<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act of
1934 for the quarterly period ended September 30, 1995
Commission file number 33-72794
PAB BANKSHARES, INC.
(Exact name of Small Business Issuer
as specified in its charter)
Georgia 58-1473302
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3102 North Oak Street Extension
Valdosta, Georgia
(Address of principal executive offices)
(912) 242-7758
(Issuer's telephone number)
Check whether the Issuer (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 X No
----- -----
The number of shares outstanding of the Issuer's class of common stock at
September 30, 1995 was 1,351,460 shares of common stock.
Transitional Small Business Disclosure Format (Check one): Yes No X
----- -----
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PAB BANKSHARES, INC.
FORM 10-QSB
TABLE OF CONTENTS
-----------------
PAGE
----
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS:
CONSOLIDATED BALANCE SHEETS - SEPTEMBER 30, 1995
(UNAUDITED) AND DECEMBER 31, 1994 . . . . . . . . . . . . . . . 3
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) - THREE
MONTH AND NINE MONTH PERIODS ENDED SEPTEMBER 30,
1995 AND 1994 . . . . . . . . . . . . . . . . . . . . . . . . . 5
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED) - NINE MONTH PERIODS ENDED SEPTEMBER 30,
1995 AND 1994 . . . . . . . . . . . . . . . . . . . . . . . . . 7
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) -
NINE MONTH PERIODS ENDED SEPTEMBER 30, 1995 AND 1994 . . . . . 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . . . 10
ACCOUNTANTS' DISCLAIMER OF OPINION . . . . . . . . . . . . . . . 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION . . . . . . . . . . . . . . . . . . . . . . . 12
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . 20
ITEM 2. CHANGES IN SECURITIES . . . . . . . . . . . . . . . . . . . . . . 20
ITEM 3. DEFAULTS UPON SENIOR SECURITIES . . . . . . . . . . . . . . . . . 20
ITEM 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS . . . . . . . . . . . . . . . . . . . . . . 20
ITEM 5. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . 20
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . 20
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
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<TABLE>
PAB BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
---------------------------
ASSETS
------
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
-------------- -------------
(Unaudited)
<S> <C> <C>
Cash and Cash Equivalents:
Cash and due from banks $ 10,843,677 12,438,797
Interest-bearing deposits in other banks 1,618,881 -0-
Federal funds sold 3,360,000 370,000
------------- -------------
Total Cash and Cash Equivalents 15,822,558 12,808,797
Time Deposits 1,502,400 1,883,000
Investment Securities 54,710,727 33,098,361
Investment in Unconsolidated Subsidiary 146,088 -0-
Loans, Net of Allowance for Loan Losses ($2,230,911 - 1995; $1,653,135 - 1994)
and Unearned Interest 166,895,856 115,498,973
Bank Premises and Equipment 6,201,309 4,249,057
Property Acquired in Settlement of Loans and Other Real Estate Owned:
Land at site of former banking facility of subsidiary 125,000 125,000
Land held for future development 366,790 366,790
Property acquired in settlement of loans 472,196 70,637
Accrued Interest Receivable 3,020,010 2,088,010
Cash Value of Life Insurance 1,567,249 1,159,073
Goodwill 2,648,252 383,314
Other Assets 455,143 1,167,776
------------- -------------
Total Assets $ 253,933,578 172,898,788
============= =============
</TABLE>
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<TABLE>
PAB BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
---------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
-------------- -------------
(Unaudited)
<S> <C> <C>
Deposits:
Demand $ 29,259,124 25,213,139
NOW 50,751,200 38,026,597
Savings 17,727,803 8,435,158
Time, $100,000 and over 35,624,166 24,232,725
Other time 86,196,072 51,604,139
------------- -------------
219,558,365 147,511,758
Federal Funds Purchased -0- 870,000
Notes Payable 2,700,000 2,000,000
Advances from Federal Home Loan Bank 7,067,323 4,629,167
Accrued Interest 632,827 416,153
Advance Payments by Borrowers for Taxes and Insurance 429,715 5,556
Dividends Payable 141,267 409,811
Income Taxes:
Current -0- 16,477
Deferred 31,536 -0-
Other Liabilities 802,941 610,857
------------- -------------
Total Liabilities 231,363,974 156,469,779
------------- -------------
Stockholders' Equity:
Common stock, no par value, 4,000,000 shares authorized, 1,413,013 shares (1994 - 1,170,888)
issued and 1,351,460 shares (1994 - 1,170,888) outstanding 1,263,745 1,263,745
Additional paid in capital 14,652,479 9,793,831
Retained earnings 8,011,752 6,230,933
Unrealized gains (losses) on available-for-sale securities 115,675 (859,500)
------------- -------------
24,043,651 16,429,009
Treasury stock, at cost (61,553 shares) (1,474,047) -0-
------------- -------------
22,569,604 16,429,009
------------- -------------
Total Liabilities and Stockholders' Equity $ 253,933,578 172,898,788
============= =============
</TABLE>
PAGE 4
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<TABLE>
