<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, 1997
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, 1997 was 2,825,963 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 - SEPTEMBER 30, 1997
(UNAUDITED) AND DECEMBER 31, 1996 . . . . . . . . . . . 3
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) - THREE
MONTH AND NINE MONTH PERIODS ENDED SEPTEMBER 30,
1997 AND 1996 . . . . . . . . . . . . . . . . . . . . . 4
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED) - NINE MONTH PERIODS ENDED SEPTEMBER 30,
1997 AND 1996 . . . . . . . . . . . . . . . . . . . . . 5
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) -
NINE MONTH PERIODS ENDED SEPTEMBER 30, 1997 AND 1996 . . 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION . . . . . . . . . . . . . . . . . . . 9
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . 17
ITEM 2. CHANGES IN SECURITIES . . . . . . . . . . . . . . . . . . . . . 17
ITEM 3. DEFAULTS UPON SENIOR SECURITIES . . . . . . . . . . . . . . . . 17
ITEM 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS . . . . . . . . . . . . . . . . . . 17
ITEM 5. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . 17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . 17
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
<PAGE> 3
<TABLE>
PAB BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
---------------------------
ASSETS
------
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------ ------------
(Unaudited)
<S> <C> <C>
Cash and Cash Equivalents:
Cash and due from banks $ 13,183,108 9,739,420
Interest-bearing deposits in other banks 1,941,732 3,907,836
Federal funds sold and securities purchased under
agreement to resell 3,940,000 14,515,000
------------ ------------
Total Cash and Cash Equivalents 19,064,840 28,162,256
Time Deposits 297,000 595,000
Investment Securities (Fair value of $53,232,990 in 1997 and $56,783,089 in 1996) 53,232,990 56,783,089
Investment in Unconsolidated Subsidiary 97,521 130,872
Loans, Net of Allowance for Loan Losses ($2,782,282 - 1997; $2,550,242 - 1996)
and Unearned Interest 218,105,694 195,856,247
Bank Premises and Equipment 7,171,257 6,707,165
Property Acquired in Settlement of Loans and Other Real Estate Owned:
Land and building of former banking offices 444,062 445,457
Land held for future development 366,790 366,790
Property acquired in settlement of loans 24,422 334,596
Accrued Interest Receivable 3,757,504 3,175,569
Cash Value of Life Insurance 2,355,309 1,957,298
Goodwill 2,185,242 2,266,170
Other Assets 882,265 524,372
------------ ------------
Total Assets $307,984,896 297,304,881
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Deposits:
Demand $ 35,552,859 40,203,157
NOW 52,618,287 51,926,581
Savings 17,515,401 17,431,631
Time, $100,000 and over 44,759,025 45,525,141
Other time 100,364,624 94,587,414
------------ ------------
250,810,196 249,673,924
Notes Payable 700,000 1,200,000
Advances from Federal Home Loan Bank 24,126,083 17,096,499
Accrued Interest Payable 719,902 725,549
Advance Payments by Borrowers for Taxes and Insurance 280,407 159,505
Dividends Payable 210,777 210,214
Other Liabilities 1,259,323 1,172,677
------------ ------------
Total Liabilities 278,106,688 270,238,368
------------ ------------
Stockholders' Equity:
Common stock, no par value, 15,000,000 shares authorized,
2,908,119 shares (1996 - 2,892,639) issued and 2,825,963
shares (1996 - 2,802,849) outstanding 1,263,745 1,263,745
Preferred stock, no par value, 1,500,000 shares authorized,
no shares issued or outstanding -0- -0-
Additional paid in capital 15,934,580 15,609,717
Retained earnings 13,659,798 11,246,210
Unrealized gains (losses) on available-for-sale securities, net of applicable
deferred income taxes 3,274 21,388
------------ ------------
30,861,397 28,141,060
Treasury stock, at cost (82,156 shares; 1996 - 89,790) (983,189) (1,074,547)
------------ ------------
29,878,208 27,066,513
------------ ------------
Total Liabilities and Stockholders' Equity $307,984,896 297,304,881
============ ============
</TABLE>
<PAGE> 4
<TABLE>
PAB BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------------- -------------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Interest Income:
Interest and fees on loans $ 5,388,064 4,666,689 15,310,633 13,342,168
Interest on investment securities:
Taxable 821,939 905,666 2,537,989 2,767,078
Tax exempt 34,568 33,552 95,821 120,052
Interest on federal funds sold 63,669 35,436 219,802 171,088
