Exhibit 99.2

PREMIER FINANCIAL CORP.

Consolidated Condensed Statements of Financial Condition

(UNAUDITED)

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

 

		June 30, 2024				December 31, 2023
Assets
Cash and cash equivalents:
Cash and amounts due from depository institutions		$	72,053			$	81,973
Interest-bearing deposits			83,598				32,783
			155,651				114,756
Securities available-for-sale, carried at fair value			1,081,120				946,708
Equity securities, carried at fair value			5,559				5,773
Loans held for sale, carried at fair value			138,604				145,641
Loans receivable, net of allowance for credit losses of $77,222 at June 30, 2024 and $76,512 at December 31, 2023, respectively			6,604,916				6,662,875
Mortgage servicing rights			18,140				18,696
Accrued interest receivable			35,334				33,446
Federal Home Loan Bank stock			32,189				21,760
Bank owned life insurance			183,409				181,544
Premises and equipment			55,073				56,878
Real estate and other assets held for sale			394				243
Goodwill			295,602				295,602
Core deposit and other intangibles			10,250				12,186
Other assets			162,452				129,841
Total assets		$	8,778,693			$	8,625,949
Liabilities and stockholders’ equity
Liabilities:
Deposits		$	7,178,554			$	7,143,046
Advances from the Federal Home Loan Bank			393,000				280,000
Subordinated debentures			85,292				85,229
Advance payments by borrowers			13,391				23,277
Reserve for credit losses—unfunded commitments			3,343				4,307
Other liabilities			125,984				114,463
Total liabilities			7,799,564				7,650,322
Stockholders’ equity:
Preferred stock, $.01 par value per share: 37,000 shares authorized; no shares issued			—				—
Preferred stock, $.01 par value per share: 4,963,000 shares authorized; no shares issued			—				—
Common stock, $.01 par value per share: 50,000,000 shares authorized; 43,297,260 and 43,297,260 shares issued and 35,840,121 and 35,729,593 shares outstanding at June 30, 2024 and December 31, 2023, respectively			306				306
Additional paid-in capital			689,743				690,585
Accumulated other comprehensive loss, net of tax of $(43,339) and $(40,862), respectively			(163,038	)			(153,719	)
Retained earnings			581,715				569,937
Treasury stock, at cost, 7,457,139 shares at June 30, 2024 and 7,567,667 shares at December 31, 2023			(129,597	)			(131,482	)
Total stockholders’ equity			979,129				975,627
Total liabilities and stockholders’ equity		$	8,778,693			$	8,625,949

See accompanying notes.

PREMIER FINANCIAL CORP.

Consolidated Condensed Statements of Income

(UNAUDITED)

(Amounts in Thousands, except per share data)

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2024				2023				2024				2023
Interest Income
Loans		$	88,560			$	81,616			$	176,156			$	157,674
Investment securities:
Taxable			8,082				6,407				15,109				13,014
Non-taxable			584				590				1,159				1,243
Interest-bearing deposits			638				641				1,247				1,085
FHLB stock dividends			606				905				1,141				1,299
Total interest income			98,470				90,159				194,812				174,315
Interest Expense
Deposits			43,927				26,825				86,494				48,283
FHLB advances and other			4,159				8,217				7,198				13,554
Subordinated debentures			1,159				1,125				2,321				2,199
Total interest expense			49,245				36,167				96,013				64,036
Net interest income			49,225				53,992				98,799				110,279
Credit loss expense - loans and leases			3,173				1,410				3,733				5,354
Credit loss (benefit) expense - unfunded commitments			(271	)			(870	)			(964	)			(1,108	)
Net interest income after credit loss expense (benefit)			46,323				53,452				96,030				106,033
Non-interest Income
Service fees and other charges			7,008				7,190				13,475				13,618
Insurance commissions			—				4,131				—				8,856
Mortgage banking income			2,047				2,940				4,396				2,666
Gain on sale of non-mortgage loans			—				71				67				71
Gain on sale insurance agency			—				36,296				—				36,296
(Loss) gain on sale of securities available for sale			—				(7	)			—				27
(Loss) gain on equity securities			(176	)			71				(213	)			(1,374	)
Wealth management income			1,842				1,537				3,556				3,022
Income from Bank Owned Life Insurance			1,207				1,015				2,904				2,432
Other non-interest income			150				102				389				194
Total non-interest income			12,078				53,346				24,574				65,808
Non-interest Expense
Compensation and benefits			21,353				24,175				44,747				49,833
Occupancy			3,434				3,320				6,799				6,894
FDIC insurance premium			1,150				1,786				2,270				3,074
Financial institutions tax			980				961				2,015				1,813
Data processing			5,067				3,640				9,737				7,503
Amortization of intangibles			946				1,223				1,936				2,493
Transaction costs			50				3,652				50				3,652
Other non-interest expense			5,228				5,738				10,554				12,024
Total non-interest expense			38,208				44,495				78,108				87,286
Income before income taxes			20,193				62,303				42,496				84,555
Income tax expense			4,017				13,912				8,531				18,015
Net income		$	16,176			$	48,391			$	33,965			$	66,540
Earnings per common share
Basic		$	0.45			$	1.35			$	0.95			$	1.86
Diluted		$	0.45			$	1.35			$	0.95			$	1.86

