<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 June 30, 1996
Commission file number 0-25422
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
June 30, 1996 was 2,762,014 shares of common stock.
Transitional Small Business Disclosure Format (Check one): Yes No X
----- -----
<PAGE> 2
PAB BANKSHARES, INC.
FORM 10-QSB
TABLE OF CONTENTS
-----------------
PAGE
----
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS:
CONSOLIDATED BALANCE SHEETS - JUNE 30, 1996
(UNAUDITED) AND DECEMBER 31, 1995 . . . . . . . . . . . 3
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) - THREE
MONTH AND SIX MONTH PERIODS ENDED JUNE 30,
1996 AND 1995 . . . . . . . . . . . . . . . . . . . . . 4
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED) - SIX MONTH PERIODS ENDED JUNE 30,
1996 AND 1995 . . . . . . . . . . . . . . . . . . . . . 5
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) -
SIX MONTH PERIODS ENDED JUNE 30, 1996 AND 1995 . . . . . 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . 9
ACCOUNTANTS' DISCLAIMER OF OPINION . . . . . . . . . . . . 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION . . . . . . . . . . . . . . . . . . . 11
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . 18
ITEM 2. CHANGES IN SECURITIES . . . . . . . . . . . . . . . . . . . . . 18
ITEM 3. DEFAULTS UPON SENIOR SECURITIES . . . . . . . . . . . . . . . . 18
ITEM 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS . . . . . . . . . . . . . . . . . . 18
ITEM 5. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . 18
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . 18
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
<PAGE> 3
<TABLE>
PAB BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
---------------------------
ASSETS
------
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
------------ ------------
(Unaudited)
<S> <C> <C>
Cash and Cash Equivalents:
Cash and due from banks $ 9,559,469 9,781,601
Interest-bearing deposits in other banks 1,577,089 2,133,269
Federal funds sold 1,700,000 7,010,000
------------ ------------
Total Cash and Cash Equivalents 12,836,558 18,924,870
Time Deposits 794,000 1,203,400
Investment Securities 60,080,078 62,690,720
Investment in Unconsolidated Subsidiary 158,778 135,180
Loans, Net of Allowance for Loan Losses ($2,433,639 - 1996; $2,293,723 - 1995)
and Unearned Interest 192,050,096 169,228,734
Bank Premises and Equipment 6,725,940 6,517,731
Property Acquired in Settlement of Loans and Other Real Estate Owned:
Land and building of former banking offices 454,643 125,000
Land held for future development 366,790 366,790
Property acquired in settlement of loans 447,445 443,378
Accrued Interest Receivable 3,329,465 3,033,991
Cash Value of Life Insurance 1,916,759 1,541,454
Goodwill 2,320,122 2,374,074
Other Assets 1,130,964 502,997
------------ ------------
Total Assets $282,611,638 267,088,319
============ ============
</TABLE>
<PAGE> 4
<TABLE>
PAB BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
---------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
------------ ------------
(Unaudited)
<S> <C> <C>
Deposits:
Demand $ 32,132,884 34,530,746
NOW 53,887,375 52,883,974
Savings 17,728,656 17,192,176
Time, $100,000 and over 38,284,635 38,688,794
Other time 89,150,060 87,929,786
------------ ------------
231,183,610 231,225,476
Notes Payable 2,200,000 2,700,000
Advances from Federal Home Loan Bank 22,649,666 7,941,073
Accrued Interest 580,815 680,618
Advance Payments by Borrowers for Taxes and Insurance 238,677 207,765
Dividends Payable 179,531 149,149
Income Taxes:
Current 94,684 24,235
Other Liabilities 627,246 781,272
------------ ------------
Total Liabilities 257,754,229 243,709,588
------------ ------------
Stockholders' Equity:
Common stock, no par value, 4,000,000 shares authorized,
2,866,184 shares (1995 - 2,834,004) issued and 2,762,014