Interest on deposits in banks 53,439 40,584 143,852 88,265
----------- ----------- ----------- -----------
Total 6,361,679 5,681,927 18,308,097 16,488,651
----------- ----------- ----------- -----------
Interest Expense:
Interest on deposits 2,648,381 2,461,458 7,721,272 7,492,701
Interest on federal funds purchased (1,058) 10,661 18,435 24,944
Interest on notes and mortgages 18,521 34,354 63,563 132,407
Interest on advances from Federal Home Loan Bank 329,795 288,169 849,755 561,032
----------- ----------- ----------- -----------
Total 2,995,639 2,794,642 8,653,025 8,211,084
----------- ----------- ----------- -----------
Net Interest Income 3,366,040 2,887,285 9,655,072 8,277,567
Provision for Loan Losses 183,800 176,250 377,800 328,750
----------- ----------- ----------- -----------
Net Interest Income After Provision for Loan Losses 3,182,240 2,711,035 9,277,272 7,948,817
----------- ----------- ----------- -----------
Other Income:
Service charges on deposit accounts 466,315 398,883 1,363,605 1,206,519
Insurance commissions 32,001 12,155 75,441 39,191
Equity in earnings of unconsolidated subsidiary 26,506 103,548 186,648 187,146
Gain (Loss) on sale of loans 4,960 2,608 23,262 6,991
Gain (Loss) on sale of assets -0- -0- -0- 2,890
Gain on sale of real estate owned -0- -0- 2,154 -0-
Other income 130,295 125,344 430,776 353,443
Securities gains (losses) 4,310 102,179 (18,755) 124,546
----------- ----------- ----------- -----------
Total 664,387 744,717 2,063,131 1,920,726
----------- ----------- ----------- -----------
Other Expenses:
Compensation 1,073,387 886,212 2,971,306 2,592,069
Other personnel expenses 241,516 189,217 717,660 564,236
Occupancy expense of bank premises 102,265 104,898 316,906 307,844
Furniture and equipment expense 238,890 183,407 584,399 556,507
Federal deposit insurance 21,922 34,180 44,436 103,146
Special SAIF assessment -0- 384,882 -0- 384,882
Postage and courier services 45,011 47,201 167,816 142,165
Supplies 85,226 74,929 257,346 201,014
Amortization 26,976 26,976 80,928 80,928
Other operating expenses 463,588 411,701 1,404,534 1,247,880
----------- ----------- ----------- -----------
Total 2,298,781 2,343,603 6,545,331 6,180,671
----------- ----------- ----------- -----------
Income Before Income Taxes 1,547,846 1,112,149 4,795,072 3,688,872
Income Taxes 571,840 398,109 1,661,528 1,263,886
----------- ----------- ----------- -----------
Net Income $ 976,006 714,040 3,133,544 2,424,986
=========== =========== =========== ===========
Earnings Per Share $ .34 .25 1.10 .88
=========== =========== =========== ===========
Weighted Average Shares 2,870,606 2,856,160 2,859,611 2,748,517
=========== =========== =========== ===========
</TABLE>
<PAGE> 5
<TABLE>
PAB BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
---------------------------------------------
<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, 1995 $1,263,745 14,744,822 8,646,738 184,469 1,461,043 23,378,731
Issuance of 6,692 shares at $10.50
to directors in lieu of fees -0- 70,265 -0- -0- -0- 70,265
Issuance of 27,344 shares at $12.57
average through dividend reinvestment
plan -0- 343,791 -0- -0- -0- 343,791
Issuance of 16,945 shares at $13.44
average through common stock purchase
plan -0- 227,679 -0- -0- -0- 227,679
Net Income -0- -0- 2,424,986 -0- -0- 2,424,986
Acquisition of 2,474 shares of treasury stock -0- -0- -0- -0- 30,925 (30,925)
Sale of 34,880 shares of treasury stock -0- 68,153 -0- -0- (417,421) 485,574
Dividends -0- -0- (538,868) -0- -0- (538,868)
Change in unrealized gains and (losses)
on available-for-sale securities, net
of applicable deferred income taxes -0- -0- -0- (487,733) -0- (487,733)
----------- ----------- ----------- ----------- ----------- -----------
Balances, September 30, 1996 (Unaudited) $ 1,263,745 15,454,710 10,532,856 (303,264) 1,074,547 25,873,500
=========== =========== =========== =========== =========== ===========
Balances, December 31, 1996 1,263,745 15,609,717 11,246,210 21,388 1,074,547 27,066,513
Issuance of 13,075 shares at $20.65
average through dividend reinvestment
plan -0- 270,062 -0- -0- -0- 270,062
Issuance of 2,405 shares at $21.09
through common stock purchase plan -0- 50,732 -0- -0- -0- 50,732
</TABLE>
<PAGE> 6
<TABLE>
PAB BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
---------------------------------------------
<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>
Issuance of 7,634 shares at $12.50
