<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the quarterly period ended March 31, 1998
Commission file number 0-25422
PAB BANKSHARES, INC.
(Exact name of Registrant
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 31602
(Address of principal executive offices)
(912) 241-2775
(Registrant's telephone number)
Indicate by check mark whether the registrant (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 May
13, 1998 was 5,661,386 shares of common stock.
<PAGE> 2
PAB BANKSHARES, INC.
FORM 10-Q
TABLE OF CONTENTS
PAGE
----
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS:
CONSOLIDATED BALANCE SHEETS - MARCH 31, 1998
(UNAUDITED) AND DECEMBER 31, 1997 . . . . . . . . . . . . . . 3
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) - THREE
MONTH PERIODS ENDED MARCH 31, 1998 AND 1997 . . . . . . . . . 4
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) -
THREE MONTH PERIODS ENDED MARCH 31, 1998 AND 1997 . . . . . . 5
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED) - THREE MONTH PERIODS ENDED MARCH 31,
1998 AND 1997 . . . . . . . . . . . . . . . . . . . . . . . . 6
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) -
THREE MONTH PERIODS ENDED MARCH 31, 1998 AND 1997 . . . . . . 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . . 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . 9
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK . . . 15
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . 16
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS . . . . . . . . . . . . 16
ITEM 3. DEFAULTS UPON SENIOR SECURITIES . . . . . . . . . . . . . . . . . 16
ITEM 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS . . . . . . . . . . . . . . . . . . . . . . 16
ITEM 5. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . 16
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . 16
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
INDEX OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
<PAGE> 3
<TABLE>
PAB BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
---------------------------
ASSETS
------
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
------------ ------------
(Unaudited)
<S> <C> <C>
Cash and Cash Equivalents:
Cash and due from banks $ 13,264,814 18,234,261
Interest-bearing deposits in other banks 548,524 3,247,147
Federal funds sold and securities purchased under
agreement to resell 25,840,000 11,720,075
------------ ------------
Total Cash and Cash Equivalents 39,653,338 33,201,483
Time Deposits 99,000 3,198,000
Investment Securities available-for-sale, at fair value 56,272,450 52,622,166
Investment in Unconsolidated Subsidiary 128,454 66,749
Loans, Net of Allowance for Loan Losses ($2,977,059 - 1998; $2,865,478 - 1997)
and Unearned Interest 229,407,162 221,997,963
Bank Premises and Equipment 8,178,870 7,672,646
Property Acquired in Settlement of Loans and Other Real Estate Owned:
Land and building of former banking offices 333,577 315,277
Property acquired in settlement of loans 651,816 384,790
Accrued Interest Receivable 3,453,664 3,667,040
Cash Value of Life Insurance 2,811,574 2,783,838
Goodwill 2,131,290 2,158,266
Other Assets 800,126 723,564
------------ ------------
Total Assets $343,921,321 328,791,782
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand $ 38,650,332 48,495,956
NOW 63,031,748 52,915,029
Savings 17,178,144 16,685,772
Time, $100,000 and over 41,430,587 46,278,966
Other time 107,431,155 101,874,639
------------ ------------
267,721,966 266,250,362
Federal funds purchased and securities sold under agreement to repurchase 2,592,815 -0-
Advances from Federal Home Loan Bank 37,776,916 28,168,166
Other borrowed funds 1,302,308 1,004,854
Accrued Interest Payable 826,957 698,291
Advance Payments by Borrowers for Taxes and Insurance 87,034 180,322
Dividends Payable 339,683 268,466
Income taxes - current 500,855 -0-
Other Liabilities 980,168 1,489,480
------------ ------------
Total Liabilities 312,128,702 298,059,941
------------ ------------
Stockholders' Equity:
Common stock, no par value, 15,000,000 shares authorized,
5,661,386 shares (1997 - 5,816,238) issued and 5,661,386
shares (1997 - 5,651,926) outstanding 1,217,065 1,263,745
Preferred stock, no par value, 1,500,000 shares authorized,
no shares issued or outstanding -0- -0-
Additional paid in capital 15,098,997 15,934,580
Retained earnings 15,392,593 14,401,920
Accumulated other comprehensive income 83,964 114,785
------------ ------------