See accompanying notes.

PREMIER FINANCIAL CORP.

Consolidated Condensed Statements of Comprehensive Income (Loss)

(UNAUDITED)

(Amounts in Thousands)

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2024				2023				2024				2023
Net income		$	16,176			$	48,391			$	33,965			$	66,540
Other comprehensive income (loss):
Unrealized gains (losses) on securities available for sale			(1,134	)			(15,290	)			(7,830	)			3,109
Reclassification adjustment for securities (gains) losses included in net income			—				7				—				(27	)
Income tax effect			238				3,210				1,644				(647	)
Net of tax amount			(896	)			(12,073	)			(6,186	)			2,435
Unrealized gain (loss) on balance sheet swap			(2,261	)			(10,483	)			(8,284	)			(1,897	)
Reclassification adjustment for cash flow hedge derivatives (gains) losses included in net income			2,183				6,409				4,319				4,460
Income tax effect			17				1,135				832				(259	)
Net of tax amount			(61	)			(2,939	)			(3,133	)			2,304
Total other comprehensive income (loss)			(957	)			(15,012	)			(9,319	)			4,739
Comprehensive income		$	15,219			$	33,379			$	24,646			$	71,279

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 Loss				Retained Earnings				Treasury Stock				Total Stockholders’ Equity
Balance at January 1, 2024		$	—				35,729,593			$	306			$	690,585			$	(153,719	)		$	569,937			$	(131,482	)		$	975,627
Net income																							17,789								17,789
Other comprehensive income (loss)																			(8,362	)											(8,362	)
Deferred compensation plan															(13	)											13				—
Stock based compensation expenses															694																694
Vesting of incentive plans							37,978								(668	)											661				(7	)
Restricted share issuance							64,988								(1,130	)											1,130				—
Restricted share forfeitures							(15,799	)																			(322	)			(322	)
Common stock dividend payment ($0.31 per share)																							(11,078	)							(11,078	)
Balance at March 31, 2024		$	—				35,816,760			$	306			$	689,468			$	(162,081	)		$	576,648			$	(130,000	)		$	974,341
Net income																							16,176								16,176
Other comprehensive income (loss)																			(957	)											(957	)
Deferred compensation plan															(13	)											13				—
Stock based compensation expenses															731																731
Vesting of incentive plans							2,456								(43	)											43				—
Restricted share issuance							27,025								(470	)											470				—
Restricted share forfeitures							(6,120	)							70												(123	)			(53	)
Common stock dividend payment ($0.31 per share)																							(11,109	)							(11,109	)
Balance at June 30, 2024		$	—				35,840,121			$	306			$	689,743			$	(163,038	)		$	581,715			$	(129,597	)		$	979,129