PAB BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------------- ---------------------------------
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Interest Income:
Interest and fees on loans $ 4,127,458 2,635,748 11,819,142 7,332,776
Interest on investment securities:
Taxable 813,313 416,781 2,421,742 1,213,082
Tax exempt 41,440 45,878 116,871 135,660
Interest on federal funds sold 80,078 50,746 211,786 162,750
Interest on deposits in banks 30,224 33,655 152,606 117,733
------------ ------------ ------------ ------------
Total 5,092,513 3,182,808 14,722,147 8,962,001
------------ ------------ ------------ ------------
Interest Expense:
Interest on deposits 2,391,154 1,222,251 6,586,527 3,601,152
Interest on federal funds purchased 1,650 31 3,854 154
Interest on notes and mortgages 27,917 -0- 107,868 -0-
Interest on advances from Federal Home Loan Bank 127,750 70,979 292,977 186,096
------------ ------------ ------------ ------------
Total 2,548,471 1,293,261 6,991,226 3,787,402
------------ ------------ ------------ ------------
Net Interest Income 2,544,042 1,889,547 7,730,921 5,174,599
Provision for Loan Losses 67,500 67,500 318,000 202,500
------------ ------------ ------------ ------------
Net Interest Income After Provision for Loan Losses 2,476,542 1,822,047 7,412,921 4,972,099
------------ ------------ ------------ ------------
Other Income:
Service charges on deposit accounts 334,246 268,481 1,013,909 766,016
Insurance commissions 10,282 6,816 33,666 19,277
Equity in earnings of unconsolidated subsidiary 79,568 -0- 150,138 -0-
Gain (Loss) on sale of loans 31,710 -0- 31,414 -0-
Gain (Loss) on sale of other real estate -0- 2,369 -0- 2,369
Securities gains (losses) 1,659 (19,427) 123,455 (60,239)
Other income 44,954 81,971 268,453 257,982
------------ ------------ ------------ ------------
Total 502,419 340,210 1,621,035 985,405
------------ ------------ ------------ ------------
Other Expenses:
Compensation 933,035 609,865 2,545,074 1,714,698
Other personnel expenses 212,791 148,745 633,265 426,031
Occupancy expense of bank premises 102,446 71,027 283,177 203,561
Furniture and equipment expense 205,841 111,083 541,304 325,503
Federal deposit insurance 23,093 82,591 252,553 242,388
Postage and courier services 49,591 27,733 143,007 95,390
</TABLE>
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<TABLE>
PAB BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------------- ---------------------------------
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Supplies 52,252 35,695 167,669 108,913
Amortization 29,524 5,988 88,573 17,967
Other operating expenses 345,224 264,131 1,079,512 775,797
------------ ------------ ------------ ------------
Total 1,953,797 1,356,858 5,734,134 3,910,248
------------ ------------ ------------ ------------
Income Before Income Taxes 1,025,164 805,399 3,299,822 2,047,256
Income Taxes 343,868 265,611 1,097,749 655,601
------------ ------------ ------------ ------------
Net Income $ 681,296 539,788 2,202,073 1,391,655
============ ============ ============ ============
Earnings Per Share $ .48 .46 1.57 1.22
============ ============ ============ ============
Weighted Average Shares 1,419,367 1,170,888 1,402,343 1,138,501
============ ============ ============ ============
</TABLE>
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<TABLE>
PAB BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
-----------------------------------------------
<CAPTION>
UNREALIZED
GAINS
(LOSSES) ON
ADDITIONAL AVAILABLE-
COMMON PAID IN RETAINED FOR-SALE TREASURY
STOCK CAPITAL EARNINGS SECURITIES STOCK TOTAL
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1993 $1,263,745 6,646,224 4,695,570 (81,733) -0- 12,523,806
Issuance of 150,000 shares at $20, less
stock issuance cost of $40,338 -0- 2,959,662 -0- -0- -0- 2,959,662
Issuance of 9,891.893 shares at $19
through dividend reinvestment plan -0- 187,945 -0- -0- -0- 187,945
Net Income -0- -0- 1,391,655 -0- -0- 1,391,655
Acquisition of 507 shares of treasury
stock -0- -0- -0- -0- 10,140 (10,140)
Sale of 507 shares of treasury stock -0- -0- -0- -0- (10,140) 10,140
Change in unrealized gains and losses -0- -0- -0- (434,367) -0- (434,367)
---------- ---------- ---------- ---------- ---------- ----------
Balances, September 30, 1994 (Unaudited) $1,263,745 9,793,831 6,087,225 (516,100) -0- 16,628,701
========== ========== ========== ========== ========== ==========
Balances, December 31, 1994 $1,263,745 9,793,831 6,230,933 (859,500) -0- 16,429,009
Issuance of 207,076 shares at $20 to
acquire First Federal Savings Bank
of Bainbridge -0- 4,141,520 -0- -0- -0- 4,141,520
Issuance of 2,488 shares at $20 to
directors in lieu of fees -0- 49,760 -0- -0- -0- 49,760
Issuance of 20,916 shares at $20.21 through
dividend reinvestment plan -0- 422,797 -0- -0- -0- 422,797
Issuance of 11,645 shares at $21.00 through
common stock purchase plan -0- 244,571 -0- -0- -0- 244,571
Net Income -0- -0- 2,202,073 -0- -0- 2,202,073
Acquisition of 62,662 shares of treasury
stock -0- -0- -0- -0- 1,498,352 (1,498,352)
Sale of 1,109 shares of treasury stock -0- -0- -0- -0- (24,305) 24,305
Dividends -0- -0- (421,254) -0- -0- (421,254)
