	)		(11,145	)
Ending Allowance	$	15,268		$	34,461		$	2,739		$	12,211		$	4,988		$	1,700		$	71,367

Year-to-date Period Ended June 30, 2020	1-4 Family Residential Real Estate			Commercial Real Estate			Construction			Commercial			Home Equity and Improvement			Consumer Finance			Total
Beginning Allowance	$	2,867		$	16,302		$	996		$	9,003		$	1,700		$	375		$	31,243
Impact of ASC 326 Adoption		1,765			3,682			(223	)		(2,263	)		(521	)		(86	)		2,354
Acquisition related allowance for credit loss (PCD)		1,077			4,053			—			2,272			248			48			7,698
Charge-Offs		(257	)		(65	)		(1	)		(133	)		(86	)		(187	)		(729	)
Recoveries		215			529			—			1,336			136			118			2,334
Provisions⁽¹⁾		18,116			19,556			365			1,624			2,739			3,255			45,655
Ending Allowance	$	23,783		$	44,057		$	1,137		$	11,839		$	4,216		$	3,523		$	88,555

(1) Provision for the six months ended June 30, 2020, includes $25.9 million as a result of the Merger with UCFC.

Three Months Ended March 31, 2020	1-4 Family Residential Real Estate			Commercial Real Estate			Construction			Commercial			Home Equity and Improvement			Consumer Finance			Total
Beginning Allowance	$	2,867		$	16,302		$	996		$	9,003		$	1,700		$	375		$	31,243
Impact of ASC 326 Adoption		1,765			3,682			(223	)		(2,263	)		(521	)		(86	)		2,354
Acquisition related allowance for credit loss (PCD)		1,077			4,053			—			2,272			248			48			7,698
Charge-Offs		(184	)		(16	)		—			(96	)		(30	)		(108	)		(434	)
Recoveries		101			340			—			669			42			60			1,212
Provisions⁽¹⁾		17,698			18,154			111			2,316			2,515			2,992			43,786
Ending Allowance	$	23,324		$	42,515		$	884		$	11,901		$	3,954		$	3,281		$	85,859

(1) Provision for the three months ended March 31, 2020, includes $25.9 million as a result of the Merger with UCFC.

	March 31, 2021 Balance deferred		December 31, 2020 Balance deferred
Residential real estate	$	3,399	$	7,016
Commercial real estate		31,232		34,831
Construction		13		9,579
Commercial		1,125		1,628
Home equity and improvement		-		114
Consumer finance		15		282
Total	$	35,784	$	53,450

Commercial deferral expirations	Balance
April	$	25,320
May		7,050
June		-
July		-
August		-
September		-
Total	$	32,370

	June 30, 2021 Balance deferred		December 31, 2020 Balance deferred
Residential real estate	$	13	$	7,016
Commercial real estate		—		34,831
Construction		—		9,579
Commercial		—		1,628
Home equity and improvement		—		114
Consumer finance		—		282
Total	$	13	$	53,450

Portfolio Segments	Loan Pool	Methodology	Loss Drivers
Residential real estate	1-4 Family nonowner occupied	DCF	National unemployment
	1-4 Family owner occupied	DCF	National unemployment
Commercial real estate	Commercial real estate nonowner occupied	DCF	National unemployment
	Commercial real estate owner occupied	DCF	National unemployment
	Multi Family	DCF	National unemployment
	Agriculture Land	DCF	National unemployment
	Other commercial real estate	DCF	National unemployment
Construction secured by real estate	Construction	PD/LGD	Call report loss history

Commercial	Commercial working capital	PD/LGD	Call report loss history
	Agriculture production	PD/LGD	Call report loss history
	Other commercial	PD/LGD	Call report loss history
Home equity and improvement	Home equity and improvement	PD/LGD	Call report loss history
Consumer finance	Consumer finance	Remaining life	Call report loss history

	2020
Par value of acquired loans at acquisition	$	2,247,317
Credit discount		(34,610	)
Non-credit (discount)/premium at acquisition		8,497
Purchase price of loans at acquisition	$	2,221,204

	June 30, 2021			December 31, 2020

Notional amount	$	250,000		$	-
Weighted average fixed receive rates		1.437	%		—
Weighted average variable 1-month LIBOR pay rates		0.086	%		—
Weighted average maturity (in years)		10			—
Unrealized gains (losses), net of tax	$	3,147			—

	Six Months Ended June 30,
	2021							2020
	Average				Yield/			Average				Yield/
	Balance		Interest (1)		Rate (2)			Balance		Interest (1)		Rate (2)
Interest-earning assets:
Loans receivable	$	5,562,379	$	113,366		4.08	%	$	4,862,410	$	110,304		4.55	%
Securities (3)		1,009,695		9,153		1.81			482,839		6,100		2.57
Interest bearing deposits		125,732		108		0.17			164,662		309		0.38
FHLB stock		11,542		115		1.99			49,631		766		3.10
Total interest-earning assets		6,709,348		122,742		3.66			5,559,542		117,479		4.24
Non-interest-earning assets		735,443							626,126
Total assets	$	7,444,791						$	6,185,668