		Preferred Stock				Common Stock Shares				Common Stock				Additional Paid-In Capital				Accumulated Other Comprehensive Loss				Retained Earnings				Treasury Stock				Total Stockholders’ Equity
Balance at January 1, 2023		$	—				35,591,277			$	306			$	691,453			$	(173,460	)		$	502,909			$	(133,487	)		$	887,721
Net income																							18,149								18,149
Other comprehensive income (loss)																			19,751												19,751
Deferred compensation plan							9,196								75												(75	)			—
Stock based compensation expenses							753								112												13				125
Vesting of incentive plans							62,061								(1,078	)											1,078				—
Restricted share issuance							60,526								(755	)											1,051				296
Restricted share forfeitures							(22,178	)																			(544	)			(544	)
Shares repurchased							(391	)																			(11	)			(11	)
Common stock dividend payment ($0.31 per share)																							(11,037	)							(11,037	)
Balance at March 31, 2023		$	—				35,701,244			$	306			$	689,807			$	(153,709	)		$	510,021			$	(131,975	)		$	914,450
Net income																							48,391								48,391
Other comprehensive income (loss)																			(15,012	)											(15,012	)
Deferred compensation plan															(13	)											13				—
Stock based compensation expenses							1,232								282												21				303
Vesting of incentive plans							4,173								(72	)											72				—
Restricted share issuance							26,545								(461	)											461				—
Restricted share forfeitures							(6,491	)							36												(121	)			(85	)
Shares repurchased																											—				—
Common stock dividend payment ($0.31 per share)																							(11,076	)							(11,076	)
Balance at June 30, 2023		$	—				35,726,703			$	306			$	689,579			$	(168,721	)		$	547,336			$	(131,529	)		$	936,971

See accompanying notes.

PREMIER FINANCIAL CORP.

Consolidated Condensed Statements of Cash Flows

(UNAUDITED)

(Amounts in Thousands)

 

		Six Months Ended June 30,
		2024				2023
Operating Activities
Net income		$	33,965			$	66,540
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses			2,769				4,246
Depreciation			2,859				2,657
Amortization of premium and discounts on loans, securities, deposits and debt obligations			2,768				2,813
Amortization of mortgage servicing rights, net of impairment charges/recoveries			1,941				2,472
Amortization of intangibles			1,936				2,493
Change in deferred taxes			922				(1,645	)
Proceeds from the sale of loans held for sale			123,152				136,185
Originations of loans held for sale			(114,839	)			(149,069	)
Mortgage banking gain, net			(2,661	)			(1,405	)
Gain on sale of insurance agency, net			—				(32,644	)
Loss on sale / write-down of real estate and other assets held for sale			61				34
Gain on sale of available for sale securities			—				(27	)
Loss on equity securities			213				1,374
Stock based compensation expense			1,418				724
Restricted stock forfeitures for taxes and option exercises			(375	)			(629	)
Income from bank owned life insurance			(2,391	)			(2,009	)
Changes in:
Accrued interest receivable and other assets			(32,944	)			(7,067	)
Other liabilities			7,556				11,710
Net cash provided by operating activities			26,350				36,753
Investing Activities
Proceeds from maturities, calls and pay-downs of available-for-sale securities			43,467				60,657
Proceeds from sale of available-for-sale securities			—				21,377
Proceeds from sale of premises and equipment, real estate and other assets held for sale			541				580
Purchases of available-for-sale securities			(187,958	)			(2,346	)
Net change in Federal Home Loan Bank stock			(10,429	)			(10,702	)
Cash received in disposition			—				47,354
Purchases of premises and equipment, net			(1,054	)			(3,294	)
Investment in bank owned life insurance			526				866
Net decrease (increase) in loans receivable			52,887				(242,558	)
Net cash used in investing activities			(102,020	)			(128,066	)
Financing Activities
Net increase in deposits and advance payments by borrowers			25,752				80,004
Net change in Federal Home Loan Bank advances			113,000				27,000
Net cash paid for repurchase of common stock			—				(11	)
Cash dividends paid on common stock			(22,187	)			(22,113	)
Net cash provided by financing activities			116,565				84,880
Increase (decrease) in cash and cash equivalents			40,895				(6,433	)
Cash and cash equivalents at beginning of period			114,756				128,160
Cash and cash equivalents at end of period		$	155,651			$	121,727
Supplemental cash flow information:
Interest paid		$	92,495			$	59,870
Income taxes paid			7,925				7,488
Initial recognition of right-of-use asset			5,536				25
Initial recognition of lease liability			5,536				25

See accompanying notes.

PREMIER FINANCIAL CORP.

