UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2021~~March 31, 2022


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________ to _______________

Commission File Number: 0-26850

Premier Financial Corp.

(Exact Name of Registrant as Specified in its Charter)


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)

Registrant’s telephone number, including area code: ~~(419) 782-5015~~(419) 785-8700

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock, Par Value $0.01 Per Share

PFC

The NASDAQ Stock Market

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.

~~Large accelerated filer~~	☐		~~Accelerated filer~~	☒
Large accelerated filer	☒		Accelerated filer	☐
~~Non-accelerated filer~~		☐			~~Smaller reporting company~~	☐
Non-accelerated filer	☐		Smaller reporting company	☐

Emerging growth company	☐

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 ~~October 31, 2021,~~May 2, 2022, the registrant had ~~36,978,266~~35,538,460 shares of common stock, $.01 par value per share, outstanding.

Table of Contents

PREMIER FINANCIAL CORP.

INDEX


		Page Number

PART I - FINANCIAL INFORMATION

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

	Consolidated Condensed Statements of Financial Condition – ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021	2

	Consolidated Condensed Statements of Income Three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~	43

	Consolidated Condensed Statements of Comprehensive Income – Three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~	54

	Consolidated Condensed Statements of Changes in Stockholders’ Equity – Three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~	65

	Consolidated Condensed Statements of Cash Flows – ~~Nine~~Three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~	86

	Notes to Consolidated Condensed Financial Statements	97

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	4839

Item 3	Quantitative and Qualitative Disclosures about Market Risk	6652

Item 4	Controls and Procedures	6753

PART II - OTHER INFORMATION:

Item 1	Legal Proceedings	6854

Item 1A.	Risk Factors	6854

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	6854

Item 3	Defaults upon Senior Securities	6854

Item 4	Mine Safety Disclosures	6855

Item 5	Other Information	6855

Item 6	Exhibits	6956

	Signatures	6956

~~PART I-FINANCIAL INFORMATION~~

~~Item 1. Financial Statements~~1

Table of Contents

PART I-FINANCIAL INFORMATION

PREMIER FINANCIAL CORP.

Consolidated Condensed Statements of Financial Condition

~~(UNAUDITED)~~

~~(Amounts in Thousands, except share and per share data)~~

September 30,
2021

December 31,
2020

Assets

Cash and cash equivalents:

Cash and amounts due from depository institutions

$
63,480

$
79,593

Interest-bearing deposits

51,614

79,673

115,094

159,266

Securities available-for-sale, carried at fair value

1,250,087

736,654

Equity securities

12,965

1,090

Loans held for sale, carried at fair value

178,490

221,616

Loans receivable, net of allowance for credit losses of $73,217 at September 30, 2021 and $82,079 at December 31, 2020, respectively

5,196,349

5,409,161

Mortgage servicing rights

19,105

13,153

Accrued interest receivable

22,994

25,434

Federal Home Loan Bank stock

11,585

16,026

Bank owned life insurance

166,866

144,784

Premises and equipment

56,073

58,665

Real estate and other assets held for sale

261

343

Goodwill

317,948

317,948

Core deposit and other intangibles

25,612

30,337

Other assets

94,889

77,257

Total assets

$
7,468,318

$
7,211,734

~~(continued)~~

~~PREMIER~~ ~~FINANCIAL CORP.~~(UNAUDITED)

~~Consolidated Condensed Statements of Financial Condition~~

~~(UNAUDITED)~~

~~(Amounts in Thousands, except share and per share data)~~

September 30,
2021

December 31,
2020

Liabilities and stockholders’ equity

Liabilities:

Deposits

$
6,248,658

$
6,047,841

Advances from the Federal Home Loan Bank

—

—

Notes payable and other interest-bearing liabilities

18,812

—

Subordinated debentures

84,944

84,860

Advance payments by borrowers

19,495

21,748

Reserve for credit losses - unfunded commitments

5,838

5,350

Other liabilities

58,702

69,659

Total liabilities

6,436,449

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 36,978,151 and 37,291,480
   shares outstanding at September 30, 2021 and December 31, 2020, respectively

306

306

Additional paid-in capital

690,783

689,390

Accumulated other comprehensive income, net of tax of $438 and $3,988,
   respectively

1,609

15,004

Retained earnings

428,518

356,414

Treasury stock, at cost, 6,301,869 shares at September 30, 2021 and 6,005,780 shares
   at December 31, 2020

(89,347
)

(78,838
)
Total stockholders’ equity

1,031,869

982,276

Total liabilities and stockholders’ equity

$
7,468,318

$
7,211,734

~~See accompanying notes.~~

~~PREMIER FINANCIAL CORP.~~

~~Consolidated Condensed Statements of Income~~

~~(UNAUDITED)~~

~~(Amounts in Thousands, except per share data)~~

Three Months Ended
September 30,

Nine Months Ended
September 30,

2021

2020

2021

2020

Interest Income

Loans

$
55,443

$
57,134

$
168,781

$
167,390

Investment securities:

Taxable

4,334

2,199

11,054

6,540

Non-taxable

991

649

2,945

1,949

Interest-bearing deposits

33

82

142

391

FHLB stock dividends

60

95

175

861

Total interest income

60,861

60,159

183,097

177,131

Interest Expense

Deposits

3,144

6,555

10,867

21,761

FHLB advances and other

11

168

23

1,690

Subordinated debentures

671

158

2,040

610

Notes payable

—

7

—

32

Total interest expense

3,826

6,888

12,930

24,093

Net interest income

57,035

53,271

170,167

153,038

Credit (benefit) loss expense - loans and leases

1,594

3,658

(9,549
)

49,312

Credit loss expense - unfunded commitments

226

(864
)

488

1,702

Net interest income after credit loss expense

55,215

50,477

179,228

102,024

Non-interest Income

Service fees and other charges

6,067

4,805

17,817

15,601

Insurance commissions

3,461

3,715

12,401

12,875

Mortgage banking income

6,175

12,047

18,865

22,763

Gain on sale of non-mortgage loans

—

—

—

234

Gain on sale of securities available for sale

233

1,466

2,218

1,464

Gain on equity securities

20

14

822

14

Wealth management income

1,321

1,458

4,644

4,351

Income from Bank Owned Life Insurance

947

841

2,975

2,460

Other non-interest income

90

654

2,391

2,251

Total non-interest income

18,314

25,000

62,133

62,013

Non-interest Expense

Compensation and benefits

23,355

20,172

66,399

57,331

Occupancy

3,693

3,989

11,642

11,848

FDIC insurance premium

695

1,469

2,115

2,372

Financial institutions tax

1,187

1,116

3,553

3,066

Data processing

3,387

4,289

10,103

11,135

Acquisition related charges

—

3,711

—

17,295

Amortization of intangibles

1,528

1,726

4,725

4,781

Other non-interest expense

5,200

7,091

17,686

16,028

Total non-interest expense

39,045

43,563

116,223

123,856

Income before income taxes

34,484

31,914

125,138

40,181

Income tax expense

6,124

6,259

24,397

7,951

Net income

$
28,360

$
25,655

$
100,741

$
32,230

Earnings per common share

Basic

$
0.76

$
0.69

$
2.70

$
0.91

Diluted

$
0.76

$
0.69

$
2.70

$
0.91

~~See accompanying notes.~~

~~PREMIER FINANCIAL CORP.~~

~~Consolidated Condensed Statements of Comprehensive Income (Loss)~~

~~(UNAUDITED)~~

~~(Amounts in Thousands)~~

Three Months Ended
September 30,

Nine Months Ended
September 30,

2021

2020

2021

2020

Net income

$
28,360

$
25,655

$
100,741

$
32,230

Other comprehensive (loss) income:

Unrealized (losses) gains on securities available for sale

(9,042
)

720

(16,169
)

13,338

Reclassification adjustment for securities gains (losses) included in net income

(233
)

(1,466
)

(2,218
)

(1,464
)
Income tax effect

1,947

158

3,861

(2,493
)
Net of tax amount

(7,328
)

(588
)

(14,526
)

9,381

Unrealized gain/(loss) on balance sheet swap

(1,692
)

—

2,742

—

Reclassification adjustment for cash flow hedge derivatives gain included in net income

(860
)

(1,310
)

Income tax effect

536

—

(301
)

—

Net of tax amount

(2,016
)

—

1,131

—

Total other comprehensive income (loss)

(9,344
)

(588
)

(13,395
)

9,381

Comprehensive income

$
19,016

$
25,067

$
87,346

$
41,611

~~See accompanying notes.~~

~~PREMIER FINANCIAL CORP.~~

~~Consolidated Statement of Changes in Stockholders’ Equity~~

~~(UNAUDITED)~~

(Amounts in Thousands, except share and per share data)

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

Net income

40,996

40,996

Other comprehensive loss

(15,506
)

(15,506
)
Deferred compensation plan

7,911

51

(51
)

—

Stock based compensation expenses

551

551

Vesting of incentive plans

6,124

(82
)

82

—

Shares issued under stock option plan

600

8

8

Restricted share issuance

13,708

(183
)

183

—

Restricted share forfeitures

(5,779
)

20

(138
)

(118
)
Shares repurchased

(39,200
)

(1,078
)

(1,078
)
Common stock dividend payment ($0.24 per share)

(8,943
)

(8,943
)
Balance at March 31, 2021

$
—

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

—

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

Net income

28,360

28,360

Other comprehensive (loss)

(9,344
)

(9,344
)
Deferred compensation plan

(10
)

10

—

Stock based compensation expenses

1,176

1,176

Vesting of incentive plans

2,002

(84
)

84

—

Restricted share issuance

6,116

(84
)

84

—

Restricted share forfeitures

(1,287
)

(61
)

(61
)
Shares repurchased

(206,285
)

(5,970
)

(5,970
)
Common stock dividend payment ($0.27 per share)

(9,995
)

(9,995
)
Balance at September 30, 2021

$
—

36,978,151

$
306

$
690,783

$
1,609

$
428,518

$
(89,347
)

$
1,031,869


	March 31, 2022			December 31, 2021
Assets
Cash and cash equivalents:
Cash and amounts due from depository institutions	$	62,083		$	54,858
Interest-bearing deposits		91,683			106,708
		153,766			161,566
Securities available-for-sale, carried at fair value		1,219,365			1,206,260
Equity securities, carried at fair value		13,454			14,097
Loans held for sale, carried at fair value		153,498			162,947
Loans receivable, net of allowance for credit losses of $67,195 at March 31, 2022 and $66,468 at December 31, 2021, respectively		5,321,136			5,229,700
Mortgage servicing rights		20,715			19,538
Accrued interest receivable		21,765			20,767
Federal Home Loan Bank stock		15,332			11,585
Bank owned life insurance		167,763			166,767
Premises and equipment		54,684			55,602
Real estate and other assets held for sale		253			171
Goodwill		317,948			317,948
Core deposit and other intangibles		22,691			24,129
Other assets		108,510			90,325
Total assets	$	7,590,880		$	7,481,402
Liabilities and stockholders’ equity
Liabilities:
Deposits	$	6,317,235		$	6,282,051
Advances from the Federal Home Loan Bank		150,000			—
Subordinated debentures		85,008			84,976
Advance payments by borrowers		20,332			24,716
Reserve for credit losses - unfunded commitments		5,340			5,031
Other liabilities		69,669			61,132
Total liabilities		6,647,584			6,457,906
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 35,620,578 and 36,383,613 shares outstanding at March 31, 2022 and December 31, 2021, respectively		306			306
Additional paid-in capital		691,350			691,132
Accumulated other comprehensive income, net of tax of $(20,069) and $(912), respectively		(75,497	)		(3,428	)
Retained earnings		459,087			443,517
Treasury stock, at cost, 7,676,682 shares at March 31, 2022 and 6,913,647 shares at December 31, 2021		(131,950	)		(108,031	)
Total stockholders’ equity		943,296			1,023,496
Total liabilities and stockholders’ equity	$	7,590,880		$	7,481,402

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

Net income

25,655

25,655

Other comprehensive income (loss)

(588
)

(588
)
Deferred compensation plan

(23
)

23

—

Stock based compensation expenses

1,185

1,185

Shares issued from direct stock sales

544

9

9

Common stock dividend payment ($0.22 per share)

(8,204
)

(8,204
)
Balance at September 30, 2020

$
—

37,296,613

$
306

$
689,736

$
13,976

$
333,772

$
(78,765
)

$
959,025

See accompanying notes.

Table of Contents

PREMIER FINANCIAL CORP.

Consolidated Condensed Statements of Income

(UNAUDITED)

(Amounts in Thousands, except per share data)


	Three Months Ended March 31,
	2022			2021
Interest Income
Loans	$	55,241		$	57,565
Investment securities:
Taxable		4,610			2,782
Non-taxable		869			900
Interest-bearing deposits		46			66
FHLB stock dividends		59			59
Total interest income		60,825			61,372
Interest Expense
Deposits		2,222			4,164
FHLB advances and other		13			0
Subordinated debentures		696			695
Total interest expense		2,931			4,859
Net interest income		57,894			56,513
Credit loss expense (benefit) - loans and leases		626			(7,514	)
Credit loss expense - unfunded commitments		309			551
Net interest income after credit (benefit) loss expense		56,959			63,476
Non-interest Income
Service fees and other charges		6,000			5,469
Insurance commissions		4,639			4,882
Mortgage banking income		4,252			10,533
Gain on sale of securities available for sale		0			516
Gain (loss) on equity securities		(643	)		1,610
Wealth management income		1,477			1,757
Income from Bank Owned Life Insurance		996			1,168
Other non-interest income		150			340
Total non-interest income		16,871			26,275
Non-interest Expense
Compensation and benefits		25,541			21,997
Occupancy		3,700			4,112
FDIC insurance premium		593			898
Financial institutions tax		1,191			1,190
Data processing		3,335			3,382
Amortization of intangibles		1,438			1,623
Other non-interest expense		5,505			5,601
Total non-interest expense		41,303			38,803
Income before income taxes		32,527			50,948
Income tax expense		6,170			9,952
Net income	$	26,357		$	40,996
Earnings per common share
Basic	$	0.73		$	1.10
Diluted	$	0.73		$	1.10

See accompanying notes.

Table of Contents

PREMIER FINANCIAL CORP.

Consolidated Condensed Statements of Comprehensive Income (Loss)

(UNAUDITED)

(Amounts in Thousands)


	Three Months Ended March 31,
	2022			2021
Net income	$	26,357		$	40,996

Other comprehensive (loss) income:
Unrealized (losses) gains on securities available for sale		(74,193	)		(19,112	)
Reclassification adjustment for securities gains (losses) included in net income		0			(516	)
Income tax effect		15,580			4,122
Net of tax amount		(58,613	)		(15,506	)

Unrealized gain (loss) on balance sheet swap		(16,241	)		—
Reclassification adjustment for cash flow hedge derivatives gain included in net income		(793	)
Income tax effect		3,578			—
Net of tax amount		(13,456	)		—

Total other comprehensive income (loss)		(72,069	)		(15,506	)

Comprehensive income (loss)	$	(45,712	)	$	25,490

See accompanying notes.

Table of Contents

PREMIER FINANCIAL CORP.

Consolidated Statement of Changes in Stockholders’ Equity

(UNAUDITED)

(Amounts in Thousands, except share and per share data)


	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, 2022	$	—		36,383,613		$	306	$	691,132		$	(3,428	)	$	443,517		$	(108,031	)	$	1,023,496
Net income															26,357						26,357
Other comprehensive income (loss)												(72,069	)								(72,069	)
Deferred compensation plan				9,933					(14	)								14			—
Vesting of incentive plans				5,660					760									246			1,006
Restricted share issuance				19,936					(597	)								351			(246	)
Restricted share forfeitures				(5,398	)				69									(285	)		(216	)
Shares repurchased				(793,166	)													(24,245	)		(24,245	)
Common stock dividend payment ($0.30 per share)															(10,787	)					(10,787	)
Balance at March 31, 2022	$	—		35,620,578		$	306	$	691,350		$	(75,497	)	$	459,087		$	(131,950	)	$	943,296


	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
Net income (loss)															40,996						40,996
Other comprehensive income (loss)												(15,506	)								(15,506	)
Deferred compensation plan				7,911					51									(51	)		—
Stock based compensation expenses									551												551
Vesting of incentive plans				6,124					(82	)								82			—
Shares issued under stock option plan				600														8			8
Restricted share issuance				13,708					(183	)								183			—
Restricted share forfeitures				(5,779	)				20									(138	)		(118	)
Shares repurchased				(39,200	)													(1,078	)		(1,078	)
Common stock dividend payment ($0.24 per share)															(8,943	)					(8,943	)
Balance at March 31, 2021	$	—		37,274,844		$	306	$	689,747		$	(502	)	$	388,467		$	(79,832	)	$	998,186

See accompanying notes.

Table of Contents

PREMIER FINANCIAL CORP.

Consolidated Condensed Statements of Cash Flows

(UNAUDITED)

(Amounts in Thousands)


	Nine Months Ended September 30,						Three Months Ended March 31,
	2021			2020			2022			2021
Operating Activities
Net income (loss)	$	100,741		$	32,230
Net income							$	26,357		$	40,996
Items not requiring (providing) cash:
Provision (benefit) for credit losses		(9,061	)		51,014
Credit loss expense (benefit)								935			(6,963	)
Depreciation		4,837			4,658			1,466			1,647
Amortization of premium and discounts on loans, securities, deposits and debt obligations		48			(6,584	)		1,882			143
Amortization of mortgage servicing rights, net of impairment charges/recoveries		464			12,829			170			(2,976	)
Amortization of intangibles		4,725			4,781			1,438			1,623
Change in deferred taxes		1,708			(14,059	)		193			0
Proceeds from the sale of loans held for sale		681,946			610,062			122,952			258,544
Originations of loans held for sale		(631,573	)		(721,063	)		(112,308	)		(249,607	)
Mortgage banking gain, net		(13,663	)		(30,447	)		(2,543	)		(5,640	)
Gain/loss on sale / write-down of real estate and other assets held for sale		10			(10	)
Gain/loss on sale of available for sale securities		(2,218	)		(1,464	)
Gain on equity securities		(822	)		(14	)
Loss (gain) on sale / write-down of real estate and other assets held for sale								(6	)		6
Loss (gain) on sale of available for sale securities								0			(516	)
Loss (gain) on equity securities								643			(1,610	)
Stock based compensation expense		2,383			2,777			760			551
Restricted stock forfeitures for taxes and option exercises		(678	)		(1,496	)		(216	)		(110	)
Income from bank owned life insurance		(2,975	)		(2,460	)		(996	)		(1,168	)
Changes in:
Accrued interest receivable and other assets		(11,908	)		(20,246	)		(20,838	)		(9,833	)
Other liabilities		(10,957	)		11,710			12,124			(744	)
Net cash provided by (used by) operating activities		113,007			(67,782	)		32,013			24,343

Investing Activities
Proceeds from maturities, calls and pay-downs of available-for-sale securities		109,756			89,514			32,299			41,123
Proceeds from sale of available-for-sale securities		158,011			52,420			0			22,380
Proceeds from sale of premises and equipment, real estate and other assets held for sale		290			903			44			117
Proceeds from sale of non-mortgage loans		—			5,241
Purchases of available-for-sale securities		(803,082	)		(165,511	)		(122,459	)		(267,079	)
Purchases of equity securities		(11,053	)		(1,000	)		0			(11,053	)
Net change in Federal Home Loan Bank stock		4,441			1,176			(3,747	)		6,698
Net cash received (paid) from acquisition (Reference Footnote 17 Business Combinations)		—			52,448
Purchases of premises and equipment, net		(2,025	)		(3,659	)		(548	)		(120	)
Proceeds from bank owned life insurance		893			—			0			892
Purchase of bank owned life insurance		(20,000	)		—
Net increase in loans receivable		226,637			(400,242	)
Net (decrease) increase in loans receivable								(91,416	)		33,669
Net cash used by investing activities		(336,132	)		(368,710	)		(185,827	)		(173,373	)
Financing Activities
Net increase in deposits and advance payments by borrowers		199,599			833,417			31,046			303,532
Net change in Federal Home Loan Bank advances		—			(436,063	)		150,000			0
Net change in notes payable		18,812			—
Proceeds from subordinated debentures		—			48,735
Decrease in securities sold under repurchase agreements		—			(2,999	)
Net cash paid for repurchase of common stock		(10,821	)		(10,095	)		(24,245	)		(1,078	)
Proceeds from direct stock sales		—			9
Cash dividends paid on common stock		(28,637	)		(24,693	)		(10,787	)		(8,943	)
Net cash provided by financing activities		178,953			408,311			146,014			293,511
Increase (decrease) in cash and cash equivalents		(44,172	)		(28,181	)		(7,800	)		144,481
Cash and cash equivalents at beginning of period		159,266			131,254			161,566			159,266
Cash and cash equivalents at end of period	$	115,094		$	103,073		$	153,766		$	303,747
Supplemental cash flow information:
Interest paid	$	13,086		$	24,767		$	3,430		$	5,425
Income taxes paid		23,858			12,750			—			0
Initial recognition of right-of-use asset		500			10,106			—			500
Initial recognition of lease liability		500			10,254			—			500
Initial recognition of ASC 326		—			2,566
Transfers from loans to real estate and other assets held for sale		438			192			—			54

See accompanying notes.

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PREMIER FINANCIAL CORP.

Notes to Consolidated Condensed Financial Statements (UNAUDITED)

~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~

1. Basis of Presentation

~~Basis of Presentation~~

~~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~~bank holding company that conducts business through its wholly-owned subsidiaries, ~~the~~Premier Bank ("Bank"), First Insurance Group of the Midwest, Inc. (“First Insurance”), PFC Risk Management Inc. (“PFC Risk Management”) and PFC Capital, LLC (“PFC Capital”). All significant intercompany transactions and balances are eliminated in consolidation. Premier’s stock is traded on the NASDAQ Global Select Market under the ticker PFC.