Interest-bearing liabilities:
Deposits	$	4,593,493	$	7,723		0.34	%	$	3,750,226	$	15,206		0.81	%
FHLB advances		15,166		12		0.16			315,337		1,523		0.97
Subordinated debentures		84,881		1,369		3.23			36,083		452		2.51
Securities sold under repurchase agreements		—		—		—			8,816		24		0.55
Total interest-bearing liabilities		4,693,540		9,104		0.39			4,110,462		17,205		0.84
Non-interest bearing deposits		1,671,901		—		—			1,122,041		—		—
Total including non-interest bearing demand deposits		6,365,441		9,104		0.29			5,232,503		17,205		0.66
Other non-interest-bearing liabilities		89,550							94,271
Total liabilities		6,454,991							5,326,774
Stockholders' equity		989,800							858,894
Total liabilities and stock-holders' equity	$	7,444,791						$	6,185,668
Net interest income; interest rate spread			$	113,638		3.27	%			$	100,274		3.40	%
Net interest margin (4)						3.39	%						3.63	%
Average interest-earning assets to average interest-bearing liabilities						143	%						135	%

	December 31, 2020
	Actual					Minimum Required for Adequately Capitalized					Minimum Required to be Well Capitalized for Prompt Corrective Action
	Amount		Ratio			Amount		Ratio(1)			Amount		Ratio
CET1 Capital (to Risk-Weighted Assets)
Consolidated	$	624,069		10.40	%	$	270,017		4.5	%	N/A		N/A
Premier Bank	$	629,653		10.52	%	$	269,396		4.5	%	$	389,128		6.5	%

Tier 1 Capital
Consolidated	$	659,069		9.76	%	$	270,072		4.0	%	N/A		N/A
Premier Bank	$	629,653		9.36	%	$	269,189		4.0	%	$	336,487		5.0	%

Tier 1 Capital (to Risk Weighted Assets)
Consolidated	$	659,069		10.98	%	$	360,022		6.0	%	N/A		N/A
Premier Bank	$	629,653		10.52	%	$	359,195		6.0	%	$	478,926		8.0	%

Total Capital (to Risk Weighted Assets)
Consolidated	$	784,148		13.07	%	$	480,030		8.0	%	N/A		N/A
Premier Bank	$	704,586		11.77	%	$	478,926		8.0	%	$	598,658		10.0	%

	Impact on Future Annual Net Interest Income
(dollars in thousands)	June 30, 2021					December 31, 2020
Immediate Change in Interest Rates
+200	$	1,876		0.86	%	$	15,215		7.24	%
+100		1,118		0.51	%		7,908		3.76	%
-100		(7,796	)	-3.58	%		(5,036	)	-2.40	%

Period	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs⁽¹⁾
Beginning Balance, December 31, 2020								570,000
January 1 - January 31, 2021		—	$	—		—		2,000,000
February 1 - February 28, 2021		39,200		27.49		39,200		1,960,800
March 1 - March 31, 2021		5,779		23.85		—		1,960,800
Total		44,979		27.02		39,200		1,960,800


Exhibit 2.1		Agreement and Plan of Merger, dated as of September 9, 2019, between First Defiance Financial Corp. and United Community Financial Corp. (incorporated herein by reference to Exhibit 2.1 in Registrant’s Form 8-K filed September 10, 2019 (File No. 000-26850))
Exhibit 3.1		Second Amended and Restated Articles of Incorporation of Premier Financial Corp. (incorporated herein by reference to Exhibit 3.2 in Registrant’s Form 8-K filed June 22, 2020 (File No. 000-26850))
Exhibit 3.2		Second Amended and Restated Code of Regulations of Premier Financial Corp. (reflecting all amendments) (incorporated herein by reference to Exhibit 3.3 in Registrant’s Form 8-K filed June 22, 2020 (File No. 000-26850))
Exhibit 31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 32.1		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Exhibit 32.2		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Exhibit 101		The following financial information from the Registrant's Quarterly Report on Form 10-Q for the quarter ended ~~March 31,~~June 30, 2020 is formatted in Inline XBRL: (i) Unaudited Consolidated Condensed Statements of Financial Condition at ~~March 31,~~June 30, 2021 and December 31, 2020; (ii) Unaudited Consolidated Condensed Statements of Income for the Three and Six Months ended ~~March 31,~~June 30, 2021 and 2020; (iii) Unaudited Consolidated Condensed Statements of Comprehensive Income for the Three and Six Months ended ~~March 31,~~June 30, 2021 and 2020; (iv) Unaudited Consolidated Condensed Statements of Changes in Stockholders’ Equity for the Three and Six Months ended ~~March 31,~~June 30, 2021 and 2020; (v) Unaudited Consolidated Condensed Statements of Cash Flows for the Three and Six Months ended ~~March 31,~~June 30, 2021 and 2020; and (vi) Notes to Unaudited Consolidated Condensed Financial Statements.

Exhibit 104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

Date: ~~May~~August 6, 2021	By:	/s/ Gary M. Small
		Gary M. Small
		President and Chief Executive Officer

Date: ~~May~~August 6, 2021	By:	/s/ Paul D. Nungester, Jr.
		Paul D. Nungester, Jr.
		Executive Vice President and
		Chief Financial Officer