Change in unrealized gains and losses -0- -0- -0- 975,175 -0- 975,175
---------- ---------- ---------- ---------- ---------- ----------
Balances, September 30, 1995 (Unaudited) $1,263,745 14,652,479 8,011,752 115,675 1,474,047 22,569,604
========== ========== ========== ========== ========== ==========
</TABLE>
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<TABLE>
PAB BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(UNAUDITED)
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------------
1995 1994
----------- -----------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 2,202,073 1,391,655
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 262,452 186,594
Deferred income taxes (22,794) (8,919)
Provision for loan losses 318,000 202,500
Amortization 88,573 17,967
Amortization (accretion) of subsidiary acquisition adjustments (145,279) -0-
(Gain) loss on sale of loans (31,414) -0-
(Gain) loss on sale of other real estate -0- (2,369)
Securities (gains) losses (123,455) 60,239
Minority interests 282 299
Equity in earnings of unconsolidated subsidiary (133,823) -0-
Dividend received from unconsolidated subsidiary 125,000 -0-
Change in assets and liabilities:
(Increase) decrease in accrued interest receivable (443,613) (487,069)
Increase (decrease) in accrued interest payable 201,800 36,371
(Increase) decrease in other assets 84,145 (379,874)
Increase (decrease) in income taxes payable (16,477) 5,816
Increase (decrease) in other liabilities (113,192) 267,743
----------- -----------
Net cash provided (used) by operating activities 2,252,278 1,290,953
----------- -----------
Cash Flows From Investing Activities:
Capital expenditures (1,040,241) (342,386)
Proceeds from calls of held-to-maturity securities 86,946 90,894
Proceeds from maturities of held-to-maturity securities 100,000 100,000
Purchase of held-to-maturity securities (530,000) (182,988)
Proceeds from sales of available-for-sale securities 4,891,118 2,089,844
Proceeds from calls of available-for-sale securities 700,000 308,200
Proceeds from maturities of available-for-sale securities 4,100,000 2,500,000
Purchases of available-for-sale securities (9,810,444) (9,000,371)
Principal payments on mortgage-backed securities 474,507 48,167
(Increase) decrease in interest-bearing deposits in banks 1,087,119 2,069,000
(Increase) decrease in loans (15,029,122) (8,522,217)
(Increase) decrease in cash value of life insurance (408,176) (246,948)
Cash disbursed to acquire First Federal Savings Bank (3,901,055) -0-
Cash and cash equivalent assets received upon acquisition of First Federal Savings Bank 3,915,646 -0-
----------- -----------
Net cash provided (used) by investing activities (15,363,702) (11,088,805)
----------- -----------
Cash Flows From Financing Activities:
Proceeds of additional long-term indebtedness 1,200,000 -0-
Proceeds of additional stock issued 244,571 3,147,607
Increase (decrease) in time deposits 16,673,157 215,261
Increase (decrease) in other deposits (1,536,696) (735,980)
Advances from Federal Home Loan Bank 5,875,000 1,500,000
Payments on long-term indebtedness (3,936,844) (333,742)
Dividends paid (267,001) (353,849)
Acquisition of treasury stock (1,498,352) (10,140)
Proceeds from sale of treasury stock 24,305 10,140
</TABLE>
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<TABLE>
PAB BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(UNAUDITED)
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------------
1995 1994
----------- -----------
<S> <C> <C>
Increase (decrease) in federal funds purchased (870,000) -0-
Increase in advance payments by borrowers for taxes and insurance 217,045 -0-
----------- -----------
Net cash provided (used) by financing activities 16,125,185 3,439,297
----------- -----------
Net Increase (Decrease) in Cash and Cash Equivalents 3,013,761 (6,358,555)
Cash and Cash Equivalents at Beginning of Period 12,808,797 15,437,103
----------- -----------
Cash and Cash Equivalents at End of Period $15,822,558 9,078,548
=========== ===========
Supplemental Disclosures of Cash Flow Information
- - -------------------------------------------------
Cash Paid During The Period For:
Interest $ 6,789,426 3,751,031
=========== ===========
Income taxes $ 1,250,230 670,260
=========== ===========
Schedule of Non-Cash Investing and Financing Activities
- - -------------------------------------------------------
Total increase (decrease) in unrealized losses on securities available-for-sale $(1,513,388) 700,236
=========== ===========
Stock issued to directors in payment of fees, stock issued through dividend
reinvestment plan and stock issued to acquire First Federal Savings Bank $ 4,614,077 187,945
=========== ===========
</TABLE>
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PAB BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
Basis of Presentation
- - ---------------------
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal and recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the nine months ended September 30, 1995 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1995. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's annual report on Form
10-KSB for the year ended December 31, 1994.
