<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, 1997
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, 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 - JUNE 30, 1997
(UNAUDITED) AND DECEMBER 31, 1996 . . . . . . . . . . . 3
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) - THREE
MONTH AND SIX MONTH PERIODS ENDED JUNE 30,
1997 AND 1996 . . . . . . . . . . . . . . . . . . . . . 4
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED) - SIX MONTH PERIODS ENDED JUNE 30,
1997 AND 1996 . . . . . . . . . . . . . . . . . . . . . 5
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) -
SIX MONTH PERIODS ENDED JUNE 30, 1997 AND 1996 . . . . . 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION . . . . . . . . . . . . . . . . . . . 8
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . 15
ITEM 2. CHANGES IN SECURITIES . . . . . . . . . . . . . . . . . . . . . 15
ITEM 3. DEFAULTS UPON SENIOR SECURITIES . . . . . . . . . . . . . . . . 15
ITEM 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS . . . . . . . . . . . . . . . . . . 15
ITEM 5. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . 15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . 15
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
<PAGE> 3
<TABLE>
PAB BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
---------------------------
ASSETS
------
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
------------ ------------
(Unaudited)
<S> <C> <C>
Cash and Cash Equivalents:
Cash and due from banks $ 13,949,061 9,739,420
Interest-bearing deposits in other banks 987,254 3,907,836
Federal funds sold and securities purchased under agreements to resell 140,000 14,515,000
------------ ------------
Total Cash and Cash Equivalents 15,076,315 28,162,256
Time Deposits 297,000 595,000
Investment Securities 54,328,534 56,783,089
Investment in Unconsolidated Subsidiary 131,015 130,872
Loans, Net of Allowance for Loan Losses ($2,636,987 - 1997; $2,550,242 - 1996)
and Unearned Interest 215,568,219 195,856,247
Bank Premises and Equipment 7,168,088 6,707,165
Property Acquired in Settlement of Loans and Other Real Estate Owned:
Land and building of former banking offices 448,474 445,457
Land held for future development 366,790 366,790
Property acquired in settlement of loans 75,575 334,596
Accrued Interest Receivable 3,446,796 3,175,569
Cash Value of Life Insurance 2,001,455 1,957,298
Goodwill 2,212,219 2,266,170
Other Assets 950,118 524,372
------------ ------------
Total Assets $302,070,598 297,304,881
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Deposits:
Demand $ 33,951,751 40,203,157
NOW 50,325,881 51,926,581
Savings 18,276,196 17,431,631
Time, $100,000 and over 44,864,531 45,525,141
Other time 99,054,085 94,587,414
------------ ------------
246,472,444 249,673,924
Federal Funds Purchased 3,240,000 -0-
Notes Payable 1,200,000 1,200,000
Advances from Federal Home Loan Bank 20,077,333 17,096,499
Accrued Interest 682,691 725,549
Advance Payments by Borrowers for Taxes and Insurance 233,460 159,505
Dividends Payable 240,207 210,214
Income Taxes:
Current 28,821 -0-
Other Liabilities 869,806 1,172,677
------------ ------------
Total Liabilities 273,044,762 270,238,368
------------ ------------
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 12,938,129 11,246,210
Unrealized gains (losses) on available-for-sale securities, net of
applicable deferred income taxes (127,429) 21,388
------------ ------------
30,009,025 28,141,060
Treasury stock, at cost (82,156 shares; 1996 - 89,790) (983,189) (1,074,547)
------------ ------------
29,025,836 27,066,513
------------ ------------
Total Liabilities and Stockholders' Equity $302,070,598 297,304,881
============ ============
</TABLE>
<PAGE> 4
<TABLE>
PAB BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------------- -------------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Interest Income:
Interest and fees on loans $5,099,680 4,482,784 9,922,569 8,675,479
Interest on investment securities:
Taxable 835,566 911,121 1,716,050 1,861,412
Tax exempt 31,816 36,087 61,253 86,500
Interest on federal funds sold 75,083 42,415 156,133 135,652
Interest on deposits in banks 45,664 21,317 90,413 47,681
----------- ----------- ----------- -----------
Total 6,087,809 5,493,724 11,946,418 10,806,724
----------- ----------- ----------- -----------
Interest Expense:
Interest on deposits 2,568,062 2,494,701 5,072,891 5,031,243
Interest on federal funds purchased 5,377 4,992 19,493 14,283
Interest on notes and mortgages 22,792 44,765 45,042 98,053
Interest on advances from Federal Home Loan Bank 269,853 151,398 519,960 272,863
----------- ----------- ----------- -----------