31,792,619 31,715,030
Treasury stock, at cost (1997 - 164,312 shares) -0- (983,189)
------------ ------------
31,792,619 30,731,841
------------ ------------
Total Liabilities and Stockholders' Equity $343,921,321 328,791,782
============ ============
</TABLE>
<PAGE> 4
<TABLE>
PAB BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------------
1998 1997
---------- ----------
<S> <C> <C>
Interest Income:
Interest and fees on loans $5,566,922 4,822,889
Interest on investment securities:
Taxable 783,567 880,484
Tax exempt 43,068 29,437
Interest on federal funds sold and securities
purchased under agreement to resell 314,006 81,050
Interest on deposits in banks 65,530 44,749
----------- -----------
Total 6,773,093 5,858,609
----------- -----------
Interest Expense:
Interest on deposits 2,764,966 2,501,522
Interest on federal funds purchased and securities
sold under agreements to repurchase 4,366 14,116
Interest on notes and mortgages -0- 22,250
Interest on other borrowed funds 7,867 3,307
Interest on advances from Federal Home Loan Bank 472,786 250,107
----------- -----------
Total 3,249,985 2,791,302
----------- -----------
Net Interest Income 3,523,108 3,067,307
Provision for Loan Losses 241,433 97,000
----------- -----------
Net Interest Income After Provision for Loan Losses 3,281,675 2,970,307
----------- -----------
Non-Interest Income:
Service charges on deposit accounts 505,530 399,559
Insurance commissions 32,158 22,378
Equity in earnings of unconsolidated subsidiary 61,705 51,013
Fees on mortgage loans sold 33,553 -0-
Gain (Loss) on sale of loans -0- 2,640
Gain (Loss) on sale of assets 102,131 -0-
Gain (Loss) on sale of other real estate (9,006) 869
Other income 306,538 166,690
Securities gains (losses) 24,457 (307)
----------- -----------
Total 1,057,066 642,842
----------- -----------
Non-Interest Expenses:
Compensation 1,045,937 950,415
Other personnel expenses 285,532 233,785
Occupancy expense of bank premises 106,067 106,104
Furniture and equipment expense 196,801 147,389
Federal deposit insurance 5,724 10,518
Postage and courier services 65,625 58,760
Supplies 78,936 82,803
Amortization 26,977 26,977
Other operating expenses 572,428 465,015
----------- -----------
Total 2,384,027 2,081,766
----------- -----------
Income Before Income Taxes 1,954,714 1,531,383
Income Taxes 624,309 512,749
----------- -----------
Net Income $ 1,330,405 1,018,634
=========== ===========
Earnings Per share:
Basic $ .24 .18
=========== ===========
Diluted $ .23 .18
=========== ===========
Weighted Average Shares:
Basic 5,657,884 5,639,240
=========== ===========
Diluted 5,784,985 5,710,342
=========== ===========
</TABLE>
<PAGE> 5
<TABLE>
PAB BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------------
1998 1997
---------- ----------
<S> <C> <C>
Net income $ 1,330,405 1,018,634
----------- -----------
Other comprehensive income, net of tax:
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during
period (15,594) (190,561)
Less: reclassification adjustment for (gains)
losses included in net income (15,227) 191
----------- -----------
Other comprehensive income (30,821) (190,370)
----------- -----------
Comprehensive Income $ 1,299,584 828,264
=========== ===========
</TABLE>
<PAGE> 6
<TABLE>
PAB BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
------------------------------------------
<CAPTION>
ACCUMULATED
OTHER
ADDITIONAL COMPREHENSIVE
COMMON PREFERRED PAID IN RETAINED INCOME TREASURY
STOCK STOCK CAPITAL EARNINGS (LOSS) STOCK TOTAL
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances,
December 31, 1996 $1,263,745 -0- 15,609,717 11,246,210 21,388 1,074,547 27,066,513
Issuance of 13,034 shares
at $10.15 average
through dividend
reinvestment plan -0- -0- 132,342 -0- -0- -0- 132,342
Issuance of 1,290 shares at
$10.68 through common
stock purchase plan -0- -0- 13,780 -0- -0- -0- 13,780
Issuance of 15,268 shares
at $6.25 to Directors
in lieu of fees -0- -0- 4,069 -0- -0- (91,358) 95,427
Net Income -0- -0- -0- 1,018,634 -0- -0- 1,018,634
Other comprehensive income
(loss) -0- -0- -0- -0- (190,370) -0- (190,370)
Dividends -0- -0- -0- (225,408) -0- -0- (225,408)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Balances,
March 31, 1997
(Unaudited) $1,263,745 -0- 15,759,908 12,039,436 (168,982) 983,189 27,910,918
========== ========== ========== ========== ========== ========== ==========
Balances,
December 31, 1997 $1,263,745 -0- 15,934,580 14,401,920 114,785 983,189 30,731,841
Issuance of 7,808 shares