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, PFC 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.

PFC ~~Capital, formerly known as 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.~~customers. Mezzanine loans are offered by PFC Capital to customers in the Company’s market area and are expected to be repaid from the cash flow from operations of the business.

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. 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 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,~~2021, 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 Form 10-K/A filed September 28, 2021 and any further amendments thereto (the “2020 Form 10-K”).~~2021.

The accompanying consolidated condensed financial statements as of ~~September 30, 2021,~~March 31, 2022, and for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 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~~2021 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 nine month periods~~months ended ~~September 30, 2021,~~March 31, 2022, are not necessarily indicative of the results that may be expected for the entire year.

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2.Significant Accounting Policies

~~Significant Accounting Policies~~

Accounting Standards Update

~~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.

~~Accounting Standards not yet adopted:~~

ASU No. 2020-04: Reference Rate Reform – Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848): ~~This~~On March 12, 2020, the FASB issued Accounting Standards Update (ASU) 2020-4, "Reference Rate Reform (“ASC 848”): Facilitation of the Effects of Reference Rate Reform on Financial Reporting." ASC 848 contains optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rates expected to be discontinued. The Company has formed a cross-functional project team to lead the transition from LIBOR to adoption of alternative reference rates which include Secured Overnight Financing Rate (“SOFR”). The Company identified loans that renewed prior to 2021 and began incorporating LIBOR fallback language into existing LIBOR loans. Additionally, management is utilizing the timeline guidance ~~provides temporary options~~published by the Alternative Reference Rates Committee to ~~ease~~develop and achieve internal milestones during this transitional period. Additionally, the ~~potential burden in accounting for~~Company has adhered to the International Swaps and Derivatives Association 2020 IBOR Fallbacks Protocol that was released on October 23, 2020. The Company discontinued the use of new LIBOR-based loans by December 31, 2021, according to regulatory guidelines. Legacy LIBOR-based loans will be transitioned to an alternative reference rate ~~reform. It is intended to help stakeholders during the global market-wide reference rate transition period.~~on or before June 30, 2023. The ~~guidance is effective as of~~amendments in these updates are elective, are only available from March 12, ~~2021, through~~2020 until December 31, ~~2022. The Company anticipates being fully prepared to implement a replacement for the reference rate~~2022 and ~~has determined that any change will~~their application did not have a material ~~impact~~effect on the Company.

Accounting Standards not yet adopted

ASU No. 2022-02, Troubled Debt Restructurings and Vintage Disclosures: On March 30, 2022, the FASB issued Accounting Standards Update ("ASU") 2022-02, "Troubled Debt Restructurings and Vintage Disclosures" which will eliminate troubled debt restructuring ("TDR") accounting for entities that have adopted ASU 2016-13, the current expected credit loss ("CECL") model and will add new vintage disclosures for gross write-offs. The elimination of TDR accounting can be adopted either prospectively for loan modifications after adoption or on a modified retrospective basis that would result in a cumulative effect adjustment to retained earnings in the ~~consolidated financial statements.~~period of adoption. ASU 2022-02 is effective for the Company for fiscal years beginning after December 15, 2022. The Company can elect to early adopt a part or all of the update. The Company is currently assessing the impacts of adopting the guidance.

3. Fair Value

3.	~~Fair Value~~

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.

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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:

•

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

•

Level 2: Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by a correlation or other means.

•

Level 3: Unobservable inputs for determining fair value of assets and liabilities that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.

•

~~Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.~~

•

~~Level 2~~: Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets

that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by a correlation or other means.

•

~~Level 3~~: Unobservable inputs for determining fair value of assets and liabilities that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.

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).

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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 ("OREO") 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%0% to ~~30%~~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,~~OREO, 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).

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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:

Assets and Liabilities Measured on a Recurring Basis


March 31, 2022	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
	(In Thousands)
Assets:
Available for sale securities:
Obligations of U.S. federal government corporations and agencies	$	—	$	161,433	$	—	$	161,433
Mortgage-backed securities		—		200,824		—		200,824
Collateralized mortgage obligations		—		305,529		—		305,529
Asset-backed securities		—		213,097		—		213,097
Corporate bonds		—		72,719		—		72,719
Obligations of state and political subdivisions		—		265,764		—		265,764
Equity securities		13,454		—		—		13,454
Loans held for sale, at fair value		—		37,014		116,484		153,498
Interest rate swaps		—		2,338		—		2,338
Mortgage banking derivative		—		9,923		—		9,923
Liabilities:
Interest rate swaps		—		2,338		—		2,338
Cash flow hedge derivative		—		16,180		—		16,180


December 31, 2021	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
	(In Thousands)
Assets:
Available for sale securities:
Obligations of U.S. federal government corporations and agencies	$	—	$	174,710	$	—	$	174,710
Mortgage-backed securities		—		206,751		—		206,751
Collateralized mortgage obligations		—		260,168		—		260,168
Asset-backed securities		—		220,536		—		220,536
Corporate bonds		—		70,893		—		70,893
Obligations of state and political subdivisions		—		273,202		—		273,202
Equity securities		14,097		—		—		14,097
Loans held for sale, at fair value		—		28,780		134,167		162,947
Interest rate swaps		—		1,287		—		1,287
Mortgage banking derivative		—		2,336		—		2,336
Liabilities:
Interest rate swaps		—		1,292		—		1,292

September 30, 2021

Level 1
Inputs

Level 2
Inputs

Level 3
Inputs

Total
Fair Value

(In Thousands)

Assets:

Available for sale securities:

Obligations of U.S. federal government corporations and
        agencies

$
—

$
176,036

$
—

$
176,036

Mortgage-backed securities

—

216,870

—

216,870

Collateralized mortgage obligations

—

280,058

—

280,058

Asset-backed securities

—

224,860

—

224,860

Corporate bonds

—

69,919

—

69,919

Obligations of state and political subdivisions

—

282,344

—

282,344

Equity securities

12,965

—

—

12,965

Loans held for sale, at fair value

—

38,920

139,570

178,490

Purchased certificate of deposit option

—

1

—

1

Interest rate swaps

—

1,233

—

1,233

Cash flow hedge derivative

—

1,431

—

1,431

Mortgage banking derivative

—

6,279

—

6,279

Liabilities:

     Written certificate of deposit option

—

1

—

1

     Interest rate swaps

—

1,258

—

1,258

December 31, 2020

Level 1
Inputs

Level 2
Inputs

Level 3
Inputs

Total
Fair Value

(In Thousands)

Assets:

Available for sale securities:

Obligations of U.S. federal government corporations and
agencies

$
—

$
40,940

$
—

$
40,940

Mortgage-backed securities

—

277,182

—

277,182

Collateralized mortgage obligations

—

106,299

—

106,299

Asset-backed securities

—

30,546

—

30,546

Corporate bonds

—

44,169

—

44,169

Obligations of state and political subdivisions

—

237,518

—

237,518

Equity securities

1,090

—

—

1,090

Loans held for sale, at fair value

—

98,587

123,029

221,616

Purchased certificate of deposit option

—

56

—

56

Interest rate swaps

—

1,870

—

1,870

Mortgage banking derivative

—

3,833

—

3,833

Liabilities:

Written certificate of deposit option

—

56

—

56

Interest rate swaps

—

2,036

—

2,036

The ~~tables~~table below ~~present~~presents a reconciliation of ~~all~~ assets that are measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three ~~and nine~~ month periods ended ~~September 30, 2021~~March 31, 2022 and ~~2020.~~2021.

Construction loans held for sale

Three Months Ended
September 30,

Nine Months Ended
September 30,

2021

2020

2021

2020

Balance of recurring Level 3 assets at beginning of period
$
148,659

$
75,739

$
123,029

$
—

Total gains (losses) for the period

Included in change in fair value of loans held for sale

(3
)

4,012

(3,757
)

11,213

Originations

32,055

40,767

96,983

83,032

Acquired in acquisition

—

—

—

37,711

Sales

(41,141
)

(8,496
)

(76,685
)

(19,934
)
Balance of recurring Level 3 assets at end of period
$
139,570

$
112,022

$
139,570

$
112,022

Securities available-for-sale

Three Months Ended
September 30,

Nine Months Ended
September 30,

2021

2020

2021

2020

Balance of recurring Level 3 assets at beginning of period
$
—

$
—

$
—

$
3,411

Balance of assets classified as Level 3 assets during the period

—

—

$
—

$
(3,411
)
Balance of recurring Level 3 assets at end of period
$
—

$
—

$
—

$
—

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There were 0 securities that were measured at Level 3 for the three month periods ended March 31, 2022 and 2021.


	Construction loans held for sale
	Three Months Ended March 31,
	2022			2021
Balance of recurring Level 3 assets at beginning of period	$	134,167		$	123,029
Total gains (losses) for the period
Included in change in fair value of loans held for sale		(13,459	)		(5,568	)
Originations		36,343			34,003
Sales		(40,567	)		(16,826	)
Balance of recurring Level 3 assets at end of period	$	116,484		$	134,638

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, 2022	Fair Value		Valuation Technique	Unobservable Inputs	Range of Inputs
			(Dollars in Thousands)
Construction loans held for sale	$	116,484	Quoted market price	Time discount using the 60 day forward contract	0.00% - 1.52%


December 31, 2021	Fair Value		Valuation Technique	Unobservable Inputs	Range of Inputs
			(Dollars in Thousands)
Construction loans held for sale	$	134,167	Quoted market price	Time discount using the 60 day forward contract	0.00% - 1.86%

September 30, 2021

Fair Value

Valuation Technique

Unobservable Inputs

Range of
Inputs

(Dollars in Thousands)
Construction loans held for sale

$
139,570

Comparable sales

Time discount using the 60 day forward contract

0.00% - 1.93%

December 31, 2020

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%

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:

Assets and Liabilities Measured on a Non-Recurring Basis


March 31, 2022	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
	(In Thousands)
Individually analyzed loans
Residential	$	—	$	—	$	16		16
Commercial real estate		—		—		3,218		3,218
Commercial		—		—		6,998		6,998
Total individually analyzed loans		—		—		10,232		10,232
Mortgage servicing rights		—		20,715		—		20,715


December 31, 2021	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
	(In Thousands)
Individually analyzed loans
Commercial real estate	$	—	$	—	$	2,749	$	2,749
Commercial		—		—		8,564		8,564
Total individually analyzed loans		—		—		11,313		11,313
Mortgage servicing rights		—		19,538		—		19,538

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September 30, 2021

Level 1
Inputs

Level 2
Inputs

Level 3
Inputs

Total Fair
Value

(In Thousands)

Individually analyzed loans

Residential

$
-

$
-

$
178

178

Commercial real estate

—

—

9,067

9,067

Commercial

—

—

13,621

13,621

Total individually analyzed loans

—

—

22,866

22,866

Mortgage servicing rights

—

5,389

—

5,389

December 31, 2020

Level 1
Inputs

Level 2
Inputs

Level 3
Inputs

Total Fair
Value

(In Thousands)

Individually analyzed loans

Commercial real estate

$
—

$
—

$
4,601

$
4,601

Commercial

—

—

7,151

7,151

Total individually analyzed loans

—

—

11,752

11,752

Mortgage servicing rights

—

13,153

—

13,153

For Level 3 assets and liabilities measured at fair value on a non-recurring basis as of ~~September 30, 2021,~~March 31, 2022, the significant unobservable inputs used in the fair value measurements were as follows:


	Fair Value		Valuation Technique	Unobservable Inputs	Range of Inputs			Weighted Average			Fair Value		Valuation Technique	Unobservable Inputs	Range of Inputs			Weighted Average
			(Dollars in Thousands)										(Dollars in Thousands)
Individually analyzed Loans- Applies to loan classes with an appraisal valuation	$	11,471	Appraisals which utilize sales comparison, net income and cost approach	Discounts for collection issues and changes in market conditions	20-50%				20.60	%	$	5,199	Appraisals which utilize sales comparison, net income and cost approach	Discounts for collection issues and changes in market conditions	20-50%				31.38	%
Individually analyzed Loans- Applies to loan classes without an appraisal valuation	$	11,395	Equitable Recoupment claim estimate	Discounts for collection issues		50	%		50.00	%	$	5,033	Equitable Recoupment claim estimate	Discounts for collection issues		25	%		25.00	%

For Level 3 assets and liabilities measured at fair value on a non-recurring basis as of December 31, ~~2020,~~2021, the significant unobservable inputs used in the fair value measurements were as follows:

Fair
Value

Valuation
Technique

Unobservable
Inputs

Range of
Inputs

Weighted
Average

(Dollars in Thousands)

Individually analyzed Loans-
Applies to all loan classes

$
11,752

Appraisals which utilize sales comparison, net income and cost approach

Discounts for collection issues and changes in market conditions

5-37%

24.17
%


	Fair Value		Valuation Technique	Unobservable Inputs	Range of Inputs			Weighted Average
			(Dollars in Thousands)
Individually analyzed Loans- Applies to loan classes with an appraisal valuation	$	5,821	Appraisals which utilize sales comparison, net income and cost approach	Discounts for collection issues and changes in market conditions	20-50%				35.18	%
Individually analyzed Loans- Applies to loan classes without an appraisal valuation	$	5,492	Equitable Recoupment claim estimate	Discounts for collection issues		25	%		25.00	%

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 ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 was ~~$38.9~~$37.0 million and ~~$98.6~~$28.8 million, respectively, and they had a contractual balance of ~~$37.9~~$36.1 million and ~~$93.2~~$27.7 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 nine~~ months ended ~~September 30, 2021, $1.2~~March 31, 2022, $1.5 million ~~and $4.4 million, respectively,~~ was recorded in losses on the sale of loans held for sale for the change in fair value. For the three ~~and nine~~ months ended ~~September 30, 2020, $0.9~~March 31, 2021, $4.3 million ~~and $5.2 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 ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, was ~~$139.6~~$116.5 million and ~~$123.0~~$134.2 million, respectively, and they had a contractual balance of ~~$130.3~~$120.8 million and ~~$109.5~~$125.0 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 nine~~ months ended ~~September 30,~~March 31, 2022, $13.4 million, was recorded in losses on the sale of loans held for sale for the change in

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fair value. For the three months ended March 31, 2021, ~~$3,000 and $3.9~~$5.6 million, ~~respectively, were~~was recorded in losses on the sale of loans held for sale for the change in fair value. ~~For the three and nine months ended September 30, 2020, $4.0 million and $11.2 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 ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020.~~2021. 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, 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 carrying value of notes payable, as a result of their short-term nature, is considered to be equal to fair value and are classified as Level 1.

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.

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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 ~~September 30, 2021.~~March 31, 2022.

The carrying value and estimated fair values of financial instruments at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, were as follows:


			Fair Value Measurements at March 31, 2022
			(In Thousands)
	Carrying Value		Total		Level 1		Level 2		Level 3
Financial Assets:
Cash and cash equivalents	$	153,766	$	153,766	$	153,766	$	—	$	—
Securities available for sale		1,219,365		1,219,365		—		1,219,365		—
Equity securities		13,454		13,454		13,454		—		—
Accrued interest receivable		21,765		21,765		21,765		—		—
Federal Home Loan Bank Stock		15,332	N/A		N/A		N/A		N/A
Loans receivable, net		5,321,136		5,319,654		—		—		5,319,654
Loans held for sale, carried at fair value		153,498		153,498		—		37,014		116,484

Financial Liabilities:
Deposits	$	6,317,235	$	6,306,616	$	5,592,560	$	714,056	$	—
Advances from Federal Home Loan Bank		150,000		150,000		—		150,000		—
Subordinated debentures		85,008		84,168		—		84,168		—


			Fair Value Measurements at December 31, 2021
			(In Thousands)
	Carrying Value		Total		Level 1		Level 2		Level 3
Financial Assets:
Cash and cash equivalents	$	161,566	$	161,566	$	161,566	$	—	$	—
Securities available for sale		1,206,260		1,206,260		—		1,206,260		—
Equity securities		14,097		14,097		14,097		—		—
Accrued interest receivable		20,767		20,767		20,767		—		—
Federal Home Loan Bank Stock		11,585	N/A		N/A		N/A		N/A
Loans receivable, net		5,229,700		5,265,689		—		—		5,265,689
Loans held for sale, carried at fair value		162,947		162,947		—		28,780		134,167

Financial Liabilities:
Deposits	$	6,282,051	$	6,280,336	$	5,481,928	$	798,408	$	—
Subordinated debentures		84,976		85,417		—		—		85,417

Table of Contents

Fair Value Measurements at September 30, 2021

(In Thousands)

Carrying
Value

Total

Level 1

Level 2

Level 3

Financial Assets:

Cash and cash equivalents

$
115,094

$
115,094

$
115,094

��
$
—

$
—

Securities available for sale

1,250,087

1,250,087

—

1,250,087

—

Equity securities

12,965

12,965

12,965

—

—

Federal Home Loan Bank Stock

11,585

N/A

N/A

N/A

N/A

Loans receivable, net

5,196,349

5,239,573

—

—

5,239,573

Loans held for sale, carried at fair value

178,490

178,490

—

38,920

139,570

Financial Liabilities:

Deposits

$
6,248,658

$
6,251,904

$
5,367,729

$
884,175

$
—

Notes Payable

$
18,812

$
18,812

$
18,812

$
—

$
—

Subordinated debentures

84,944

84,841

—

84,841

—

4. Stock Compensation Plans

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

4.	~~Stock Compensation Plans~~

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 (the “UCFC 2007 Plan”) and UCFC’s 2015 Long Term Incentive Plan, which has since been renamed as the “Premier Financial Corp. 2015 Long Term Incentive Plan” (the ~~“UCFC 2015~~“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~~became 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~~options and remain subject to the terms of the 2015 Plan. Besides certain options issued under the First Defiance Financial Corp. 2010 Equity Incentive Plan, all awards currently outstanding ~~under prior plans will remain in effect in accordance with their respective terms. Any new awards will be made~~are issued under the 2018 Equity Plan or the ~~UCFC~~ 2015 Plan. The 2018 Equity Plan and the 2015 Plan were each amended and restated in February 2022 to align certain administrative components of the plans in addition to enhancing certain governance components. New awards will be made under either the 2018 Equity Plan or the 2015 Plan as the Company determines. The 2018 Equity Plan allows for issuance of up to 900,000 common shares through the award of options, performance stock ~~grants,~~units ("PSUs"), restricted stock awards ("RSAs"), restricted stock units ~~(“RSU”~~("RSUs"), stock appreciation rights ("SARs") or other stock-based awards. The ~~UCFC~~ 2015 Plan ~~had 126,758 Premier~~allows for the issuance of up to 1.2 million common shares, ~~available~~as adjusted for ~~issuance immediately after the effective time of the Merger.~~

As of September 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~~through the award of options, ~~were exchanged for~~ ~~all of the outstanding stock options on the books of UCFC at the same conversion price~~RSAs, RSUs, and ~~ratio applied to UCFC common shares at January 31, 2020. All of these options were fully vested at the time of acquisition.~~ SARs.~~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~~maintains a Short-Term Incentive Plan ~~(“STIP”~~("STIP"). Under the 2020, 2021 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~~2022 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.

As of March 31, 2022, 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. All options expire ten years from the date of grant. Vested options of retirees expire on the earlier of the scheduled expiration date or one year after the retirement date.

The Company maintains Long-Term Equity Incentive Plans ("LTIP") for select members of management (the "Executive LTIP") and a Key Employee and Commercial Lender Plan (the "Key Plan").

Under ~~each~~the Executive LTIP, ~~the~~ participants may earn between ~~20%~~20% to ~~50%~~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~~80,794 PSUs to the participants ~~for~~in the 2021 Executive LTIP during the first quarter of ~~2021.~~ 2022, which represents the maximum target award. The ~~amount~~value of ~~benefit~~awards issued in 2021 and 2022 under the ~~2020 and 2021~~ Executive ~~LTIPs~~LTIP will be determined individually at the end of ~~the~~each respective 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. ~~Participants whose~~The participants will receive all or a portion of the award if their employment is terminated by the Company without cause, by the participant in certain situations, or ~~who retire during~~by death, disability or retirement.

Under the course of the 36 month performance period will receive a pro-rated payout, payable at the end of the performance period, based on the number of months of the 36 month performance period the individual worked. Participants whose employment is terminated as a result of their death or disability will receive a full payout of any outstanding award at the end of the performance period.

~~Under each~~ Key ~~LTIP,~~Plan, the participants are granted ~~shares~~RSUs based upon the achievement of certain targets in the prior year. The participants can earn from 5%5% to ~~10%~~10% of their salary in ~~restricted stock units~~RSUs that vest three years from the

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date of grant. The Company granted 19,612 in RSAs and 17,542 RSUs in the first quarter of 2022 and 2021, respectively, as a payout under the Key Plan.

In 2022, the Company also granted 324 discretionary RSAs 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 nine months ended September 30, 2021, the Company also granted 16,846 discretionary RSUs that~~grants vest over a three ~~years from the date of grant and 42,374 restricted stock grants. Of the 42,374 restricted stock grants, 13,708 were issued to directors and have a~~ year~~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.

The fair value of each option award is estimated on the date of grant using the Black-Scholes model. Expected volatilities are based on historical volatilities of the Company’s common shares. The Company uses historical data to estimate option exercise and post-vesting termination behavior. The expected term of options granted is based on historical data and represents the period of time that options granted are expected to be outstanding, which takes into account that the options are not transferable. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of the grant.

There were 0 options granted during the three months ended March 31, 2022 or 2021.