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<PAGE> 11
Board of Directors
PAB Bankshares, Inc. and Subsidiaries
Valdosta, Georgia
The accompanying consolidated balance sheet of PAB Bankshares, Inc. and
Subsidiaries as of September 30, 1995, and the related statements of income,
stockholders' equity and cash flows, for the three and nine months ended
September 30, 1995 and 1994 were not audited by us and, accordingly, we do not
express an opinion on them.
We have audited, in accordance with generally accepted auditing standards, the
consolidated balance sheet of PAB Bankshares, Inc. and Subsidiaries as of
December 31, 1994, and the related consolidated statements of income,
stockholders' equity and cash flows for the year then ended (not presented
herein); and in our report dated January 23, 1995, we expressed an unqualified
opinion on those consolidated financial statements.
In our opinion, the information set forth in the accompanying 1994 consolidated
financial statements is fairly stated, in all material respects, in relation to
the consolidated financial statements from which it has been derived.
STEWART, FOWLER & STALVEY, P.C.
- - ------------------------------------
Valdosta, Georgia
October 12, 1995
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MANAGEMENTS'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Results of Operations
- - ---------------------
The Company, including the operations of its subsidiaries, reported consolidated
net income of $2,202,073 for the nine months ended September 30, 1995 compared
to $1,391,655 for the nine months ended September 30, 1994. Net interest income
after provision for loan losses was $7,412,921 and $4,972,099 for the nine
months ended September 30, 1995 and 1994, respectively. The provision for loan
losses was $318,000 and $202,500 for the nine months ended September 30, 1995
and 1994, respectively. Noninterest income totalled $1,621,035 and $985,405 for
the nine months ended September 30, 1995 and 1994, respectively and noninterest
expenses totalled $5,734,134 and $3,910,248 for the nine months ended September
30, 1995 and 1994, respectively.
The nine months ended September 30, 1995 represents the first period reflecting
the operations of First Federal Savings Bank of Bainbridge (Bainbridge) which
was acquired by the Company effective January 1, 1995. Net income of Bainbridge
included in these financial statements for the nine months ended September 30,
1995 totalled $579,986. Net interest income after provision for loan losses was
$1,870,593. The provision for loan losses was $115,500. Noninterest income
totalled $465,704 and noninterest expenses totalled $1,428,540.
The following table summarizes the results of operations of the Company for the
three month and nine month periods ended September 30, 1995 and 1994.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ ------------------
1995 1994 1995 1994
-------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Interest income $ 5,092 3,183 14,722 8,962
Interest expense (2,548) (1,293) (6,991) (3,787)
-------- -------- -------- --------
Net interest income 2,544 1,890 7,731 5,175
Provision for loan losses (67) (67) (318) (203)
Noninterest income 502 340 1,621 985
Noninterest expense (1,954) (1,357) (5,734) (3,910)
-------- -------- -------- --------
Income before taxes 1,025 806 3,300 2,047
Income taxes (344) (266) (1,098) (655)
-------- -------- -------- --------
Net income $ 681 540 2,202 1,392
======== ======== ======== ========
</TABLE>
Interest Income
- - ---------------
Total interest income increased approximately $5,760,000 (3,994,000 from
Bainbridge) for the nine months ended September 30, 1995 compared to the nine
months ended September 30, 1994. This increase is attributed to the factors
explained in the following paragraphs.
This increase was the combined effect of an increase in the average loan
portfolio balance from approximately $110.4 million for the nine months ended
September 30, 1994 to approximately $161.9 million for the nine months ended
September 30, 1995 and an increase in the average rate earned on the loan
portfolio from 8.86% for the nine months ended September 30, 1994 to 9.74% for
PAGE 12
<PAGE> 13
the nine months ended September 30, 1995. The effect of these two changes
increased the interest income earned on the loan portfolio from approximately
$7,333,000 for the nine months ended September 30, 1994 to approximately
$11,819,000 for the nine months ended September 30, 1995, an increase of
$4,486,000. Interest income on the loan portfolio increased from approximately
$2,636,000 for the quarter ended September 30, 1994 to approximately $4,127,000
for the quarter ended September 30, 1995, an increase of $1,491,000.