Total 2,866,084 2,695,856 5,657,386 5,416,442
----------- ----------- ----------- -----------
Net Interest Income 3,221,725 2,797,868 6,289,032 5,390,282
Provision for Loan Losses 97,000 76,250 194,000 152,500
----------- ----------- ----------- -----------
Net Interest Income After Provision for Loan Losses 3,124,725 2,721,618 6,095,032 5,237,782
----------- ----------- ----------- -----------
Other Income:
Service charges on deposit accounts 497,731 420,069 897,290 807,636
Insurance commissions 21,062 20,615 43,440 27,036
Equity in earnings of unconsolidated subsidiary 109,129 37,856 160,142 83,598
Gain (Loss) on sale of loans 15,662 840 18,302 4,383
Gain (Loss) on sale of assets -0- -0- -0- 2,890
Gain on sale of real estate owned -0- -0- 869 -0-
Other income 135,076 117,586 301,766 228,099
Securities gains (losses) (22,758) (4,318) (23,065) 22,367
----------- ----------- ----------- -----------
Total 755,902 592,648 1,398,744 1,176,009
----------- ----------- ----------- -----------
Other Expenses:
Compensation 947,504 851,940 1,897,919 1,705,857
Other personnel expenses 242,359 192,626 476,144 375,019
Occupancy expense of bank premises 108,537 99,798 214,641 202,946
Furniture and equipment expense 198,120 189,125 345,509 373,100
Federal deposit insurance 11,996 34,905 22,514 68,966
Postage and courier services 64,045 49,335 122,805 94,964
Supplies 89,317 67,732 172,120 126,085
Amortization 26,975 26,975 53,952 53,952
Other operating expenses 475,931 402,629 940,946 836,179
----------- ----------- ----------- -----------
Total 2,164,784 1,915,065 4,246,550 3,837,068
----------- ----------- ----------- -----------
Income Before Income Taxes 1,715,843 1,399,201 3,247,226 2,576,723
Income Taxes 576,939 469,566 1,089,688 865,777
----------- ----------- ----------- -----------
Net Income $ 1,138,904 929,635 2,157,538 1,710,946
=========== =========== =========== ===========
Earnings Per Share $ .40 .34 .76 .63
=========== =========== =========== ===========
Weighted Average Shares 2,847,260 2,734,221 2,855,171 2,733,084
=========== =========== =========== ===========
</TABLE>
<PAGE> 5
<TABLE>
PAB BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 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 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
=========== =========== =========== =========== =========== ===========
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 average through
common stock purchase plan -0- 50,732 -0- -0- -0- 50,732
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- 2,157,538 -0- -0- 2,157,538
Dividends -0- -0- (465,619) -0- -0- (465,619)
Change in unrealized
gains and losses on
available-for-sale
securities, net of
applicable deferred
income taxes -0- -0- -0- (148,817) -0- (148,817)
----------- ----------- ----------- ----------- ----------- -----------
Balances, June 30, 1997 (Unaudited) $ 1,263,745 15,934,580 12,938,129 (127,429) 983,189 29,025,836
=========== =========== =========== =========== =========== ===========
</TABLE>
<PAGE> 6
<TABLE>
PAB BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(UNAUDITED)
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------------------
1997 1996
---------- ----------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 2,157,538 1,710,946
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 298,633 236,437
Deferred income taxes (15,968) (11,964)
Provision for loan losses 194,000 152,500
Amortization of goodwill 53,952 53,952
Amortization (accretion) of subsidiary acquisition adjustments (70,269) (101,075)
(Gain) loss on sale of loans (18,302) (4,383)
Securities (gains) losses 23,065 (22,367)
(Gain) loss on sale of assets -0- (2,890)
(Gain) Loss on sale of real estate owned (869) -0-
Minority interests 337 208
Equity in earnings of unconsolidated subsidiary (160,142) (83,598)
Dividend received from unconsolidated subsidiary 160,000 60,000
Increase in cash value of life insurance (44,157) (29,073)
Change in assets and liabilities:
(Increase) decrease in accrued interest receivable (271,227) (295,474)
Increase (decrease) in accrued interest payable (42,858) (99,803)
(Increase) decrease in other assets (331,642) (321,050)
Increase (decrease) in income taxes payable 28,821 70,449
Increase (decrease) in other liabilities (207,781) (83,969)
----------- -----------
Net cash provided (used) by operating activities 1,753,131 1,228,846
----------- -----------
Cash Flows From Investing Activities:
Capital expenditures (762,573) (840,300)
Proceeds from sale of assets -0- 68,901
Principal payments on mortgage-backed securities 261,832 731,784
Purchase of available-for-sale securities (8,975,780) (8,902,459)