at $10.40 to directors
in lieu of fees -0- -0- 81,240 -0- -0- -0- 81,240
Issuance of 1,650
shares at $11.93 average
through dividend
reinvestment plan -0- -0- 19,686 -0- -0- -0- 19,686
Net Income -0- -0- -0- 1,330,405 -0- -0- 1,330,405
Other comprehensive income
(loss) -0- -0- -0- -0- (30,821) -0- (30,821)
Dividends -0- -0- -0- (339,732) -0- -0- (339,732)
Cancellation of treasury stock (46,680) -0- (936,509) -0- -0- (983,189) -0-
---------- ---------- ---------- ---------- ---------- ---------- ----------
Balances,
March 31, 1998
(Unaudited) $1,217,065 -0- 15,098,997 15,392,593 83,964 -0- 31,792,619
========== ========== ========== ========== ========== ========== ==========
</TABLE>
<PAGE> 7
<TABLE>
PAB BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------------
1998 1997
---------- ----------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 1,330,405 1,018,634
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 168,697 139,866
Deferred income taxes (31,527) (7,177)
Provision for loan losses 241,433 97,000
Amortization of goodwill 26,977 26,977
Amortization (accretion) of securities (52,511) (41,143)
(Gain) loss on sale of loans -0- (2,640)
Securities (gains) losses (24,457) 307
(Gain) loss on sale of assets (102,131) -0-
(Gain) loss on sale of other real estate 9,006 (869)
Minority interests 171 151
Equity in earnings of unconsolidated subsidiary (61,705) (51,013)
Dividend received from unconsolidated subsidiary -0- -0-
Increase in cash value of life insurance (27,736) (20,433)
Change in assets and liabilities:
(Increase) decrease in accrued interest receivable 213,376 (112,737)
Increase (decrease) in accrued interest payable 128,666 (60,434)
(Increase) decrease in other assets (86,352) (300,334)
Increase (decrease) in income taxes payable 500,855 471,789
Increase (decrease) in other liabilities (428,243) (400,116)
----------- -----------
Net cash provided (used) by operating activities 1,804,924 757,828
----------- -----------
Cash Flows From Investing Activities:
Capital expenditures (698,221) (200,236)
Proceeds from sale of assets 167,414 -0-
Principal payments on mortgage-backed securities 2,417,520 111,730
Purchase of available-for-sale securities (11,615,624) (3,543,805)
Proceeds from maturity of available-for-sale securities 4,590,000 3,927,183
Proceeds from sale of available-for-sale securities 985,000 194,700
(Increase) decrease in time deposits 3,099,000 199,000
(Increase) decrease in loans (7,926,664) (5,870,190)
----------- -----------
Net cash provided (used) by investing activities (8,981,575) (5,181,618)
----------- -----------
Cash Flows From Financing Activities:
Advances from Federal Home Loan Bank 15,300,000 1,050,000
Proceeds of additional stock issued -0- 13,780
Increase (decrease) in time deposits 708,137 2,697,855
Increase (decrease) in other deposits 763,467 (5,125,028)
Payments on long-term indebtedness (5,691,250) (2,641,250)
Increase (decrease) in other borrowed funds 297,454 -0-
Dividends paid (248,829) (77,872)
Increase in federal funds purchased and securities sold under agreements
to repurchase 2,592,815 -0-
Increase (decrease) in advance payments by borrowers for taxes and insurance (93,288) 48,107
----------- -----------
Net cash provided (used) by financing activities 13,628,506 (4,034,408)
----------- -----------
Net Increase (Decrease) in Cash and Cash Equivalents 6,451,855 (8,458,198)
Cash and Cash Equivalents at Beginning of Period 33,201,483 28,162,256
----------- -----------
Cash and Cash Equivalents at End of Period $39,653,338 19,704,058
=========== ===========
Supplemental Disclosures of Cash Flow Information
- -------------------------------------------------
Cash Paid During The Period For:
Interest $ 3,121,319 2,851,736
=========== ===========
Income taxes $ 118,203 31,174
=========== ===========
Schedule of Non-Cash Investing and Financing Activities
- -------------------------------------------------------
Total increase (decrease) in unrealized losses on securities available-for-sale $ 49,788 305,959
=========== ===========
Stock issued to directors in payment of fees and stock issued through dividend
reinvestment plan $ 100,926 227,769
=========== ===========
</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-Q. 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 three months ended March 31, 1998 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1998. 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, 1997.