to Directors in lieu of fees -0- 4,069 -0- -0- (91,358) 95,427
Net Income -0- -0- 3,133,544 -0- -0- 3,133,544
Dividends -0- -0- (719,956) -0- -0- (719,956)
Change in unrealized gains and losses
on available-for-sale securities, net
of applicable deferred income taxes -0- -0- -0- (18,114) -0- (18,114)
----------- ----------- ----------- ----------- ----------- -----------
Balances, September 30, 1997 (Unaudited) $ 1,263,745 15,934,580 13,659,798 3,274 983,189 29,878,208
=========== =========== =========== =========== =========== ===========
</TABLE>
<PAGE> 7
<TABLE>
PAB BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(UNAUDITED)
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------------
1997 1996
---------- ----------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 3,133,544 2,424,986
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 482,563 367,569
Deferred income taxes (24,761) (17,947)
Provision for loan losses 377,800 328,750
Amortization of goodwill 80,928 80,928
Amortization (accretion) of subsidiary acquisition adjustments (79,866) (142,252)
(Gain) loss on sale of loans (23,262) (6,991)
Securities (gains) losses 18,755 (124,546)
(Gain) loss on sale of assets -0- (2,890)
(Gain) loss on sale of real estate owned (2,154) -0-
Minority interests 472 332
Equity in earnings of unconsolidated subsidiary (186,648) (187,146)
Dividend received from unconsolidated subsidiary 220,000 160,000
Increase in cash value of life insurance (62,161) (43,610)
Change in assets and liabilities:
(Increase) decrease in accrued interest receivable (581,935) (449,850)
Increase (decrease) in accrued interest payable (5,647) (104,574)
(Increase) decrease in other assets (338,122) (143,989)
Increase (decrease) in income taxes payable -0- (24,235)
Increase (decrease) in other liabilities 181,747 554,203
----------- -----------
Net cash provided (used) by operating activities 3,191,253 2,668,738
----------- -----------
Cash Flows From Investing Activities:
Capital expenditures (945,260) (909,798)
Proceeds from sale of assets -0- 68,901
Principal payments on mortgage-backed securities 488,351 992,737
Purchase of available-for-sale securities (16,134,741) (15,506,817)
Proceeds from maturities of available-for-sale securities 12,166,133 12,480,971
Proceeds from sales of available-for-sale securities 7,076,801 5,441,297
(Increase) decrease in interest-bearing deposits in banks 298,000 608,400
(Increase) decrease in loans (22,290,263) (22,018,827)
(Increase) decrease in cash value of life insurance (335,850) (347,081)
----------- -----------
Net cash provided (used) by investing activities (19,676,829) (19,190,217)
----------- -----------
Cash Flows From Financing Activities:
Proceeds of additional stock issued 50,732 223,939
Increase (decrease) in time deposits 5,011,094 6,607,872
Increase (decrease) in other deposits (3,874,822) (5,019,164)
Advances from Federal Home Loan Bank 13,350,000 57,067,000
Payments on long-term indebtedness (6,820,416) (45,211,657)
Dividends paid (449,330) (148,562)
Acquisition of treasury stock -0- (30,925)
Proceeds from sale of treasury stock -0- 485,574
Increase (decrease) in federal funds purchased -0- 1,200,000
Increase in advance payments by borrowers for taxes and insurance 120,902 89,377
----------- -----------
Net cash provided (used) by financing activities 7,388,160 15,263,454
----------- -----------
Net Increase (Decrease) in Cash and Cash Equivalents (9,097,416) (1,258,025)
Cash and Cash Equivalents at Beginning of Period 28,162,256 18,924,870
----------- -----------
Cash and Cash Equivalents at End of Period $19,064,840 17,666,845
=========== ===========
Supplemental Disclosures of Cash Flow Information
- -------------------------------------------------
Cash Paid During The Period For:
Interest $ 8,658,672 8,315,658
=========== ===========
Income taxes $ 1,750,346 1,309,445
=========== ===========
Schedule of Non-Cash Investing and Financing Activities
- -------------------------------------------------------
Total increase (decrease) in unrealized losses on securities available-for-sale $ 31,633 810,829
=========== ===========
Stock issued to directors in payment of fees and stock issued through dividend
reinvestment plan $ 365,489 414,056
=========== ===========
</TABLE>
<PAGE> 8
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, 1997 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1997. 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, 1996.