Following is stock option activity under the plans during the ~~nine~~three months ended ~~September 30, 2021:~~March 31, 2022:

	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
										Options Outstanding		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in 000’s)
Options outstanding, January 1, 2022											35,661	$	21.72
Forfeited or cancelled		—			—						—		—
Exercised		(600	)		13.80						0		0
Granted		—			—						—		—
Options outstanding, September 30, 2021		35,661		$	21.72		4.46	$	367,655
Exercisable at September 30, 2021		35,661		$	21.72		4.46	$	367,655
Options outstanding, March 31, 2022											35,661	$	21.72		4.09	$	310,597
Exercisable at March 31, 2022											35,661	$	21.72		4.09	$	310,597

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 March 31,
	2022		2021		2022		2021
Proceeds of options exercised	$	—	$	8	$	—	$	8
Related tax benefit recognized		—		—		—		—
Intrinsic value of options exercised		—		11		—		11

Three Months Ended
September 30,

Nine Months Ended
September 30,

2021

2020

2021

2020

Proceeds of options exercised

$
—

$
—

$
8

$
—

Related tax benefit recognized

—

—

—

40

Intrinsic value of options exercised

—

—

11

189

As of March 31, 2022, there was a de minimus amount of total unrecognized compensation costs related to unvested stock options granted under the Company’s equity plans. The cost is expected to be recognized over a weighted-average period of 1.0 month.

At ~~September 30, 2021, 172,916 PSUs, 56,832 RSUs and 57,174 restricted stock grants~~March 31, 2022, a total of 332,251 RSAs were ~~unvested.~~outstanding. 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.~~ period. Total expense of ~~$1.8 million~~$34,000 and ~~$4.2~~$1.0 million was recorded during each of the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021, ~~compared to expense of $974,000~~respectively, and ~~$3.0~~approximately $181,000 and $2.7 million ~~for the three and nine months ended September 30, 2020. There was approximately $1.9 million and $3.2 million~~is included within other liabilities at ~~September 30, 2021,~~March 31, 2022 and December 31, ~~2020,~~2021, respectively, related to the ~~STIP.~~cash portion of the STIPs.

Table of Contents

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

Unvested at January 1, 2021

90,891

$
26.48

55,759

$
25.18

41,057

$
26.93

Granted

86,058

30.32

34,388

30.77

42,374

32.42

Vested

(4,033
)

28.24

(30,884
)

26.07

(24,849
)

28.00

Forfeited

—

—

(2,431
)

25.99

(1,408
)

28.41

Unvested at September 30, 2021

172,916

$
28.35

56,832

$
28.03

57,174

$
29.68


	Performance Stock Units				Restricted Stock Units					Restricted Stock Awards
Unvested Shares	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, 2022		161,674	$	28.36		51,773		$	28.44		58,260		$	29.71
Granted		80,794		30.65		—			—		19,936			30.66
Vested		—		—		(8,090	)		26.40		(27,580	)		26.93
Forfeited		—		—		(3,730	)		28.20		(786	)		31.84
Unvested at March 31, 2022		242,468	$	29.12		39,953		$	28.88		49,830		$	31.60

The maximum amount of compensation expense that may be earned for the PSUs at ~~September 30, 2021,~~March 31, 2022, is approximately ~~$4.8~~$6.9 million in the aggregate. However, the estimated expense that is expected to be earned as of ~~September 30, 2021,~~March 31, 2022, is ~~$3.2~~$4.6 million of which ~~$2.0~~$1.7 million iswas unrecognized at ~~September 30, 2021,~~March 31, 2022, and will be recognized over the remaining performance periods.

5. Dividends on Common Stock

~~Dividends on~~ ~~Common~~ ~~Stock~~

Premier declared and paid a ~~$0.27~~$0.30 per common stock dividend in the ~~third~~first quarter of ~~2021~~2022 and declared and paid a ~~$0.22~~$0.24 per common stock dividend in the ~~third~~first quarter of ~~2020.~~ 2021.

6. Earnings Per Common Share

~~Earnings Per Common Share~~

Basic earnings per share are calculated using the two-class method. The two-class method is an earnings allocation formula under which earnings 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 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.

Table of Contents

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


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2021		2020		2021		2020		2022		2021
	(In Thousands, except per share data)								(In Thousands, except per share data)
Basic Earnings Per Share:
Net income available to common shareholders	$	28,360	$	25,655	$	100,741	$	32,230	$	26,357	$	40,996
Less: income allocated to participating securities		27		36		98		46		35		43
Net income allocated to common shareholders		28,333		25,619		100,643		32,184		26,322		40,953

Weighted average common shares outstanding including participating securities		37,135		37,356		37,262		35,481		36,026		37,332
Less: Participating securities		35		52		36		50		48		39
Average common shares		37,100		37,304		37,226		35,431		35,978		37,293

Basic earnings per common share	$	0.76	$	0.69	$	2.70	$	0.91	$	0.73	$	1.10
Diluted Earnings Per Share:
Net income allocated to common shareholders	$	28,333	$	25,619	$	100,643	$	32,184	$	26,322	$	40,953
Weighted average common shares outstanding for basic earnings per common share		37,100		37,304		37,226		35,431		35,978		37,293
Add: Dilutive effects of stock options and restricted stock units		85		30		85		51		112		64
Average shares and dilutive potential common shares		37,185		37,334		37,311		35,482		36,090		37,357

Diluted earnings per common share	$	0.76	$	0.69	$	2.70	$	0.91	$	0.73	$	1.10

T~~here~~There were 016,206 shares for the three ~~and nine month period ending September 30, 2021~~months ended March 31, 2022 that were excluded from the diluted earnings per common share ~~calculation as no shares were anti-dilutive during this period.~~calculation. There were ~~27,341 and 25,329~~0 shares for the three ~~and nine month periods ending September 30, 2020,~~

~~respectively,~~months ended March 31, 2021 that were excluded from the dilutive earnings per common share calculation as ~~they~~no shares were anti-dilutive.

7. Investment Securities

7.	~~Investment Securities~~

The following is a summary of available-for-sale securities:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(In Thousands)									Amortized Cost		Gross Unrealized Gains		Gross Unrealized Loss			Fair Value
At September 30, 2021
										(In Thousands)
At March 31, 2022
Available-for-Sale Securities:
Obligations of U.S. government corporations and agencies	$	174,891	$	1,821	$	(676	)	$	176,036	$	174,400	$	3	$	(12,970	)	$	161,433
Mortgage-backed securities		218,083		1,049		(2,262	)		216,870		215,800		114		(15,090	)		200,824
Collateralized mortgage obligations		281,099		1,032		(2,073	)		280,058		326,650		—		(21,122	)		305,528
Asset-backed securities		224,976		735		(851	)		224,860		216,998		487		(4,388	)		213,097
Corporate bonds		68,875		1,151		(107	)		69,919		74,395		158		(1,834	)		72,719
Obligations of state and political subdivisions		281,458		5,914		(5,028	)		282,344		290,408		1,577		(26,221	)		265,764
Total Available-for-Sale	$	1,249,382	$	11,702	$	(10,997	)	$	1,250,087	$	1,298,651	$	2,339	$	(81,625	)	$	1,219,365

Table of Contents


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Loss			Fair Value
	(In Thousands)
At December 31, 2021
Available-for-sale
Obligations of U.S. government corporations and agencies	$	174,644	$	984	$	(918	)	$	174,710
Mortgage-backed securities		208,281		851		(2,381	)		206,751
Collateralized mortgage obligations		264,541		363		(4,736	)		260,168
Asset-backed securities		221,545		610		(1,619	)		220,536
Corporate bonds		70,008		1,160		(275	)		70,893
Obligations of state and political subdivisions		272,334		5,898		(5,030	)		273,202
Total Available-for-Sale	$	1,211,353	$	9,866	$	(14,959	)	$	1,206,260

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair Value

(In Thousands)

At December 31, 2020

Available-for-sale

Obligations of U.S. government corporations and agencies

$
39,233

$
1,707

$
—

$
40,940

Mortgage-backed securities

270,683

6,746

(247
)

277,182

Collateralized mortgage obligations

103,532

2,927

(160
)

106,299

Asset-backed securities

30,643

1

(98
)

30,546

Corporate bonds

43,826

489

(146
)

44,169

Obligations of state and political subdivisions

229,645

8,069

(196
)

237,518

Total Available-for-Sale

$
717,562

$
19,939

$
(847
)

$
736,654

The amortized cost and fair value of the investment securities portfolio at ~~September 30, 2021,~~March 31, 2022, 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
	Amortized Cost		Fair Value
	(In Thousands)
Due in one year or less	$	3,230	$	3,235
Due after one year through five years		43,732		42,536
Due after five years through ten years		205,366		195,580
Due after ten years		286,875		258,565
MBS/CMO/ABS		759,448		719,449
	$	1,298,651	$	1,219,365

Available-for-Sale

Amortized
Cost

Fair Value

(In Thousands)

Due in one year or less

$
3,276

$
3,297

Due after one year through five years

30,183

30,710

Due after five years through ten years

206,516

209,608

Due after ten years

285,249

284,684

MBS/CMO/ABS

724,158

721,788

$
1,249,382

$
1,250,087

Investment securities with a carrying amount of ~~$592.0~~$555.0 million and $564.4 million at ~~September 30,~~March 31, 2022 and December 31, 2021, respectively, were pledged as collateral on public deposits.

Table of Contents

The following tables summarize Premier’s securities that were in an unrealized loss position at ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020:~~2021:

	Duration of Unrealized Loss Position
	Less than 12 Months					12 Months or Longer					Total					Duration of Unrealized Loss Position
	Fair Value		Gross Unrealized Loss			Fair Value		Gross Unrealized Loss			Fair Value		Unrealized Losses			Less than 12 Months					12 Months or Longer					Total
	(In Thousands)															Fair Value		Gross Unrealized Loss			Fair Value		Gross Unrealized Loss			Fair Value		Unrealized Loss
At September 30, 2021
																(In Thousands)
At March 31, 2022
Available-for-sale securities:
Obligations of U.S. government corporations and agencies	$	55,017	$	(676	)	$	-	$	-		$	55,017	$	(676	)	$	152,407	$	(11,201	)	$	8,503	$	(1,769	)	$	160,910	$	(12,970	)
Mortgage-backed securities		180,687		(2,262	)		—		—			180,687		(2,262	)		134,953		(9,319	)		61,098		(5,771	)		196,051		(15,090	)
Collateralized mortgage obligations		213,446		(2,073	)		—		—			213,446		(2,073	)		300,681		(20,737	)		4,847		(385	)		305,528		(21,122	)
Asset-backed securities		115,823		(851	)		—		—			115,823		(851	)		167,305		(4,255	)		15,634		(133	)		182,939		(4,388	)
Corporate bonds		15,409		(101	)		505		(6	)		15,914		(107	)		60,809		(1,786	)		1,212		(48	)		62,021		(1,834	)
Obligations of state and political subdivisions		153,264		(4,705	)		5,404		(323	)		158,668		(5,028	)		125,688		(13,129	)		73,619		(13,092	)		199,307		(26,221	)
Total available-for-sale	$	733,646	$	(10,668	)	$	5,909	$	(329	)	$	739,555	$	(10,997	)	$	941,843	$	(60,427	)	$	164,913	$	(21,198	)	$	1,106,756	$	(81,625	)


	Duration of Unrealized Loss Position
	Less than 12 Months					12 Months or Longer					Total
	Fair Value		Gross Unrealized Loss			Fair Value		Gross Unrealized Loss			Fair Value		Unrealized Loss
	(In Thousands)
At December 31, 2021
Available-for-sale securities:
Obligations of U.S. government corporations and agencies	$	73,810	$	(918	)	$	—	$	—		$	73,810	$	(918	)
Mortgage-backed securities-residential		167,379		(2,048	)		13,689		(333	)		181,068		(2,381	)
Collateralized mortgage obligations		222,134		(4,736	)		—		—			222,134		(4,736	)
Asset-backed securities		140,226		(1,589	)		2,705		(30	)		142,931		(1,619	)
Corporate bonds		24,173		(270	)		504		(5	)		24,677		(275	)
Obligations of state and political subdivisions		99,199		(3,355	)		34,548		(1,675	)		133,747		(5,030	)
Total available-for-sale	$	726,921	$	(12,916	)	$	51,446	$	(2,043	)	$	778,367	$	(14,959	)

Duration of Unrealized Loss Position

Less than 12 Months

12 Months or Longer

Total

Fair Value

Gross
Unrealized
Loss

Fair Value

Gross
Unrealized
Loss

Fair Value

Unrealized
Losses

(In Thousands)

At December 31, 2020

Available-for-sale securities:

Mortgage-backed securities-residential

$
26,361

$
(247
)

$
—

$
—

$
26,361

$
(247
)
Collateralized mortgage obligations

5,161

(160
)

—

—

5,161

(160
)
Asset-backed securities

18,439

(98
)

—

—

18,439

(98
)
Corporate bonds

12,177

(146
)

—

—

12,177

(146
)
Obligations of state and political subdivisions

41,088

(196
)

—

—

41,088

(196
)
Total available-for-sale

$
103,226

$
(847
)

$
—

$
—

$
103,226

$
(847
)

The Company realized0 gains from the sale of available-for-sale securities ~~totaling $233,000 and $2.2 million~~ in the three ~~and nine~~ month ~~periods~~period ending ~~September 30, 2021.~~March 31, 2022. For the three ~~and nine~~ months ended ~~September 30, 2020,~~March 31, 2021, the Company had ~~$1.5 million~~$516,000 in realized gains from the sale of 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.

Table of Contents

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:

•

~~Review the extent to which the fair value is less than the amortized cost and observe the security’s lowest credit rating as reported by third-party credit ratings companies.~~

•

Review the extent to which the fair value is less than the amortized cost and observe the security’s lowest credit rating as reported by third-party credit ratings companies.

•

Any securities that are downgraded by a third party ratings company above would be subjected to additional analysis that may include, but is not limited to: changes in market interest rates, changes in securities credit ratings, security type, service area economic factors, financial performance of the issuer/or obligor of the underlying issue and third-party guarantee.

•

If the Company determines that a credit loss exists, the credit portion of the allowance will be measured using a DCF analysis using the effective interest rate as of the security’s purchase date. The amount of credit loss the Company records will be limited to the amount by which the amortized cost exceeds the fair value. As of September 30, 2021, management had determined that no credit loss exists.

•

If the Company determines that a credit loss exists, the credit portion of the allowance will be measured using a DCF analysis using the effective interest rate as of the security’s purchase date. The amount of credit loss the Company records will be limited to the amount by which the amortized cost exceeds the fair value. As of March 31, 2022, management had determined that no credit loss exists.

At ~~September 30, 2021~~March 31, 2022, and December 31, ~~2020,~~2021, the Company held preferred and common stock of various bank holding companies totaling ~~$13.0~~$13.4 million and ~~$1.1~~$14.1 million, respectively. During the three ~~and nine~~ months ended ~~September 30, 2021, $20,000 and $822,000~~March 31, 2022, $643,000 of unrealized ~~gains~~losses were recorded within gain (loss) on equity securities on the Consolidated Condensed Statements of Income. During the three ~~and nine~~ months ended ~~September 30, 2020, $14,000~~March 31, 2021, $1.6 million of unrealized gains were recorded within ~~gain~~gain(loss) on equity securities on the Consolidated Condensed Statements of Income.

8. Loans

~~Loans~~

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


	September 30, 2021			December 31, 2020			March 31, 2022			December 31, 2021
	(In Thousands)						(In Thousands)
Real Estate:
Residential	$	1,129,877		$	1,201,051		$	1,222,057		$	1,167,466
Commercial		2,389,759			2,383,001			2,495,469			2,450,349
Construction		885,586			667,649			883,712			862,815
		4,405,222			4,251,701			4,601,238			4,480,630
Other Loans:
Commercial		952,729			1,202,353			910,553			895,638
Home equity and improvement		264,140			272,701			261,176			264,354
Consumer finance		125,163			120,729			132,294			126,417
		1,342,032			1,595,783			1,304,023			1,286,409
Loans before deferred loan origination fees and costs		5,747,254			5,847,484			5,905,261			5,767,039
Deduct:
Undisbursed construction loan funds		(481,434	)		(355,065	)		(525,545	)		(477,890	)
Net deferred loan origination fees and costs		3,746			(1,179	)		8,615			7,019
Allowance for credit losses		(73,217	)		(82,079	)		(67,195	)		(66,468	)
Total loans	$	5,196,349		$	5,409,161		$	5,321,136		$	5,229,700

Table of Contents

The Company has responded to the pandemic in numerous ways, including by actively participating in the Paycheck Protection Program (“PPP”) and distributing ~~over $600~~$636.9 million to small businesses in our markets. As of ~~September 30, 2021,~~March 31, 2022, the ~~company~~Company had ~~$143.9~~$18.7 million in PPP loans, which remained unpaid and were included in ~~other~~ commercial loans in the above loan table. As of December 31, ~~2020,~~2021, the ~~company~~Company had ~~$386.9~~$58.9 million in PPP loans.

The following table discloses allowance for credit loss (“ACL”) activity for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ by portfolio segment (in thousands):


Three Months Ended March 31, 2022	Residential Real Estate			Commercial Real Estate			Construction			Commercial			Home Equity and Improvement			Consumer Finance			Total
Beginning Allowance	$	12,029		$	32,399		$	3,004		$	13,410		$	4,221		$	1,405		$	66,468
Charge-Offs		(140	)		(7	)		—			(10	)		(29	)		(103	)		(289	)
Recoveries		81			59			—			102			34			114			390
Provisions		(330	)		1,750			(391	)		319			(307	)		(415	)		626
Ending Allowance	$	11,640		$	34,201		$	2,613		$	13,821		$	3,919		$	1,001		$	67,195


Three Months Ended March 31, 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
Charge-Offs		—			—			—		(70	)		(3	)		(36	)		(109	)
Recoveries		8			36			—		198			29			27			298
Provisions		(34	)		(8,181	)		35		398			416			(148	)		(7,514	)
Ending Allowance	$	17,508		$	35,272		$	2,776	$	12,191		$	5,181		$	1,826		$	74,754

Three Months Ended September 30, 2021

1-4 Family
Residential
Real
Estate

Commercial
Real Estate

Construction

Commercial

Home Equity
and
Improvement

Consumer
Finance

Total

Beginning Allowance

$
15,268

$
34,461

$
2,739

$
12,211

$
4,988

$
1,700

$
71,367

Charge-Offs

(27
)

(84
)

—

(375
)

(47
)

(85
)

(618
)
Recoveries

75

143

—

576

23

57

874

Provisions

(1,567
)

(428
)

882

3,016

(276
)

(33
)

1,594

Ending Allowance

$
13,749

$
34,092

$
3,621

$
15,428

$
4,688

$
1,639

$
73,217

Nine Months Ended
September 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

(29
)

(689
)

—

(445
)

(50
)

(227
)

(1,440
)
Recoveries

165

332

12

1,279

217

122

2,127

Provisions

(3,921
)

(8,968
)

868

2,929

(218
)

(239
)

(9,549
)
Ending Allowance

$
13,749

$
34,092

$
3,621

$
15,428

$
4,688

$
1,639

$
73,217

Three Months Ended September 30, 2020

1-4 Family
Residential
Real
Estate

Commercial
Real Estate

Construction

Commercial

Home Equity
and
Improvement

Consumer Finance

Total

Beginning Allowance

$
23,783

$
44,057

$
1,137

$
11,839

$
4,216

$
3,523

$
88,555

Charge-Offs

—

(4,172
)

—

—

(12
)

(35
)

(4,219
)
Recoveries

7

581

—

266

41

28

923

Provisions

(5,622
)

8,109

1,352

1,139

148

(1,468
)

3,658

Ending Allowance

$
18,168

$
48,575

$
2,489

$
13,244

$
4,393

$
2,048

$
88,917

Nine Months Ended
September 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
)

(4,237
)

(1
)

(133
)

(98
)

(222
)

(4,948
)
Recoveries

223

1,110

—

1,602

177

146

3,258

Provisions⁽¹⁾

12,493

27,665

1,717

2,763

2,887

1,787

49,312

Ending Allowance

$
18,168

$
48,575

$
2,489

$
13,244

$
4,393

$
2,048

$
88,917

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

The following table presents the amortized cost basis of collateral-dependent loans by class of loans and collateral type as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 (in thousands):


	March 31, 2022
	Real Estate		Equipment and Machinery		Inventory and Receivables		Vehicles		Total
Real Estate:
Residential	$	78	$	—	$	—	$	—	$	78
Commercial		17,592		—		—		—		17,592
Construction		—		—		—		—		—

Other Loans:
Commercial		1,573		—		13,711		21		15,305
Home equity and improvement		—		—		—		—		—
Consumer finance		—		—		—		—		—

Total	$	19,243	$	—	$	13,711	$	21	$	32,975

Table of Contents


	December 31, 2021
	Real Estate		Equipment and Machinery		Inventory and Receivables		Vehicles		Total
Real Estate:
Residential	$	226	$	—	$	—	$	—	$	226
Commercial		18,399		—		—		—		18,399
Construction		—		—		—		—		—

Other Loans:
Commercial		1,574		160		14,023		25		15,782
Home equity and improvement		—		—		—		—		—
Consumer finance		—		—		—		—		—

Total	$	20,199	$	160	$	14,023	$	25	$	34,407

September 30, 2021

Real Estate

Equipment and Machinery

Inventory and Receivables

Vehicles

Total

Real Estate:

Residential

$
324

$
—

$
—

$
—

$
324

Commercial

25,563

—

—

—

25,563

Construction

—

—

—

—

—

Other Loans:

Commercial

1,631

1,215

20,617

148

23,611

Home equity and improvement

—

—

—

—

—

Consumer finance

—

—

—

—

—

Total

$
27,518

$
1,215

$
20,617

$
148

$
49,498

December 31, 2020

Real Estate

Equipment and Machinery

Inventory and Receivables

Vehicles

Total

Real Estate:

Residential

$
1,024

$
—

$
—

$
—

$
1,024

Commercial

33,999

—

—

—

33,999

Construction

—

—

—

—

—

Other Loans:

Commercial

1,426

5,317

4,943

125

11,811

Home equity and improvement

—

—

—

—

—

Consumer finance

—

—

—

—

—

Total

$
36,449

$
5,317

$
4,943

$
125

$
46,834

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, 2022		December 31, 2021
	(In Thousands)
Non-accrual loans with reserve	$	32,930	$	35,480
Non-accrual loans without reserve		14,368	$	12,534
Loans 90 days plus past due and still accruing		—		—
Total non-performing loans		47,298		48,014
Real estate and other assets held for sale		253		171
Total non-performing assets	$	47,551	$	48,185
Troubled debt restructuring, still accruing	$	6,287	$	7,768

September 30,
2021

December 31,
2020

(In Thousands)

Non-accrual loans with reserve

$
47,047

$
35,234

Non-accrual loans without reserve

12,818

$
16,448

Loans over 90 days past due and still accruing

—

—

Total non-performing loans

59,865

51,682

Real estate and other assets held for sale

261

343

Total non-performing assets

$
60,126

$
52,025

Troubled debt restructuring, still accruing

$
6,503

$
7,173

The following table presents the aging of the amortized cost in past due and non-accrual loans as of ~~September 30, 2021,~~March 31, 2022, by class of loans (in thousands):


	Current		30 - 59 days		60 - 89 days		90 + days		Total Past Due		Total Non- Accrual
Real Estate:
Residential	$	1,202,041	$	307	$	3,327	$	7,654	$	11,288	$	9,280
Commercial		2,486,865		549		6		8,059		8,614		14,423
Construction		358,167		0		0		0		0		0

Other Loans:
Commercial		890,418		10,371		—		936		11,307		11,386
Home equity and improvement		255,180		756		334		1,771		2,861		2,171
Consumer finance		129,659		1,530		598		1,959		4,087		2,100
PCD		21,924		173		703		5,044		5,920		7,938

Total Loans	$	5,344,254	$	13,686	$	4,968	$	25,423	$	44,077	$	47,298

Current

30 - 59 days

60 - 89 days

90 + days

Total
Past Due

Total
Non-
Accrual

Real Estate:

Residential

1,110,037

480

5,051

5,476

11,007

6,777

Commercial

2,377,310

1,414

1,649

1,904

4,967

17,982

Construction

402,831

—

1,321

—

1,321

—

Other Loans:

Commercial

937,552

756

879

526

2,161

19,007

Home equity and improvement

257,238

1,447

318

1,406

3,171

1,807

Consumer finance

122,999

1,304

485

1,439

3,228

1,539

PCD

28,899

46

588

6,211

6,845

12,753

Total Loans

$
5,236,866

$
5,447

$
10,291

$
16,962

$
32,700

$
59,865

Table of Contents

The following table presents the aging of the recorded investment in past due and non-accrual loans as of December 31, ~~2020,~~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	$	1,173,979	$	433	$	7,669	$	9,000	$	17,102	$	10,178	$	1,144,533	$	234	$	5,340	$	7,487	$	13,061	$	9,034
Commercial		2,357,909		1,033		369		844		2,246		11,980		2,439,552		96		847		7,168		8,111		14,621
Construction		310,152		—		1,626		806		2,432		806		383,136		43		1,746		0		1,789		0

Other Loans:
Commercial		1,172,636		9		4		394		407		1,365		884,025		42		35		867		944		11,531
Home equity and improvement		262,373		3,440		839		1,137		5,416		1,537		257,055		1,851		408		1,634		3,893		2,051
Consumer finance		117,088		1,687		491		1,521		3,699		1,624		124,073		1,112		819		1,728		3,659		1,873
PCD		50,218		402		1,882		13,299		15,583		24,192		25,111		225		1,005		5,996		7,226		8,904

Total Loans	$	5,444,355	$	7,004	$	12,880	$	27,001	$	46,885	$	51,682	$	5,257,485	$	3,603	$	10,200	$	24,880	$	38,683	$	48,014

Troubled Debt Restructurings

As of ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, the Company had a recorded investment in troubled debt restructurings (“TDRs”) of ~~$11.3~~$10.6 million and ~~$16.6~~$11.9 million, respectively. The Company allocated ~~$614,000~~$358,000 and ~~$883,000~~$378,000 of specific reserves to those loans at ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, respectively, and had committed to lend additional amounts totaling up to ~~$339,000~~$319,000 and ~~$303,000~~$348,000 at ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, respectively.

The Company had previously w~~orked~~worked with borrowers that were impacted by the COVID-19 pandemic by providing modifications to include either interest only deferral or principal and interest deferral. These modifications ranged from one to nine ~~months.~~months. As of ~~September 30,~~March 31, 2022 and December 31, 2021, the Company had 0active deferrals compared to December 31, 2020 at $53.5 million. A majority of these modifications were 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.

~~A breakout of deferrals by loan category is as follows (in thousands):~~0 active deferrals.

September 30, 2021 Balance deferred

December 31, 2020 Balance deferred

Residential real estate

$
7,016

Commercial real estate

—

34,831

Construction

—

9,579

Commercial

—

1,628

Home equity and improvement

—

114

Consumer finance

—

282

Total
$
-

$
53,450

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 ~~September 30, 2021, $4.8~~March 31, 2022, $4.3 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.

Table of Contents

The following tables present loans by class modified as TDRs that occurred during the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2020:~~2021:


	Loans Modified as a TDR for the Three Months Ended March 31, 2022 ($ in thousands)
Troubled Debt Restructurings	Number of Loans		Recorded Investment (as of period end)
Real Estate:
Residential		1	$	252
Commercial		—		—
Construction		—		—

Other Loans:
Commercial		—		—
Home equity and improvement		—		—
Consumer finance		2		20

Total		3	$	272

Loans Modified as a TDR for the Three
Months Ended September 30, 2021
($ in thousands)

Loans Modified as a TDR for the Nine
Months Ended September 30, 2021
($ in thousands)

Troubled Debt Restructurings

Number of
Loans

Recorded Investment
(as of period end)

Number of
Loans

Recorded Investment
(as of period end)

Real Estate:

Residential

1

$
263

4

$
512

Commercial

—

—

—

—

Construction

—

—

—

—

��

Other Loans:

Commercial

1

275

6

1,853

Home equity and improvement

—

—

—

—

Consumer finance

—

—

—

—

Total

2

$
538

10

$
2,365

The loans described above increased the ACL by ~~$9,000 and~~ $~~382,000~~1,000 in the three ~~and nine~~ months ended ~~September 30, 2021.~~ March 31, 2022.


	Loans Modified as a TDR for the Three Months Ended September 30, 2020 ($ in thousands)				Loans Modified as a TDR for the Nine Months Ended September 30, 2020 ($ in thousands)				Loans Modified as a TDR for the Three Months Ended March 31, 2021 ($ 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		1	$	51		6	$	660		2	$	150
Commercial		1		451		5		7,327		—		—
Construction		—		—		—		—		—		—

Other Loans:
Commercial		3		7,347		8		7,503		3		709
Home equity and improvement		3		66		4		92		—		—
Consumer finance		—		—		—		—		—		—

Total		8	$	7,915		23	$	15,582		5	$	859

The loans described above increased the ACL by ~~$758,000 and $790,000~~$6,000 in the three ~~and nine~~ months ended ~~September 30, 2020.~~ March 31, 2021.

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 ~~September 30,~~March 31, 2022 or March 31, 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 nine months ended September 30, 2020:

Three Months Ended September 30, 2020

For the Nine Months Ended September 30, 2020

($ 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)

Real Estate:

Residential

2

$
211

8

$
647

Commercial

2

128

4

322

Construction

—

—

—

—

Other Loans:

Commercial

—

—

2

250

Home equity and improvement

1

4

4

330

Consumer finance

—

—

1

21

Total

5

$
343

19

$
1,570

~~The TDRs that subsequently defaulted described above increased the ACL by$16,000 and $61,000 for the three and nine months ended September 30, 2020.~~

Credit Quality Indicators

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

Table of Contents

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 ~~September 30,~~March 31, 2022, 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
Real Estate:
Residential	$	1,202,103	$	1,295	$	9,931	$	-	$	9,931	$	1,213,329
Commercial		2,376,266		93,550		25,663		—		25,663		2,495,479
Construction		358,167		—		—		—		—		358,167

Other Loans:
Commercial		869,383		20,558		11,784		—		11,784		901,725
Home equity and improvement		255,883		—		2,158		—		2,158		258,041
Consumer finance		131,647		—		2,099		—		2,099		133,746
PCD		19,110		98		8,636		—		8,636		27,844

Total Loans	$	5,212,559	$	115,501	$	60,271	$	—	$	60,271	$	5,388,331

As of December 31, 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
Real Estate:
Residential	$	1,146,212	$	1,316	$	10,066	$	-	$	10,066	$	1,157,594
Commercial		2,324,846		93,676		29,141		—		29,141		2,447,663
Construction		365,403		19,522		—		—		—		384,925

Other Loans:
Commercial		856,402		14,815		13,752		—		13,752		884,969
Home equity and improvement		258,914		—		2,034		—		2,034		260,948
Consumer finance		125,879		—		1,853		—		1,853		127,732
PCD		19,547		101		12,689		—		12,689		32,337

Total Loans	$	5,097,203	$	129,430	$	69,535	$	—	$	69,535	$	5,296,168

Class

Unclassified

Special
Mention

Substandard

Doubtful

Total classified

Total

Real Estate:

Residential

$
1,111,776

$
1,315

$
7,953

$
-

$
7,953

$
1,121,044

Commercial

2,223,425

117,068

41,784

—

41,784

2,382,277

Construction

384,620

19,532

—

—

—

404,152

Other Loans:

Commercial

899,137

20,474

20,102

—

20,102

939,713

Home equity and improvement

258,576

—

1,833

—

1,833

260,409

Consumer finance

124,657

—

1,570

—

1,570

126,227

PCD

18,793

102

16,849

—

16,849

35,744

Total Loans

$
5,020,984

$
158,491

$
90,091

$
—

$
90,091

$
5,269,566

Table of Contents

~~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

Real Estate:

Residential

$
1,187,923

$
795

$
2,363

$
-

$
2,363

$
1,191,081

Commercial

2,203,652

111,039

45,464

—

45,464

2,360,155

Construction

299,866

12,718

—

—

—

312,584

Other Loans:

Commercial

1,142,289

23,907

6,847

—

6,847

1,173,043

Home equity and improvement

267,350

—

439

—

439

267,789

Consumer finance

120,682

—

105

—

105

120,787

PCD

26,829

3,813

35,159

—

35,159

65,801

Total Loans

$
5,248,591

$
152,272

$
90,377

$
—

$
90,377

$
5,491,240

The tables below ~~presents~~present the amortized cost basis of loans by credit quality indicator and class of loans as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 (in thousands):

Term of loans by origination

2021

2020

2019

2018

2017

Prior

Revolving Loans

Total

As of September 30, 2021

Real Estate

Residential:

Risk Rating

Pass
$
144,877

$
352,127

$
126,426

$
72,304

$
80,201

$
333,819

$
2,022

$
1,111,776

Special Mention

—

192

—

—

60

137

926

1,315

Substandard

170

509

1,123

744

1,243

4,164

—

7,953

Doubtful

—

—

—

—

—

—

—

—

Total
$
145,047

$
352,828

$
127,549

$
73,048

$
81,504

$
338,120

$
2,948

$
1,121,044

Commercial:

Risk Rating

Pass
$
303,260

$
493,517

$
416,426

$
245,256

$
249,295

$
504,502

$
11,169

$
2,223,425

Special Mention

297

5,917

5,585

11,143

64,392

28,794

940

117,068

Substandard

172

581

6,745

15,815

62

17,048

1,361

41,784

Doubtful

—

—

—

—

—

—

—

—

Total
$
303,729

$
500,015

$
428,756

$
272,214

$
313,749

$
550,344

$
13,470

$
2,382,277

Construction:

Risk Rating

Pass
$
185,751

$
87,035

$
91,614

$
9,623

$
10,452

$
145

$
-

$
384,620

Special Mention

—

12,500

—

5,995

1,037

—

—

19,532

Substandard

—

—

—

—

—

—

—

Doubtful

—

—

—

—

—

—

—

—

Total
$
185,751

$
99,535

$
91,614

$
15,618

$
11,489

$
145

$
-

$
404,152

Other Loans

Commercial:

Risk Rating

Pass
$
295,264

$
151,822

$
95,567

$
55,773

$
27,759

$
21,213

$
251,739

$
899,137

Special Mention

—

999

4,223

419

1,597

4,852

8,384

20,474

Substandard

100

15,993

1,261

259

293

438

1,758

20,102

Doubtful

—

—

—

—

—

—

—

—

Total
$
295,364

$
168,814

$
101,051

$
56,451

$
29,649

$
26,503

$
261,881

$
939,713

Home equity and Improvement:

Risk Rating

Pass
$
19,000

$
7,258

$
5,287

$
3,206

$
6,020

$
31,000

$
186,805

$
258,576

Special Mention

—

—

—

—

—

—

—

—

Substandard

—

—

29

49

28

631

1,096

1,833

Doubtful

—

—

—

—

—

—

—

—

Total
$
19,000

$
7,258

$
5,316

$
3,255

$
6,048

$
31,631

$
187,901

$
260,409

Consumer Finance:

Risk Rating

Pass
$
39,226

$
28,304

$
25,904

$
11,741

$
5,481

$
3,683

$
10,318

$
124,657

Special Mention

—

—

—

—

—

—

—

—

Substandard

10

632

555

147

53

164

9

1,570

Doubtful

—

—

—

—

—

—

—

—

Total
$
39,236

$
28,936

$
26,459

$
11,888

$
5,534

$
3,847

$
10,327

$
126,227

PCD:

Risk Rating

Pass
$
-

$
-

$
173

$
1,835

$
1,946

$
12,650

$
2,189

$
18,793

Special Mention

—

—

—

—

—

102

—

102

Substandard

—

—

69

30

6,274

7,331

3,145

16,849

Doubtful

—

—

—

—

—

—

—

—

Total
$
-

$
-

$
242

$
1,865

$
8,220

$
20,083

$
5,334

$
35,744


	Term of loans by origination
	2022		2021		2020		2019		2018		Prior		Revolving Loans		Total
As of March 31, 2022

Real Estate
Residential:
Risk Rating
Pass	$	87,717	$	247,594	$	355,860	$	104,958	$	59,789	$	344,704	$	1,481	$	1,202,103
Special Mention		—		—		187		37		—		158		913		1,295
Substandard		—		777		957		779		1,178		6,240		—		9,931
Doubtful		—		—		—		—		—		—		—		—
Total	$	87,717	$	248,371	$	357,004	$	105,774	$	60,967	$	351,102	$	2,394	$	1,213,329

Commercial:
Risk Rating
Pass	$	117,640	$	511,210	$	513,331	$	358,355	$	228,407	$	636,090	$	11,233	$	2,376,266
Special Mention		2,380		292		—		2,111		17,094		71,000		673		93,550
Substandard		—		195		559		4,788		4,946		14,949		226		25,663
Doubtful		—		—		—		—		—		—		—		—
Total	$	120,020	$	511,697	$	513,890	$	365,254	$	250,447	$	722,039	$	12,132	$	2,495,479

Construction:
Risk Rating
Pass	$	196,348	$	86,533	$	53,706	$	-	$	727	$	-	$	20,853	$	358,167
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—				—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—
Total	$	196,348	$	86,533	$	53,706	$	-	$	727	$	-	$	20,853	$	358,167

Other Loans
Commercial:
Risk Rating
Pass	$	67,089	$	240,506	$	125,299	$	74,398	$	41,778	$	34,471	$	285,842	$	869,383
Special Mention		2,857		—		2,117		3,919		225		5,738		5,702		20,558
Substandard		—		123		10,347		22		249		216		827		11,784
Doubtful		—		—		—		—		—		—		—		—
Total	$	69,946	$	240,629	$	137,763	$	78,339	$	42,252	$	40,425	$	292,371	$	901,725

Home equity and Improvement:
Risk Rating
Pass	$	3,622	$	23,965	$	6,444	$	4,267	$	2,524	$	35,008	$	180,053	$	255,883
Special Mention		—		—		—		—		��		—		—		—
Substandard		—		—		—		28		37		790		1,303		2,158
Doubtful		—		—		—		—		—		—		—		—
Total	$	3,622	$	23,965	$	6,444	$	4,295	$	2,561	$	35,798	$	181,356	$	258,041

Consumer Finance:
Risk Rating
Pass	$	21,501	$	44,590	$	23,257	$	19,959	$	7,877	$	5,528	$	8,935	$	131,647
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		187		980		717		125		86		4		2,099
Doubtful		—		—		—		—		—		—		—		—
Total	$	21,501	$	44,777	$	24,237	$	20,676	$	8,002	$	5,614	$	8,939	$	133,746

PCD:
Risk Rating
Pass	$	-	$	-	$	-	$	163	$	1,733	$	13,739	$	3,475	$	19,110
Special Mention		—		—		—		—		—		98		—		98
Substandard		—		—		—		53		26		5,854		2,703		8,636
Doubtful		—		—		—		—		—		—		—		—
Total	$	-	$	-	$	-	$	216	$	1,759	$	19,691	$	6,178	$	27,844

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	Term of loans by origination
	2020		2019		2018		2017		2016		Prior		Revolving Loans		Total
As of December 31, 2021

Real Estate
Residential:
Risk Rating
Pass	$	219,006	$	373,439	$	112,781	$	65,544	$	71,794	$	301,735	$	1,913	$	1,146,212
Special Mention		—		190		—		—		59		109		958		1,316
Substandard		465		780		1,198		1,006		2,095		4,522		—		10,066
Doubtful		—		—		—		—		—		—		—		—
Total	$	219,471	$	374,409	$	113,979	$	66,550	$	73,948	$	306,366	$	2,871	$	1,157,594

Commercial:
Risk Rating
Pass	$	514,333	$	493,575	$	388,117	$	230,734	$	237,712	$	451,113	$	9,262	$	2,324,846
Special Mention		294		5,349		5,533		11,055		49,993		20,662		790		93,676
Substandard		172		570		4,920		5,525		62		17,665		227		29,141
Doubtful		—		—		—		—		—		—		—		—
Total	$	514,799	$	499,494	$	398,570	$	247,314	$	287,767	$	489,440	$	10,279	$	2,447,663

Construction:
Risk Rating
Pass	$	198,221	$	100,606	$	55,707	$	10,039	$	685	$	145	$	-	$	365,403
Special Mention		—		12,500		—		5,996		1,026		—		—		19,522
Substandard		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—
Total	$	198,221	$	113,106	$	55,707	$	16,035	$	1,711	$	145	$	-	$	384,925

Other Loans
Commercial:
Risk Rating
Pass	$	293,644	$	132,703	$	84,668	$	47,421	$	24,269	$	17,038	$	256,659	$	856,402
Special Mention		—		2,180		4,094		272		1,264		4,663		2,342		14,815
Substandard		136		11,550		23		288		388		131		1,236		13,752
Doubtful		—		—		—		—		—		—		—		—
Total	$	293,780	$	146,433	$	88,785	$	47,981	$	25,921	$	21,832	$	260,237	$	884,969

Home equity and Improvement:
Risk Rating
Pass	$	24,707	$	6,870	$	4,867	$	2,879	$	5,534	$	31,317	$	182,740	$	258,914
Special Mention		—		—		—		—		—		—		—		—
Substandard		15		—		28		48		27		690		1,226		2,034
Doubtful		—		—		—		—		—		—		—		—
Total	$	24,722	$	6,870	$	4,895	$	2,927	$	5,561	$	32,007	$	183,966	$	260,948

Consumer Finance:
Risk Rating
Pass	$	50,202	$	25,866	$	23,000	$	9,643	$	4,313	$	2,769	$	10,086	$	125,879
Special Mention		—		—		—		—		—		—		—		—
Substandard		196		707		619		129		67		131		4		1,853
Doubtful		—		—		—		—		—		—		—		—
Total	$	50,398	$	26,573	$	23,619	$	9,772	$	4,380	$	2,900	$	10,090	$	127,732

PCD:
Risk Rating
Pass	$	-	$	-	$	170	$	1,753	$	1,860	$	12,496	$	3,268	$	19,547
Special Mention		—		—		—		0		0		101		0		101
Substandard		—		—		67		28		3,242		6,490		2,862		12,689
Doubtful		—		—		��		—		—		—		—		—
Total	$	-	$	-	$	237	$	1,781	$	5,102	$	19,087	$	6,130	$	32,337

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

~~Allowance~~Allowance for Credit Losses ~~(“ACL”)~~

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

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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 direct 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.


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 Other	PD/LGD	Call report loss history

~~Commercial~~	~~Commercial working capital~~	~~PD/LGD~~	~~Call report loss history~~
	~~Agriculture production~~Construction Residential	PD/LGD	Call report loss history
Commercial	Commercial working capital	PD/LGD	Call report loss history
	~~Other commercial~~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~~direct	Remaining life	Call report loss history
	Consumer indirect	DCF	National unemployment

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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 ~~September 30, 2021,~~March 31, 2022, the Company had ~~$1.4~~$1.5 billion in unfunded commitments and set aside ~~$5.8~~$5.3 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.