Proceeds from maturities of available-for-sale securities 6,331,357 10,080,971
Proceeds from sales of available-for-sale securities 4,655,013 -0-
(Increase) decrease in interest-bearing deposits in banks 298,000 409,400
(Increase) decrease in loans (19,625,398) (22,972,355)
(Increase) decrease in cash value of life insurance -0- (346,232)
----------- -----------
Net cash provided (used) by investing activities (17,817,549 (21,770,290)
----------- -----------
Cash Flows From Financing Activities:
Proceeds of additional stock issue 50,732 111,150
Increase (decrease) in time deposits 3,806,061 816,115
Increase (decrease) in other deposits (7,007,541) (857,981)
Advances from Federal Home Loan Bank 6,250,000 34,573,000
Payments on long-term indebtedness (3,269,166) (20,364,407)
Dividends paid (165,564) (108,385)
Acquisition of treasury stock -0- (30,925)
Proceeds from sale of treasury stock -0- 283,653
Increase in federal funds purchased 3,240,000 -0-
Increase in advance payments by borrowers for taxes and insurance 73,955 30,912
----------- -----------
Net cash provided (used) by financing activities 2,978,477 14,453,132
----------- -----------
Net Increase (Decrease) in Cash and Cash Equivalents (13,085,941) (6,088,312)
Cash and Cash Equivalents at Beginning of Period 28,162,256 18,924,870
----------- -----------
Cash and Cash Equivalents at End of Period $15,076,315 12,836,558
=========== ===========
Supplemental Disclosures of Cash Flow Information
- -------------------------------------------------
Cash Paid During The Period For:
Interest $ 5,700,244 5,516,245
=========== ===========
Income taxes $ 1,140,826 792,095
=========== ===========
Schedule of Non-Cash Investing and Financing Activities
- -------------------------------------------------------
Total increase (decrease) in unrealized losses on securities available-for-sale $ 239,196 836,029
=========== ===========
Stock issued to directors in payment of fees and stock issued through dividend
reinvestment plan $ 365,489 274,702
=========== ===========
</TABLE>
<PAGE> 7
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, 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> 8
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 $2,157,538 for the six months ended June 30, 1997 compared to
$1,710,946 for the six months ended June 30, 1996. Net interest income after
provision for loan losses was $6,095,032 and $5,237,782 for the six months ended
June 30, 1997 and 1996, respectively. The provision for loan losses was
$194,000 and $152,500 for the six months ended June 30, 1997 and 1996,
respectively. Noninterest income totalled $1,398,744 and $1,176,009 for the six
months ended June 30, 1997 and 1996, respectively and noninterest expenses
totalled $4,246,550 and $3,837,068 for the six months ended June 30, 1997 and
1996, respectively.
The following table summarizes the results of operations of the Company for the
three month and six month periods ended June 30, 1997 and 1996.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ -------------------
1997 1996 1997 1996
-------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Interest income $ 6,088 5,494 11,946 10,807
Interest expense (2,866) (2,695) (5,657) (5,416)
-------- -------- -------- --------
Net interest income 3,222 2,799 6,289 5,391
Provision for loan losses (97) (77) (194) (153)
Noninterest income 756 593 1,399 1,176
Noninterest expense (2,165) (1,915) (4,247) (3,837)
-------- -------- -------- --------
Income before taxes 1,716 1,400 3,247 2,577
Income taxes (577) (470) (1,089) (866)
-------- -------- -------- --------
Net income $ 1,139 930 2,158 1,711
======== ======== ======== ========
</TABLE>
Interest Income
- ---------------
Total interest income increased approximately $1,139,000 for the six months
ended June 30, 1997 compared to the six months ended June 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 $182.2 million for the six months ended
June 30, 1996 to approximately $206.2 million for the six months ended June 30,
1997 and an increase in the average rate earned on the loan portfolio from 9.53%
for the six months ended June 30, 1996 to 9.62% for the six months ended June
30, 1997. The effect of these two changes increased the interest income earned
on the loan portfolio from approximately $8,675,000 for the six months ended
June 30, 1996 to approximately $9,923,000 for the six months ended June 30,
1997, an increase of $1,248,000. Interest income on the loan portfolio increased
from approximately $4,483,000 for the quarter ended June 30, 1996 to
approximately $5,100,000 for the quarter ended June 30, 1997, an increase of
$617,000.