shares (1995 - 2,834,004) outstanding 1,263,745 1,263,745
Additional paid in capital 15,168,997 14,744,822
Retained earnings 10,014,480 8,646,738
Unrealized gains (losses) on available-for-sale securities,
net of applicable deferred income taxes (343,175) 184,469
------------ ------------
26,104,047 24,839,774
Treasury stock, at cost (104,170 shares; 1995 - 122,196) (1,246,638) (1,461,043)
------------ ------------
24,857,409 23,378,731
------------ ------------
Total Liabilities and Stockholders' Equity $282,611,638 267,088,319
============ ============
</TABLE>
<PAGE> 5
<TABLE>
PAB BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------------- -------------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Interest Income:
Interest and fees on loans $ 4,482,784 3,983,049 8,675,479 7,691,684
Interest on investment securities:
Taxable 911,121 789,943 1,861,412 1,608,429
Tax exempt 36,087 38,283 86,500 75,431
Interest on federal funds sold 42,415 98,222 135,652 131,708
Interest on deposits in banks 21,317 43,504 47,681 122,382
----------- ----------- ----------- -----------
Total 5,493,724 4,953,001 10,806,724 9,629,634
----------- ----------- ----------- -----------
Interest Expense:
Interest on deposits 2,494,701 2,230,876 5,031,243 4,195,373
Interest on federal funds purchased 4,992 30 14,283 2,204
Interest on notes and mortgages 44,765 37,895 98,053 79,951
Interest on advances from Federal Home Loan Bank 151,398 98,047 272,863 165,227
----------- ----------- ----------- -----------
Total 2,695,856 2,366,848 5,416,442 4,442,755
----------- ----------- ----------- -----------
Net Interest Income 2,797,868 2,586,153 5,390,282 5,186,879
Provision for Loan Losses 76,250 175,500 152,500 250,500
----------- ----------- ----------- -----------
Net Interest Income After Provision for Loan Losses 2,721,618 2,410,653 5,237,782 4,936,379
----------- ----------- ----------- -----------
Other Income:
Service charges on deposit accounts 420,069 351,118 807,636 679,663
Insurance commissions 20,615 14,605 27,036 23,384
Fees on mortgage loans sold -0- 2,488 -0- 5,074
Equity in earnings of unconsolidated subsidiary 37,856 31,617 83,598 70,570
Gain (Loss) on sale of loans 840 613 4,383 (296)
Gain (Loss) on sale of assets -0- -0- 2,890 -0-
Other income 117,586 104,109 228,099 218,425
Securities gains (losses) (4,318) 121,796 22,367 121,796
----------- ----------- ----------- -----------
Total 592,648 626,346 1,176,009 1,118,616
----------- ----------- ----------- -----------
Other Expenses:
Compensation 851,940 809,741 1,705,857 1,612,039
Other personnel expenses 192,626 204,120 375,019 420,474
Occupancy expense of bank premises 99,798 93,746 202,946 180,731
Furniture and equipment expense 189,125 170,824 373,100 335,463
Federal deposit insurance 34,905 114,730 68,966 229,460
Postage and courier services 49,335 41,405 94,964 93,416
Supplies 67,732 55,367 126,085 115,417
Amortization 26,975 29,524 53,952 59,049
Other operating expenses 402,629 371,314 836,179 734,288
----------- ----------- ----------- -----------
Total 1,915,065 1,890,771 3,837,068 3,780,337
----------- ----------- ----------- -----------
</TABLE>
<PAGE> 6
<TABLE>
PAB BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------------- -------------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Income Before Income Taxes 1,399,201 1,146,228 2,576,723 2,274,658
Income Taxes 469,566 387,264 865,777 753,881
----------- ----------- ----------- -----------
Net Income $ 929,635 758,964 1,710,946 1,520,777
=========== =========== =========== ===========
Earnings Per Share $ .34 * .27 .63 * .54
=========== =========== =========== ===========
Weighted Average Shares 2,734,221 * 2,810,978 2,733,084 * 2,797,566
=========== =========== =========== ===========
* Restated to reflect 2-for-1 stock split in May 1996.