~~Purchased Loans~~

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

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

Purchased Credit Deteriorated Loans

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 ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 is as follows (in thousands):


	As of September 30, 2021				As of December 31, 2020				As of March 31, 2022				As of December 31, 2021
	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	$	12,822	$	195	$	14,895	$	201	$	12,520	$	176	$	13,396	$	197
Commercial		10,026		599		24,334		2,286		3,146		51		5,878		151
Construction		—		—		—		—		—		—		—		—
		22,848		794		39,229		2,487		15,666		227		19,274		348
Other Loans:
Commercial		8,527		1,151		20,990		1,896		8,595		1,211		9,167		1,531
Home equity and improvement		3,731		184		4,912		214		3,135		139		3,405		154
Consumer finance		638		11		670		20		448		9		491		7
		12,896		1,346		26,572		2,130		12,178		1,359		13,063		1,692
Total	$	35,744	$	2,140	$	65,801	$	4,617	$	27,844	$	1,586	$	32,337	$	2,040

Foreclosure Proceedings

Consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure totaled ~~$2,357,000~~$4.1 million as of ~~September 30, 2021,~~March 31, 2022, and ~~$784,000~~$3.3 million as of December 31, ~~2020.~~ 2021.

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9. Mortgage Banking

9.	~~Mortgage Banking~~

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


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2021			2020			2021			2020			2022			2021
	(In Thousands)												(In Thousands)
Mortgage banking gain, net	$	5,353		$	13,781		$	13,663		$	30,213		$	2,543		$	5,640
Mortgage loans servicing revenue (expense):
Mortgage loans servicing revenue		1,861			1,898			5,666			5,379			1,879			1,917
Amortization of mortgage servicing rights		(1,822	)		(1,959	)		(6,119	)		(5,302	)		(1,403	)		(2,344	)
Mortgage servicing rights valuation adjustments		783			(1,673	)		5,655			(7,527	)		1,233			5,320
		822			(1,734	)		5,202			(7,450	)		1,709			4,893

Net revenue from sale and servicing of mortgage loans	$	6,175		$	12,047		$	18,865		$	22,763		$	4,252		$	10,533

The unpaid principal balance of residential mortgage loans serviced for third parties was ~~$2.9~~$2.94 billion at ~~September 30, 2021,~~March 31, 2022, and ~~$2.95 billion at~~ December 31, ~~2020.~~2021.

Activity for capitalized mortgage servicing rights and the related valuation allowance follows for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2020:~~2021:


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2021			2020			2021			2020			2022			2021
	(In Thousands)												(In Thousands)
Mortgage servicing assets:
Balance at beginning of period	$	21,682		$	21,034		$	21,666		$	10,801		$	22,244		$	21,666
Loans sold, servicing retained		2,103			2,463			6,416			6,292			1,348			2,374
Mortgage servicing rights acquired		—			—			—			9,747
Amortization		(1,822	)		(1,959	)		(6,119	)		(5,302	)		(1,403	)		(2,344	)
Carrying value before valuation allowance at end of period		21,963			21,538			21,963			21,538			22,189			21,696

Valuation allowance:
Balance at beginning of period		(3,641	)		(6,388	)		(8,513	)		(534	)		(2,707	)		(8,513	)
Impairment recovery (charges)		783			(1,673	)		5,655			(7,527	)		1,233			5,320
Balance at end of period		(2,858	)		(8,061	)		(2,858	)		(8,061	)		(1,474	)		(3,193	)
Net carrying value of MSRs at end of period	$	19,105		$	13,477		$	19,105		$	13,477		$	20,715		$	18,503
Fair value of MSRs at end of period	$	20,189		$	13,477		$	20,189		$	13,477		$	25,996		$	18,695

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~~had no accrual for secondary market buy-back activity at ~~September 30,~~March 31, 2022 or December 31, 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 $0 and $43,000 related to the reduction of the accrual for the three and nine months ended September 30, 2021. There was 0 expense or credit recognized in the three ~~and nine~~ months ended ~~September 30, 2020.~~ March 31, 2022.

10. Leases

~~10.~~

~~Leases~~

The Company’s lease agreements have maturity dates ranging from ~~October 2021~~April 2022 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 ~~14.94~~13.72 years as of ~~September 30, 2021~~March 31, 2022 and ~~15.09~~14.21 years as of December 31, ~~2020.~~2021. The weighted average discount rate for leases was ~~2.64%~~2.55% as of ~~September 30, 2021~~March 31, 2022 and ~~2.61%~~2.57% as of December 31, ~~2020.~~2021.

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The total operating lease costs were ~~$560,000~~$542,000 and ~~$1.8 million~~$664,000 for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and March 31, 2021, ~~and $615,000 and $1.7 million for the three and nine months ended September 30, 2020.~~respectively. The right-of-use asset, included in other assets, was ~~$16.0~~$15.6 million and ~~$16.9~~$15.4 million at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively. The lease liabilities, included in other liabilities, were ~~$16.6~~$16.3 million and ~~$17.8~~$16.1 million as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively.

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


(in thousands)	March 31, 2022
Remainder of 2022	$	2,526
2023		2,023
2024		1,632
2025		1,408
2026		1,173
Thereafter		11,772
Total undiscounted minimum lease payments		20,534
Present value adjustment		(4,187	)
Total lease liabilities	$	16,347

(in thousands)

September 30, 2021

2021

$
2,367

2022

1,830

2023

1,497

2024

1,312

2025

1,158

Thereafter

13,753

Total undiscounted minimum lease payments

21,917

Present value adjustment

(5,340
)
Total lease liabilities

$
16,577

11. Deposits

~~11.~~

~~Deposits~~

A summary of deposit balances is as follows:


	March 31, 2022		December 31, 2021
	(In Thousands)
Non-interest-bearing checking accounts	$	1,733,157	$	1,724,772
Interest-bearing checking and money market accounts		3,029,260		2,952,705
Savings deposits		830,143		804,451
Retail certificates of deposit less than $250,000		586,967		636,477
Retail certificates of deposit greater than $250,000		137,708		163,646
	$	6,317,235	$	6,282,051

September 30,
2021

December 31,
2020

(In Thousands)

Non-interest-bearing checking accounts

$
1,618,769

$
1,597,262

Interest-bearing checking and money market accounts

2,962,032

2,627,669

Savings deposits

786,929

700,480

Retail certificates of deposit less than $250,000

692,224

912,006

Retail certificates of deposit greater than $250,000

188,704

210,424

$
6,248,658

$
6,047,841

12. Borrowings

~~12.~~

~~Borrowings~~

~~Premier’s Bank Line of Credit advance and~~The Company's junior subordinated debentures owed to unconsolidated subsidiary trusts and subordinated debentures are comprised of the ~~following~~following::

	September 30, 2021		December 31, 2020
	(In Thousands)				March 31, 2022		December 31, 2021
Overnight bank line of credit	$	18,812	$	—
					(In Thousands)
First Defiance Statutory Trust I due December 2035					$	20,619	$	20,619
First Defiance Statutory Trust II due June 2037					$	15,464	$	15,464
Junior subordinated debentures owed to unconsolidated subsidiary trusts	$	36,083	$	36,083	$	36,083	$	36,083
Subordinated debentures	$	48,830	$	48,777	$	48,925	$	48,893

At ~~September 30, 2021,~~March 31, 2022, the Company had ~~$18.8~~$150.0 million of outstanding FHLB advances with a maturity date in ~~overnight borrowings on a bank line of credit.~~ 2022. There were ~~The Company has been approved to borrow up to $25 million overnight~~0 outstanding FHLB advances at ~~a rate determined by the lender.~~December 31, 2021.

In September 2020, the Company completed the issuance of ~~$50.0~~$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%~~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 of388.5 ~~388.5~~ basis points. The Company may, at its option, beginning September 30, 2025, redeem the notes,

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in whole or in part, from time to time, subject to certain conditions. The net proceeds from the sale were approximately ~~$48.7~~$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~~$15.0 million of Guaranteed Capital Trust Securities (“Trust Preferred Securities”). In connection with this transaction, the Company issued ~~$15.5~~$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 ~~1.62%~~2.33% as of ~~September 30, 2021,~~March 31, 2022, and ~~1.72%~~1.70% as of December 31, ~~2020.~~2021.

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~~$20.0 million of Trust Preferred Securities in 2005. In connection with this transaction, the Company issued ~~$20.6~~$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 ~~1.50%~~2.21% and ~~1.60%~~1.58% on ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, 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.

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13. Commitments, Guarantees and Contingent Liabilities

~~13.~~

~~Commitments, Guarantees and Contingent Liabilities~~

Loan commitments are made to accommodate the financial needs of Premier’s ~~customers’~~customers in the form of unfunded loans or unused lines of credit and 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):



	September 30, 2021		December 31, 2020		March 31, 2022			December 31, 2021
Commitments to make loans	$	952,515	$	702,103	$	1,154,525		$	1,175,916
Unused lines of credit		930,885		918,470		1,007,302			626,348
Standby letters of credit		18,841		22,250		13,319			10,851
Total	$	1,902,241	$	1,642,823	$	2,175,146	��	$	1,813,115

Commitments to make loans are generally made for periods of 60 days or ~~less.~~less.

14. Income Taxes

~~14.~~

~~Income Taxes~~

The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax in the states of Indiana and West Virginia. The Company is no longer subject to examination by income taxing authorities for years before ~~2017.~~2018. The Company also currently operates in the states of Ohio, Michigan and Pennsylvania which tax financial institutions based on their equity rather than their income.

The components of income tax expense (benefit) are as follows:


	For the Three Months Ended March 31,
	2022		2021
	(In Thousands)
Current:
Federal	$	5,814	$	6,362
State and local		163		163
Deferred		193		3,427
	$	6,170	$	9,952

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

2021

2020

2021

2020

(In Thousands)

(In Thousands)

Current:

Federal
$
6,600

$
11,359

$
22,199

$
22,310

State and local

162

—

490

150

Deferred

(638
)

(5,100
)

1,708

(14,509
)

$
6,124

$
6,259

$
24,397

$
7,951

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


	For the Three Months Ended March 31,
	2022			2021
	(In Thousands)
Tax expense (benefit) at statutory rate (21%)	$	6,830		$	10,699
Increases (decreases) in taxes from:
State income tax - net of federal tax benefit		128			128
Tax exempt interest income, net of TEFRA		(186	)		(200	)
Bank owned life insurance		(209	)		(245	)
Captive insurance		(105	)		(90	)
Other		(288	)		(340	)
Totals	$	6,170		$	9,952

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For the Three Months Ended September 30,

For the Nine Months Ended September 30,

2021

2020

2021

2020

(In Thousands)

(In Thousands)

Tax expense (benefit) at statutory rate (21%)
$
7,242

$
6,703

$
26,278

$
8,439

Increases (decreases) in taxes from:

State income tax - net of federal tax benefit

128

—

387

118

Tax exempt interest income, net of TEFRA

(213
)

(216
)

(641
)

(607
)
Bank owned life insurance

(199
)

(251
)

(625
)

(590
)
Captive insurance

(90
)

—

(282
)

(189
)
Other

(744
)

23

(720
)

780

Totals
$
6,124

$
6,259

$
24,397

$
7,951

15. Derivative Financial Instruments

~~15.~~

~~Derivative Financial Instruments~~

At ~~September 30, 2021,~~March 31, 2022, the Company had approximately ~~$37.7~~$27.3 million of interest rate lock commitments and ~~$250~~$337.0 million of forward sales of mortgage backed securities. These commitments are considered derivatives. The Company had ~~$135.7~~$65.4 million of interest rate lock commitments and ~~$265.0~~$305.0 million of forward commitments at December 31, ~~2020.~~ 2021.

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:

September 30, 2021

December 31, 2020

Assets

Carrying

Value

March 31, 2022

December 31, 2021

(In Thousands)

Derivatives not designated as hedging instruments

Mortgage Banking Derivatives

6,279

3,833

9,923

2,336

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 ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ represents a fair value adjustment that runs through mortgage banking income.


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2021		2020		2021		2020		2022		2021
	(In Thousands)								(In Thousands)
Derivatives not designated as hedging instruments
Mortgage Banking Derivatives – Gain (Loss)	$	2,122	$	7,913	$	2,446	$	892	$	7,587	$	4,124

Interest Rate Swaps

The Company maintains an interest rate protection program for commercial loan customers. 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 ~~$77.7~~$82.6 million and fair value of ~~$1.2~~$2.3 million in other assets and ~~$1.3~~$2.3 million in other liabilities at ~~September 30, 2021.~~March 31, 2022. As of December 31, ~~2020,~~2021, the Company had interest rate swaps associated with commercial loans with a notional value of ~~$87.8~~$69.4 million and fair value of ~~$1.9~~$1.3 million in other assets and ~~$2.0~~$1.3 million in other liabilities. ~~The difference in fair value of $25,000 between the asset and liability at September 30, 2021 represents a credit valuation adjustment that flows through noninterest income.~~ For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021, ~~$(7,000)~~$1,000 and ~~$136,000~~$198,000, respectively, flowed through noninterest income. ~~For the three and nine months ended September 30, 2020, $(3,000) and $162,000 flowed through noninterest income.~~

Interest Rate Swap Designated as Cash Flow Hedge

In May 2021, the Company entered into derivative instruments designated as a cash flow hedge. 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.

An interest rate swap with notional amount totaling ~~$250~~$250.0 million as of ~~September 30, 2021~~March 31, 2022 was designated as a cash flow hedge 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 was determined to be highly effective during the period.~~pool. The gross aggregate fair value of the swap of ~~$1.4~~$16.2 million is recorded in other ~~assets~~liabilities in the unaudited Consolidated

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Balance Sheets at ~~September 30, 2021,~~March 31, 2022, with changes in fair value recorded net of tax in other comprehensive income (loss). ~~The Company expects~~As of December 31, 2021, the ~~hedge to remain highly effective during the remaining terms~~gross aggregate fair value of the ~~swap.~~ swap of $854,000 was recorded in other assets in the Consolidated Balance Sheets. A summary of the interest-rate swap designated as a cash flow hedge is presented below (dollars in thousands):


	March 31, 2022			December 31, 2021

Notional amount	$	250,000		$	250,000
Weighted average fixed receive rates		1.437	%		1.437	%
Weighted average variable 1-month LIBOR pay rates		0.438	%		0.089	%
Weighted average remaining maturity (in years)		9.0			9.3
Fair value	$	(16,180	)	$	854

16. Other Comprehensive (Loss) Income

September 30, 2021

December 31, 2020

Notional amount

$
250,000

$
-

Weighted average fixed receive rates

1.437
%

—

Weighted average variable 1-month LIBOR pay rates

0.089
%

—

Weighted average remaining maturity (in years)

9.6

—

Unrealized gains (losses), net of tax

$
1,131

—

~~Equity Linked Time Deposit~~

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 September 30, 2021 and December 31, 2020, the balance of the equity linked time deposits was $208,000 and $5.7 million, respectively, and the written and purchased options each had a fair value of $1,000 and $56,000, respectively.

~~16.~~

~~Other Comprehensive (Loss) Income~~

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
	(In Thousands)
Three months ended March 31, 2022:
Securities available for sale and transferred securities:
Change in net unrealized gain/loss during the period	$	(74,193	)	$	15,580	$	(58,613	)
Reclassification adjustment for net losses included in net income		—			—		—
Cash flow hedge derivatives
Change in net unrealized gain/loss during the period		(16,241	)		3,411		(12,830	)
Reclassification adjustment for net gains included in net income		(793	)		167		(626	)
Total other comprehensive gain	$	(91,227	)	$	19,158	$	(72,069	)


	Before Tax Amount			Tax (Expense) Benefit		Net of Tax Amount
	(In Thousands)
Three months ended March 31, 2021:
Securities available for sale:
Change in net unrealized gain/loss during the period	$	(19,112	)	$	4,014	$	(15,098	)
Reclassification adjustment for net gains included in net income		(516	)		108		(408	)
Total other comprehensive loss	$	(19,628	)	$	4,122	$	(15,506	)

Before Tax
Amount

Tax (Expense)
Benefit

Net of Tax
Amount

(In Thousands)

Three months ended September 30, 2021:

Securities available for sale and transferred securities:

Change in net unrealized gain/loss during the period

$
(9,042
)

$
1,898

$
(7,144
)
Reclassification adjustment for net losses included in net income

(233
)

49

(184
)
Cash flow hedge derivatives

Change in net unrealized gain/loss during the period

(1,692
)

356

(1,336
)
Reclassification adjustment for net gains included in net income

(860
)

180

(680
)
Total other comprehensive gain

$
(11,827
)

$
2,483

$
(9,344
)

Nine months ended September 30, 2021:

Securities available for sale:

Change in net unrealized gain/loss during the period

$
(16,169
)

$
3,395

$
(12,774
)
Reclassification adjustment for net gains included in net income

(2,218
)

466

(1,752
)
Cash flow hedge derivatives

Change in net unrealized gain/loss during the period

2,742

(576
)

2,166

Reclassification adjustment for net gains included in net income

(1,310
)

275

(1,035
)
Total other comprehensive loss

$
(16,955
)

$
3,560

$
(13,395
)

Before Tax
Amount

Tax (Expense)
Benefit

Net of Tax
Amount

(In Thousands)

Three months ended September 30, 2020:

Securities available for sale:

Change in net unrealized gain/loss during the period

$
720

$
(150
)

$
570

Reclassification adjustment for net gains included in net income

(1,466
)

308

(1,158
)
Total other comprehensive loss

$
(746
)

$
158

$
(588
)

Nine months ended September 30, 2020

Securities available for sale:

Change in net unrealized gain/loss during the period

$
13,338

$
(2,800
)

$
10,538

Reclassification adjustment for net gains included in net income

(1,464
)

307

(1,157
)
Postretirement medical plan

—

—

Total other comprehensive loss

$
11,874

$
(2,493
)

$
9,381

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

Securities
Available
For Sale

Post-
retirement
Benefit

Cash Flow Hedge Derivatives

Accumulated
Other
Comprehensive
Income (Loss)

(In Thousands)

Balance January 1, 2021

$
15,083

$
(79
)

$
—

$
15,004

Other comprehensive income/(loss) before reclassifications

(12,774
)

—

2,166

(10,608
)
Amounts reclassified from accumulated other comprehensive income

(1,752
)

—

(1,035
)

(2,787
)

Net other comprehensive income/(loss) during period

(14,526
)

—

1,131

(13,395
)

Balance September 30, 2021

$
557

$
(79
)

$
1,131

$
1,609

Balance January 1, 2020

$
4,839

$
(244
)

$
—

$
4,595

Other comprehensive income (loss) before reclassifications

10,538

—

—

10,538

Amounts reclassified from accumulated other comprehensive income

(1,157
)

—

—

(1,157
)

Net other comprehensive income during period

9,381

—

—

9,381

Balance September 30, 2020

$
14,220

$
(244
)

$
—

$
13,976

~~17.~~

~~Business Combinations~~

~~The Merger became~~


	Securities Available For Sale			Post- retirement Benefit			Cash Flow Hedge Derivatives			Accumulated Other Comprehensive Income (Loss)
	(In Thousands)
Balance January 1, 2022	$	(4,023	)	$	(79	)	$	674		$	(3,428	)
Other comprehensive income/(loss) before reclassifications		(58,613	)		—			(12,830	)		(71,443	)
Amounts reclassified from accumulated other comprehensive income		0			—			(626	)		(626	)

Net other comprehensive income/(loss) during period		(58,613	)		—			(13,456	)		(72,069	)

Balance March 31, 2022	$	(62,636	)	$	(79	)	$	(12,782	)	$	(75,497	)

Balance January 1, 2021	$	15,083		$	(79	)	$	—		$	15,004
Other comprehensive income (loss) before reclassifications		(15,098	)		—			—			(15,098	)
Amounts reclassified from accumulated other comprehensive income		(408	)		—			—			(408	)

Net other comprehensive income during period		(15,506	)		—			—			(15,506	)

Balance March 31, 2021	$	(423	)	$	(79	)	$	—		$	(502	)

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.

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In accordance with ASC 805, the Company expensed approximately $3.7 million and $17.3 million of direct acquisition costs during the three and nine months ended September 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

(In Thousands)

Cash Consideration

$
132

Fair Value of Options Exchanged

461

Equity - Dollar Value of Issued Shares

526,850

Fair Value of Total Consideration Transferred

527,443

Recognized Amounts of Identifiable Assets Acquired and Liabilities Assumed:

Cash and Cash Equivalents

52,580

Securities available for sale

262,753

Net loans, including loans held for sale

2,340,701

FHLB Stock

12,753

Office Properties and Equipment

20,253

Intangible Assets

33,014

Bank Owned Life Insurance

65,934

Mortgage Servicing Rights

9,747

Accrued Interest Receivable and Other Assets

35,943

Deposits - Non-Interest Bearing

(430,921
)
Deposits - Interest Bearing

(1,651,669
)
Advances from FHLB

(381,000
)
Accrued Interest Payable and Other Liabilities

(60,524
)
Total Identifiable Net Assets

309,564

Goodwill

$
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

Forward-Looking Information

This quarterly report, as well as other publicly available documents, including those incorporated herein by reference, may contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended ~~(the~~(the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995 . These statements may include, but are not limited to, statements regarding projections, forecasts, goals and plans of Premier ~~Financial Corp.~~ and its management, future movements of interests, loan or deposit production levels, future credit quality ratios, future strength in the market area, and growth projections. These statements do not describe historical or current facts and may be identified by words such as “intend,” “intent,” “believe,” “expect,” “estimate,” “target,” “plan,” “anticipate,” or similar words or phrases, or future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” “may,” “can,” or similar ~~verbs~~.verbs. There can be no assurances that the forward-looking statements included in this quarterly report will prove to be accurate. In light of the significant uncertainties in the forward-looking statements, the inclusion of such information should not be regarded as a representation by Premier or any other persons, that our objectives and plans will be achieved.