<PAGE> 9
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 $3,133,544 for the nine months ended September 30, 1997 compared
to $2,424,986 for the nine months ended September 30, 1996. Net interest income
after provision for loan losses was $9,277,272 and $7,948,817 for the nine
months ended September 30, 1997 and 1996, respectively. The provision for loan
losses was $377,800 and $328,750 for the nine months ended September 30, 1997
and 1996, respectively. Noninterest income totalled $2,063,131 and $1,920,726
for the nine months ended September 30, 1997 and 1996, respectively and
noninterest expenses totalled $6,545,331 and $6,180,671 for the nine months
ended September 30, 1997 and 1996, respectively.
The following table summarizes the results of operations of the Company for the
three month and nine month periods ended September 30, 1997 and 1996.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -------------------
1997 1996 1997 1996
-------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Interest income $ 6,362 5,682 18,308 16,489
Interest expense (2,996) (2,795) (8,653) (8,211)
-------- -------- -------- --------
Net interest income 3,366 2,887 9,655 8,278
Provision for loan losses (184) (176) (378) (329)
Noninterest income 664 745 2,063 1,921
Special SAIF assessment -0- (385) -0- (385)
Other noninterest expense (2,298) (1,959) (6,545) (5,796)
-------- -------- -------- --------
Income before taxes 1,548 1,112 4,795 3,689
Income taxes (572) (398) (1,661) (1,264)
-------- -------- -------- --------
Net income $ 976 714 3,134 2,425
======== ======== ======== ========
Earnings per share $ .34 .25 1.10 .88
======== ======== ======== ========
</TABLE>
Interest Income
- ---------------
Total interest income increased approximately $1,819,000 for the nine months
ended September 30, 1997 compared to the nine months ended September 30, 1996.
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 $185.0 million for the nine months ended
September 30, 1996 to approximately $210.0 million for the nine months ended
September 30, 1997 and an increase in the average rate earned on the loan
portfolio from 9.62% for the nine months ended September 30, 1996 to 9.72% for
the nine months ended September 30, 1997. The effect of these two changes
increased the interest income earned on the loan portfolio from approximately
$13,342,000 for the nine months ended September 30, 1996 to approximately
$15,311,000 for the nine months ended September 30, 1997, an increase of
$1,969,000. Interest income on the loan portfolio increased from approximately
$4,667,000 for the quarter ended September 30, 1996 to approximately $5,388,000
for the quarter ended September 30, 1997, an increase of $721,000.
Interest earned on taxable investment securities decreased from approximately
<PAGE> 10
$2,767,000 for the nine months ended September 30, 1996 to approximately
$2,538,000 for the nine months ended September 30, 1997, a decrease of $229,000.
This decrease was the net effect of a decrease in the average taxable investment
portfolio balance from approximately $58.2 million for the nine months ended
September 30, 1996 to approximately $52.4 million for the nine months ended
September 30, 1997 and an increase in the rate earned on the taxable investment
portfolio from 6.34% for the nine months ended September 30, 1996 to 6.46% for
the nine months ended September 30, 1997. Interest income on the taxable
investment portfolio decreased from approximately $906,000 for the quarter ended
September 30, 1996 to approximately $822,000 for the quarter ended September 30,
1997, a decrease of $84,000.
Interest earned on nontaxable investment securities decreased from approximately
$120,000 for the nine months ended September 30, 1996 to approximately $96,000
for the nine months ended September 30, 1997, a decrease of $24,000. This
decrease was the combined effect of a decrease in the average nontaxable
investment securities balance from approximately $3.1 million for the nine
months ended September 30, 1996 to approximately $2.5 million for the nine
months ended September 30, 1997 and a decrease in the rate earned on the non-
taxable investment portfolio from 5.19% for the nine months ended September 30,
1996 to 5.10% for the nine months ended September 30, 1997. Interest income on
the non-taxable investment securities increased from approximately $34,000 for
the quarter ended September 30, 1996 to approximately $35,000 for the quarter
ended September 30, 1997, an increase of $1,000.