</TABLE>
<PAGE> 7
<TABLE>
PAB BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
------------------------------------------
<CAPTION>
UNREALIZED GAINS (LOSSES) ON
AVAILABLE-FOR-SALE
SECURITIES,
NET OF
ADDITIONAL APPLICABLE
COMMON PAID IN RETAINED DEFERRED TREASURY
STOCK CAPITAL EARNINGS INCOME TAXES STOCK TOTAL
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1994 $ 1,263,745 9,793,831 6,230,933 (859,500) -0- 16,429,009
Issuance of 414,152 shares at $10 to
acquire First Federal Savings Bank
of Bainbridge -0- 4,141,520 -0- -0- -0- 4,141,520
Issuance of 4,976 shares at $10 to
directors in lieu of fees -0- 49,760 -0- -0- -0- 49,760
Issuance of 35,272 shares at $10.24
through dividend reinvestment plan -0- 333,395 -0- -0- -0- 333,395
Issuance of 21,572 shares at $10.50
through common stock purchase plan -0- 226,527 -0- -0- -0- 226,527
Net Income -0- -0- 1,520,777 -0- -0- 1,520,777
Acquisition of 3,290 shares of treasury stock -0- -0- -0- -0- 35,637 (35,637)
Sale of 2,218 shares of treasury stock -0- -0- -0- -0- (24,305) 24,305
Dividends -0- -0- (279,947) -0- -0- (279,947)
Change in unrealized gains and losses on
available-for-sale securities, net of
applicable deferred income taxes -0- -0- -0- 1,017,864 -0- 1,017,864
----------- ----------- ----------- ----------- ----------- -----------
Balances, June 30, 1995 (Unaudited) $ 1,263,745 14,545,033 7,471,763 158,364 11,332 23,427,573
=========== =========== =========== =========== =========== ===========
Balances, December 31, 1995 $ 1,263,745 14,744,822 8,646,738 184,469 1,461,043 23,378,731
Issuance of 16,866 shares at $12.12
average through dividend reinvestment plan -0- 204,437 -0- -0- -0- 204,437
Issuance of 8,622 shares at $12.89
average through common stock purchase plan -0- 111,150 -0- -0- -0- 111,150
Issuance of 6,692 shares at $10.50 to
Directors in lieu of fees -0- 70,265 -0- -0- -0- 70,265
Net Income -0- -0- 1,710,946 -0- -0- 1,710,946
Acquisition of 2,474 shares of treasury stock -0- -0- -0- -0- 30,925 (30,925)
Sale of 20,500 shares of treasury stock -0- 38,323 -0- -0- (245,330) 283,653
Dividends -0- -0- (343,204) -0- -0- (343,204)
Change in unrealized gains and losses on
available-for-sale securities, net of
applicable deferred income taxes -0- -0- -0- (527,644) -0- (527,644)
----------- ----------- ----------- ----------- ----------- -----------
Balances, June 30, 1996 (Unaudited) $ 1,263,745 15,168,997 10,014,480 (343,175) 1,246,638 24,857,409
=========== =========== =========== =========== =========== ===========
All numbers of shares ane per share amounts restated to reflect 2-for-1 stock split in May 1996.