Earnings per share information for the period ended March 31, 1997 has been
restated to reflect a two-for-one stock split on March 10, 1998 for shareholders
of record February 17, 1998.
<PAGE> 9
ITEM 2. MANAGEMENTS'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
- ---------------------
The Company, including the operations of its subsidiaries, reported consolidated
net income of $1,330,405 for the three months ended March 31, 1998 compared to
$1,018,634 for the three months ended March 31, 1997. Net interest income after
provision for loan losses was $3,281,675 and $2,970,307 for the three months
ended March 31, 1998 and 1997, respectively. The provision for loan losses was
$241,433 and $97,000 for the three months ended March 31, 1998 and 1997,
respectively. Noninterest income totalled $1,057,066 and $642,842 for the three
months ended March 31, 1998 and 1997, respectively and noninterest expenses
totalled $2,384,027 and $2,081,766 for the three months ended March 31, 1998 and
1997, respectively.
Comprehensive income was $1,299,584 and $828,264 for the three months ended
March 31, 1998 and 1997, respectively. Other comprehensive income consisted of
unrealized gains and losses on available-for-sale securities.
The following table summarizes the results of operations of the Company for the
three month periods ended March 31, 1998 and 1997.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1998 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Interest income $ 6,773 5,858
Interest expense (3,250) (2,791)
-------- --------
Net interest income 3,523 3,067
Provision for loan losses (241) (97)
Noninterest income 1,057 643
Noninterest expense (2,385) (2,081)
-------- --------
Income before taxes 1,954 1,532
Income taxes (624) (513)
-------- --------
Net income 1,330 1,019
Other comprehensive income, net of tax (30) (190)
-------- --------
Comprehensive income $ 1,300 829
======== ========
</TABLE>
Interest Income
- ---------------
Total interest income increased approximately $914,000 for the three months
ended March 31, 1998 compared to the three months ended March 31, 1997.
This increase was the combined effect of an increase in the average loan
portfolio balance from approximately $202.0 million for the three months ended
March 31, 1997 to approximately $227.8 million for the three months ended March
31, 1998 and an increase in the average rate earned on the loan portfolio from
9.50% for the three months ended March 31, 1997 to 9.77% for the three months
ended March 31, 1998. The effect of these changes increased the interest income
earned on the loan portfolio from approximately $4,823,000 for the three months
ended March 31, 1997 to approximately $5,567,000 for the three months ended
March 31, 1998, an increase of $744,000.
<PAGE> 10
Interest earned on taxable investment securities decreased from approximately
$880,000 for the three months ended March 31, 1997 to approximately $784,000 for
the three months ended March 31, 1998, a decrease of $96,000. This decrease was
the net effect of a decrease in the average taxable investment portfolio balance
from approximately $54.5 million for the three months ended March 31, 1997 to
approximately $48.3 million for the three months ended March 31, 1998 and an
increase in the rate earned on the taxable investment portfolio from 6.46% for
the three months ended March 31, 1997 to 6.49% for the three months ended March
31, 1998.