Notes to Consolidated Condensed Financial Statements (UNAUDITED)

June 30, 2024 and 2023

 

1.	Basis of Presentation

Premier Financial Corp. (“Premier” or the “Company”) is a financial holding company that conducts business through its wholly-owned subsidiaries, Premier Bank (the “Bank”), 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.

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 (“MBS”) 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 was formed as an Ohio limited liability company in 2016 for the purpose of providing mezzanine funding for 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 Group of the Midwest, Inc. (“First Insurance”) is a wholly-owned subsidiary of Premier that conducted business as an insurance agency that conducted business throughout Premier’s markets. First Insurance offered property and casualty insurance, life insurance and group health insurance. On June 30, 2023, the Company completed the sale of substantially all of the assets (including $24.7 million of goodwill and intangibles) of First Insurance to Risk Strategies Corporation (“Buyer”). Consideration included a combination of cash and a subordinated note resulting in net cash received of $47.4 million after certain transaction costs at closing, the assumption of certain leases, and contingent consideration subject to certain performance criteria by the Buyer to be determined after the year ended December 31, 2026. The Company recorded a pre-tax gain on sale of $36.3 million, transaction costs of $3.7 million and taxes of $8.5 million for a $24.1 million increase to equity in 2023.

PFC Risk Management Inc. (“PFC Risk Management”) was a wholly-owned insurance company subsidiary of the Company that was formed to insure the Company and its subsidiaries against certain risks unique to the operations of the Company and for which insurance was not available or economically feasible, in the insurance marketplace. Due to pending changes in tax law, PFC Risk Management was dissolved and liquidated in December 2023.

The Company tests goodwill at least annually and, more frequently, if events or changes in circumstances indicate that it may be more likely than not that there is a possible impairment. Due to the ongoing impacts from the closure of large, well-known regional banks in early 2023 that led to a significant decline in bank stock prices, the Company conducted a quantitative interim goodwill impairment assessment at September 30, 2023. The impairment assessment compared the fair value of identified reporting units with their carrying amount (including goodwill). If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to the excess. On July 26, 2024, the Company announced the signing of a definitive merger agreement under which the Company will merge into Wesbanco, Inc. in a stock-for-stock transaction. The transaction’s initial implied valuation was approximately $987 million, which was in excess of the Company’s book value as of June 30, 2024. The Company will continue to monitor its goodwill as there is potential for volatility based on changes in stock prices and book value.

The consolidated condensed statement of financial condition at December 31, 2023, 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, 2023 (“2023 Form 10-K”).

The accompanying consolidated condensed financial statements as of June 30, 2024, and for the three and six months ended June 30, 2024 and 2023 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 2023 Form 10-K. However, in the opinion of management, all adjustments, consisting of only normal recurring items, necessary for the fair presentation of the financial statements have been made. The results for the three and six months ended June 30, 2024, are not necessarily indicative of the results that may be expected for the entire year.

 

2.	Significant Accounting Policies

Accounting Standards Update (“ASU”)

ASU No. 2023-06, Disclosure Improvements - Codification Amendments in Response to the Securities and Exchange Commission’s (“SEC”) Disclosure Update and Simplification Initiative: On October 9, 2023, the Financial Accounting Standards Board (the “FASB”) issued ASU 2023-06 “Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative,” which incorporates 14 of the 27 disclosures referred by the SEC in Release No. 33-10532, “Disclosure Update and Simplification,” that was issued Aug. 17, 2018. The changes modify the disclosure or presentation requirements of a variety of topics including statement of cash flows, accounting changes and error corrections, earnings per share, interim reporting, commitments, debt, equity, derivatives and hedging, and secured borrowing and collateral. For entities subject to the SEC’s existing disclosure requirements and for entities required to file or furnish financial statements with or to the SEC in preparation for the sale of or for purposes of issuing securities that are not subject to contractual restrictions on transfer, the effective date for each amendment is the date on which the SEC removes that related disclosure from its rules. For all other entities, the amendments will be effective two years later. If the SEC has not removed the related disclosure from its regulations by June 30, 2027, the amendments will be removed from the codification and not become effective for any entity. This ASU is not expected to have a material effect on the Company’s consolidated financial statements.