</TABLE>
<PAGE> 8
<TABLE>
PAB BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(UNAUDITED)
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------------------
1996 1995
---------- ----------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 1,710,946 1,520,777
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 236,437 164,733
Deferred income taxes (11,964) (13,684)
Provision for loan losses 152,500 250,500
Amortization of goodwill 53,952 59,049
Amortization (accretion) of subsidiary acquisition adjustments (101,075) (98,656)
(Gain) loss on sale of loans (4,383) 296
Securities (gains) losses (22,367) (121,796)
(Gain) loss on sale of assets (2,890) -0-
Minority interests 208 241
Equity in earnings of unconsolidated subsidiary (83,598) (50,750)
Dividend received from unconsolidated subsidiary 60,000 50,000
Change in assets and liabilities:
(Increase) decrease in accrued interest receivable (295,474) (214,450)
Increase (decrease) in accrued interest payable (99,803) 56,524
(Increase) decrease in other assets (321,050) 106,631
Increase (decrease) in income taxes payable 70,449 10,045
Increase (decrease) in other liabilities (83,969) (389,079)
----------- -----------
Net cash provided (used) by operating activities 1,257,919 1,330,381
----------- -----------
Cash Flows From Investing Activities:
Capital expenditures (840,300) (410,997)
Proceeds from sale of assets 68,901 -0-
Principal payments on mortgage-backed securities 731,784 319,267
Purchase of available-for-sale securities (8,902,459) (5,807,193)
Proceeds from maturities of available-for-sale securities 10,080,971 4,150,000
Proceeds from calls of held-of-maturity securities -0- 4,546
Proceeds from maturities of held-to-maturity securities -0- 100,000
Purchase of held-to-maturity securities -0- (530,000)
Proceeds from sales of available-for-sale securities -0- 2,162,261
(Increase) decrease in interest-bearing deposits in banks 409,400 593,402
(Increase) decrease in loans (22,972,355) (12,912,818)
(Increase) decrease in cash value of life insurance (375,305) (13,470)
Cash disbursed to acquire First Federal Savings Bank -0- (3,901,055)
Cash and cash equivalent assets received upon acquisition of First Federal Savings Bank -0- 3,915,646
----------- -----------
Net cash provided (used) by investing activities (21,799,363) (12,330,411)
----------- -----------
Cash Flows From Financing Activities:
Proceeds of additional stock issue 111,150 226,527
Increase (decrease) in time deposits 816,115 13,699,412
Increase (decrease) in other deposits (857,981) (5,114,822)
</TABLE>
<PAGE> 9
<TABLE>
PAB BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(UNAUDITED)
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------------------
1996 1995
---------- ----------
<S> <C> <C>
Advances from Federal Home Loan Bank 34,573,000 3,100,000
Payments on long-term indebtedness (20,364,407) (722,500)
Dividends paid (108,385) (215,664)
Acquisition of treasury stock (30,925) (35,637)
Proceeds from sale of treasury stock 283,653 24,305
Increase in federal funds purchased -0- 500,000
Increase in advance payments by borrowers for taxes and insurance 30,912 86,362
----------- -----------
Net cash provided (used) by financing activities 14,453,132 11,547,983
----------- -----------
Net Increase (Decrease) in Cash and Cash Equivalents (6,088,312) 547,953
Cash and Cash Equivalents at Beginning of Period 18,924,870 12,808,797
----------- -----------
Cash and Cash Equivalents at End of Period $12,836,558 13,356,750
=========== ===========
Supplemental Disclosures of Cash Flow Information
- -------------------------------------------------
Cash Paid During The Period For:
Interest $ 5,516,245 4,386,231
=========== ===========
Income taxes $ 792,095 723,430
=========== ===========
Schedule of Non-Cash Investing and Financing Activities
- -------------------------------------------------------
Total increase (decrease) in unrealized losses on securities available-for-sale $ 836,029 (1,586,075)
=========== ===========
Stock issued to directors in payment of fees, stock issued through dividend
reinvestment plan and stock issued to acquire First Federal Savings Bank $ 274,702 4,524,675
=========== ===========
</TABLE>
<PAGE> 10
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 six months ended June 30, 1996 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1996. 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, 1995.
<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 June 30, 1996, and the related statements of income,
stockholders' equity and cash flows, for the three and six months ended June 30,
1996 and 1995 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, 1995, 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 25, 1996, we expressed an unqualified
opinion on those consolidated financial statements.