As of September 30, 1997, the amortized cost of taxable and non-taxable
investments consisted of U.S. Treasury securities (20.9%), securities of U.S.
Government Agencies and Corporations (67.3%), obligations of States, Counties
and Municipalities (5.3%) and equity securities (6.5%). 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.
Interest earned on interest-bearing deposits in banks increased from
approximately $88,000 for the nine months ended September 30, 1996 to
approximately $144,000 for the nine months ended September 30, 1997, an increase
of $56,000. This increase was the combined effect of an increase in the average
interest-bearing deposits balance from approximately $2.6 million for the nine
months ended September 30, 1996 to approximately $3.7 million for the nine
months ended September 30, 1997 and an increase in the rate earned on the
interest-bearing deposits from 4.57% for the nine months ended September 30,
1996 to 5.18% for the nine months ended September 30, 1997. Interest income on
the interest-bearing deposits increased from approximately $41,000 for the
quarter ended September 30, 1996 to approximately $53,000 for the quarter ended
September 30, 1997, an increase of $12,000.
Interest earned on federal funds sold increased from approximately $171,000 for
the nine months ended September 30, 1996 to approximately $220,000 for the nine
months ended September 30, 1997, an increase of $49,000. This increase was the
combined effect of an increase in the average federal funds sold balance from
approximately $4.6 million for the nine months ended September 30, 1996 to
approximately $5.2 million for the nine months ended September 30, 1997 and an
increase in the rate earned on the federal funds sold from 4.98% for the nine
months ended September 30, 1996 to 5.63% for the nine months ended September 30,
1997. Interest income on federal funds sold increased from approximately
$35,000 for the quarter ended September 30, 1996 to approximately $64,000 for
the quarter ended September 30, 1997, an increase of $29,000.
<PAGE> 11
Interest Expense
- ----------------
Total interest expense increased approximately $442,000 for the nine months
ended September 30, 1997 compared to the nine months ended September 30, 1996.
This increase is attributed to the factors explained in the following
paragraphs.
This increase was the net effect of an increase in the average balance of
interest-bearing deposits from approximately $199.6 million for the nine months
ended September 30, 1996 to approximately $211.4 million for the nine months
ended September 30, 1997 and a decrease in the average rate paid on interest-
bearing deposits from 5.00% for the nine months ended September 30, 1996 to
4.87% for the nine months ended September 30, 1997. The effect of these changes
increased the interest expense on interest-bearing deposits from approximately
$7,493,000 for the nine months ended September 30, 1996 to approximately
$7,721,000 for the nine months ended September 30, 1997, an increase of
$228,000. The increase in interest-bearing deposits came from the local
communities served by the Banks. Interest expense on interest-bearing deposits
increased from approximately $2,461,000 for the quarter ended September 30, 1996
to approximately $2,648,000 for the quarter ended September 30, 1997, an
increase of $187,000.
All other interest expense consisting principally of notes and mortgages
payable, increased from approximately $718,000 for the nine months ended
September 30, 1996 to approximately $932,000 for the nine months ended September
30, 1997, an increase of $214,000. This increase was the combined effect of an
increase in the average balance of advances from the Federal Home Loan Bank from
approximately $15.1 million for the nine months ended September 30, 1996 to
approximately $18.9 million for the nine months ended September 30, 1997 and an
increase in the average rate paid on the advances from 4.96% for the nine months
ended September 30, 1996 to 6.00% for the nine months ended September 30, 1997.
Interest of approximately $18,000 was paid on federal funds purchased during the
nine months ended September 30, 1997 and approximately $25,000 during the nine
months ended September 30, 1996. No funds were outstanding at September 30,
1997. Funds outstanding at September 30, 1996 totalled $1,200,000.
Additionally, the Company had notes payable outstanding to a correspondent bank
in the amount of $.7 million at September 30, 1997 (average balance of $1.1
million).
The advances from the Federal Home Loan Bank in the amount of $24.1 million
carry a combination of fixed and variable interest rates ranging from 5.20% to
7.24% at September 30, 1997 with maturities through 2010.