Interest earned on taxable investment securities increased from approximately
$1,213,000 for the nine months ended September 30, 1994 to approximately
$2,422,000 for the nine months ended September 30, 1995, an increase of
$1,209,000 ($1,092,000 from Bainbridge). This increase was the combined effect
of an increase in the average taxable investment portfolio balance from
approximately $30.6 million for the nine months ended September 30, 1994 to
approximately $51.3 million for the nine months ended September 30, 1995 and an
increase in the rate earned on the taxable investment portfolio from 5.28% for
the nine months ended September 30, 1994 to 6.29% for the nine months ended
September 30, 1995. Interest income on the taxable investment portfolio
increased from approximately $417,000 for the quarter ended September 30, 1994
to approximately $813,000 for the quarter ended September 30, 1995, an increase
of $396,000.
Interest earned on nontaxable investment securities decreased from approximately
$136,000 for the nine months ended September 30, 1994 to approximately $117,000
for the nine months ended September 30, 1995, a decrease of $19,000. This
decrease was the result of a decrease in the rate earned on the non-taxable
investment portfolio from 6.67% for the nine months ended September 30, 1994 to
5.79% for the nine months ended September 30, 1995. The average non-taxable
investment securities balance was unchanged at $2.7 million. Interest income on
the non-taxable investment securities decreased from approximately $46,000 for
the quarter ended September 30, 1994 to approximately $41,000 for the quarter
ended September 30, 1995, a decrease of $5,000.
As of September 30, 1995, the amortized cost of taxable and non-taxable
investments consisted of U.S. Treasury securities (29.0%), securities of U.S.
Government Agencies and Corporations (61.0%), obligations of States, Counties
and Municipalities (5.0%), equity securities (4.0%) and other debt securities
(1.0%). The securities are predominantly at fixed rates. There are no interest
rates which change inversely to changes in interest rates. As further discussed
under "Financial Condition", the portfolio reflects unrealized gains. These
unrealized gains are reflective of the effects on value of a predominately fixed
rate portfolio in a period of falling interest rates.
Interest earned on interest-bearing deposits in banks increased from
approximately $118,000 for the nine months ended September 30, 1994 to
approximately $153,000 for the nine months ended September 30, 1995, an increase
of $35,000 ($74,000 from Bainbridge). This increase was the combined effect of
an increase in the average interest-bearing deposits balance from approximately
$3.4 million for the nine months ended September 30, 1994 to approximately $4.2
million for the nine months ended September 30, 1995 and an increase in the rate
earned on the interest-bearing deposits from 4.67% for the nine months ended
September 30, 1994 to 4.88% for the nine months ended September 30, 1995.
Interest income on the interest-bearing deposits decreased from approximately
$34,000 for the quarter ended September 30, 1994 to approximately $30,000 for
the quarter ended September 30, 1995, a decrease of $4,000.
Interest earned on federal funds sold increased from approximately $163,000 for
the nine months ended September 30, 1994 to approximately $212,000 for the nine
months ended September 30, 1995, an increase of $49,000. This increase was the
net effect of a decrease in the average federal funds sold balance from
approximately $6.1 million for the nine months ended September 30, 1994 to
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<PAGE> 14
approximately $2.9 million for the nine months ended September 30, 1995 and an
increase in the rate earned on the federal funds sold from 3.59% for the nine
months ended September 30, 1994 to 8.00% for the nine months ended September 30,
1995. Interest income on federal funds sold increased from approximately
$51,000 for the quarter ended September 30, 1994 to approximately $80,000 for
the quarter ended September 30, 1995, an increase of $29,000.
Interest Expense
- - ----------------
Total interest expense increased approximately $3,204,000 ($2,008,000 from
Bainbridge) for the nine months ended September 30, 1995 compared to the nine
months ended September 30, 1994. This increase is attributed to the factors
explained in the following paragraphs.
This increase was the combined effect of an increase in the average balance of
interest-bearing deposits from approximately $121.6 million for the nine months
ended September 30, 1994 to approximately $184.3 million for the nine months
ended September 30, 1995 and an increase in the average rate paid on interest-
bearing deposits from 3.95% for the nine months ended September 30, 1994 to
4.76% for the nine months ended September 30, 1995. The effect of these changes
increased the interest expense on interest-bearing deposits from approximately
$3,601,000 for the nine months ended September 30, 1994 to approximately
$6,587,000 for the nine months ended September 30, 1995, an increase of
$2,986,000 ($1,913,000 from Bainbridge). The increase in interest-bearing
deposits came from the local communities served by the Banks. Interest expense
on interest-bearing deposits increased from approximately $1,222,000 for the
quarter ended September 30, 1994 to approximately $2,391,000 for the quarter
ended September 30, 1995, an increase of $1,169,000.