In our opinion, the information set forth in the accompanying 1995 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
July 3, 1996
<PAGE> 12
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 $1,710,946 for the six months ended June 30, 1996 compared to
$1,520,777 for the six months ended June 30, 1995. Net interest income after
provision for loan losses was $5,237,782 and $4,936,379 for the six months ended
June 30, 1996 and 1995, respectively. The provision for loan losses was
$152,500 and $250,500 for the six months ended June 30, 1996 and 1995,
respectively. Noninterest income totalled $1,176,009 and $1,118,616 for the six
months ended June 30, 1996 and 1995, respectively and noninterest expenses
totalled $3,837,068 and $3,780,337 for the six months ended June 30, 1996 and
1995, respectively.
The following table summarizes the results of operations of the Company for the
three month and six month periods ended June 30, 1996 and 1995.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ -------------------
1996 1995 1996 1995
-------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Interest income $ 5,494 4,953 10,807 9,630
Interest expense (2,695) (2,367) (5,416) (4,443)
-------- -------- -------- --------
Net interest income 2,799 2,586 5,391 5,187
Provision for loan losses (77) (176) (153) (251)
Noninterest income 593 626 1,176 1,119
Noninterest expense (1,915) (1,890) (3,837) (3,780)
-------- -------- -------- --------
Income before taxes 1,400 1,146 2,577 2,275
Income taxes (470) (387) (866) (754)
-------- -------- -------- --------
Net income $ 930 759 1,711 1,521
======== ======== ======== ========
</TABLE>
Interest Income
- ---------------
Total interest income increased approximately $1,177,000 for the six months
ended June 30, 1996 compared to the six months ended June 30, 1995. This
increase is attributed to the factors explained in the following paragraphs.
This increase was the net effect of an increase in the average loan portfolio
balance from approximately $159.5 million for the six months ended June 30, 1995
to approximately $182.2 million for the six months ended June 30, 1996 and a
decrease in the average rate earned on the loan portfolio from 9.65% for the six
months ended June 30, 1995 to 9.53% for the six months ended June 30, 1996. The
effect of these two changes increased the interest income earned on the loan
<PAGE> 13
portfolio from approximately $7,692,000 for the six months ended June 30, 1995
to approximately $8,675,000 for the six months ended June 30, 1996, an increase
of $983,000. Interest income on the loan portfolio increased from
approximately $3,983,000 for the quarter ended June 30, 1995 to approximately
$4,483,000 for the quarter ended June 30, 1996, an increase of $500,000.
Interest earned on taxable investment securities increased from approximately
$1,608,000 for the six months ended June 30, 1995 to approximately $1,861,000
for the six months ended June 30, 1996, an increase of $253,000. This increase
was the combined effect of an increase in the average taxable investment
portfolio balance from approximately $51.2 million for the six months ended June
30, 1995 to approximately $58.9 million for the six months ended June 30, 1996
and an increase in the rate earned on the taxable investment portfolio from
6.28% for the six months ended June 30, 1995 to 6.32% for the six months ended
June 30, 1996. Interest income on the taxable investment portfolio increased
from approximately $790,000 for the quarter ended June 30, 1995 to approximately
$911,000 for the quarter ended June 30, 1996, an increase of $121,000.
Interest earned on nontaxable investment securities increased from approximately
$75,000 for the six months ended June 30, 1995 to approximately $87,000 for the
six months ended June 30, 1996, an increase of $12,000. This increase was the
net effect of an increase in the average non-taxable investment securities
portfolio balance from approximately $2.7 million for the six months ended June
30, 1995 to approximately $3.1 million for the six months ended June 30, 1996
and a decrease in the rate earned on the non-taxable investment portfolio from
5.68% for the six months ended June 30, 1995 to 5.66% for the six months ended
June 30, 1996. Interest income on the non-taxable investment securities
decreased from approximately $38,000 for the quarter ended June 30, 1995 to
approximately $36,000 for the quarter ended June 30, 1996, a decrease of $2,000.
As of June 30, 1996, the amortized cost of taxable and non-taxable investments
consisted of U.S. Treasury securities (24.7%), securities of U.S. Government
Agencies and Corporations (64.4%), obligations of States, Counties and
Municipalities (5.2%) and equity securities (5.5%) and other debt securities
(.2%). 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 losses.