The note payable to a correspondent bank in the amount of $.7 million is at
prime less .50% subject to a ceiling of 9.50% until July 1, 1999, secured by the
stock of First Community Bank of Southwest Georgia 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 note is in a
prepaid status at September 30, 1997.
The correspondent bank loan was to partially fund the acquisition of First
Community Bank of Southwest Georgia and the acquisition of 123,106 shares of
treasury stock for approximately $1.5 million in 1995. 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> 12
Noninterest Income
- ------------------
The following table presents the principal components of noninterest income for
the three month and nine month periods ended September 30, 1997 and 1996.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -------------------
1997 1996 1997 1996
-------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Service charges on deposit
accounts $ 466 399 1,364 1,207
Insurance commissions 32 12 75 39
Gain (Loss) on sale of loans 5 3 23 7
Gain (Loss) on sale of assets -0- -0- -0- 3
Gain on sale of real estate
owned -0- -0- 2 -0-
Securities gains (losses) 4 102 (19) 125
Equity in earnings of
unconsolidated subsidiary 27 104 187 187
Other income 130 125 431 353
-------- -------- -------- --------
Total Noninterest Income $ 664 745 2,063 1,921
======== ======== ======== ========
</TABLE>
Noninterest income for the nine months ended September 30, 1997 as compared to
the nine months ended September 30, 1996 increased approximately $142,000.
Service charges on deposit accounts for the nine months ended September 30, 1997
as compared to the nine months ended September 30, 1996, increased approximately
$157,000. 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 Community Bank of Southwest Georgia, which was acquired by
the Company effective January 1, 1995 was unchanged at approximately $187,000.
During the nine months ended September 30, 1997, the Company realized losses on
the sale of securities from the available-for-sale portfolio of approximately
$(19,000) and approximately $125,000 of gains during the nine months ended
September 30, 1996. All other income increased approximately $127,000.
<PAGE> 13
Noninterest Expenses
- --------------------
The following table presents the principal components of noninterest expenses
for the three month and nine month periods ended September 30, 1997 and 1996.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -------------------
1997 1996 1997 1996
-------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Compensation $ 1,073 886 2,971 2,592
Other personnel expenses 242 189 718 564
Occupancy expense of bank
premises 102 105 317 308
Furniture and equipment
expense 239 184 584 557
Federal deposit insurance 22 34 44 103
Postage and courier services 45 47 168 142
Supplies 85 75 257 201
Amortization 27 27 81 81
Other operating expenses 464 412 1,405 1,248
-------- -------- -------- --------
Noninterest expenses before
special SAIF assessment 2,299 1,959 6,545 5,796
Special SAIF assessment -0- 385 -0- 385
-------- -------- -------- --------
Total Noninterest Expense $ 2,299 2,344 6,545 6,181
======== ======== ======== ========
</TABLE>
Noninterest expenses for the nine months ended September 30, 1997 as compared to
the nine months ended September 30, 1996, increased approximately $749,000 or
12.9%, excluding the effect of the special SAIF assessment in 1996.
Compensation and other personnel expenses increased approximately $533,000 for
the nine months ended September 30, 1997 as compared to the nine months ended
September 30, 1996. This increase reflects increases in the number of
employees, in wage levels and in the cost of employee benefits. All other
expenses increased approximately $216,000 or 8.2% for the nine months ended
September 30, 1997 compared to the nine months ended September 30, 1996. 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, 1997 was
$378,000 compared to $329,000 for the nine months ended September 30, 1996. The
balance of the allowance for loan losses was approximately $2,782,000 (1.3% of
outstanding loans) at September 30, 1997 and approximately $2,580,000 (1.3% of
outstanding loans) at September 30, 1996. Actual loan charge-offs net of
recoveries were approximately $146,000 of net charge-offs for the nine months
ended September 30, 1997 and approximately $43,000 of net charge-offs for the
nine months ended September 30, 1996. Non-accrual loans were approximately
$219,000 at September 30, 1997 as compared to $291,000 at December 31, 1996.
Loans ninety days or more past due and still accruing amounted to approximately
$295,000 at September 30, 1997 and $241,000 at December 31, 1996. 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> 14
Income Taxes
- ------------
The effective tax rate for the nine months ended September 30, 1997 was 34.7%
compared to 34.3% for the nine months ended September 30, 1996.