All other interest expense consisting principally of notes and mortgages
payable, increased from approximately $186,000 for the nine months ended
September 30, 1994 to approximately $405,000 for the nine months ended September
30, 1995, an increase of $219,000 ($95,000 from Bainbridge). This increase was
the combined effect of an increase in the average balance of advances from the
Federal Home Loan Bank from approximately $4.4 million for the nine months ended
September 30, 1994 to approximately $6.3 million for the nine months ended
September 30, 1995 and an increase in the average rate paid on the advances from
5.60% for the nine months ended September 30, 1994 to 6.20% for the nine months
ended September 30, 1995. Interest of approximately $4,000 was paid on federal
funds purchased during the nine months ended September 30, 1995. Additionally,
the Company had notes payable outstanding to a correspondent bank in the amount
of $2.7 million at September 30, 1995 (average balance of $2.1 million). The
advances from the Federal Home Loan Bank in the amount of $7.1 million carry a
combination of fixed and variable interest rates averaging 6.26% at September
30, 1995 with maturities through 2011. The note payable to a correspondent bank
in the amount of $2.7 million is at prime less .50% subject to a ceiling of
9.50% until July 1, 1999, secured by the stock of First Federal Savings Bank of
Bainbridge which was acquired effective January 1, 1995. Annual principal
payments are scheduled to begin July 1, 1997 and continue through the maturity
date of July 1, 2004. The Company had no federal funds purchased outstanding at
September 30, 1995. The correspondent bank loan was to partially fund the
acquisition of First Federal Savings Bank of Bainbridge and the acquisition of
61,553 shares of treasury stock for approximately $1.5 million. The advances
from the Federal Home Loan Bank were primarily to fund mortgage loans made. The
federal funds purchased were for short term liquidity purposes.
PAGE 14
<PAGE> 15
Noninterest Income
- - ------------------
The following table presents the principal components of noninterest income for
the three month and nine month periods ended September 30, 1995 and 1994.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ ------------------
1995 1994 1995 1994
-------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Service charges on deposit accounts $ 334 268 1,014 766
Insurance commissions 10 7 34 19
Gain (Loss) on sale of loans 32 -0- 31 -0-
Gain (Loss) on sale of other
real estate -0- 2 -0- 2
Securities gains (losses) 2 (19) 123 (60)
Equity in earnings of unconsolidated
subsidiary 79 -0- 150 -0-
Other income 45 82 269 258
-------- -------- -------- --------
Total Noninterest Income $ 502 340 1,621 985
======== ======== ======== ========
</TABLE>
Noninterest income for the nine months ended September 30, 1995 as compared to
the nine months ended September 30, 1994 increased approximately $636,000
($466,000 from Bainbridge).
Service charges on deposit accounts for the nine months ended September 30, 1995
as compared to the nine months ended September 30, 1994, increased approximately
$248,000. This increase was related primarily to an increase in the number of
transaction deposit accounts with NSF charges. Equity in earnings of
unconsolidated subsidiary of approximately $150,000 represents the Company's 50%
interest in the earnings of Empire Financial Services, Inc., an unconsolidated
subsidiary which is 50% owned by First Federal Savings Bank of Bainbridge, which
was acquired by the Company effective January 1, 1995. During the nine months
ended September 30, 1995 the Company realized gains on the sale of securities
from the available-for-sale portfolio of approximately $123,000. All other
income increased approximately $55,000.
PAGE 15
<PAGE> 16
Noninterest Expenses
- - --------------------
The following table presents the principal components of noninterest expenses
for the three month and nine month periods ended September 30, 1995 and 1994.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ ------------------
1995 1994 1995 1994
-------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Compensation $ 933 610 2,545 1,715
Other personnel expenses 213 149 633 426
Occupancy expense of bank premises 102 71 283 204
Furniture and equipment expense 206 111 541 326
Federal deposit insurance 23 83 253 242
Postage and courier services 50 28 143 95
Supplies 52 36 168 109
Amortization 30 6 89 18
Other operating expenses 345 263 1,079 775
-------- -------- -------- --------
Total Noninterest Expenses $ 1,954 1,357 5,734 3,910
======== ======== ======== ========
</TABLE>
Noninterest expenses for the nine months ended September 30, 1995 as compared to
the nine months ended September 30, 1994, increased approximately $1,824,000
($1,429,000 from Bainbridge) or 46.7%. Compensation and other personnel
expenses increased approximately $1,037,000 ($721,000 from Bainbridge) for the
nine months ended September 30, 1995 as compared to the nine months ended
September 30, 1994. This increase reflects increases in the number of
employees, in wage levels and in the cost of employee benefits. All other
expenses increased approximately $787,000 ($707,000 from Bainbridge) or 44.5%
for the nine months ended September 30, 1995 compared to the nine months ended
September 30, 1994. This increase was primarily the result of a larger volume
of business.
Provision for Loan Losses
- - -------------------------
The provision for loan losses for the nine months ended September 30, 1995 was
$318,000 ($116,000 from Bainbridge) compared to $203,000 for the nine months
ended September 30, 1994. The balance of the allowance for loan losses was
approximately $2,231,000 (1.3% of outstanding loans) at September 30, 1995 and
approximately $1,537,000 (1.3% of outstanding loans) at September 30, 1994.