Interest earned on nontaxable investment securities increased from approximately
$29,000 for the three months ended March 31, 1997 to approximately $43,000 for
the three months ended March 31, 1998, an increase of $14,000. This increase
was the combined effect of an increase in the average non-taxable investment
portfolio from approximately $2.3 million for the three months ended March 31,
1997 to approximately $3.0 million for the three months ended March 31, 1998 and
an increase in the rate earned on the non-taxable investment portfolio from
5.02% for the three months ended March 31, 1997 to 5.70% for the three months
ended March 31, 1998.
As of March 31, 1998, the amortized cost of taxable and non-taxable investments
consisted of U.S. Treasury securities (19.9%), securities of U.S. Government
Agencies and Corporations (67.5%), obligations of States, Counties and
Municipalities (6.5%) and equity securities (6.1%). The securities are
predominantly at fixed rates. There are no interest rates which change
inversely to changes in interest rates.
Interest earned on interest-bearing deposits in banks increased from
approximately $45,000 for the three months ended March 31, 1997 to approximately
$66,000 for the three months ended March 31, 1998, an increase of $21,000. This
increase was the net effect of a decrease in the average interest-bearing
deposits balance from approximately $4.8 million for the three months ended
March 31, 1997 to approximately $3.7 million for the three months ended March
31, 1998 and an increase in the rate earned on the interest-bearing deposits
from 3.70% for the three months ended March 31, 1997 to 7.07% for the three
months ended March 31, 1998.
Interest earned on federal funds sold and securities purchased under agreement
to resell increased from approximately $81,000 for the three months ended March
31, 1997 to approximately $314,000 for the three months ended March 31, 1998, an
increase of $233,000. This increase was the combined effect of an increase in
the average federal funds sold balance from approximately $6.2 million for the
three months ended March 31, 1997 to approximately $22.0 million for the three
months ended March 31, 1998 and an increase in the average rate earned from
5.27% for the three months ended March 31, 1997 to 5.72% for the three months
ended March 31, 1998.
Interest Expense
- ----------------
Total interest expense increased approximately $459,000 for the three months
ended March 31, 1998 compared to the three months ended March 31, 1997.
This increase was the combined effect of an increase in the average balance of
interest-bearing deposits from approximately $209.2 million for the three months
ended March 31, 1997 to approximately $224.6 million for the three months ended
March 31, 1998 and an increase in the average rate paid on interest-bearing
deposits from 4.79% for the three months ended March 31, 1997 to 4.93% for the
<PAGE> 11
three months ended March 31, 1998. The effect of these changes increased the
interest expense on interest-bearing deposits from approximately $2,502,000 for
the three months ended March 31, 1997 to approximately $2,765,000 for the three
months ended March 31, 1998, an increase of $263,000. The increase in interest-
bearing deposits came primarily from the local communities served by the Banks.
Interest expense on advances from the Federal Home Loan Bank increased from
approximately $250,000 for the three months ended March 31, 1997 to
approximately $473,000 for the three months ended March 31, 1998, an increase of
$223,000. This increase was the net effect of an increase in the average
balance of advances from approximately $16.3 million for the three months ended
March 31, 1997 to approximately $35.1 million for the three months ended March
31, 1998 and a decrease in the average rate paid from 6.13% for the three months
ended March 31, 1997 to 5.39% for the three months ended March 31, 1998. As of
March 31, 1998, advances from the Federal Home Loan Bank amounted to $37.8
million with fixed and variable interest rates ranging from 5.20% to 7.24% with
maturities through 2010.
All other interest expense consisting of interest on notes and mortgages
payable, federal funds purchased and securities sold under agreements to
repurchase and sweep agreements decreased from approximately $40,000 for the
three months ended March 31, 1997 to approximately $12,000 for the three months
ended March 31, 1998, a decrease of $28,000. This decrease was the combined
effect of a decrease in the average balance of such indebtedness from
approximately $1.8 million for the three months ended March 31, 1997 to
approximately $1.7 million for the three months ended March 31, 1998 and a
decrease in the average rate paid from approximately 7.50% for the three months
ended March 31, 1997 to approximately 2.90% for the three months ended March 31,
1998. The interest rate reduction was attributed to the repayment prior to
maturity of a note payable to a correspondent bank which carried a rate of prime
less .50% subject to a ceiling of 9.50% until July 1, 1999.