Forward-looking statements involve numerous risks and uncertainties, any one or more of which could affect Premier’s business and financial results in future periods and could cause actual results to differ materially from plans and projections. These risks and uncertainties include, but not limited to: impacts from the novel coronavirus ~~(COVID-19)~~("COVID-19") pandemic on the economy, financial markets, our customers, and our business and results of operation; changes in interest rates; disruptions in the mortgage market; risks and uncertainties inherent in general and local banking, insurance and mortgage conditions; political uncertainty; uncertainty in U.S. fiscal or monetary policy; uncertainty concerning or disruptions relating to tensions surrounding the current socioeconomic ~~landscape~~;landscape; competitive factors specific to markets in which Premier and its subsidiaries operate; future interest rate levels; legislative or regulatory rulemaking or actions; capital market conditions; security breaches or unauthorized disclosure of confidential customer or Company information; interruptions in the effective operation of information and transaction processing systems of Premier or Premier’s vendors and service providers; failures or delays in integrating or adopting new technology; the impact of the cessation of LIBOR interest rates and implementation of a replacement rate; and other risks and uncertainties detailed from time to time in our Securities and Exchange Commission (“SEC”) filings, including our Annual Report on Form 10-K for the year ended December 31, ~~2020,~~ ~~the Form 10-K/A filed September 28,~~ 2021, ~~and any further amendments thereto~~(the ~~“2020~~“2021 Form 10-K”) ~~and our quarterly report on Form 10-Q for the quarter ended June 30, 2021.~~. Any one or more of these factors have affected or could in the future affect Premier’s business and financial results in future periods and could cause actual results to differ materially from plans and projections.

All forward-looking statements made in this quarterly report are based on information presently available to the management of Premier and speak only as of the date on which they are made. We assume no obligation to update any forward-looking statements, whether as a result of new information, future developments or otherwise, except as may be required by law.

Non-GAAP Financial Measures

In addition to results presented in accordance with ~~accounting principles generally accepted in the United States (“GAAP”),~~GAAP, this report includes non-GAAP financial measures. The Company believes these non-GAAP financial measures provide additional information that is useful to investors in helping to understand the underlying performance and trends of the Company. The Company monitors the non-GAAP financial measures and the Company’s management believes they are helpful to investors because they provide an additional tool to use in evaluating the Company’s financial and business trends and operating results. In addition, the

Company’s management uses these non-GAAP measures to compare the

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

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

The following tables present a reconciliation of non-GAAP measures to their respective GAAP measures for the three ~~and nine~~ month periods ended ~~September 30, 2021~~March 31, 2022 and ~~2020.~~2021.

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


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2021			2020			2021			2020			2022			2021
	(In Thousands)												(In Thousands)
Net interest income (GAAP)	$	57,035		$	53,271		$	170,167		$	153,038		$	57,894		$	56,513
Add: FTE adjustment		256			259			763			767			229			237
Net interest income on a FTE basis (1)	$	57,291		$	53,530		$	170,930		$	153,805		$	58,123		$	56,750

Non-interest income-less securities gains/losses (2)	$	18,061		$	23,520			59,093			60,549		$	17,514		$	24,149
Non-interest expense (3)		39,045			43,563			116,223			123,856			41,303			38,803
Average interest-earning assets net of average
unrealized gains/losses on securities (4)		6,773,021			6,211,267			6,730,807			5,787,134			6,754,862			6,611,343

Ratios:
Net interest margin (1) / (4)		3.38	%		3.45	%		3.39	%		3.54	%		3.44	%		3.43	%
Efficiency ratio (3) / (1) + (2)		51.82	%		56.54	%		50.53	%		57.78	%		54.61	%		47.96	%

Critical Accounting Policies

~~The Company~~Premier has established various accounting policies ~~which~~that govern the application of GAAP in the preparation of its ~~financial statements.~~Consolidated Financial Statements. The significant accounting policies of ~~the Company~~Premier are described in the ~~footnotes~~Notes to the ~~consolidated financial statements included in the 2020 Form 10-K and in Footnote 2 of this report.~~Consolidated Financial Statements. Certain accounting policies involve significant judgments and assumptions by management, which have a material impact on the carrying value of certain assets and ~~liabilities;~~liabilities and management considers such accounting policies to be critical accounting policies. ~~Those policies~~The judgments and assumptions used by management are based on historical experience and other factors, which are ~~identified~~believed to be reasonable under the circumstances. Because of the nature of the judgments and ~~discussed in detail in~~assumptions made by management, actual results could differ from these judgments and estimates, which could have a material impact on the ~~2020 Form 10-K~~carrying value of assets and ~~in Footnote 2 of this report include the Allowance for Credit Losses, Goodwill,~~liabilities and the ~~Valuation~~results of ~~Mortgage Servicing Rights.~~operations of Premier.

General

~~General~~40

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

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, PFC 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.

PFC 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 PFC Capital to customers in the Company’s market area and are expected to be repaid from the cash flow from operations of the business.

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

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

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)~~FDIC and the Division of Financial Institutions of the Ohio Department of Commerce ~~(ODFI)~~("ODFI"). In addition, the Bank is subject to regulations of the Consumer Financial Protection Bureau (“CFPB”), which was established by the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) and has broad powers to adopt and enforce consumer protection regulations. The Company and the Bank must file periodic reports with the Federal Reserve, and examinations are

conducted periodically by the Federal Reserve, the FDIC and the ODFI to determine whether the Company and the Bank are in compliance with various regulatory requirements and are operating in a safe and sound manner.

The Company is also subject to various Ohio laws which restrict takeover bids, tender offers and control-share acquisitions involving public companies which have significant ties to Ohio.

Changes in Financial Condition

At ~~September 30, 2021,~~March 31, 2022, the Company's total assets amounted to ~~$7.5~~$7.6 billion compared to ~~$7.2~~$7.5 billion at December 31, ~~2020.~~2021. The increase is primarily attributable to growth in ~~securities available for sale~~net loans of ~~$513.4~~$91.4 million from ~~$736.7 million~~$5.2 billion at December 31, ~~2020~~2021 to ~~$1.3~~$5.3 billion at ~~September 30, 2021.~~March 31, 2022. The ~~increase~~increases in ~~securities were~~loans was funded by advances from the FHLB and deposit ~~growth and a decline in loan balances being invested in securities that offer a higher yield than what~~growth. Deposits increased $35.2 million from $6.3 billion at December 31, 2021, to $6.3 billion as of March 31, 2022. Non-interest bearing deposits grew $8.4 million for the ~~Company could earn in an~~quarter while interest-bearing ~~deposit.~~ deposits grew $26.8 million for the quarter.

~~Gross loans~~Loans receivable, excluding loans held for sale, were $5.3 billion at ~~September 30, 2021,~~March 31, 2022, compared to ~~$5.5~~$5.2 billion at December 31, ~~2020.~~2021. The ~~$221.7~~$91.4 million ~~decline~~increase was primarily due to ~~a decline~~an increase in ~~other~~residential loans and commercial loans. Residential loans ~~resulting from a decline in PPP~~increased as the Company sold fewer loans due to ~~$143.9 million at September 30, 2021 compared to $386.9 million at December 31, 2020.~~higher yields on holding loans than selling loans. Loans held for sale decreased from ~~$221.6~~$162.9 million at December 31, ~~2020,~~2021, to ~~$178.5~~$153.5 million at ~~September 30, 2021~~March 31, 2022 as a result of sales activity.

~~The Company held~~41

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Stockholders’ equity securities in the amount of $13.0 million at September 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 $200.8~~decreased $80.2 million from ~~$6.0~~$1.0 billion at December 31, ~~2020,~~2021, to $6.2 billion as of September 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 $21.5 million for the year while interest-bearing deposits grew $179.3 million for the year.

~~Stockholders’ equity increased $49.6 million from $982.3~~$943.3 million at ~~December~~March 31, ~~2020, to $1.0 billion at September 30, 2021.~~2022. The ~~increase~~quarterly decrease in stockholders’ equity was primarily ~~the result of net income earned for the year~~due to ~~date offset by dividends paid on the Company’s common stock and~~ a ~~decline~~decrease in accumulated other comprehensive ~~income.~~income (“AOCI”) and stock buybacks. The decrease in AOCI is primarily related to a $58.6 million negative valuation adjustment on the available-for-sale securities portfolio. The Company also ~~repurchased 371,851~~completed the repurchase of 793,166 common shares ~~of its common stock~~for $24.2 million during the ~~first nine months of~~quarter. At March 31, 2022, 1,291,000 common shares remained available for repurchase under the ~~year which totaled $10.8 million.~~Company’s existing repurchase program.

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

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


	Three Months Ended March 31,
	2022							2021
	Average				Yield/			Average				Yield/
	Balance		Interest(1)		Rate(2)			Balance		Interest(1)		Rate(2)
Interest-earning assets:
Loans receivable	$	5,382,825	$	55,248		4.11	%	$	5,629,715	$	57,579		4.09	%
Securities		1,250,321		5,701		1.82			823,986		3,905		1.90
Interest bearing deposits		109,757		46		0.17			145,658		66		0.18
FHLB stock		11,959		59		1.97			11,984		59		1.97
Total interest-earning assets		6,754,862		61,054		3.62			6,611,343		61,609		3.73
Non-interest-earning assets		786,552							727,543
Total assets	$	7,541,414						$	7,338,886

Interest-bearing liabilities:
Deposits	$	4,600,801	$	2,222		0.19	%	$	4,546,272	$	4,164		0.37	%
FHLB advances and other		16,278		13		0.32			—		—		—
Subordinated debentures		84,988		696		3.28			84,868		695		3.28
Total interest-bearing liabilities		4,702,067		2,931		0.25			4,631,140		4,859		0.42
Non-interest bearing deposits		1,713,416		—		—			1,644,020		—		—
Total including non-interest bearing demand deposits		6,415,483		2,931		0.18			6,275,160		4,859		0.31
Other non-interest-bearing liabilities		92,115							91,073
Total liabilities		6,507,598							6,366,233
Stockholders’ equity		1,033,816							972,653
Total liabilities and stockholders’ equity	$	7,541,414						$	7,338,886
Net interest income; interest rate spread			$	58,123		3.37	%			$	56,750		3.31	%
Net interest margin (3)						3.44	%						3.43	%
Average interest-earning assets to average interest-bearing liabilities						144	%						143	%

Three Months Ended September 30,

2021

2020

Average

Yield/

Average

Yield/

Balance

Interest(1)

Rate(2)

Balance

Interest(1)

Rate(2)

Interest-earning assets:

Loans receivable

$
5,416,696

$
55,444

4.09
%

$
5,555,621

$
57,158

4.12
%
Securities

1,273,148

5,580

1.75

552,458

3,083

2.23

Interest bearing deposits

71,276

33

0.19

65,551

82

0.50

FHLB stock

11,901

60

2.02

37,637

95

1.01

Total interest-earning assets

6,773,021

61,117

3.61

6,211,267

60,418

3.89

Non-interest-earning assets

756,079

724,516

Total assets

$
7,529,100

$
6,935,783

Interest-bearing liabilities:

Deposits

$
4,649,462

$
3,144

0.27
%

$
4,285,287

$
6,555

0.61
%
FHLB advances and other

20,098

11

0.22

120,417

168

0.56

Subordinated debentures

84,924

671

3.16

36,613

158

1.73

Notes payable

204

—

0.75

—

—

—

Securities sold under repurchase agreements

—

—

—

6,616

7

0.42

Total interest-bearing liabilities

4,754,688

3,826

0.32

4,448,933

6,888

0.62

Non-interest bearing deposits

1,667,767

—

—

1,452,719

—

—

Total including non-interest bearing demand deposits

6,422,455

3,826

0.24

5,901,652

6,888

0.47

Other non-interest-bearing liabilities

86,439

106,625

Total liabilities

6,508,894

6,008,277

Stockholders’ equity

1,020,206

927,506

Total liabilities and stockholders’ equity

$
7,529,100

$
6,935,783

Net interest income; interest rate spread

$
57,291

3.29
%

$
53,530

3.27
%
Net interest margin (3)

3.38
%

3.45
%
Average interest-earning assets to average
interest-bearing liabilities

142
%

140
%
(1)

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

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~~(1)~~

(2)

Annualized

~~(2)~~

~~Annualized~~

(3)

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

~~(3)~~

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

Nine Months Ended September 30,

2021

2020

Average

Yield/

Average

Yield/

Balance

Interest (1)

Rate (2)

Balance

Interest (1)

Rate (2)

Interest-earning assets:

Loans receivable

$
5,513,285

$
168,810

4.08
%

$
5,095,167

$
167,463

4.38
%
Securities (3)

1,098,478

14,733

1.79

514,979

9,183

2.38

Interest bearing deposits

107,381

142

0.18

131,384

391

0.40

FHLB stock

11,663

175

2.00

45,604

861

2.52

Total interest-earning assets

6,730,807

183,860

3.64

5,787,134

177,898

4.10

Non-interest-earning assets

742,396

650,752

Total assets

$
7,473,203

$
6,437,886

Interest-bearing liabilities:

Deposits

$
4,612,354

$
10,867

0.31
%

$
3,929,881

$
21,761

0.74
%
FHLB advances

16,828

23

0.18

249,889

1,690

0.90

Subordinated debentures

84,895

2,040

3.20

36,261

610

2.24

Notes payable

69

—

0.75

—

—

-

Securities sold under repurchase agreements

—

—

—

8,077

32

0.53

Total interest-bearing liabilities

4,714,146

12,930

0.37

4,224,108

24,093

0.76

Non-interest bearing deposits

1,670,508

—

—

1,233,071

—

—

Total including non-interest bearing demand deposits

6,384,654

12,930

0.27

5,457,179

24,093

0.59

Other non-interest-bearing liabilities

88,502

98,775

Total liabilities

6,473,156

5,555,954

Stockholders' equity

1,000,047

881,932

Total liabilities and stock-holders' equity

$
7,473,203

$
6,437,886

Net interest income; interest rate spread

$
170,930

3.27
%

$
153,805

3.34
%
Net interest margin (4)

3.39
%

3.54
%
Average interest-earning assets to average
interest-bearing liabilities

143
%

137
%

~~(1)~~

~~(2)~~

~~Annualized~~

~~(3)~~

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

Results of Operations

Three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~

For the three months ended ~~September 30, 2021,~~March 31, 2022, the Company reported net income of ~~$28.4~~$26.4 million compared to net income of ~~$25.7~~$41.0 million for the quarter ended ~~September 30, 2020.~~March 31, 2021. On a per share basis, basic and diluted earnings per common share were ~~$0.76~~$0.73 for the three months ended ~~September 30, 2021~~March 31, 2022 and basic and diluted income per common share were ~~$0.69~~$1.10 for the three months ended ~~September 30, 2020.~~March 31, 2021. The ~~third quarter of 2020 was impacted by the Merger including $3.7 million acquisition-related costs.~~ changes from 2021 to 2022 are due to fluctuations in provision for credit losses, mortgage banking income and security gains/losses, which are described in further detail below.

Net Interest Income

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

Net interest income was ~~$57.0~~$57.9 million for the quarter ended ~~September 30, 2021,~~March 31, 2022, up from ~~$53.3~~$56.5 million for the same period in ~~2020.~~2021. Average earning assets for the quarter ended ~~September 30, 2021~~March 31, 2022 were $6.8 billion compared to ~~$6.2~~$6.6 billion for the quarter ended ~~September 30, 2020.~~March 31, 2021. The tax-equivalent net interest margin was ~~3.38%~~3.44% for the quarter ended ~~September 30, 2021, a decrease~~March 31, 2022, an increase from ~~3.45%~~3.43% for the same period in ~~2020.~~2021. The ~~decrease~~slight increase in margin between the ~~2021~~2022 and ~~2020~~2021 quarters was primarily due to a decrease in the cost of funds partially offset by 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.~~assets. The yield on interest-earning assets was ~~3.61%~~3.62% for the quarter ended ~~September 30, 2021,~~March 31, 2022, down 2811 basis points from ~~3.89%~~3.73% for the same period in ~~2020.~~2021. The cost of interest-bearing liabilities between the two periods declined 3017 basis points to ~~0.32%~~0.25% in the ~~third~~first quarter of ~~2021~~2022 from ~~0.62%~~0.42% in the ~~third~~first quarter of ~~2020.~~ 2021.

Interest income ~~increased $702,000~~decreased $547,000 to ~~$60.9~~$60.8 million for the quarter ended ~~September 30, 2021,~~March 31, 2022, from ~~$60.2~~$61.4 million for the quarter ended ~~September 30, 2020.~~March 31, 2021. This ~~increase~~decrease is due to a decrease in interest on loans offset mostly by an increase in ~~average interest-earning assets.~~interest on securities. Income from loans decreased to ~~$55.4~~$55.2 million for the quarter ended ~~September 30, 2021,~~March 31, 2022, compared to ~~$57.1~~$57.6 million ~~for the same period in 2020 due to a decrease in yield from 4.12% for the three months ended September 30, 2020 to 4.09%~~ for the same period in 2021 due ~~mainly~~ to ~~declining rates. In addition,~~a decrease in average loan balances ~~decreased~~ to $5.4 billion for the three months ended ~~September 30, 2021~~March 31, 2022 from $5.6 billion for the ~~third~~first quarter of ~~2020~~2021 primarily as a result of a decline in PPP loans. Interest income from investments increased ~~$2.5~~$1.8 million in the ~~third~~first quarter of ~~2021~~2022 to ~~$5.3~~$5.5 million compared to ~~$2.8~~$3.7 million in the same period in ~~2020~~2021 primarily due to an increase in average security balances of ~~$720.7~~$426.3 million. The yield decreased 488 basis points to ~~1.75%~~1.82% for the three months ended ~~September 30, 2021,~~March 31, 2022, compared to ~~2.23%~~1.90% for the same period in ~~2020.~~2021. Income from interest bearing deposits decreased to ~~$33,000~~$46,000 in the ~~third~~first quarter of ~~2021~~2022 compared to ~~$82,000~~$66,000 for the same period in ~~2020.~~2021. Average balances on interest earning deposits ~~increased $5.7~~decreased $35.9 million to ~~$71.3~~$109.8 million in the ~~third~~first quarter of ~~2021~~2022 from ~~$65.6~~$145.7 million for the same period in ~~2020.~~2021. The yield earned on interest bearing deposits declined 311 basis points in the ~~third~~first quarter of ~~2021~~2022 compared to ~~2020. Income from FHLB stock decreased to $60,000 in the third quarter of 2021 from $95,000 for~~ the same period in ~~2020.~~2021.

Interest expense decreased ~~$3.1~~$2.0 million to ~~$3.8~~$2.9 million in the ~~third~~first quarter of ~~2021~~2022 compared to ~~$6.9~~$4.9 million for the same period in ~~2020.~~2021. This decrease was due to a decline in the ~~yield on~~cost of interest-bearing liabilities of 3017 basis points. Interest expense related to interest-bearing deposits was ~~$3.1~~$2.2 million in the ~~third~~first quarter of ~~2021~~2022 compared to ~~$6.6~~$4.2 million for the same period in ~~2020.~~2021. Interest expense recognized by the Company related to FHLB advances was ~~$11,000~~$13,000 in the ~~third~~first quarter of ~~2021 compared~~2022. There was no expense related to ~~$168,000~~FHLB advances for the same period in ~~2020.~~2021. Expenses on subordinated debentures and notes payable ~~were $671,000~~was essentially flat at $696,000 in the ~~third~~first quarter of ~~2021~~2022 compared to ~~$158,000~~$695,000 for the same period in ~~2020. This increase was due to the issuance~~2021.

Table of ~~$50.0 million of subordinated debt costing 4.0% during the third quarter of 2020.~~Contents

Allowance for Credit Losses ~~(“ACL”)~~

The Company has 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.model. 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 ~~$9,881,000~~$7.1 million at ~~September 30, 2021,~~both March 31, 2022, 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~~fifteen different loan pools to allocate the ACL. Residential real estate is further segregated into owner occupied and nonowner occupied for ACL. Commercial real estate is split into owner occupied, nonowner occupied, multifamily, agriculture land and other commercial real estate. Commercial credits are comprised of commercial working capital, agriculture production and other commercial credits. Construction is broken down into construction other and residential construction and consumer is broken down into consumer direct, consumer indirect and home equity. The Company utilizes three different methodologies to analyze loan pools.

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

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

•

Becomes 90 days or more past due;

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•

Is placed on nonaccrual;

•

Is marked as a troubled debt restructuring (“TDR”); or

•

Is partially or wholly charged-off.

•

~~Becomes 90 days or more past due;~~

•

~~Is placed on nonaccrual;~~

•

~~Is marked as a troubled debt restructuring (“TDR”); or~~

•

~~Is partially or wholly charged-off.~~

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

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

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~~increased to ~~$11.8~~$15.0 million at ~~September 30, 2021, down~~March 31, 2022, up from ~~$29.2~~$12.3 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.

ECONOMIC

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

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

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

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

ENVIRONMENT

Changes in the nature and volume in the loan portfolio.

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

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

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

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

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~~Changes in the nature and volume in the loan portfolio.~~

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

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

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

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

RISK

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

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

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

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

The qualitative analysis indicated a general reserve of ~~$51.6~~$45.1 million at ~~September 30, 2021,~~March 31, 2022, compared to ~~$48.8~~$47.1 million at December 31, ~~2020. This increase is primarily a result of an increase in risk factors that are used to calculate the general reserves.~~2021. Overall, the factors decreased slightly in the ~~third~~first quarter as a result of favorable trends in the ~~economic~~environmental and risk factors listed above, ~~but were~~partially offset by ~~the~~an increase in the ~~risk~~economic factors.

The Company’s general reserve percentages for main loan segments, not otherwise classified, ranged from ~~0.88%~~0.66% for ~~construction~~consumer indirect loans to ~~1.66%~~1.48% for ~~home equity~~commercial real estate owner occupied loans at ~~September 30, 2021.~~March 31, 2022.