ASU No. 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures: On November 27, 2023, the FASB issued ASU 2023-07 “Segment Reporting (Topic 820): Improvements to Reportable Segment Disclosure,” which requires public entities to disclose significant expense categories and amounts for each reportable segment, an amount for and description of the composition of “other segment items,” the title and position of the entity’s Chief Operating Decision Maker (the “CODM”) and explanation of how the CODM uses the reported measures of profit or loss to assess segment performance, and—on an interim basis—certain segment-related disclosures that previously were required only on an annual basis. This ASU clarifies that entities with a single reportable segment are subject to both new and existing segment reporting requirements and that an entity is permitted to disclose multiple measures of segment profit or loss, provided that certain criteria are met. The amendments are effective for fiscal years beginning after December

15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. Entities must adopt the changes to the segment reporting guidance on a retrospective basis. This ASU is not expected to have a material effect on the Company’s consolidated financial statements.

ASU No. 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures: On December 14, 2023, the FASB issued ASU 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” to address requests for improved income tax disclosures from investors, lenders, creditors and other allocators of capital that use the financial statements to make capital allocation decisions. This ASU is intended to improve the transparency of tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction, in addition to certain other amendments intended to improve the effectiveness of income tax disclosures. For public business entities, this ASU is effective for annual periods beginning after December 15, 2024. For other entities, this ASU is effective for annual periods beginning after December 15, 2025. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. This ASU is not expected to have a material effect on the Company’s consolidated financial statements.

SEC Final Rules Not Yet Adopted

The Enhancement and Standardization of Climate-Related Disclosures for Investors: On March 6, 2024, the SEC approved the final rule for these disclosures, requiring registrants to provide information about climate-related risks that materially impact or are reasonably likely to materially impact a registrant’s strategy, results of operations, or financial condition. The rule applies to all SEC reporting companies and may significantly increase reporting costs and complexities, including increased data collection and development of significant internal processes and controls. The final rule includes a phased-in compliance period, effective for the Company for the fiscal year ending December 31, 2025. On March 15, 2024, the U.S. Court of Appeals granted an administrative stay of the climate-related disclosure rules recently adopted by the SEC.

 

3.	Fair Value

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

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

 

•

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 the asset or liability and that are significant to the fair value of assets and liabilities (i.e., allowing for situations in which there is little or no market activity for the asset or liability at the measurement date).

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, MBS, asset-backed securities (“ABS”), corporate bonds and municipal securities. Securities in Level 1 include U.S. treasuries.

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 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 5-day forward contract price for 15 or 30 years conventional mortgages which is then adjusted for unobservable market data such as estimated fall out rates and estimated time from origination to completion of construction (Level 3).

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

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

Appraisals for both individually analyzed collateral-dependent loans and other real estate owned (“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% to 30% to account for other factors that may impact the value of collateral. In determining the value of individually analyzed collateral dependent loans and 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 is 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).

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).

Cash flow and fair value hedge derivatives - The Company periodically enters into cash flow and fair value hedge derivative instruments to hedge the risk of variability in cash flows on the Company’s floating rate loan pool, fixed rate mortgage loan pool and FHLB advances. 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

 

June 30, 2024		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		$	—			$	120,293			$	—			$	120,293
Mortgage-backed securities			—				166,257				—				166,257
Collateralized mortgage obligations			—				289,959				—				289,959
Asset-backed securities			—				193,564				—				193,564
Corporate bonds			—				63,061				—				63,061
Obligations of state and political subdivisions			—				199,557				—				199,557
US Treasuries			48,429				—				—				48,429
Equity securities			5,559				—				—				5,559
Loans held for sale, at fair value			—				20,214				118,390				138,604
Interest rate swaps			—				2,740				—				2,740
Mortgage banking derivatives - asset							181								181
Cash flow/fair value hedge derivatives			—				4,072				—				4,072
Liabilities:
Interest rate swaps			—				2,728				—				2,728
Cash flow/fair value hedge derivatives			—				39,134				—				39,134