Actual loan charge-offs net of recoveries were approximately $66,000 of net
charge-offs for the nine months ended September 30, 1995 and approximately
$26,000 of net charge-offs for the nine months ended September 30, 1994. Non-
accrual loans were approximately $199,000 at September 30, 1995 as compared to
$133,000 at December 31, 1994. Loans ninety days or more past due and still
accruing amounted to approximately $134,000 at September 30, 1995 and $15,000 at
December 31, 1994. In determining an adequate level of loan loss reserves, such
loans were included in such consideration. The amount of the provision for loan
losses is a result of the amount of loans charged off, the amount of loans
recovered and management's conclusion concerning the level of the allowance for
loan losses. The level of the allowance for loan losses is based upon a number
of factors including the Banks' past loan loss experience, management's
evaluation of the collectibility of loans, the general state of the economy and
other relevant factors.
PAGE 16
<PAGE> 17
Income Taxes
- - ------------
The effective tax rate for the nine months ended September 30, 1995 was 33.3%
compared to 32.0% for the nine months ended September 30, 1994.
Financial Condition
- - -------------------
The Company, including its subsidiaries, reported consolidated total assets of
approximately $253.9 million ($72.9 million from Bainbridge) at September 30,
1995 and approximately $172.9 million at December 31, 1994 representing an
increase of approximately $81.0 million.
The Company acquired 100% of the outstanding stock of First Federal Savings Bank
of Bainbridge effective January 1, 1995 by disbursing cash of approximately $3.9
million and issuing 207,076 shares of Company stock valued at $20 per share.
The acquisition has been accounted for as a purchase.
Subsequent to the acquisition and during the nine months ended September 30,
1995, deposits increased $15.2 million, notes payable to a correspondent bank
increased by $.7 million, advances from the Federal Home Loan Bank increased
$2.4 million, operations generated $2.7 million, interest bearing deposits
decreased $3.0 million, and proceeds of additional stock issued were $.2 million
which provided $24.2 million of funds which were used to fund increases in loans
of $15.0 million, increase federal funds sold of $3.0 million, pay dividends of
approximately $.3 million, increase capital expenditures by $1.0 million,
increase cash by $1.8 million, decrease federal funds purchased by $.9 million,
increase investments by $.3 million, increase cash value of life insurance on
key officers by $.4 million and acquire treasury stock of $1.5 million.
The subsidiary, Farmers & Merchants Bank, has a new main banking facility under
construction that is scheduled for completion in December 1995.
A number of factors contribute to the increases in loans and deposits as
discussed under "Results of Operations" and "Financial Condition". Such factors
include the growth in the customer base due to business development efforts of
the management team, the pricing of loans and deposits and the favorable
economic conditions experienced in the markets served by the subsidiary banks.
The changes in interest rates as previously discussed are reflective of interest
rates in general, market conditions and competition. Changes in short-term
funds including cash and due from banks, federal funds sold, interest-bearing
deposits and investment securities are reflective of the liquidity position of
the company.
The investment securities portfolio of the Company, including its subsidiaries,
reflected unrealized gains for the available-for-sale category of approximately
$210,855 ($115,675 net of income tax effect) and approximately $57,000 for the
held-to-maturity category. Pursuant to Financial Accounting Standards Board
Statement No. 115 effective January 1, 1994, a valuation allowance has been
provided for the available-for-sale category with a resulting credit to
stockholders' equity (net of income tax effect). No valuation allowance has
been provided for the held-to-maturity category inasmuch as the Company has the
ability and management has the intent to hold such securities until maturity.
The available-for-sale category consists predominantly of U.S. Treasury
securities and securities of other U.S. Government Agencies and Corporation.
The held-to-maturity category consists of State, County and Municipal
obligations. These unrealized gains are reflective of the effects on value of a
predominately fixed rate portfolio in a period of falling interest rates.
The Company's three subsidiary banks are required to maintain minimum amounts of
capital to total "risk weighted" assets, as defined by the banking regulators.
PAGE 17
<PAGE> 18
At September 30, 1995, a comparison of the minimum required and actual capital
ratios are as follows:
<TABLE>
<CAPTION>
FARMERS FIRST FEDERAL
PARK AND SAVINGS BANK
AVENUE MERCHANTS OF
BANK BANK BAINBRIDGE
---------------- ---------------- ----------------
MINIMUM MINIMUM MINIMUM
REQUIRED ACTUAL REQUIRED ACTUAL REQUIRED ACTUAL
-------- ------ -------- ------ -------- ------
<S> <C> <C> <C> <C> <C> <C>
Leverage Capital Ratio 4.0% 7.9 4.0 9.1 3.0 12.3
Tier One Capital to
"Risk Weighted" Assets 4.0 10.2 4.0 13.7 4.0 24.3
Tier Two Capital to
"Risk Weighted" Assets 8.0 11.5 8.0 14.8 8.0 25.5
</TABLE>
Liquidity and Capital Resources
- - -------------------------------
Liquidity management involves the matching of the cash flow requirements of
customers, for the withdrawal of funds or the funding of additional loans, and
the ability of the Banks to meet those requirements. Management monitors and
maintains appropriate levels of assets and liabilities so that maturities of
assets are such that adequate funds are provided to meet estimated customer
withdrawals and loan requests.
