PAB Bankshares, Inc. Announces Financial Results for Fourth Quarter and Full-Year 2009

VALDOSTA, Ga., March 9, 2010 (GLOBE NEWSWIRE) -- PAB Bankshares, Inc. (Nasdaq:PABK), the parent company for The Park Avenue Bank, today announced its consolidated financial results for the fourth quarter and full-year 2009. The Company reported a net loss of $31.3 million in the fourth quarter of 2009, compared to a $5.8 million net loss in the fourth quarter of 2008. During the fourth quarter, the Company:

• made significant progress in its plan to identify, measure and ultimately resolve its problem assets,
• took aggressive actions to charge-off problem assets during the quarter,
• recognized a $15.6 million income tax benefit on the fourth quarter charge-offs, due to recent tax law changes,
• improved its earnings from core operations 59%, primarily through expense reductions,
• posted non-cash charges to earnings representing over half of its net loss in the quarter,
• continued to carry excess liquidity on its balance sheet to support its operations, and
• maintained adequate capital and reserves on its balance sheet to support its banking activities and serve its customers' financial needs.

Since early in the third quarter of 2009, the Company has proactively identified and recognized problem loans in its portfolio. During the fourth quarter, the Company placed $95.4 million of loans on nonaccrual status, reversed $2.6 million in previously accrued, but uncollected, interest from earnings, and foreclosed or repossessed $44.3 million in collateral on defaulted loans. "We have allocated significant resources to manage our credit problems, and I am pleased with our progress through this phase of our overall plan to resolve these problems," stated President and CEO Jay Torbert. "We expect to see the results of our efforts begin to materialize over the next three to six months as we continue to focus on the orderly liquidation of our troubled assets."

The Company charged off $26.9 million of problem loans during the fourth quarter, and set aside specific reserves of $15.5 million on a balance of $134.3 million in loans evaluated for impairment at quarter end. In addition, the Company incurred $3.7 million in losses on other real estate owned during the quarter. The charge-offs and other losses were based on current appraisals and recent regulatory guidance on the recognition of impaired loans. "We have our problem assets marked down to a discounted carrying value, and we do not expect further material deterioration in residential real estate values in our markets," stated Torbert. "With these losses, we recovered $15.6 million in prior income taxes paid as a result of a recent tax law change increasing the net operating loss carry-back period."

As noted above, the Company reported a net loss of $31.3 million in the fourth quarter of 2009, compared to a $5.8 million net loss in the fourth quarter of 2008. However, earnings from core operations were $4.2 million for the fourth quarter of 2009, a 59% increase compared to $2.6 million for the same period in 2008. The improvement in earnings from core operations is primarily the result of operating expense control. The Company defines earnings from core operations as pre-tax, pre-provision earnings less other identified items as shown in the reconciliation of earnings from core operations to net loss in the financial tables included with this press release. 

Approximately 55% of the net loss for the quarter is the result of two significant non-cash charges to earnings. At December 31, 2009, the Company recorded an $11.1 million valuation allowance on its deferred tax assets that will be reversed when the Company returns to a level of sustained profitability. The Company also recorded a $6.0 million charge to earnings for the impairment of goodwill due primarily to the decline in the market value of the Company's common stock. In addition to the above charges, the Company recorded an additional $1.8 million of FDIC insurance expense during the fourth quarter related to a change in the timing and expensing of FDIC insurance premiums. Further details regarding the Company's results for the fourth quarter and full-year ended December 31, 2009 are set forth in the accompanying financial tables.

During the fourth quarter, the Company continued to increase liquidity on its balance sheet to meet its funding needs and to have funds on hand for other contingencies through this economic recession. At December 31, 2009, the Company had $186.5 million in cash and cash equivalents, approximately 15% of total assets. This amount is over twice the level the Company would carry in a normal operating environment. Carrying this excess liquidity at a negative net spread reduced the Company's net interest margin by 15 basis points, or $450,000, during the fourth quarter of 2009.

At the end of the fourth quarter, the Company increased the allowance for loan losses by $16.0 million. At quarter end, the Company had an allowance for loan losses of $29.3 million, or 3.64% of total loans. After posting the net loss for the quarter, the Company remained adequately capitalized with a total risk-based capital ratio of 8.1% and a tier one risk-based capital ratio of 6.8%. 

Asset Quality

A summary of pertinent asset quality ratios for the Company as of December 31, 2009 is as follows:

• Total nonperforming assets equaled $185.3 million, or 15.04% of total assets. Nonperforming assets consisted of $92.3 million in nonaccrual loans, $92.1 million in foreclosed real estate and other repossessed assets, $881,000 in loans classified as troubled-debt restructurings and $15,000 in loans past due 90 days or more and still accruing interest.
• Approximately 55% of nonperforming loans were construction and development loans, and these loans represented approximately 25% of the Company's total portfolio of construction and development loans.
• For the full-year 2009, the Company charged off $41.7 million in loans and recovered $501,000 in loans previously charged-off for an annualized net charge-off ratio of 4.50% of average loans. 
• The allowance for loan losses represented approximately 3.64% of total loans and 31.46% of total nonperforming loans at December 31, 2009.
• Loan loss provision expense was $16.0 million in the fourth quarter of 2009, compared to $31.4 million for the third quarter of 2009 and $8.5 million for the fourth quarter of 2008. 
• For the full-year 2009, loan loss provision expense was $51.2 million, compared to $18.1 million for the full-year 2008.
• The nonperforming loans consisted of:

• Foreclosed real estate included:

Non-GAAP Financial Measures

This press release, including the attached selected unaudited financial tables, which are a part of this release, contains financial information determined by methods other than in accordance with U.S. generally accepted accounting principles ("GAAP"). Management uses the non-GAAP measures of "earnings from core operations" and "net interest margin as adjusted for the impact of nonperforming loans and excess liquidity" in its analysis of the Company's performance. These measures, as used by the Company, adjust net income (loss) determined in accordance with GAAP to exclude the effects of taxes, the provision for loan losses and other expenses as detailed in the attached financial tables and adjust net interest income to exclude the effects of nonperforming loans and excess liquidity carried on the balance sheet. Because certain of these items and their impact on the Company's performance are difficult to predict, management believes presentation of financial measures excluding the impact of those items provides useful supplemental information in evaluating the operating results of the Company's core business and assessing trends in the Company's core operations reflected in the current quarter and year-to-date results. These disclosures should not be viewed as a substitute for net income (loss) or net interest margin as determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Please refer to the "Reconciliation of Non-GAAP Measures" in the attached tables for a more detailed analysis of these non-GAAP measures and the most directly comparable GAAP measures.

Conference Call

Management will host a conference call and webcast to discuss the Company's quarterly financial results at 10:00 AM Eastern on Friday, March 12, 2010. The conference call will be broadcast via the Internet using Windows Media Player. The webcast URL is http://www.talkpoint.com/viewer/starthere.asp?Pres=129527. A link to the webcast is posted on the "Investor Relations" section of the Company's website at www.pabbankshares.com. Interested shareholders, industry analysts and members of the news media and the investment community wanting to participate in the live question and answer session following management's presentation may access the conference call by dialing (toll free) 800-860-2442 or (international) +1 412-858-4600. 

Shortly following the call and at any time for at least 30 days thereafter, interested parties may access an archived version of the webcast on the "Investor Relations" section of the Company's website or by dialing (toll free) 877-344-7529 or (International) +1 412-317-0088. The following replay passcodes will be required for playback access: 438766.

About PAB

The Company is a $1.23 billion bank holding company headquartered in Valdosta, Georgia, and its sole operating subsidiary is The Park Avenue Bank. Founded in 1956, the Bank operates through 18 branch offices in 11 counties in Georgia and Florida. Additional information on the Bank's locations and the products and services offered by the Bank is available on the Internet at www.parkavebank.com. The Company's common stock is listed on the NASDAQ Global Select Market under the symbol PABK. More information on the Company is available on the Internet at www.pabbankshares.com. 

Cautionary Note to Investors Regarding Forward-Looking Statements

Certain matters set forth in this news release are "forward-looking statements" within the meaning of the federal securities laws, including, without limitation, statements regarding our plans regarding our nonperforming assets, our outlook on asset quality and the adequacy of our capital and loan loss reserves, the impact of our nonperforming assets on our capital position, our liquidity position, the interest rate environment and economic conditions in general, and are based upon management's beliefs as well as assumptions made based on data currently available to management. When words like "believe", "anticipate", "intend", "plan", "expect", "estimate", "could", "should", "will" and similar expressions are used, you should consider them as identifying forward-looking statements. These forward-looking statements are not guarantees of future performance, and a variety of factors could cause the Company's actual results to differ materially from the anticipated or expected results expressed in these forward-looking statements. The following list, which is not intended to be an all-encompassing list of risks and uncertainties affecting the Company, summarizes several factors that could cause the Company's actual results to differ materially from those anticipated or expected in these forward-looking statements: (1) general economic conditions (both generally and in our markets) may continue to be less favorable than expected, resulting in, among other things, a further deterioration in credit quality and/or a reduction in demand for credit; (2) continued weakness in the real estate market has adversely affected us and may continue to adversely affect us, leading to higher loan charge-offs or an increase in our provision for loan losses; (3) the possibility that we may fail to comply with our Written Agreement with the Federal Reserve Bank of Atlanta and the Georgia Department of Banking and Finance, which could result in significant enforcement actions against us of increasing severity, up to and including a regulatory takeover of our bank subsidiary; (4) competitive pressures among depository and other financial institutions may increase significantly; (5) changes in the interest rate environment may reduce margins or the volumes or values of loans made by The Park Avenue Bank; (6) legislative or regulatory changes, including changes in accounting standards and compliance requirements, may adversely affect the businesses in which we are engaged; (7) competitors may have greater financial resources and develop products that enable such competitors to compete more successfully than we can; (8) our ability to attract and retain key personnel can be affected by the increased competition for experienced employees in the banking industry; (9) adverse changes may continue to occur in the bond and equity markets; (10) our ability to raise capital to protect against further deterioration in our loan portfolio may be limited due to unfavorable conditions in the equity markets; (11) war or terrorist activities may cause further deterioration in the economy or cause instability in credit markets; (12) restrictions or conditions imposed by our regulators on our operations may make it more difficult for us to achieve our goals; (13) economic, governmental or other factors may prevent the projected population, residential and commercial growth in the markets in which we operate; and (14) the risk factors discussed from time to time in the Company's periodic reports filed with the Securities and Exchange Commission, including the Company's Annual Report on Form 10-K for the year ended December 31, 2008. The Company undertakes no obligation to revise these statements following the date of this press release.

(Financial Tables Follow)