December 31, 2023		Level 1 Inputs				Level 2 Inputs				Level 3 Inputs				Total Fair Value
		(In Thousands)
Assets:
Available for sale securities:
Obligations of U.S. government corporations and agencies		$	—			$	101,598			$	—			$	101,598
Mortgage-backed securities			—				156,508				—				156,508
Collateralized mortgage obligations			—				235,767				—				235,767
Asset-backed securities			—				136,980				—				136,980
Corporate bonds			—				62,420				—				62,420
Obligations of states and political subdivisions			—				204,258				—				204,258
US Treasuries			49,177				—				—				49,177
Equity securities			5,773				—				—				5,773
Loans held for sale, at fair value			—				14,397				131,244				145,641
Interest rate swaps			—				2,867				—				2,867
Cash flow / Fair value hedge derivatives			—				299				—				299
Liabilities:
Interest rate swaps			—				2,867				—				2,867
Cash flow / Fair value hedge derivatives			—				35,392				—				35,392
Mortgage banking derivatives - liability			—				4,750				—				4,750

The following table presents a reconciliation of assets that are measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and six months ended June 30, 2024 and 2023. There were no securities that were measured at Level 3 for the three and six months ended June 30, 2024 and 2023.

 

		Construction loans held for sale
		Three Months Ended June 30,								Six Months Ended June 30,
		2024				2023				2024				2023
Balance of recurring Level 3 assets at beginning of period		$	124,429			$	97,280			$	131,244			$	91,662
Total gains (losses) for the period
Included in change in fair value of loans held for sale			295				(990	)			(33	)			4,981
Originations			23,841				24,321				43,471				47,502
Sales			(30,175	)			(9,149	)			(56,292	)			(32,683	)
Balance of recurring Level 3 assets at end of period		$	118,390			$	111,462			$	118,390			$	111,462

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:

 

June 30, 2024

Fair Value

Valuation Technique

Unobservable Inputs

Range of Inputs

(Dollars in Thousands)

Construction loans held for sale

$

118,390

Adjusted secondary market pricing

Adjustments

0.00% -  0.288%

 

December 31, 2023

Fair Value

Valuation Technique

Unobservable Inputs

Range of Inputs

(Dollars in Thousands)

Construction loans held for sale

$

131,244

Adjusted secondary market pricing

Adjustments

0.00% - 0.0984%

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 June 30, 2024 and December 31, 2023 was $20.2 million and $14.4 million, respectively, and they had a contractual balance of $20.5 million and $14.7 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 six months ended June 30, 2024, $295,000 and ($33,000), respectively, was recorded in gains (losses) on the sale of loans held for sale for the change in fair value. For the three and six months ended June 30, 2023, $21,000 and $389,000, respectively, was recorded in gains (losses) 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 June 30, 2024 and December 31, 2023, was $118.4 million and $131.2 million, respectively, and they had a contractual balance of $121.0 million and $133.1 million, respectively, for these same periods. The difference between the fair value and the contractual balance is recorded in gains and losses on the sale of loans held for sale. For the three and six months ended June 30, 2024, ($2.0) million and ($2.3) million, respectively, was recorded in gains (losses) on the sale of loans held for sale for the change in fair value. For the three and six months ended June 30, 2023, $(990,000) and $5.0 million, respectively, was recorded in gains (losses) on the sale of loans held for sale for the change in fair value.

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

 

June 30, 2024		Level 1 Inputs				Level 2 Inputs				Level 3 Inputs				Total Fair Value
		(In Thousands)
Individually analyzed loans
Commercial real estate		$	—			$	—			$	1,026			$	1,026
Commercial			—				—				25,464				25,464
Mortgage servicing rights			—				2,563				—				2,563

 

December 31, 2023		Level 1 Inputs				Level 2 Inputs				Level 3 Inputs				Total Fair Value
		(In Thousands)
Individually analyzed loans
Commercial real estate		$	—			$	—			$	3,425			$	3,425
Commercial			—				—				6,164				6,164
Mortgage servicing rights			—				2,744				—				2,744

For Level 3 assets and liabilities measured at fair value on a non-recurring basis as of June 30, 2024, 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 loan classes with an appraisal valuation

$

26,490

Appraisals which utilize sales comparison, net income and cost approach

Discounts for collection issues and changes in market conditions

10-50%

44.97

%

For Level 3 assets and liabilities measured at fair value on a non-recurring basis as of December 31, 2023, 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 loan classes with an appraisal valuation

$

9,589

Appraisals which utilize sales comparison, net income and cost approach

Discounts for collection issues and changes in market conditions

10-50%

27.60

%

Fair value of financial instruments

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 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 resulting in a Level 2 classification.