The Banks' liquidity position depends primarily upon the liquidity of its assets
relative to its need to respond to short-term demand for funds caused by
withdrawals from deposit accounts and loan funding commitments. Primary sources
of liquidity are scheduled payments on its loans and interest on the Banks'
investments. The Banks may also utilize their cash and due from banks, short-
term deposits with financial institutions, federal funds sold and investment
securities to meet liquidity requirements. At September 30, 1995, the Company's
cash and due from banks were approximately $9.9 million in excess of its reserve
requirements of approximately $.9 million, its short-term deposits with
financial institutions were approximately $3.1 million and its federal funds
sold were approximately $3.4 million. All of the above can be converted to cash
on short notice. The sale of investments which had a market value of
approximately $54.8 million at September 30, 1995 can also be used to meet
liquidity requirements, to the extent the investments are not pledged to secure
public funds on deposit as required by law. Securities with a market value of
approximately $18.7 million were pledged as of September 30, 1995.
The Banks' funding needs are based primarily on the volume of lending. The
primary funding source is from new deposits. The Banks seek to attract new
deposits by paying rates of interest on deposit accounts which are competitive
in their respective primary service areas. The Banks' generally do not pay
brokers' commissions in connection with the obtaining of deposits or have
deposits outside the primary service area. The Banks do not pay premiums to
attract deposits. The Banks continue to expect that new deposits will serve as
their primary funding source.
The Banks also have the ability, on short-term basis, to borrow and purchase
federal funds from other financial institutions. The Banks are members of the
Federal Home Loan Bank of Atlanta and as such have the ability to secure
advances therefrom, although the cost of such advances exceed lower cost
alternatives such as deposits from the local communities. The Banks had
advances outstanding from the Federal Home Loan Bank of Atlanta of $7.1 million
at September 30, 1995, at an average rate of 6.26%.
Through the Company's dividend reinvestment plan, an additional 20,916 shares
PAGE 18
<PAGE> 19
for proceeds of $422,797 was issued during the nine months ended September 30,
1995. Additionally, 11,645 shares for proceeds of $244,571 was issued through
the common stock purchase plan during the nine months ended September 30, 1995.
PAGE 19
<PAGE> 20
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
ITEM 2. CHANGES IN SECURITIES.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Items 1, 2, 3, and 4 are inapplicable and are omitted.
ITEM 5. OTHER INFORMATION.
As a result of the occurrence of the matters described below at
Farmers & Merchants Bank in Adel, Georgia (a 99% owned subsidiary
of the Company) from November 1991 through June 1993, Forrest J.
Caldwell resigned effective September 30, 1995 as the president
and a director of Farmers & Merchants Bank and as a director of
the Company and The Park Avenue Bank in Valdosta, Georgia (a
wholly-owned subsidiary of the Company). The Board of Directors
at Farmers & Merchants Bank filed a Report of Apparent Crime on
October 22, 1995 with the appropriate federal and state
authorities with respect to certain business relationships
between Mr. Caldwell, John F. Scarboro, then a director of
Farmers and Merchants Bank, and AW & Associates, Inc., a customer
of Farmers & Merchants Bank, as a result of (i) possible
violations of the legal lending limit of the Bank under Georgia
law; (ii) possible technical violations by the Bank of Regulation
O under federal law regarding extension of credit to insiders;
and (iii) the apparent holding of overdraft checks of a Bank
depositor with which Messrs. Caldwell and Scarboro had a business
relationship. Mr. Scarboro also resigned, effective September
30, 1995, as a director of Farmers and Merchants Bank.
Notwithstanding the foregoing, there has been no financial loss
to Farmers and Merchants Bank as a result of these transactions.
As a result of the resignation of Mr. Caldwell, effective
September 30, 1995, the Company incurred, primarily under his
employment agreement, approximately $102,500 in payments and
other expenses associated with the matter and the Company
repurchased 47,662.951 shares of the Company's common stock from
Mr. Caldwell at $24 per share for a total purchase price of
$1,143,910. In addition, the Company repurchased 12,284.177
shares of the Company's common stock from Mr. Scarboro at $24 per
share for a total purchase price of $294,820.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
No exhibits are required to be filed with the Form 10-QSB for
this period.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the period covered by
this Report.
PAGE 20
<PAGE> 21
SIGNATURES
In accordance with the requirements of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
PAB BANKSHARES, INC.
By: R. BRADFORD BURNETTE
----------------------------------------
R. Bradford Burnette
President
(Principal Executive Officer)
By: C. LARRY WILKINSON
----------------------------------------
C. Larry Wilkinson
(Vice President, Principal
Financial Officer, and
Principal Accounting Officer)
Date: November 7, 1995
PAGE 21