Financial Condition
- -------------------
The Company, including its subsidiaries, reported consolidated total assets of
approximately $308.0 million at September 30, 1997 and approximately $297.3
million at December 31, 1996, representing an increase of approximately $10.7
million.
During the nine months ended September 30, 1997, deposits increased $1.1
million, federal funds sold decreased $10.6 million, advances from the Federal
Home Loan Bank increased $7.0 million, operations generated $3.2 million,
interest bearing deposits decreased $2.3 million, and investment securities
decreased by $3.6 million which provided $27.8 million of funds which were used
to fund increases in loans of $22.3 million, pay dividends of approximately $.4
million and increase capital expenditures by $.9 million, increase cash by $3.4
million, reduce note payable to correspondent bank by $.5 million and increase
cash value of life insurance on key officers by $.3 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 gains for the available-for-sale category of approximately
$16,000 ($3,000 net of income tax effect). All securities are held in the
available-for-sale category as of September 30, 1997. 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> 15
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 September 30, 1997, a comparison of the minimum required and actual capital
ratios are as follows:
<TABLE>
<CAPTION>
TO BE WELL
FOR CAPITAL CAPITALIZED UNDER
ADEQUACY PROMPT CORRECTIVE
ACTUAL PURPOSES ACTION PROVISIONS
--------------- -------------- -----------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------ ----- ------ ----- ------ -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
As of September 30, 1997
Total Capital
(to Risk Weighted
Assets) $30,365 13.5% 17,994 8.0% 22,493 10.0%
Tier 1 Capital
(to Risk Weighted
Assets) 27,582 12.3% 8,970 4.0% 13,455 6.0%
Tier 1 Capital
(to Average Assets) 27,582 9.1% 12,124 4.0% 15,155 5.0%
</TABLE>
Each individual 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 September 30, 1997, the Company's
cash and due from banks were approximately $11.9 million in excess of its
reserve requirements of approximately $1.3 million, its short-term deposits with
financial institutions were approximately $2.2 million and its federal funds
sold were approximately $3.9 million. All of the above can be converted to cash
on short notice. The sale of investments which had a market value of
approximately $53.2 million at September 30, 1997 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 $19.4 million were pledged as of September 30, 1997.
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.
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
<PAGE> 16
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 $24.1 million
at September 30, 1997, at fixed and variable rates ranging from 5.20 to 7.24%.
Through the Company's dividend reinvestment plan and common stock purchase
plans, an additional 15,480, shares at an average of $20.72 per share was issued
during the nine months ended September 30, 1997.
<PAGE> 17
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
Exhibit No.
-----------
27.1 Financial Data Schedule
(b) Reports on Form 8-K filed in the third quarter of 1997:
None.
<PAGE> 18
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:/s/ R. Bradford Burnette
-------------------------------------------------
R. Bradford Burnette
(President and Chief Executive Officer)
By:/s/ C. Larry Wilkinson
-------------------------------------------------
C. Larry Wilkinson
(Executive Vice President,
Principal Financial Officer, and
Principal Accounting Officer)
Date: November 13, 1997
-----------------------------------------------
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 13,183,108
<INT-BEARING-DEPOSITS> 2,238,732
<FED-FUNDS-SOLD> 3,940,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 53,232,990
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 220,887,976
<ALLOWANCE> 2,782,282
<TOTAL-ASSETS> 307,984,896
<DEPOSITS> 250,810,196
<SHORT-TERM> 0
<LIABILITIES-OTHER> 2,470,409
<LONG-TERM> 24,826,083
<COMMON> 1,263,745
0
0
<OTHER-SE> 28,614,463
<TOTAL-LIABILITIES-AND-EQUITY> 307,984,896
<INTEREST-LOAN> 15,310,633
<INTEREST-INVEST> 2,633,810
<INTEREST-OTHER> 363,654
<INTEREST-TOTAL> 18,308,097
<INTEREST-DEPOSIT> 7,721,272
<INTEREST-EXPENSE> 8,653,025
<INTEREST-INCOME-NET> 9,655,072
<LOAN-LOSSES> 377,800
<SECURITIES-GAINS> (18,755)
<EXPENSE-OTHER> 6,545,331
<INCOME-PRETAX> 4,795,072
<INCOME-PRE-EXTRAORDINARY> 3,133,544
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,133,544
<EPS-PRIMARY> 1.10
<EPS-DILUTED> 1.10
<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>