Under ~~CECL,~~ASU Topic 326, when loans are purchased with evidence of more than insignificant deterioration of credit, they are accounted for as purchase credit deteriorated (“PCD”). PCD loans acquired in a transaction are marked to fair value and a mark on yield is recorded. In addition, an adjustment is made to the ACL for the expected loss through retained earnings on the acquisition date. These loans are assessed on a regular basis and subsequent adjustments to the ACL are recorded on the income statement. ~~On January~~The outstanding balance and related allowance on these loans as of March 31, ~~2020, the Company acquired PCD loans with a fair value of $79.1 million, a recorded adjustment on yield of $4.1~~2022, is $27.8 million and ~~an increase to the ACL of $7.7 million.~~ $1.6 million, respectively.

As a result of the quantitative and qualitative analyses, along with the change in specific reserves and the ~~decrease~~change in net charge-offs in the quarter, the Company’s provision for credit losses for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 was an expense of ~~$1.6 million and a recovery of $9.5 million.~~$626,000. This is compared to ~~an expense~~a recovery of ~~$3.7 million and $45.7~~$7.5 million for the three ~~and nine~~ months ended ~~September 30, 2020, which included $25.9 million attributable to the Merger.~~March 31, 2021. The ACL was ~~$73.2~~$67.2 million at ~~September 30, 2021,~~March 31, 2022, and ~~$82.1~~$66.5 million at December 31, ~~2020.~~2021. The ACL represented ~~1.39%~~1.25% of loans, net of undisbursed loan funds and deferred fees and costs ~~or 1.43% excluding PPP loans~~ at ~~September 30, 2021,~~March 31, 2022, compared to ~~1.49%~~1.26% at December 31, ~~2020, or 1.61% excluding PPP loans.~~ 2021. In management’s opinion, the overall ACL of ~~$73.2~~$67.2 million as of ~~September 30, 2021,~~March 31, 2022, is adequate to cover current estimated credit losses.

Management also assesses the value of ~~other real estate owned (“OREO”)~~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 ~~nine~~three month period ended ~~September 30, 2021,~~March 31, 2022, there were no write-downs of real estate held for sale. Management believes that the values recorded at ~~September 30, 2021,~~March 31, 2022, for OREO and repossessed assets represent the realizable value of such assets.

Total classified loans decreased to ~~$90.1~~$60.3 million at ~~September 30, 2021,~~March 31, 2022, compared to ~~$90.4~~$69.5 million at December 31, ~~2020,~~2021, a decrease of ~~$300,000.~~$9.2 million. Management monitors collateral values of all loans included on the watch list that are collateral dependent and believes that allowances for such loans at ~~September 30, 2021,~~March 31, 2022, were appropriate. Of the ~~$59.9~~$47.3 million in non-accrual loans at ~~September 30, 2021, $42.9~~March 31, 2022, $21.9 million or ~~71.7%~~(46.3%) 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 ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, by category were as follows:

September 30,

December 31,

2021

2020

(In Thousands)

Non-performing loans:

Residential real estate

$
6,777

$
10,178

Commercial real estate

17,982

11,980

Construction

—

806

Commercial

19,007

1,365

Home equity and improvement

1,807

1,537

Consumer finance

1,539

1,624

PCD

12,753

24,192

Total non-performing loans

59,865

51,682

Real estate owned

261

343

Total repossessed assets

261

343

Total Nonperforming assets

$
60,126

$
52,025

TDR loans, accruing

$
6,503

$
7,173

Total nonperforming assets as a percentage of total assets

0.81
%

0.72
%
Total nonperforming assets as a percentage of total loans plus REO*

1.14
%

0.96
%
ACL as a percent of total nonperforming assets

121.77
%

157.77
%

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	March 31,			December 31,
	2022			2021
	(In Thousands)
Non-performing loans:
Residential real estate	$	9,280		$	9,034
Commercial real estate		14,423			14,621
Construction		—			—
Commercial		11,386			11,531
Home equity and improvement		2,171			2,051
Consumer finance		2,100			1,873
PCD		7,938			8,904
Total non-performing loans		47,298			48,014

Real estate owned		253			171
Total repossessed assets		253			171

Total Nonperforming assets	$	47,551		$	48,185
TDR loans, accruing	$	6,287		$	7,768

Total nonperforming assets as a percentage of total assets		0.63	%		0.64	%
Total nonperforming assets as a percentage of total loans plus REO*		0.88	%		0.91	%
ACL as a percent of total nonperforming assets		141.31	%		137.94	%

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

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

PCD loans ~~acquired in the Merger~~ account for ~~21.3%~~16.7% of non-performing loans. Excluding non-performing PCD loans, non-performing loans in the commercial loan category represented ~~2.02%~~1.25% of the total loans in that category at ~~September 30, 2021,~~March 31, 2022, compared to ~~0.11%~~1.29% for the same category at December 31, ~~2020.~~2021. Non-performing loans in the non-residential and multi-family residential real estate loan category were ~~0.75%~~0.58% of the total loans in this category at ~~September 30, 2021,~~March 31, 2022, compared to ~~0.50%~~0.60% at December 31, ~~2020.~~2021. Non-performing loans in the residential loan category represented ~~0.60%~~0.76% of the total loans in that category at ~~September 30, 2021,~~March 31, 2022, compared to ~~0.85%~~0.77% for the same category at December 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.

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


	For the Nine Months Ended September 30, 2021						As of September 30, 2021					For the Three Months Ended March 31, 2022						As of March 31, 2022
	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	$	(94	)		13.68	%	$	6,777		11.32	%	$	82			(81.19	)%	$	9,280		19.62	%
Commercial real estate		(215	)		31.30	%		17,982		30.04	%		(52	)		51.49	%		14,423		30.49	%
Construction		—			—			-		—			—			—			-		—
Commercial		159			(23.14	)%		19,007		31.75	%		(89	)		88.12	%		11,386		24.07	%
Home equity and improvement		(167	)		24.31	%		1,807		3.02	%		(14	)		13.86	%		2,171		4.59	%
Consumer finance		101			(14.70	)%		1,539		2.57	%		19			(18.81	)%		2,100		4.44	%
PCD		(471	)		68.56	%		12,753		21.30	%		(47	)		46.53	%		7,938		16.78	%
Total	$	(687	)		100.00	%	$	59,865		100.00	%	$	(101	)		100.00	%	$	47,298		100.00	%


	For the Nine Months Ended September 30, 2020						As of September 30, 2020					For the Three Months Ended March 31, 2021						As of December 31, 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	$	34			2.01	%	$	8,622		17.83	%	$	(8	)		4.23	%	$	9,034		18.82	%
Commercial real estate		(1,045	)		(61.83	)%		12,336		25.51	%		(36	)		19.05	%		14,621		30.45	%
Construction		1			0.06	%		363		0.75	%		—			—			-		—
Commercial		(1,469	)		(86.92	)%		749		1.55	%		(20	)		10.58	%		11,531		24.02	%
Home equity and improvement		(79	)		(4.67	)%		1,704		3.52	%		(26	)		13.76	%		2,051		4.27	%
Consumer finance		74			4.38	%		857		1.77	%		5			(2.65	)%		1,873		3.90	%
PCD		4,174			246.98	%		23,729		49.07	%		(104	)		55.03	%		8,904		18.54	%
Total	$	1,690			100.00	%	$	48,360		100.00	%	$	(189	)		100.00	%	$	48,014		100.00	%


	For the Quarter Ended														For the Quarter Ended
	3rd 2021			2nd 2021			1st 2021			4th 2020			3rd 2020		1st Qtr 2022			4th Qtr 2021		3rd Qtr 2021			2nd Qtr 2021			1st Qtr 2021
	(In Thousands)														(In Thousands)
Allowance at beginning of period	$	71,367		$	74,754		$	82,079		$	88,917		$	88,555	$	66,468		$	73,217	$	71,367		$	74,754		$	82,079
Provision (benefit) for credit losses		1,594			(3,631	)		(7,514	)		(6,158	)		3,658		626			2,818		1,594			(3,631	)		(7,514	)
Charge-offs:
Residential		27			—			—			45			—		140			83		27			—			—
Commercial real estate		84			—			—			—			—		7			3,087		84			—			—
Construction		—			—			—			—			—		—			—		—			—			—
Commercial		372			—			70			554			—		10			6,513		372			—			70
Home equity and improvement		47			—			3			43			12		20			13		47			—			3
Consumer finance		85			106			32			83			32		102			249		85			106			32
PCD		3			605			4			679			4,175		10			2		3			605			4
Total charge-offs		618			711			109			1,404			4,219		289			9,947		618			711			109
Recoveries		874			955			298			724			923		390			380		874			955			298
Net charge-offs (recoveries)		(256	)		(244	)		(189	)		680			3,296		(101	)		9,567		(256	)		(244	)		(189	)
Ending allowance	$	73,217		$	71,367		$	74,754		$	82,079		$	88,917	$	67,195		$	66,468	$	73,217		$	71,367		$	74,754

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

September 30, 2021

June 30, 2021

March 31, 2021

December 31, 2020

September 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

(Dollars In Thousands)

Residential

$
13,749

19.66
%

$
15,268

19.60
%

$
17,508

19.91
%

$
17,534

20.54
%

$
18,168

20.68
%
Commercial real estate

34,092

41.58
%

34,461

41.43
%

35,272

40.93
%

43,417

40.75
%

48,575

40.31
%
Construction

3,621

15.41
%

2,739

14.31
%

2,776

12.77
%

2,741

11.42
%

2,489

10.04
%
Commercial

15,428

16.58
%

12,211

18.11
%

12,191

19.99
%

11,665

20.56
%

13,244

21.88
%
Home equity and improvement

4,688

4.60
%

4,988

4.51
%

5,181

4.40
%

4,739

4.67
%

4,393

4.86
%
Consumer finance

1,639

2.17
%

1,700

2.04
%

1,826

2.00
%

1,983

2.06
%

2,048

2.23
%

$
73,217

100.00
%

$
71,367

100.00
%

$
74,754

100.00
%

$
82,079

100.00
%

$
88,917

100.00
%

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	March 31, 2022					December 31, 2021					September 30, 2021					June 30, 2021					March 31, 2021
	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)
Residential	$	11,640		20.7	%	$	12,029		20.2	%	$	13,749		19.7	%	$	15,268		19.6	%	$	17,508		19.9	%
Commercial real estate		34,201		42.3	%		32,399		42.5	%		34,092		41.6	%		34,461		41.4	%		35,272		40.9	%
Construction		2,613		15.0	%		3,004		15.0	%		3,621		15.4	%		2,739		14.3	%		2,776		12.8	%
Commercial		13,821		15.4	%		13,410		15.5	%		15,428		16.6	%		12,211		18.1	%		12,191		20.0	%
Home equity and improvement		3,919		4.4	%		4,221		4.6	%		4,688		4.6	%		4,988		4.5	%		5,181		4.4	%
Consumer finance		1,001		2.2	%		1,405		2.2	%		1,639		2.2	%		1,700		2.0	%		1,826		2.0	%
	$	67,195		100.0	%	$	66,468		100.0	%	$	73,217		100.0	%	$	71,367		100.0	%	$	74,754		100.0	%

Key Asset Quality Ratio Trends


	3rd Qtr 2021			2nd Qtr 2021			1st Qtr 2021			4th Qtr 2020			3rd Qtr 2020			1st Qtr 2022			4th Qtr 2021			3rd Qtr 2021			2nd Qtr 2021			1st Qtr 2021
Allowance for credit losses / loans*		1.39	%		1.33	%		1.37	%		1.49	%		1.63	%		1.25	%		1.26	%		1.39	%		1.33	%		1.37	%
Allowance for credit losses / loans excluding PPP loans		1.43	%		1.41	%		1.49	%		1.61	%		1.77	%		1.25	%		1.27	%		1.43	%		1.41	%		1.49	%
Allowance for credit losses / non-performing assets		121.77	%		172.63	%		151.47	%		157.77	%		181.90	%		141.31	%		137.94	%		121.77	%		172.63	%		151.47	%
Allowance for credit losses / non-performing loans		122.30	%		172.82	%		151.64	%		158.82	%		183.90	%		142.07	%		138.43	%		122.30	%		172.82	%		151.64	%
Non-performing assets / loans plus OREO*		1.14	%		0.77	%		0.90	%		0.96	%		0.89	%		0.88	%		0.91	%		1.14	%		0.77	%		0.90	%
Non-performing assets / total assets		0.81	%		0.54	%		0.66	%		0.72	%		0.70	%		0.63	%		0.64	%		0.81	%		0.54	%		0.66	%
Net charge-offs / average loans (annualized)		(0.02	)%		(0.02	)%		(0.01	)%		0.05	%		0.24	%		(0.01	)%		0.71	%		(0.02	)%		(0.02	)%		(0.01	)%

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

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

Non-Interest Income.

Total non-interest income decreased ~~$6.7~~$9.4 million in the ~~third~~first quarter of ~~2021~~2022 to ~~$18.3~~$16.9 million from ~~$25.0~~$26.3 million for the same period in ~~2020.~~ 2021.

Service Fees. Service fees and other charges increased by ~~$1.3 million~~$531,000 from ~~$4.8~~$5.5 million for the three months ended ~~September 30, 2020,~~March 31, 2022, to ~~$6.1~~$6.0 million for the same period in 2021. This increase is due primarily to higher ATM and interchange related fees in the ~~third~~first quarter of ~~2021~~2022 compared to the same quarter in ~~2020.~~ 2021.

Mortgage Banking Activity. Mortgage banking income decreased to ~~$6.2~~$4.3 million in the ~~third~~first quarter of ~~2021~~2022 from ~~$12.0~~$10.5 million in the ~~third~~first quarter of ~~2020.~~2021. Mortgage banking gains decreased to ~~$5.4~~$2.5 million in the ~~third~~first quarter of ~~2021~~2022 from ~~$13.8~~$5.6 million in the ~~third~~first quarter of ~~2020.~~2021. This decrease was primarily due to lower production, compressed margins and lower saleable ~~volume and hedge costs returning to normal after historically low levels in 2020.~~mix. Mortgage loan servicing revenue was $1.9 million in the ~~third~~first quarter of both ~~2021~~2022 and ~~2020.~~2021. Amortization of mortgage servicing rights decreased to ~~$1.8~~$1.4 million in the ~~third~~first quarter of ~~2021~~2022 from ~~$2.2~~$2.3 million in the ~~third~~first quarter of ~~2020.~~2021. The Company had a ~~positive change~~benefit for a decrease in the valuation adjustment in mortgage servicing assets of ~~$783,000~~$1.2 million in the ~~third~~first quarter of ~~2021~~2022 compared with a ~~negative~~benefit for a decrease in the valuation adjustment of ~~$1.7~~$5.3 million in the ~~third~~first quarter of ~~2020.~~2021. 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 ~~third~~first quarter of ~~2020~~2021 resulting in a gain of ~~$1.5 million~~$516,000 compared to ~~minimal~~no activity for the same period in ~~2021.~~2022. The Company sold the securities to exit from fast paying mortgage-backed securities and take advantage of favorable pricing.

Gain (loss) on Equity Securities. ~~Income from the sale of~~The Company recognized an unrealized loss on equity securities ~~was $20,000~~of $643,000 for the ~~third~~first quarter of ~~2021~~2022 compared to ~~$14,000~~an unrealized gain of $1.6 million in the ~~third~~first quarter of ~~2020.~~ 2021.

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These amounts are attributable to changes in valuations in the trading securities portfolio as a result of market conditions.

Insurance Commissions. Insurance commissions decreased slightly from ~~$3.7~~$4.9 million in the ~~third~~first quarter of ~~2020~~2021 to ~~$3.5~~$4.6 million in the ~~third~~first quarter of ~~2021.~~ 2022.

Wealth Management Income. Income from wealth management was ~~$1.3~~$1.5 million for the ~~third~~first quarter of ~~2021~~2022 compared to ~~$1.5~~$1.8 million in the ~~third~~first quarter of ~~2020.~~ 2021.

Bank-Owned Life Insurance. Income from bank owned life insurance ~~(“BOLI”) increased~~decreased slightly from ~~$841,000~~$1.2 million in the ~~third~~first quarter of ~~2020~~2021 to ~~$947,000~~$996,000 for the same period in ~~2021~~2022 as a result of ~~a $20.0 million premium purchase~~$334,000 in claims in the ~~third~~first quarter of ~~2021.~~ 2021 compared to none in 2022.

Other Non-Interest Income. Other non-interest income declined to ~~$90,000~~$150,000 in the ~~third~~first quarter of ~~2021~~2022 from ~~$654,000~~$340,000 in the same period in ~~2020.~~ 2021.

Non-Interest Expense.

Non-interest expense ~~decreased $4.5~~increased $2.5 million to ~~$39.0~~$41.3 million for the ~~third~~first quarter of ~~2021~~2022 compared to ~~$43.6~~$38.8 million for the same period in ~~2020.~~2021. The ~~decrease~~increase is mainly attributable to ~~a reduction in acquisition related charges.~~ compensation and benefits.

Compensation and Benefits. Compensation and benefits increased to ~~$23.4~~$25.5 million in the ~~third~~first quarter of ~~2021,~~2022, compared to ~~$20.2~~$22.0 million in the ~~third~~first quarter of ~~2020.~~ 2021. This is primarily due to ~~increased health care costs.~~ the combination of higher costs related to higher staffing levels for our growth initiatives, continued higher healthcare benefit costs and lower deferred costs related to lower residential mortgage production.

Occupancy. Occupancy expense decreased to $3.7 million in the ~~third~~first quarter of ~~2021~~2022 compared to ~~$4.0~~$4.1 million in the ~~third~~first quarter of ~~2020.~~2021. This decrease was due to the closure of three branches in 2021.

FDIC Insurance Premium. The premiums on FDIC insurance decreased to ~~$695,000~~$593,000 for the three months ended ~~September 30, 2021~~March 31, 2022 compared to ~~$1.5 million~~$898,000 for the ~~third~~first quarter of ~~2020.~~2021. The decrease was due to higher levels of equity at the ~~bank~~Bank resulting from increased net income.

Financial Institutions Tax.The Company’s financial institutions tax ~~increased to~~remained flat at $1.2 million in the ~~third~~first quarter of ~~2021 from $1.1 for the third quarter of 2020. The increase was due to increased equity in 2021 compared to 2020 which is the basis for the tax calculation.~~2022 and 2021.

Data Processing.Data processing costs were mostly flat at $3.3 million in the first quarter of 2022, a decrease of $47,000 from $3.4 million in the ~~third~~first quarter of ~~2021, a decrease of $902,000 from $4.3 million in the third quarter of 2020. The decrease is primarily due to the consolidation of core systems in the second half of 2020.~~ 2021.

Amortization of Intangibles.Expense from the amortization of intangibles decreased to ~~$1.5~~$1.4 million in the ~~third~~first quarter of ~~2021~~2022 from ~~$1.7~~$1.6 million in the ~~third~~first quarter of ~~2020.~~2021. The decrease is primarily related to the ~~runoff~~amortization of core deposit intangibles over the past year.

Other Non-Interest Expenses. Other non-interest expenses decreased ~~$1.9 million~~$96,000 to ~~$5.2~~$5.5 million for the three months ended ~~September 30, 2021~~March 31, 2022 from ~~$7.1~~$5.6 million for the same period in ~~2020.~~ 2021.This decrease is primarily attributable to prepayment penalties of $1.4 million in the third quarter of 2020 from the early extinguishment of $30 million of fixed rate FHLB advances that had a weighted average rate of 2.0%.

~~Nine Months Ended September 30, 2021 and 2020~~

On a consolidated basis, the Company’s net income for the nine months ended September 30, 2021 was $100.7 million compared to income of $32.2 million for the same period in 2020. On a per share basis, basic and diluted earnings per common share for the nine months ended September 30, 2021 were both $2.70, compared to basic and diluted earnings per common share of $0.91 for the same period in 2020.

~~Net Interest Income.~~

Net interest income was $170.2 million for the first nine months of 2021 compared with $153.0 million in the first nine months of 2020. Average interest-earning assets increased to $6.7 billion in the first nine months of 2021 compared to $5.8 billion in the first nine months of 2020. This increase was primarily due to the Merger as well as organic loan growth and an increase in average securities.

For the nine month period ended September 30, 2021, total interest income was $183.1 million compared to $177.1 million for the same period in 2020. Interest expense decreased by $11.2 million to $12.9 million for the nine months ended September 30, 2021, compared to $24.1 million for the same period in 2020.

Net interest margin for the first nine months of 2021 was 3.39%, down 15 basis points from the 3.54% margin reported in the nine month period ended September 30, 2020. The decline in net interest margin was primarily due to the fall in interest rates year over year along with the Merger.

~~Provision for Credit Losses~~

The provision for credit losses on loans and unfunded commitments was a recovery of $9.1 million for the nine months ended September 30, 2021, compared to an expense of $51.0 million for the nine months ended September 30, 2020. The decrease from 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 during 2020. Charge-offs for the nine months of 2021 were $1.4 million and recoveries of previously charged off loans totaled $2.1 million for net recoveries of $689,000. By comparison, $4.9 million of charge-offs were recorded in the same period of 2020 and $3.2 million of recoveries were realized for net charge-offs of $1.7 million.

~~Non-Interest Income~~

~~Total non-interest income increased $120,000 to $62.1 million for the nine months ended September 30, 2021, from $62.0 million recognized for the same period in 2020.~~

~~Service Fees.~~ Service fees and other charges were $17.8 million for the first nine months of 2021, an increase of $2.2 million for the same period in 2020. A full year of income from the Merger in 2021 compared to eight months in 2020 was the primary reason for the increase.