Noninterest Income
- ------------------
The following table presents the principal components of noninterest income for
the three month periods ended March 31, 1998 and 1997.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1998 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Service charges on deposit
accounts $ 506 400
Insurance commissions 32 22
Fees on mortgage loans sold 34 -0-
Gain (Loss) on sale of loans -0- 3
Gain (Loss) on sale of assets 102 -0-
Securities gains (losses) 24 -0-
Equity in earnings of unconsolidated
subsidiary 62 51
Gain (loss) on sale of other real estate (9) -0-
Other income 306 167
-------- --------
Total Noninterest Income $ 1,057 643
======== ========
</TABLE>
Noninterest income for the three months ended March 31, 1998 as compared to the
three months ended March 31, 1997 increased approximately $414,000.
<PAGE> 12
Service charges on deposit accounts for the three months ended March 31, 1998 as
compared to the three months ended March 31, 1997, increased approximately
$106,000. 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 owned by First Community Bank of Southwest Georgia (a subsidiary of the
Company), increased $11,000. Gain on sale of assets represented a gain on the
sale of mortgage servicing rights. All other income increased approximately
$195,000.
Noninterest Expenses
- --------------------
The following table presents the principal components of noninterest expenses
for the three month periods ended March 31, 1998 and 1997.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1998 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Compensation $ 1,046 950
Other personnel expenses 286 234
Occupancy expense of bank premises 106 106
Furniture and equipment expense 197 147
Federal deposit insurance 6 10
Postage and courier services 66 59
Supplies 79 83
Amortization 27 27
Other operating expenses 572 465
-------- --------
Total Noninterest Expenses $ 2,385 2,081
======== ========
</TABLE>
Noninterest expenses for the three months ended March 31, 1998 as compared to
the three months ended March 31, 1997, increased approximately $304,000 or
14.6%. Compensation and other personnel expenses increased approximately
$148,000 for the three months ended March 31, 1998 as compared to the three
months ended March 31, 1997. This increase reflects increases in the number of
employees, in wage levels and in the cost of employee benefits. All other
expenses increased approximately $156,000 or 17.4% for the three months ended
March 31, 1998 compared to the three months ended March 31, 1997. This increase
was primarily the result of a larger volume of business.
Provision for Loan Losses
- -------------------------
The provision for loan losses for the three months ended March 31, 1998 was
$241,000 compared to $97,000 for the three months ended March 31, 1997. The
balance of the allowance for loan losses was approximately $2,977,000 (1.3% of
outstanding loans) at March 31, 1998 and approximately $2,613,000 (1.3% of
outstanding loans) at March 31, 1997. Actual loan charge-offs net of recoveries
were approximately $130,000 for the three months ended March 31, 1998 and
approximately $34,000 for the three months ended March 31, 1997. Non-accrual
loans were approximately $129,000 at March 31, 1998 as compared to $368,000 at
December 31, 1997. Loans ninety days or more past due and still accruing
amounted to approximately $170,000 at March 31, 1998 and $178,000 at December
31, 1997. 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 including specific impaired loans, the
general state of the economy and other relevant factors.
<PAGE> 13
Income Taxes
- ------------
The effective tax rate for the three months ended March 31, 1998 was 31.9%
compared to 33.5% for the three months ended March 31, 1997.
Financial Condition
- -------------------
The Company, including its subsidiaries, reported consolidated total assets of
approximately $343.9 million at March 31, 1998 and approximately $328.8 million
at December 31, 1997 representing an increase of approximately $15.1 million.
During the three months ended March 31, 1998, deposits increased $1.5 million,
cash and due from banks decreased $5.0 million, federal funds purchased and
securities sold under agreement to repurchase increased $2.6 million, advances
from the Federal Home Loan Bank increased $9.6 million, other borrowed funds
increased $.3 million, operations generated $1.9 million and interest bearing
deposits decreased $5.8 million which provided $26.7 million of funds which were
used to fund increases in loans of $7.9 million, increase investments $3.7
million, increase federal funds sold and securities purchased under agreement
to resell $14.1 million, pay dividends of $.3 million and fund capital
expenditures of $.7 million.