Interest earned on interest-bearing deposits in banks decreased from
approximately $122,000 for the six months ended June 30, 1995 to approximately
$48,000 for the six months ended June 30, 1996, a decrease of $74,000. This
decrease was the combined effect of a decrease in the average interest-bearing
deposits balance from approximately $4.5 million for the six months ended June
30, 1995 to approximately $2.7 million for the six months ended June 30, 1996
and a decrease in the rate earned on the interest-bearing deposits from 5.41%
for the six months ended June 30, 1995 to 3.53% for the six months ended June
30, 1996. Interest income on the interest-bearing deposits decreased from
approximately $44,000 for the quarter ended June 30, 1995 to approximately
$21,000 for the quarter ended June 30, 1996, a decrease of $23,000.
Interest earned on federal funds sold increased from approximately $132,000 for
the six months ended June 30, 1995 to approximately $136,000 for the six months
ended June 30, 1996, an increase of $4,000. This increase was the net effect of
an increase in the average federal funds sold balance from approximately $2.7
<PAGE> 14
million for the six months ended June 30, 1995 to approximately $5.3 million for
the six months ended June 30, 1996 and a decrease in the rate earned on the
federal funds sold from 6.13% for the six months ended June 30, 1995 to 5.13%
for the six months ended June 30, 1996. Interest income on federal funds sold
decreased from approximately $98,000 for the quarter ended June 30, 1995 to
approximately $42,000 for the quarter ended June 30, 1996, a decrease of
$56,000.
Interest Expense
- ----------------
Total interest expense increased approximately $973,000 for the six months ended
June 30, 1996 compared to the six months ended June 30, 1995. 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 $182.3 million for the six months
ended June 30, 1995 to approximately $199.8 million for the six months ended
June 30, 1996 and an increase in the average rate paid on interest-bearing
deposits from 4.60% for the six months ended June 30, 1995 to 5.04% for the six
months ended June 30, 1996. The effect of these changes increased the interest
expense on interest-bearing deposits from approximately $4,195,000 for the six
months ended June 30, 1995 to approximately $5,031,000 for the six months ended
June 30, 1996, an increase of $836,000. Interest expense on interest-bearing
deposits increased from approximately $2,231,000 for the quarter ended June 30,
1995 to approximately $2,495,000 for the quarter ended June 30, 1996, an
increase of $264,000. The increase in interest-bearing deposits came from the
local communities served by the Banks.
All other interest expense consisting principally of notes and mortgages
payable, increased from approximately $247,000 for the six months ended June 30
30, 1995 to approximately $385,000 for the six months ended June 30, 1996, an
increase of $138,000. This increase was the combined effect of an increase in
the average balance of advances from the Federal Home Loan Bank from
approximately $6.1 million for the six months ended June 30, 1995 to
approximately $13.2 million for the six months ended June 30, 1996 and an
increase in the average rate paid on the advances from 5.46% for the six months
ended June 30, 1995 to 5.60% for the six months ended June 30, 1996. Interest
of approximately $14,000 was paid on federal funds purchased during the six
months ended June 30, 1996 and approximately $2,000 during the six months ended
June 30, 1995. Additionally, the Company had notes payable outstanding to a
correspondent bank in the amount of $2.2 million at June 30, 1996 (average
balance of $2.5 million). The advances from the Federal Home Loan Bank in the
amount of $22.6 million carry a combination of fixed and variable interest rate
averaging 5.60% at June 30, 1996 with maturities through 2010. The note payable
to a correspondent bank in the amount of $2.2 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 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 June 30, 1996. The correspondent bank loan was to
partially fund the acquisition of First Federal Savings Bank of Bainbridge. 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> 15
Noninterest Income
- ------------------
The following table presents the principal components of noninterest income for
the three month and six month periods ended June 30, 1996 and 1995.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ -------------------
1996 1995 1996 1995
-------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Service charges on deposit
accounts $ 421 351 808 680
Insurance commissions 21 15 27 23
Fees on mortgage loans sold -0- 2 -0- 5
Gain (Loss) on sale of loans -0- 1 4 -0-
Securities gains (losses) (5) 122 22 122
Gain (loss) on sale of assets -0- -0- 3 -0-
Equity in earnings of
unconsolidated subsidiary 38 32 84 71
Other income 118 103 228 218
-------- -------- -------- --------
Total Noninterest Income $ 593 626 1,176 1,119
======== ======== ======== ========
</TABLE>
Noninterest income for the six months ended June 30, 1996 as compared to the six
months ended June 30, 1995 increased approximately $57,000.