<PAGE> 9
Interest earned on taxable investment securities decreased from approximately
$1,861,000 for the six months ended June 30, 1996 to approximately $1,716,000
for the six months ended June 30, 1997, a decrease of $145,000. This decrease
was the net effect of a decrease in the average taxable investment portfolio
balance from approximately $58.9 million for the six months ended June 30, 1996
to approximately $53.6 million for the six months ended June 30, 1997 and an
increase in the rate earned on the taxable investment portfolio from 6.32% for
the six months ended June 30, 1996 to 6.40% for the six months ended June 30,
1997. Interest income on the taxable investment portfolio decreased from
approximately $911,000 for the quarter ended June 30, 1996 to approximately
$836,000 for the quarter ended June 30, 1997, a decrease of $75,000.
Interest earned on nontaxable investment securities decreased from approximately
$87,000 for the six months ended June 30, 1996 to approximately $61,000 for the
six months ended June 30, 1997, a decrease of $26,000. This decrease was the
combined effect of a decrease in the average non-taxable investment securities
portfolio balance from approximately $3.1 million for the six months ended June
30, 1996 to approximately $2.4 million for the six months ended June 30, 1997
and a decrease in the rate earned on the non-taxable investment portfolio from
5.66% for the six months ended June 30, 1996 to 5.15% for the six months ended
June 30, 1997. Interest income on the non-taxable investment securities
decreased from approximately $36,000 for the quarter ended June 30, 1996 to
approximately $32,000 for the quarter ended June 30, 1997, a decrease of $4,000.
As of June 30, 1997, the amortized cost of taxable and non-taxable investments
consisted of U.S. Treasury securities (19.8%), securities of U.S. Government
Agencies and Corporations (68.7%), obligations of States, Counties and
Municipalities (5.3%) and equity securities (6.2%). 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 increased from
approximately $48,000 for the six months ended June 30, 1996 to approximately
$90,000 for the six months ended June 30, 1997, an increase of $42,000. This
increase was the combined effect of an increase in the average interest-bearing
deposits balance from approximately $2.7 million for the six months ended June
30, 1996 to approximately $3.6 million for the six months ended June 30, 1997
and an increase in the rate earned on the interest-bearing deposits from 3.53%
for the six months ended June 30, 1996 to 4.99% for the six months ended June
30, 1997. Interest income on the interest-bearing deposits increased from
approximately $21,000 for the quarter ended June 30, 1996 to approximately
$46,000 for the quarter ended June 30, 1997, an increase of $25,000.
Interest earned on federal funds sold increased from approximately $136,000 for
the six months ended June 30, 1996 to approximately $156,000 for the six months
ended June 30, 1997, an increase of $20,000. This increase was the combined
effect of an increase in the average federal funds sold balance from
approximately $5.3 million for the six months ended June 30, 1996 to
approximately $5.9 million for the six months ended June 30, 1997 and an
increase in the rate earned on the federal funds sold from 5.13% for the six
months ended June 30, 1996 to 5.28% for the six months ended June 30, 1997.
Interest income on federal funds sold increased from approximately $42,000 for
the quarter ended June 30, 1996 to approximately $75,000 for the quarter ended
June 30, 1997, an increase of $33,000.
<PAGE> 10
Interest Expense
- ----------------
Total interest expense increased approximately $241,000 for the six months ended
June 30, 1997 compared to the six months ended June 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 $199.8 million for the six months
ended June 30, 1996 to approximately $209.8 million for the six months ended
June 30, 1997 and a decrease in the average rate paid on interest-bearing
deposits from 5.04% for the six months ended June 30, 1996 to 4.83% for the six
months ended June 30, 1997. The effect of these changes increased the interest
expense on interest-bearing deposits from approximately $5,031,000 for the six
months ended June 30, 1996 to approximately $5,073,000 for the six months ended
June 30, 1997, an increase of $42,000. Interest expense on interest-bearing
deposits increased from approximately $2,495,000 for the quarter ended June 30,
1996 to approximately $2,568,000 for the quarter ended June 30, 1997, an
increase of $73,000. 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 $385,000 for the six months ended June 30,
1996 to approximately $584,000 for the six months ended June 30, 1997, an
increase of $199,000. This increase was the combined effect of an increase in
the average balance of advances from the Federal Home Loan Bank from
approximately $13.2 million for the six months ended June 30, 1996 to
approximately $16.9 million for the six months ended June 30, 1997 and an
increase in the average rate paid on the advances from 5.60% for the six months
ended June 30, 1996 to 6.16% for the six months ended June 30, 1997. Interest
of approximately $19,000 was paid on federal funds purchased during the six
months ended June 30, 1997 and approximately $14,000 during the six months ended
June 30, 1996. Additionally, the Company had notes payable outstanding to a
correspondent bank in the amount of $1.2 million at June 30, 1997 (average
balance of $1.2 million). The advances from the Federal Home Loan Bank in the
amount of $20.1 million carry a combination of fixed and variable interest rates
ranging from 5.20% to 7.24% at June 30, 1997 with maturities through 2010. The
note payable to a correspondent bank in the amount of $1.2 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 June 30, 1997. The Company had federal funds purchased
outstanding at June 30, 1997 of $3.2 million. The correspondent bank loan was
to partially fund the acquisition of First Community Bank of Southwest Georgia.