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 June 30, 2024.

Subordinated Debt is valued utilizing the coupon rate, discount rate, weighted average life and duration. This debt is classified as Level 3.

The carrying amount of advance payments by borrowers, as a result of their short-term nature, is considered to be equal to fair value and are classified as Level 1.

The carrying value and estimated fair values of financial instruments at June 30, 2024 and December 31, 2023, were as follows:

 

						Fair Value Measurements at June 30, 2024 (In Thousands)
		Carrying Value				Total				Level 1				Level 2				Level 3
Financial Assets:
Cash and cash equivalents		$	155,651			$	155,651			$	155,651			$	—			$	—
Federal Home Loan Bank Stock			32,189				N/A				N/A				N/A				N/A
Loans receivable, net			6,604,916				6,172,756				—				—				6,172,756
Accrued interest receivable			35,334				35,334				35,334				—				—
Financial Liabilities:
Deposits		$	7,178,554			$	7,166,496			$	5,396,806			$	1,769,690			$	—
Advances from Federal Home Loan Bank			393,000				391,408				—				391,408				—
Subordinated debentures			85,292				82,598				—				—				82,598
Advance payments by borrowers			13,391				13,391				13,391				—				—

						Fair Value Measurements at December 31, 2023 (In Thousands)
		Carrying Value				Total				Level 1				Level 2				Level 3
Financial Assets:
Cash and cash equivalents		$	114,756			$	114,756			$	114,756			$	—			$	—
Federal Home Loan Bank Stock			21,760				N/A				N/A				N/A				N/A
Loans receivable, net			6,662,875				6,100,394				—				—				6,100,394
Accrued interest receivable			33,446				33,446				33,446				—				—
Financial Liabilities:
Deposits		$	7,143,046			$	7,099,593			$	5,447,423			$	1,652,170			$	—
Advances from Federal Home Loan Bank			280,000				279,213				—				279,213				—
Subordinated debentures			85,229				84,231				—				—				84,231

 

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 Company’s merger (the “UCFC Merger”) with United Community Federal Corp. (“UCFC”), 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 “2015 Plan”). Premier also assumed the shares available for future issuance under the 2015 Plan as of the effective date of the UCFC Merger, with appropriate adjustments to the number of shares available to reflect the UCFC Merger. The stock options assumed from UCFC in the UCFC Merger remain subject to the terms of the 2015 Plan, but 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. Besides certain options previously issued under the First Defiance Financial Corp. 2010 Equity Incentive Plan, all awards currently outstanding are issued under the 2018 Equity Plan or the 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, restricted stock, stock, stock appreciation rights, or other stock-based awards. The 2015 Plan allows for the issuance of up to 1.2 million common shares, as adjusted for the UCFC Merger, through the award of options, stock, restricted stock, stock units, stock appreciation rights, or performance stock awards.

Beginning in 2023, directors were able to elect to receive stock in lieu of cash for their director fees. In the first six months of 2024, the Company did not issue any shares or recognize any expense for shares. In the first six months of 2023, the Company recognized $39,000 in expense for 1,985 shares that were issued to directors in lieu of cash fees.

The Company maintains Long-Term Equity Incentive Plans (each, an “LTIP”) for select members of management (the “Executive LTIP”) and a Key Employee and Commercial Lender Plan (the “Key Plan”). Under the Executive LTIP, participants may earn between 20% to 50% of their salary for potential payout in the form of (1) equity awards based on the achievement of certain corporate performance targets over a three-year period and (2) beginning in 2023, restricted stock awards (“RSAs”). The Company granted 82,737 performance stock units (“PSUs”) to the participants under the Executive LTIP during the first six months of 2024, which represents the maximum target award. The value of PSU awards issued in 2022, 2023 and 2024 under the Executive LTIP will be determined individually at the end of each respective 36 month performance period ending December 31. The benefits earned under these PSUs will be paid out in equity in the first quarter following the end of the performance period. The participants will receive all or a portion of the award if their employment is terminated by the Company without cause,