Service charges on deposit accounts for the six months ended June 30, 1996 as
compared to the six months ended June 30, 1995, increased approximately
$128,000. This increase was related primarily to an increase in the number of
transaction deposit accounts with NSF charges. Equity in earnings of
unconsolidated subsidiary which 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 increased $13,000. During the six months
ended June 30, 1996, the Company realized gains on the sale of securities from
the available-for-sale portfolio of approximately $22,000 and approximately
$122,000 during the six months ended June 30, 1995. All other income increased
approximately $16,000.
<PAGE> 16
Noninterest Expenses
- --------------------
The following table presents the principal components of noninterest expenses
for the three month and six month periods ended June 30, 1996 and 1995.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ -------------------
1996 1995 1996 1995
-------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Compensation $ 852 810 1,706 1,612
Other personnel expenses 193 204 375 421
Occupancy expense of bank
premises 100 94 203 181
Furniture and equipment expense 189 171 373 335
Federal deposit insurance 35 115 69 230
Postage and courier services 49 41 95 93
Supplies 68 55 126 115
Amortization 27 30 54 59
Other operating expenses 402 370 836 734
-------- -------- -------- --------
Total Noninterest Expenses $ 1,915 1,890 3,837 3,780
======== ======== ======== ========
</TABLE>
Noninterest expenses for the six months ended June 30, 1996 as compared to the
six months ended June 30, 1995, increased approximately $57,000 or 1.5%.
Compensation and other personnel expenses increased approximately $48,000 for
the six months ended June 30, 1996 as compared to the six months ended June 30,
1995. This increase reflects increases in the number of employees, in wage
levels and in the cost of employee benefits. Excluding federal deposit
insurance, all other expenses increased approximately $170,000 for the six
months ended June 30, 1996 compared to the six months ended June 30, 1995 or
11.2%. This increase was primarily the result of a larger volume of business.
Federal deposit insurance decreased $161,000 for the six months ended June 30,
1996 compared to the six months ended June 30, 1995.
Provision for Loan Losses
- -------------------------
The provision for loan losses for the six months ended June 30, 1996 was
$153,000 compared to $251,000 for the six months ended June 30, 1995. The
balance of the allowance for loan losses was approximately $2,434,000 (1.3% of
outstanding loans) at June 30, 1996 and approximately $2,160,000 (1.3% of
outstanding loans) at June 30, 1995. Actual loan charge-offs net of recoveries
were approximately $13,000 of net charge-offs for the six months ended June 30,
1996 and approximately $69,000 of net charge-offs for the six months ended June
30, 1995. Non-accrual loans were approximately $229,000 at June 30, 1996 as
compared to $198,000 at December 31, 1995. Loans ninety days or more past due
and still accruing amounted to approximately $166,000 at June 30, 1996 and
$302,000 at December 31, 1995. In determining an adequate level of loan loss
<PAGE> 17
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.
Income Taxes
- ------------
The effective tax rate for the six months ended June 30, 1996 was 33.6% compared
to 33.1% for the six months ended June 30, 1995.
Financial Condition
- -------------------
The Company, including its subsidiaries, reported consolidated total assets of
approximately $282.6 million at June 30, 1996 and approximately $267.1 million
at December 31, 1995 representing an increase of approximately $15.5 million.