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> 11
Noninterest Income
The following table presents the principal components of noninterest income for
the three month and six month periods ended June 30, 1997 and 1996.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ -------------------
1997 1996 1997 1996
-------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Service charges on deposit
accounts $ 498 421 897 808
Insurance commissions 21 21 44 27
Gain (Loss) on sale of loans 16 -0- 18 4
Securities gains (losses) (23) (5) (23) 22
Gain (loss) on sale of assets -0- -0- -0- 3
Gain on sale of real estate owned -0- -0- 1 -0-
Equity in earnings
of unconsolidated subsidiary 109 38 160 84
Other income 135 118 302 228
-------- -------- -------- --------
Total Noninterest Income $ 756 593 1,399 1,176
======== ======== ======== ========
</TABLE>
Noninterest income for the six months ended June 30, 1997 as compared to the six
months ended June 30, 1996 increased approximately $223,000.
Service charges on deposit accounts for the six months ended June 30, 1997 as
compared to six months ended June 30, 1996, increased approximately $89,000.
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 increased $76,000. During the six months ended June
30, 1997, the Company realized losses on the sale of securities from the
available-for-sale portfolio of approximately $(23,000) and gains of
approximately $22,000 during the six months ended June 30, 1996. All other
income increased approximately $106,000.
Noninterest Expenses
- --------------------
The following table presents the principal components of noninterest expenses
for the three month and six month periods ended June 30, 1997 and 1996.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ -------------------
1997 1996 1997 1996
-------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Compensation $ 948 852 1,898 1,706
Other personnel expenses 242 193 476 375
Occupancy expense of bank
premises 109 100 215 203
Furniture and equipment expense 198 189 345 373
Federal deposit insurance 12 35 23 69
Postage and courier services 64 49 123 95
Supplies 89 68 172 126
Amortization 27 27 54 54
Other operating expenses 476 402 941 836
-------- -------- -------- --------
Total Noninterest Expenses $ 2,165 1,915 4,247 3,837
======== ======== ======== ========
</TABLE>
<PAGE> 12
Noninterest expenses for the six months ended June 30, 1997 as compared to the
six months ended June 30, 1996, increased approximately $410,000 or 10.7%.
Compensation and other personnel expenses increased approximately $293,000 for
the six months ended June 30, 1997 as compared to the six months ended June 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 $117,000 or 6.7% for the six months ended June 30, 1997 compared
to the six months ended June 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 six months ended June 30, 1997 was
$194,000 compared to $153,000 for the six months ended June 30, 1996. The
balance of the allowance for loan losses was approximately $2,637,000 (1.2% of
outstanding loans) at June 30, 1997 and approximately $2,434,000 (1.3% of
outstanding loans) at June 30, 1996. Actual loan charge-offs net of recoveries
were approximately $107,000 of net charge-offs for the six months ended June 30,
1997 and approximately $13,000 of net charge-offs for the six months ended June
30, 1996. Non-accrual loans were approximately $154,000 at June 30, 1997 as
compared to $291,000 at December 31, 1996. Loans ninety days or more past due
and still accruing amounted to approximately $190,000 at June 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.
Income Taxes
- ------------
The effective tax rate for the six months ended June 30, 1997 was 33.6% compared
to 33.6% for the six months ended June 30, 1996.
Financial Condition
- -------------------
The Company, including its subsidiaries, reported consolidated total assets of
approximately $302.1 million at June 30, 1997 and approximately $297.3 million
at December 31, 1996 representing an increase of approximately $4.8 million.