A number of factors contribute to the charges 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 and securities
purchased under agreement to resell, 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
$142,000 ($84,000 net of income tax effect). All securities were held in the
available-for-sale category as of March 31, 1998. Pursuant to Financial
Accounting Standards Board Statement No. 115 and as amended by Statement No.
130, a valuation allowance has been provided for the available-for-sale category
and is reflected as a separate component of shareholders' equity as other
comprehensive income.
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.
On a consolidated basis, at March 31, 1998, a comparison of the minimum required
and actual capital ratios are as follows:
<TABLE>
<CAPTION>
TO BE WELL
CAPITALIZED
UNDER
PROMPT
FOR CAPITAL CORRECTIVE
ADEQUACY ACTION
ACTUAL PURPOSES PROVISIONS
---------------- ---------------- ----------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
-------- ----- -------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C>
As of March 31, 1998
Total Capital
(to Risk Weighted
Assets) $32,452 13.27% 19,564 8.0% 24,455 10.0%
Tier 1 Capital
(to Risk Weighted
Assets) 29,476 12.06% 9,776 4.0% 14,665 6.0%
Tier 1 Capital
(to Average Assets) 29,476 8.83% 13,353 4.0% 16,691 5.0%
</TABLE>
<PAGE> 14
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 March 31, 1998, 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 $.6 million and its federal funds sold
and securities purchased under agreement to resell were approximately $25.8
million. All of the above can be converted to cash on short notice. The sale
of investments which had a market value of approximately $56.3 million at March
31, 1998 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 $23.5 million were pledged
as of March 31, 1998.
The Banks' funding needs are based primarily on the volume of lending. The
primary funding source is from new deposits. The Banks seek to attract new
deposits by paying rates of interest on deposit accounts which are competitive
in their respective primary service areas. The Banks' generally do not pay
brokers' commissions in connection with the obtaining of deposits or have
deposits outside the primary service area. The Banks do not pay premiums to
attract deposits. The Banks continue to expect that new deposits will serve as
their primary funding source.
The Banks also have the ability, on short-term basis, to borrow and purchase
federal funds from other financial institutions. The Banks are members of the
Federal Home Loan Bank of Atlanta and as such have the ability to secure
advances therefrom, although the cost of such advances exceed lower cost
alternatives such as deposits from the local communities. The Banks had
advances outstanding from the Federal Home Loan Bank of Atlanta of $37.8 million
at March 31, 1998, 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 1,650 shares at an average of $11.93 per share was issued during the
three months ended March 31, 1998.
Year 2000 Issue
- ---------------
Based on a preliminary study, the Company expects to spend approximately
$200,000 to $250,000 from 1998 through 1999 to modify its computer information
systems enabling proper processing of transactions relating to the year 2000 and
beyond. The Company continues to evaluate appropriate courses of corrective
<PAGE> 15
action, including replacement of certain systems whose associated costs would be
recorded as assets and amortized. Accordingly, the Company does not expect the
amounts required to be expensed over the next two years to have a material
effect on its financial position or results of operations. The amount expensed
through March 31, 1998 was immaterial.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's financial performance is impacted by, among other factors,
interest rate risk and credit risk. The Company utilizes no derivatives to
mitigate its credit risk, relying instead on strict underwriting standards, loan
review and an adequate loan loss reserve.
The Company has reviewed its market risk information disclosed in its 1997
Annual Report to Stockholders in relation to market risk information for the
three months ended March 31, 1998 and has determined that there has been no
material changes in its market risk disclosures from those presented in its 1997
Annual Report.
<PAGE> 16
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
The Company has announced its plans for a merger of Investors
Financial Corporation (Parent Company of Bainbridge National
Bank) into the Company and has a signed merger agreement. The
anticipated effective date is prior to June 30, 1998. The
transaction is to be consummated by the issuance of 1,710,114
shares of Company common stock in exchange for the outstanding
common stock, options and warrants of Investors Financial
Corporation. It is anticipated that the merger will qualify
as a "pooling of interest" for financial reporting purposes.