During the six months ended June 30, 1996, Federal Funds sold decreased $5.3
million, cash and due from banks decreased $.2 million, advances from the
Federal Home Loan Bank increased $14.7 million, operations generated $1.3
million, interest bearing deposits decreased $1.0 million, investment securities
decreased $1.9 million and proceeds of additional stock issued were $.4 million
which provided $24.8 million of funds which were used to fund increases in loans
of $23.0 million, pay dividends of approximately $.1 million, reduce note
payable to correspondent bank by $.5 million, increase capital expenditures by
$.8 million and acquire additional life insurance on key officers participating
in the salary continuation plan of $.4 million.
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 losses for the available-for-sale category of approximately
$534,000 ($343,000 net of income tax effect). All securities were held in the
available-for-sale category as of June 30, 1996. 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).
<PAGE> 18
The Company and its subsidiary banks are required to maintain minimum amounts of
capital to total "risk weighted" assets, as defined by the banking regulators.
At June 30, 1996, a comparison of the minimum required and actual capital ratios
are as follows:
<TABLE>
<CAPTION>
CONSOLIDATED
------------------
MINIMUM
REQUIRED ACTUAL
-------- --------
<S> <C> <C>
Leverage Capital Ratio 4.0 8.9
Tier One Capital to
"Risk Weighted" Assets 4.0 13.4
Tier Two Capital to
"Risk Weighted" Assets 8.0 14.7
</TABLE>
Each entity was in full compliance with its respective regulatory capital
requirements.
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 June 30, 1996, the Company's cash
and due from banks were approximately $8.6 million in excess of its reserve
requirements of approximately $.9 million, its short-term deposits with
financial institutions were approximately $2.4 million and its federal funds
sold were approximately $1.7 million. All of the above can be converted to cash
on short notice. The sale of investments which had a market value of
approximately $60.1 million at June 30, 1996 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 $20.4 million were pledged as of June 30, 1996.
The Banks' funding needs are based primarily on the volume of lending. The
primary funding source is from new deposits and advances from the Federal Home
Loan Bank. 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.
<PAGE> 19
The Banks do not pay premiums to attract deposits. The Banks continue to expect
that new deposits and advances 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 $22.6 million
at June 30, 1996, at an average rate of 5.60%.
Through the Company's dividend reinvestment and common stock purchase plans, an
additional 25,488 shares at an average of $12.38 per share was issued during the
six months ended June 30, 1996.
<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.
In May 1996, the Company split its stock 2-for-1. Additionally,
in July 1996, the stock of the Company began trading on the
American Stock Exchange.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
Exhibit No.
-----------
27.1 Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the period covered
by this Report.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
<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: August 13, 1996
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 9,559,469
<INT-BEARING-DEPOSITS> 2,371,089
<FED-FUNDS-SOLD> 1,700,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 60,080,078
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 194,483,735
<ALLOWANCE> 2,433,639
<TOTAL-ASSETS> 282,611,638
<DEPOSITS> 231,183,610
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,720,953
<LONG-TERM> 24,849,666
<COMMON> 1,263,745
0
0
<OTHER-SE> 23,593,664
<TOTAL-LIABILITIES-AND-EQUITY> 282,611,638
<INTEREST-LOAN> 8,675,479
<INTEREST-INVEST> 1,947,912
<INTEREST-OTHER> 183,333
<INTEREST-TOTAL> 10,806,724
<INTEREST-DEPOSIT> 5,031,243
<INTEREST-EXPENSE> 5,416,442
<INTEREST-INCOME-NET> 5,390,282
<LOAN-LOSSES> 152,500
<SECURITIES-GAINS> 22,367
<EXPENSE-OTHER> 3,837,068
<INCOME-PRETAX> 2,576,723
<INCOME-PRE-EXTRAORDINARY> 1,710,946
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,710,946
<EPS-PRIMARY> .63
<EPS-DILUTED> .63
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 0
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