~~Mortgage Banking Activity.~~ Total revenue from the sale and servicing of mortgage loans decreased $3.9 million to $18.9 million for the nine months ended September 30, 2021, from $15.6 million for the same period in 2020. Mortgage banking gains decreased $16.5 million to $13.7 million for the first nine months of 2021 from $30.2 million for the same period in 2020. Mortgage loan servicing revenue increased to $5.7 million in the first nine months of 2021 from $5.4 million for the first nine months of 2020. The amortization of mortgage servicing rights increased from an expense of $5.3 million for the first nine months of 2020 to an expense of $6.1 million for the first nine 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 $5.7 million in the first nine months of 2021 compared to a negative adjustment of $7.5 million in the first nine 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 $12.4 million in the first nine months of 2021, a decrease of $474,000 from $12.9 million in the first nine months of 2020.~~

~~Wealth Management Income.~~ Income in this category was $4.6 million in the first nine months of 2021, compared to $4.4 million in the first nine months of 2020. The increase was primarily attributable to a full year of income from the Merger in 2021 versus eight months in 2020.

~~Income from Bank Owned Life Insurance.~~ ~~Income from BOLI increased to $3.0 million in the first nine months of 2021, compared to $2.5 million in the first nine 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. Additional premiums totaling $20.0 million were purchased in the third quarter of 2021.

~~Other Non-Interest Income. Other non-interest income for the first nine months of 2021 was $2.4 million, up from $2.3 million in the first nine months of 2020 primarily due to a full year of income from the Merger.~~

~~Non-Interest Expense~~

Non-interest expense was $116.2 million for the first nine months of 2021, down from $123.9 million for the same period in 2020. Merger expenses of $17.3 million in 2020 offset by an increase in compensation and benefits are the primary factors in this decline.

~~Compensation and Benefits~~. Compensation and benefits increased to $66.4 million for the nine months ended September 30, 2021, compared to $57.3 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 decreased by $206,000 to $11.6 million for the nine months ended September 30, 2021, compared to the same period in 2020. This can be primarily attributed to the closure of three branches in 2021 offset by a full year of expense from the Merger in 2021 compared to eight months in 2020.

~~Data Processing. Data processing costs were $10.1 million in the first nine months of 2021, down from $11.1 million in same period of 2020. This is primarily due to~~ ~~the consolidation of core systems in the second half of 2020.~~

~~Amortization of Intangibles. Intangible amortization decreased by $56,000 to $4.7 million in the nine months ended September 30, 2021.~~

~~Acquisition Related Charges. The Company recorded $17.3 million in acquisition related charges during the first nine months of 2020. There were no similar charges in 2021.~~

~~Other Non-Interest Expenses~~. Other non-interest expenses increased $1.7 million to $17.7 million for the first nine months of 2021 from $16.0 million for the same period in 2020. This increase is primarily related to volume based fees as a result of increased activity.

Liquidity

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

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

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

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

At ~~September 30, 2021,~~March 31, 2022, the Bank had ~~$2.2~~$1.9 billion of on-hand liquidity, defined as cash and cash equivalents, unencumbered securities and additional FHLB borrowing capacity.

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

Capital Resources

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

In July 2013, the federal 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, 2020 capital calculations. The Company met each of the well-capitalized ratio guidelines at ~~September 30, 2021.~~March 31, 2022. The following table indicates the capital ratios for the Company (consolidated) and the Bank at ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020.~~2021 (in thousands):

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	March 31, 2022
	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	$	683,235		10.31	%	$	298,312		4.5	%	N/A		N/A
Premier Bank	$	713,920		10.81	%	$	297,097		4.5	%	$	429,139		6.5	%
Tier 1 Capital
Consolidated	$	718,235		9.86	%	$	291,406		4.0	%	N/A		N/A
Premier Bank	$	713,920		9.88	%	$	289,054		4.0	%	$	361,317		5.0	%
Tier 1 Capital (to Risk Weighted Assets)
Consolidated	$	718,235		10.83	%	$	397,750		6.0	%	N/A		N/A
Premier Bank	$	713,920		10.81	%	$	396,129		6.0	%	$	528,172		8.0	%
Total Capital (to Risk Weighted Assets)
Consolidated	$	839,184		12.66	%	$	530,333		8.0	%	N/A		N/A
Premier Bank	$	784,869		11.89	%	$	528,172		8.0	%	$	660,215		10.0	%

September 30, 2021

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

$
691,782

10.98
%

$
283,419

4.5
%

N/A

N/A

Premier Bank

$
714,406

11.39
%

$
282,257

4.5
%

$
407,705

6.5
%
Tier 1 Capital

Consolidated

$
726,782

10.11
%

$
287,597

4.0
%

N/A

N/A

Premier Bank

$
714,406

9.97
%

$
286,496

4.0
%

$
358,120

5.0
%
Tier 1 Capital (to Risk Weighted Assets)

Consolidated

$
726,782

11.54
%

$
377,892

6.0
%

N/A

N/A

Premier Bank

$
714,406

11.39
%

$
376,343

6.0
%

$
501,790

8.0
%
Total Capital (to Risk Weighted Assets)

Consolidated

$
853,696

13.55
%

$
503,855

8.0
%

N/A

N/A

Premier Bank

$
791,320

12.62
%

$
501,790

8.0
%

$
627,238

10.0
%
(1)

Excludes capital conservation buffer of 2.50%

~~(1)~~

~~Excludes capital conservation buffer of 2.50%~~


	December 31, 2021
	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	$	689,930		10.92	%	$	284,394		4.5	%	N/A		N/A
Premier Bank	$	725,600		11.53	%	$	283,265		4.5	%	$	409,160		6.5	%

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

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

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

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
%
(1)

Excludes capital conservation buffer of 2.50%.

~~(1)~~

~~Excludes capital conservation buffer of 2.50%.~~

Item 3. Quantitative and Qualitative Disclosures About Market Risk

As discussed in detail in the Company’s ~~2020~~2021 Form 10-K, ~~Premier’s~~the Company'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~~the Company 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~~The Company 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

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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 ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, 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 ~~September 30, 2021,~~March 31, 2022, net interest income sensitivity to changes in interest rates for the twelve months subsequent to ~~September 30, 2021,~~March 31, 2022, 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.~~ 2021.


	Impact on Future Annual Net Interest Income
	March 31, 2022		December 31, 2021
Immediate Change in Interest Rates
+400		14.45%	19.16%
+300		11.08%	14.52%
+200		7.49%	9.66%
+100		3.62%	4.82%
-100		(3.13)%	(3.21)%

Impact on Future Annual Net Interest Income

(dollars in thousands)

September 30,
2021

December 31,
2020

Immediate Change in Interest Rates

+200

$
2,424

1.13
%

$
15,215

7.24
%
+100

1,406

0.65
%

7,908

3.76
%
-100

(5,515
)

-2.57
%

(5,036
)

-2.40
%

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 -100 basis points to +400 basis points. The results of this analysis are reflected in the following tables for the quarter ended ~~September 30, 2021,~~March 31, 2022, and the year ended December 31, ~~2020.~~2021.


	September 30, 2021								March 31, 2022	December 31, 2021
Change in Rates	$ Amount		$ Change			% Change			Economic Value of Equity % Change	Economic Value of Equity % Change
	(Dollars in Thousands)
+400 bp	$	1,411,217	$	2,984			0.21	%	2.03%	7.01%
+ 300 bp		1,427,318		19,085			1.36	%	2.41%	6.61%
+ 200 bp		1,432,528		24,295			1.73	%	2.20%	5.39%
+ 100 bp		1,429,810		21,577			1.53	%	1.45%	3.10%
0 bp		1,408,233		—			—		—		—
- 100 bp		1,342,490		(65,743	)		(4.67	)%	(3.08)%	(6.83)%

December 31, 2020

Change in Rates

$ Amount

$ Change

% Change

(Dollars in Thousands)

+400 bp

$
1,474,119

$
228,654

18.36
%
+ 300 bp

1,441,004

195,539

15.70
%
+ 200 bp

1,394,640

149,175

11.98
%
+ 100 bp

1,335,538

90,073

7.23
%
0 bp

1,245,465

—

—

- 100 bp

1,103,896

(141,569
)

(11.37
)%

Item 4. Controls and Procedures

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,

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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 ~~September 30, 2021.~~March 31, 2022. 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 ~~September 30, 2021,~~March 31, 2022, that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II-OTHER INFORMATION

Item 1. Legal Proceedings

Premier and its subsidiaries are involved in various legal proceedings that arise in the ordinary course of its business. While the ultimate liability with respect to litigation matters and claims cannot be determined at this time, management believes any resulting liability and other amounts relating to pending matters are not likely to be material to the Company’s consolidated financial position or results of operations.

Item 1A. Risk Factors

There are no material changes from the risk factors set forth under Part I, Item 1A, “Risk Factors” in the ~~2020~~2021 Form 10-K.

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

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

March 31, 2022. The following table provides information regarding Premier’s purchases of its common stock during the three-month period ended ~~September 30, 2021:~~March 31, 2022:


Period	Total Number of Shares Purchased(2)		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, January 1, 2022								1,032,864
January 1 - January 31, 2022		103,038	$	30.86		99,166		1,985,000
February 1 - February 28, 2022		486,126		30.46		484,600		1,500,400
March 1 - March 31, 2022		209,400		30.69		209,400		1,291,000
Total		798,564	$	28.92		793,166		1,291,000

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 August
Yet Be Purchased
Under the Plans
or Programs(1)

Beginning Balance, June 30, 2021

1,834,434

July 1 - July 31, 2021

1,287

$
26.76

—

1,834,434

August 1 - August 31, 2021

189,382

28.92

189,045

1,645,389

September 1 - September 30, 2021

17,827

29.01

17,240

1,628,149

Total

208,496

$
28.92

206,285

1,628,149

(1)

On January 26, 2021, the Company announced that its Board of Directors authorized a program for the repurchase of up to 2,000,000 shares of outstanding common stock. On January 25, 2022, the Company announced that its Board of Directors approved an increase in the Company’s repurchasing authorization to up to 2,000,000 shares of outstanding common stock. There is no expiration date for the repurchase program.

~~(1)~~

~~On May 23, 2019, the Company announced that its Board of Directors authorized a program for the repurchase of up to 500,000 shares of its outstanding common stock.~~On February 18, 2020, the Company announced that its Board of Directors increased the number of shares authorized to be repurchased under the program by an additional 500,000 shares. On January 26, 2021, the Company announced that its Board of Directors increased the number of shares authorized to be repurchased under the program to 2,000,000 shares of outstanding common stock. There is no expiration date for the repurchase program.

(2)

Of this amount, 5,398 shares were obtained in fulfillment of tax obligations from vesting of restricted stock compensation and were not part of the publicly announced repurchase program.

Item 3. Defaults upon Senior Securities

Not applicable.

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Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Item 6. Exhibits


Exhibit ~~2.1~~3.1		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~~10.1		Premier Financial Corp. Long Term Incentive Program (incorporated herein by reference to Exhibit 10.1 in Registrant's Form 8-K filed February, 23, 2022 (File NO. 000-26850))
Exhibit 10.2		Premier Financial Corp. Form of Long Term Incentive Plan Performance Share Units Award Agreement (incorporated herein by reference to Exhibit 10.2 in Registrant's Form 8-K filed February, 23, 2022 (File NO. 000-26850))
Exhibit 10.3		Premier Financial Corp. Restricted Stock Award Agreement (incorporated herein by reference to Exhibit 10.3 in Registrant's Form 8-K filed February, 23, 2022 (File NO. 000-26850))
Exhibit 10.4		Premier Financial Corp. Short Term Incentive Program (incorporated herein by reference to Exhibit 10.4 in Registrant's Form 8-K filed February, 23, 2022 (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 ~~September 30, 2020~~March 31, 2022 is formatted in Inline XBRL: (i) Unaudited Consolidated Condensed Statements of Financial Condition at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020;~~2021; (ii) Unaudited Consolidated Condensed Statements of Income for the ~~Three and nine~~three months ended ~~September 30, 2021~~March 31, 2022 and ~~2020;~~2021; (iii) Unaudited Consolidated Condensed Statements of Comprehensive Income for the ~~Three and nine~~three months ended ~~September 30, 2021~~March 31, 2022 and ~~2020;~~2021; (iv) Unaudited Consolidated Condensed Statements of Changes in Stockholders’ Equity for the ~~Three and nine~~three months ended ~~September 30, 2021~~March 31, 2022 and ~~2020;~~2021; (v) Unaudited Consolidated Condensed Statements of Cash Flows for the ~~Three and nine~~three months ended ~~September 30, 2021~~March 31, 2022 and ~~2020;~~2021; 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)

SIGNATURES

~~SIGNATURES~~

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.


	Premier Financial Corp.
	~~(Registrant)~~

~~Date:~~ ~~November 4, 2021~~

(Registrant)

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Date: May 9, 2022	~~By:~~	By:	/s/ Gary M. Small
			Gary M. Small
			President and Chief Executive Officer (Principal Executive Officer)

~~Date:~~ ~~November 4, 2021~~

~~By:~~


Date: May 9, 2022	By:	/s/ Paul D. Nungester, Jr.
		Paul D. Nungester, Jr.
		Executive Vice President and
		Chief Financial Officer (Principal Financial and Accounting Officer)

6957

	Securities available-for-sale
	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Balance of recurring Level 3 assets at beginning of period	$	—	$	—	$	—	$	3,411
Balance of assets classified as Level 3 assets during the period		—		—	$	—	$	(3,411	)
Balance of recurring Level 3 assets at end of period	$	—	$	—	$	—	$	—

	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
Unvested at January 1, 2021		90,891		$	26.48		55,759		$	25.18		41,057		$	26.93
Granted		86,058			30.32		34,388			30.77		42,374			32.42
Vested		(4,033	)		28.24		(30,884	)		26.07		(24,849	)		28.00
Forfeited		—			—		(2,431	)		25.99		(1,408	)		28.41
Unvested at September 30, 2021		172,916		$	28.35		56,832		$	28.03		57,174		$	29.68

Three Months Ended September 30, 2021	1-4 Family Residential Real Estate			Commercial Real Estate			Construction		Commercial			Home Equity and Improvement			Consumer Finance			Total
Beginning Allowance	$	15,268		$	34,461		$	2,739	$	12,211		$	4,988		$	1,700		$	71,367
Charge-Offs		(27	)		(84	)		—		(375	)		(47	)		(85	)		(618	)
Recoveries		75			143			—		576			23			57			874
Provisions		(1,567	)		(428	)		882		3,016			(276	)		(33	)		1,594
Ending Allowance	$	13,749		$	34,092		$	3,621	$	15,428		$	4,688		$	1,639		$	73,217

Nine Months Ended September 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		(29	)		(689	)		—		(445	)		(50	)		(227	)		(1,440	)
Recoveries		165			332			12		1,279			217			122			2,127
Provisions		(3,921	)		(8,968	)		868		2,929			(218	)		(239	)		(9,549	)
Ending Allowance	$	13,749		$	34,092		$	3,621	$	15,428		$	4,688		$	1,639		$	73,217

Three Months Ended September 30, 2020	1-4 Family Residential Real Estate			Commercial Real Estate			Construction		Commercial		Home Equity and Improvement			Consumer Finance			Total
Beginning Allowance	$	23,783		$	44,057		$	1,137	$	11,839	$	4,216		$	3,523		$	88,555
Charge-Offs		—			(4,172	)		—		—		(12	)		(35	)		(4,219	)
Recoveries		7			581			—		266		41			28			923
Provisions		(5,622	)		8,109			1,352		1,139		148			(1,468	)		3,658
Ending Allowance	$	18,168		$	48,575		$	2,489	$	13,244	$	4,393		$	2,048		$	88,917

Nine Months Ended September 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	)		(4,237	)		(1	)		(133	)		(98	)		(222	)		(4,948	)
Recoveries		223			1,110			—			1,602			177			146			3,258
Provisions⁽¹⁾		12,493			27,665			1,717			2,763			2,887			1,787			49,312
Ending Allowance	$	18,168		$	48,575		$	2,489		$	13,244		$	4,393		$	2,048		$	88,917

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

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

	Three Months Ended September 30, 2020				For the Nine Months Ended September 30, 2020
	($ 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)
Real Estate:
Residential		2	$	211		8	$	647
Commercial		2		128		4		322
Construction		—		—		—		—

Other Loans:
Commercial		—		—		2		250
Home equity and improvement		1		4		4		330
Consumer finance		—		—		1		21

Total		5	$	343		19	$	1,570

	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

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2021			2020			2021		2020
	(In Thousands)						(In Thousands)
Current:
Federal	$	6,600		$	11,359		$	22,199	$	22,310
State and local		162			—			490		150
Deferred		(638	)		(5,100	)		1,708		(14,509	)
	$	6,124		$	6,259		$	24,397	$	7,951

	January 31, 2020
	(In Thousands)

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

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

Goodwill	$	217,879

	Three Months Ended September 30,
	2021							2020
	Average				Yield/			Average				Yield/
	Balance		Interest(1)		Rate(2)			Balance		Interest(1)		Rate(2)
Interest-earning assets:
Loans receivable	$	5,416,696	$	55,444		4.09	%	$	5,555,621	$	57,158		4.12	%
Securities		1,273,148		5,580		1.75			552,458		3,083		2.23
Interest bearing deposits		71,276		33		0.19			65,551		82		0.50
FHLB stock		11,901		60		2.02			37,637		95		1.01
Total interest-earning assets		6,773,021		61,117		3.61			6,211,267		60,418		3.89
Non-interest-earning assets		756,079							724,516
Total assets	$	7,529,100						$	6,935,783

Interest-bearing liabilities:
Deposits	$	4,649,462	$	3,144		0.27	%	$	4,285,287	$	6,555		0.61	%
FHLB advances and other		20,098		11		0.22			120,417		168		0.56
Subordinated debentures		84,924		671		3.16			36,613		158		1.73
Notes payable		204		—		0.75			—		—		—
Securities sold under repurchase agreements		—		—		—			6,616		7		0.42
Total interest-bearing liabilities		4,754,688		3,826		0.32			4,448,933		6,888		0.62
Non-interest bearing deposits		1,667,767		—		—			1,452,719		—		—
Total including non-interest bearing demand deposits		6,422,455		3,826		0.24			5,901,652		6,888		0.47
Other non-interest-bearing liabilities		86,439							106,625
Total liabilities		6,508,894							6,008,277
Stockholders’ equity		1,020,206							927,506
Total liabilities and stockholders’ equity	$	7,529,100						$	6,935,783
Net interest income; interest rate spread			$	57,291		3.29	%			$	53,530		3.27	%
Net interest margin (3)						3.38	%						3.45	%
Average interest-earning assets to average interest-bearing liabilities						142	%						140	%

	Nine Months Ended September 30,
	2021							2020
	Average				Yield/			Average				Yield/
	Balance		Interest (1)		Rate (2)			Balance		Interest (1)		Rate (2)
Interest-earning assets:
Loans receivable	$	5,513,285	$	168,810		4.08	%	$	5,095,167	$	167,463		4.38	%
Securities (3)		1,098,478		14,733		1.79			514,979		9,183		2.38
Interest bearing deposits		107,381		142		0.18			131,384		391		0.40
FHLB stock		11,663		175		2.00			45,604		861		2.52
Total interest-earning assets		6,730,807		183,860		3.64			5,787,134		177,898		4.10
Non-interest-earning assets		742,396							650,752
Total assets	$	7,473,203						$	6,437,886

Interest-bearing liabilities:
Deposits	$	4,612,354	$	10,867		0.31	%	$	3,929,881	$	21,761		0.74	%
FHLB advances		16,828		23		0.18			249,889		1,690		0.90
Subordinated debentures		84,895		2,040		3.20			36,261		610		2.24
Notes payable		69		—		0.75			—		—		-
Securities sold under repurchase agreements		—		—		—			8,077		32		0.53
Total interest-bearing liabilities		4,714,146		12,930		0.37			4,224,108		24,093		0.76
Non-interest bearing deposits		1,670,508		—		—			1,233,071		—		—
Total including non-interest bearing demand deposits		6,384,654		12,930		0.27			5,457,179		24,093		0.59
Other non-interest-bearing liabilities		88,502							98,775
Total liabilities		6,473,156							5,555,954
Stockholders' equity		1,000,047							881,932
Total liabilities and stock-holders' equity	$	7,473,203						$	6,437,886
Net interest income; interest rate spread			$	170,930		3.27	%			$	153,805		3.34	%
Net interest margin (4)						3.39	%						3.54	%
Average interest-earning assets to average interest-bearing liabilities						143	%						137	%

	September 30,			December 31,
	2021			2020
	(In Thousands)
Non-performing loans:
Residential real estate	$	6,777		$	10,178
Commercial real estate		17,982			11,980
Construction		—			806
Commercial		19,007			1,365
Home equity and improvement		1,807			1,537
Consumer finance		1,539			1,624
PCD		12,753			24,192
Total non-performing loans		59,865			51,682

Real estate owned		261			343
Total repossessed assets		261			343

Total Nonperforming assets	$	60,126		$	52,025
TDR loans, accruing	$	6,503		$	7,173

Total nonperforming assets as a percentage of total assets		0.81	%		0.72	%
Total nonperforming assets as a percentage of total loans plus REO*		1.14	%		0.96	%
ACL as a percent of total nonperforming assets		121.77	%		157.77	%

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 August Yet Be Purchased Under the Plans or Programs(1)
Beginning Balance, June 30, 2021								1,834,434
July 1 - July 31, 2021		1,287	$	26.76		—		1,834,434
August 1 - August 31, 2021		189,382		28.92		189,045		1,645,389
September 1 - September 30, 2021		17,827		29.01		17,240		1,628,149
Total		208,496	$	28.92		206,285		1,628,149