Regulatory and stockholder approvals will be required.
The Company has announced that it has entered into a letter of
intent for a proposed merger of Eagle Bancorp, Inc. (Parent
Company of Eagle Bank and Trust in Statesboro) into the
Company. The anticipated effective date is prior to June 30,
1998. The transaction is to be consummated by issuance of one
share of Company common stock for each share of Eagle common
stock. It is anticipated that the merger will qualify as a
"pooling of interest" for financial reporting purposes.
Regulatory and stockholder approvals will be required.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
Exhibit No.
11 Statement re Computation of Per Share Earnings
27 Financial Data Schedule
(b) Reports on Form 8-K.
During the quarterly period ended March 31, 1998, the
Company filed a Current Report on Form 8-K dated January
16, 1998. Such Current Report, which was filed under Item
5 of Form 8-K, reported the execution of a definitive
agreement concerning the proposed acquisition of Investors
Financial Corporation and its wholly-owned subsidiary
(Bainbridge National Bank). The Form 8-K also included a
press release dated January 8, 1998 concerning the proposed
acquisition.
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly 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 and Chief
Financial Officer)
Date:May 15, 1998
<PAGE> 18
PAB BANKSHARES, INC.
FORM 10-Q
INDEX OF EXHIBITS
-----------------
The following exhibits are filed as part of the report.
EXHIBIT NO. DESCRIPTION PAGE
- ----------- --------------------------------- ----
11 Statement re computation of
per share earnings 19
27 Financial data schedule 20
[MULTIPLIER] 1
EXHIBIT 11
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
PAB BANKSHARES, INC.
--------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------
1998 1997
__________ __________
---------- ----------
<S> <C> <C>
Basic Earnings Per Share:
- -------------------------
Average shares outstanding 5,657,884 5,639,240
========== ==========
Diluted Earnings Per Share:
- ---------------------------
Average shares outstanding 5,567,884 5,639,240
---------- ----------
Average options outstanding:
With exercise price of $12.50 144,000 144,000
With exercise price of $20.125 131,500 131,500
With exercise price of $24.125 46,500 -0-
---------- ----------
Proceeds from assumed exercise of options
outstanding $5,568,251 4,446,438
Average market price per share during the period $ 28.57 21.75
---------- ----------
Assumed shares repurchased 194,899 204,398
---------- ----------
Common stock equivalents of options outstanding 127,101 71,102
---------- ----------
Average shares outstanding 5,784,985 5,710,342
========== ==========
Earnings Per Share:
- -------------------
Net Income $1,330,405 1,018,634
========== ==========
Basic Earnings Per Share $ .24 .18
========== ==========
Diluted Earnings Per Share $ .23 .18
========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 13,264,814
<INT-BEARING-DEPOSITS> 647,524
<FED-FUNDS-SOLD> 25,840,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 56,272,450
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 232,384,221
<ALLOWANCE> 2,977,059
<TOTAL-ASSETS> 343,921,321
<DEPOSITS> 267,721,966
<SHORT-TERM> 3,895,123
<LIABILITIES-OTHER> 2,734,697
<LONG-TERM> 37,776,916
<COMMON> 1,217,065
0
0
<OTHER-SE> 30,575,554
<TOTAL-LIABILITIES-AND-EQUITY> 343,921,321
<INTEREST-LOAN> 5,566,922
<INTEREST-INVEST> 826,635
<INTEREST-OTHER> 379,536
<INTEREST-TOTAL> 6,773,093
<INTEREST-DEPOSIT> 2,764,966
<INTEREST-EXPENSE> 3,249,985
<INTEREST-INCOME-NET> 3,523,108
<LOAN-LOSSES> 241,433
<SECURITIES-GAINS> 24,457
<EXPENSE-OTHER> 2,384,027
<INCOME-PRETAX> 1,954,714
<INCOME-PRE-EXTRAORDINARY> 1,330,405
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,330,405
<EPS-PRIMARY> .24
<EPS-DILUTED> .23
<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>
