iStock via Naftalina/Getty Images
Our members have been discussing Premier Financial’s Public Buy Call (Nasdaq: PFC) last year. When the stock was $26, he recommended buying every $0.75 drop.Couldn’t get a real position here That’s because the stock rose significantly after the call. But while the company admittedly just reported mixed earnings, the news sent its stock down 13%. This is an overreaction in our opinion. But it pushes the stock a few feet into our buy zone. It’s time to buy this local bank and insurance company.Let me explain the consequences that caused this sale
Premier Financial Corp. Fourth Quarter 2022 Results
In the fourth quarter, we again saw banks taking deposits and lending more, generating decent margins. Premier Financial Corporation is doing well. However, the key performances in the fourth quarter report are: Under expectationsEarnings were up slightly from a year ago.
In Q4 2022, Premier reported top-line revenue of $77 million. The bank said this key metric increased him 3.9% year-over-year, which was $3.4 million short of estimates. Having covered many banks this earnings season, Premier’s estimates have been very mixed. Please note that as this is a small regional bank, it is subject to quarterly earnings fluctuations. That said, the key indicators aren’t as bad as the market’s reaction would have you believe. Loan loss reserves surged from his $2 million provision in the fourth quarter of 2021 to $2.8 million. This was the main reason for the loss of revenue. Much of this increase in provisions is due to an overall increase in loans on the books and a general It was due to a different macro situation. In the fourth quarter of 2022, it was $25.3 million, or $0.71 per share. That’s up from $0.69 per share a year ago, but well below estimates of $0.81 per share.
Earnings were also boosted by higher net interest income of $62.8 million, up 9.3% year over year. Net interest income is expected to continue to improve, and earnings are expected to be further boosted by loan growth.
Loans and deposits up in Q4
Unlike many other banks this season, Premier Financial actually posted strong growth in both loans and deposits in the fourth quarter. In fact, loans increased by $239 million, or 15.1% compared to Q4 2021. This growth is simply due to strong performance in all categories except PPP loans which continues to decline. Home and commercial loans are strong. Overall, loan demand remains strong despite interest rates rising significantly and the Fed taking steps to slow the economy.
We also know that more deposits mean more assets on hand to lend to customers, and Premier deposits have actually increased. Deposits made him $104 million, an annualized increase of 6.0% for him. Additionally, asset quality metrics are strong.
Strong asset quality indicators
Premier’s asset quality metrics were also strong. One of the key metrics to watch is banks’ loan loss reserves. At the end of Q4 2022, the loan loss reserve was only 1.13% of total loans. That was an improvement of 1 basis point from a year ago and 13 basis points from the third quarter. Moreover, non-performing assets increase in proportion to the large increase in loans. Total nonperforming assets were $34.4 million, or 0.4% of assets, up $33.6 million from the third quarter but down from $48.2 million a year earlier. However, loan delinquencies increased to $18.3 million, or 0.3% of loans, from $13.2 million in the third quarter and $12.3 million a year ago. This was a bearish point, but it is only a mild bearish point.
Return metrics were mixed. Return on assets declined to 1.21% from 1.34% in Q4 2021. Return on equity increased from 9.70% to 11.46% sequentially. Return on tangible equity also soared, rising to 18.64% from 14.49% last year. We expect these indicators to remain strong through 2023, but if the recession is moderate or strong, Q1 or Q2 could be weaker, but Q4 should pick up again. .
Finally, the book value was $24.94, up from $24.32 in the third consecutive quarter. This is no longer a premium on the books. Inventory is also attractive compared to tangible books, but at a premium. Physical books rose from $14.82 a year ago to $15.47.
take home
The bottom line is that this was a mixed quarter, but stocks are overreacting. The dividend has just been increased, and the yield going forward for him is 5.2%. Key indicators weren’t as bad as stock prices reacted. It was a dark quarter, but I think you should buy this stock here.