During the six months ended June 30, 1997, Federal Funds sold decreased $14.4
million, federal funds purchased increased $3.2 million, advances from the
Federal Home Loan Bank increased $3.0 million, operations generated $1.8
million, interest bearing deposits decreased $3.2 million and investment
securities decreased $2.5 million which provided $28.1 million of funds which
were used to fund increases in loans of $19.6 million, pay dividends of
approximately $.2 million, decrease deposits $3.2 million, increase capital
expenditures by $.8 million and increase cash and due from banks $4.3 million.
<PAGE> 13
A number of factors contribute to the changes 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
$193,000 ($127,000 net of income tax effect). All securities were held in the
available-for-sale category as of June 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 charge to stockholders' equity (net of income tax effect).
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, 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 June 30, 1997
Total Capital
(to Risk Weighted
Assets) $30,558 13.91% 17,575 8.0% 21,968 10.0%
Tier 1 Capital
(to Risk Weighted
Assets) 27,921 12.71% 8,787 4.0% 13,181 6.0%
Tier 1 Capital
(to Average Assets) 27,921 9.50% 11,756 4.0% 14,695 5.0%
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, 1997, the Company's cash
and due from banks were approximately $12.7 million in excess of its reserve
requirements of approximately $1.2 million, its short-term deposits with
financial institutions were
<PAGE> 14
approximately $1.3 million and its federal funds sold were approximately $.1
million. All of the above can be converted to cash on short notice. The sale
of investments which had a market value of approximately $54.3 million at June
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 $22.6 million were pledged
as of June 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 a 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 $20.1 million
at June 30, 1997, at fixed and variable rates ranging from 5.20% to 7.24%.
Through the Company's dividend reinvestment and common stock purchase plans, an
additional 15,480 shares at an average of $20.72 per share was issued during the
six months ended June 30, 1997.
<PAGE> 15
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES.
The restated Articles of Incorporation referred to under Item
6 below, increased the total number of shares of all classes
of capital stock which the corporation shall have authority to
issue to 16,500,000 consisting of 15,000,000 shares of common
stock and 1,500,000 shares of preferred stock. Although no
preferred stock has been issued, the Board of Directors of the
Company is vested with authority to issue shares of preferred
stock, in one or more series, and to establish from time to
time the number of shares to be included in each such series
and to fix the designations, powers, preferences and rights of
each such series, and the qualifications, limitations or
restrictions thereof.
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 second quarter of 1997:
Form 8-K dated May 8, 1997:
Item 5. The Company converted the Federal Savings Bank
Charter of First Federal Savings Bank of Bainbridge to a
State chartered commercial bank to be known as First
Community Bank of Southwest Georgia, following receipt
of regulatory approval for such charter conversion from
the Georgia Department of Banking and Finance, Federal
Reserve Bank of Atlanta and The Office Thrift
Supervision.
Form 8-K dated June 5, 1997:
Item 5. Pursuant to the affirmative vote of
shareholders at the Company's 1997 Annual Meeting, the
Company filed effective June 6, 1997 its restated
Articles of Incorporation under applicable Georgia Law.
<PAGE> 16
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:August 13, 1997
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 13,949,061
<INT-BEARING-DEPOSITS> 1,284,254
<FED-FUNDS-SOLD> 140,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 54,328,534
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 218,205,206
<ALLOWANCE> 2,636,987
<TOTAL-ASSETS> 302,070,598
<DEPOSITS> 246,472,444
<SHORT-TERM> 3,240,000
<LIABILITIES-OTHER> 2,054,985
<LONG-TERM> 21,277,333
<COMMON> 1,263,745
0
0
<OTHER-SE> 27,762,091
<TOTAL-LIABILITIES-AND-EQUITY> 302,070,598
<INTEREST-LOAN> 9,922,569
<INTEREST-INVEST> 1,777,303
<INTEREST-OTHER> 246,546
<INTEREST-TOTAL> 11,946,418
<INTEREST-DEPOSIT> 5,072,891
<INTEREST-EXPENSE> 5,657,386
<INTEREST-INCOME-NET> 6,289,032
<LOAN-LOSSES> 194,000
<SECURITIES-GAINS> (23,065)
<EXPENSE-OTHER> 4,246,550
<INCOME-PRETAX> 3,247,226
<INCOME-PRE-EXTRAORDINARY> 2,157,538
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,157,538
<EPS-PRIMARY> .76
<EPS-DILUTED> .76
<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>
