PAB Bankshares, Inc. Announces Financial Results for First Quarter 2010

VALDOSTA, Ga., April 21, 2010 (GLOBE NEWSWIRE) -- PAB Bankshares, Inc. (Nasdaq:PABK), the parent company for The Park Avenue Bank, today announced its consolidated financial results for the first quarter 2010. The Company reported a net loss of $5.3 million in the first quarter of 2010, compared to a $31.3 million net loss in the fourth quarter of 2009 and a $295,000 net loss in the first quarter of 2009. "Although we reported a net loss for the quarter, we continued to make progress in working through our problem assets," stated Company President and CEO Jay Torbert. "Our team continues to work diligently, and we are starting to see the results materialize. We ended the first quarter on an encouraging note, selling or collecting payments on $8.6 million of our problem assets in March, and the activity and resolution of our problem assets have continued as we have moved into the second quarter."

"While there were a few disappointments, this was the first quarter of this downturn where there were no material unexpected additions to our list of problem assets. Most loan relationships that were downgraded to nonperforming status in the first quarter were previously identified as a potential problem loan in the fourth quarter of 2009 or earlier. Consequently, the analysis of the loss allowance necessary for those assets had been addressed in the fourth quarter of 2009," noted Torbert.

The loss for the first quarter of 2010 is the result of the following credit-related charges: a $2.0 million provision for loan loss, a $1.2 million loss on the sale of other real estate owned, $2.4 million in carrying costs of nonperforming assets, and the reversal of $1.4 million in previously accrued, but uncollected, interest from earnings on loans that were placed on nonaccrual during the quarter. However, the credit-related charges for the first quarter were significantly less than the following credit-related charges incurred in the fourth quarter of 2009: a $16.0 million provision for loan loss, a $3.7 million loss on the sale of ORE, $1.5 million in carrying costs of nonperforming assets, and the reversal of $2.6 million in previously accrued, but uncollected, interest from earnings on loans that were placed on nonaccrual during the quarter. 

During the first quarter of 2010, the Company placed $63.0 million of loans on nonaccrual status and foreclosed or repossessed $10.5 million in collateral on defaulted loans. Also during the first quarter, the Company sold approximately $5.6 million of foreclosed assets and received an additional $6.3 million in principal payments on nonperforming loans, compared to sales of $3.9 million and principal payments received of $2.5 million in the fourth quarter of 2009. The Company charged off $938,000 of problem loans during the first quarter, and set aside specific reserves of $15.5 million on a balance of $151.8 million in loans evaluated for impairment at quarter end. In addition, the Company incurred $1.2 million in losses on the sale of other real estate owned during the quarter.

For the first quarter of 2010, the Company's net interest margin was 1.71%, a 33 basis point decrease compared to 2.05% in the fourth quarter of 2009. The reduction of interest income due to the nonperforming assets negatively impacted the net interest margin by 103 basis points during the first quarter of 2010, compared to an 88 basis point impact in the fourth quarter of 2009. In addition, 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 March 31, 2010, the Company had $213.2 million in cash and cash equivalents, approximately 17% of total assets. This amount is triple the level the Company would carry in a normal operating environment. Carrying this excess liquidity at a negative net spread adversely affected the Company's net interest margin by 22 basis points during the first quarter of 2010. 

At March 31, 2010, the Company reported total assets of $1.25 billion, a slight increase compared to total assets of $1.23 billion in total assets reported at December 31, 2009. During the first quarter of 2010, total deposits increased $22.0 million, or 2.1%, to $1.07 billion while total loans decreased $47.6 million, or 5.9%, to $757.7 million. During the first quarter of 2010, the company entered into a definitive agreement to sell five Park Avenue Bank branches to HeritageBank of the South, a subsidiary of Albany-based Heritage Financial Group (Nasdaq:HBOS). The transaction is expected to close in the second quarter of 2010, subject to regulatory approval and other customary conditions. After posting the net loss for the quarter, the Bank remained adequately capitalized with a total risk-based capital ratio of 8.1% and a tier one risk-based capital ratio of 6.8%. Additional information regarding the Company's financial results is provided in the tables accompanying this press release.

Asset Quality

A summary of pertinent asset quality ratios for the Company as of March 31, 2010 is as follows:

• Total nonperforming assets equaled $234.7 million, or 18.78% of total assets. Nonperforming assets consisted of $138.3 million in nonaccrual loans, $95.5 million in foreclosed real estate and other repossessed assets and $880,000 in loans classified as troubled-debt restructurings.
• Approximately 53% of nonperforming loans were construction and development loans, and these loans represented approximately 40% of the Company's total portfolio of construction and development loans.
• For the first quarter, the Company charged off $938,000 in loans and recovered $153,000 in loans previously charged-off for an annualized net charge-off ratio of 0.41% of average loans. 
• The allowance for loan losses represented approximately 4.03% of total loans and 21.94% of total nonperforming loans at March 31, 2010. 
• The Company has previously recognized the loss portion and charged off $15.1 million of its existing nonperforming loans. If these charge-offs had not been recorded and were still reported as reserves in the allowance for loan losses, the adjusted allowance for loan losses would represent 5.90% of total loans and 29.56% of total nonperforming loans.
• Loans that were 30-89 days past due and still accruing totaled $26.0 million, or 3.4% of total loans, at March 31, 2010, compared to $57.3 million, or 7.1% of total loans, at December 31, 2009.
• Loan loss provision expense was $2.00 million in the first quarter of 2010, compared to $1.75 million for the first quarter of 2009 and $16.00 million for the fourth quarter of 2009. 
• 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 measure of "net interest margin as adjusted for the impact of nonperforming loans and excess liquidity" in its analysis of the Company's performance.  This measure, as used by the Company, adjusts 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 and unusual during these extraordinary economic times, 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 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 this non-GAAP measure 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, April 23, 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=130740. 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: 440065.

About PAB

The Company is a $1.25 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, 2009. The Company undertakes no obligation to revise these statements following the date of this press release.

[Financial Tables Follow]