UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

 

FORM 8-K

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): October 22, 2014

 

 

Palmetto Bancshares, Inc.

(Exact name of registrant as specified in its charter)

 

 

South Carolina

 

0-26016

 

74-2235055

State or other jurisdiction of incorporation

Commission File Number

IRS Employer I.D. number

 

 

306 East North Street, Greenville, South Carolina 

29601

Address of principal executive offices

Zip Code

  

 

800.725.2265

Registrant's telephone number

 

N/A

(Former Name or Former Address, if Changed Since Last Report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

[   ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

[   ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

[   ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

[   ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 
 
 

 

SECTION 2 – FINANCIAL INFORMATION

 

Item 2.02. Results of Operations and Financial Condition

 

On October 22, 2014, Palmetto Bancshares, Inc. issued a news release announcing its results of operations for the three and nine months ended September 30, 2014. The news release also announced the declaration of a quarterly cash dividend of $0.05 per common share. The cash dividend is payable on November 17, 2014 to shareholders of record as of the close of business on November 3, 2014. A copy of the news release is attached hereto as Exhibit 99.1.

 

SECTION 9 – FINANCIAL STATEMENTS AND EXHIBITS

 

Item 9.01. Financial Statements and Exhibits

 

(d) Exhibits

 

Item Exhibit

99.1

News release dated October 22, 2014 announcing results of operations for Palmetto Bancshares, Inc. for the three and nine months ended September 30, 2014.

 

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 hereunto duly authorized.

 

 

 

PALMETTO BANCSHARES, INC.

 

 

By:

 

 

/s/ Roy D. Jones                           

Roy D. Jones

Chief Financial Officer

 

 

 

Date: October 22, 2014

ex99-1.htm

 

Exhibit 99.1



FOR IMMEDIATE RELEASE

For More Information Contact:

October 22, 2014

Roy D. Jones, Chief Financial Officer

 

(864) 240-5104 or rjones@palmettobank.com

 

 

The Palmetto Bank Reports Third Quarter Net Income of $2.0 Million

Net Loan Growth of $23.9 Million (3.2%) During the Third Quarter

 

Greenville, S.C. – Palmetto Bancshares, Inc. (NASDAQ: PLMT) (the “Company”) reported third quarter 2014 net income of $2.0 million ($0.15 per diluted share), which is unchanged from the second quarter 2014 ($0.16 per diluted share). For the nine months ended September 30, 2014, the Company reported net income of $6.0 million ($0.47 per diluted share) compared to net income of $25.9 million ($2.03 per diluted share) for the nine months ended September 30, 2013. Results for the nine months ended September 30, 2013 include a non-cash income tax benefit resulting from the reversal of substantially all of the valuation allowance on the Company’s net deferred tax asset. Income before provision (benefit) for income taxes was $9.6 million for the nine months ended September 30, 2014 compared to $7.7 million for the nine months ended September 30, 2013. The Company also declared a quarterly cash dividend of $0.05 per common share payable on November 17, 2014 to shareholders of record on November 3, 2014.

 

“We continue to demonstrate our ability to produce solid financial results in this challenging economic environment and competitive banking market,” said Samuel L. Erwin, Chairman and Chief Executive Officer. “We are encouraged by both our loan production during the quarter and our deposit generation efforts. We are also pleased to continue the quarterly dividend for our shareholders as part of our “value creation strategy” to increase the value of The Palmetto Bank franchise.”

 

Highlights for the third quarter 2014 are summarized as follows:

 

●

Net income was $2.0 million, which was unchanged from the second quarter. As detailed below, a negative provision for loan losses was recorded which was offset primarily by writedowns on foreclosed real estate and vacant bank properties being marketed for sale.

●

Net interest margin declined 4 basis points from the second quarter to 3.77%, reflecting a reduction in average loan balances and loan yields from the continued low interest rate environment, as well as a decline in investment securities yields from an increase in prepayments on securities backed by mortgage and Small Business Administration (“SBA”) loans. As a result, net interest income declined $44 thousand.

●

The provision for loan losses was negative $500 thousand reflecting continued improvement in the risk profile of the loan portfolio, low charge-offs and a recovery of $833 thousand that was realized on a previously charged-off loan. There was no provision for loan losses recorded during the second quarter. The allowance for loan losses coverage ratio declined to 1.98%, also reflecting continued positive trends in credit quality.

●

Noninterest income decreased $82 thousand from the second quarter as increases in deposit-related fees were more than offset by a decline in mortgage banking and trading asset income.

●

Non-credit related expenses increased $438 thousand from the second quarter primarily due to writedowns of $253 thousand on vacant bank properties being marketed for sale, an increase in performance-based incentive accruals and professional fees associated with the revenue enhancement initiatives implemented in the third quarter.

●

Credit-related expenses, defined as foreclosed real estate writedowns and expenses and loan workout expenses, declined $40 thousand from the second quarter. The second and third quarters included writedowns related to a single real estate development included in foreclosed real estate of $478 thousand and $337 thousand, respectively.

●

Total period-end loans held for investment increased $23.9 million from the second quarter 2014 reflecting an increase in commercial and consumer loan originations, a strategic decision to retain a larger portion of mortgage loan production in the held for investment loan portfolio, and the purchase of $14.0 million of adjustable-rate mortgage (“ARM”) loans to supplement organic loan originations.

 

 
 
 

 

 




●

Nonperforming assets decreased $1.4 million from the second quarter reflecting ongoing payments and dispositions of problem loans and foreclosed assets.

 

The discussion of the Company’s results of operations and financial condition below is supplemented by the accompanying financial tables.

 

Net Interest Income

The net interest margin decreased 4 basis points to 3.77% in the third quarter 2014 and net interest income declined $44 thousand. The declines in net interest margin and net interest income are primarily due to lower average loan balances and yields and an increase in prepayments on securities backed by mortgage and SBA loans. While loans held for investment increased $23.9 million as of the end of the third quarter 2014, the increase occurred primarily in September, therefore interest income was only earned on these loans during a portion of the third quarter 2014.

●

The overall yield on the loan portfolio continued to decline as higher-yielding loans matured and were replaced with new loan originations at lower rates in the current low interest rate and competitive banking environment.

●

The overall cost of funds was unchanged and remained at 0.05% during the third quarter 2014, reflecting the Company’s strong core deposit franchise. Core deposits, defined as total deposits less time deposits over $100 thousand, increased $9.5 million during the third quarter 2014 and represent 93% of total deposits at September 30, 2014.

●

The Federal Reserve continues to maintain short term interest rates near historically low levels. The sustained level of low interest rates, in addition to increasing competition for credit-worthy borrowers in the Company’s markets, has an overall negative impact on earning asset yields and makes improvement in our net interest income and margin challenging.

 

Noninterest Income

Noninterest income decreased $82 thousand from the second quarter, primarily due to the following:

●

Mortgage banking income declined $241 thousand from a $1.1 million reduction in mortgage loan sales due to the Company’s decision during the third quarter 2014 to retain mortgage production in the held for investment portfolio rather than selling the loans in the secondary market, as well as a $196 thousand reduction in the fair value of mortgage loan commitments accounted for as derivatives. The Company expects to continue its strategy of retaining a portion of its mortgage loan production during the fourth quarter 2014. Mortgage loan production was $25.7 million and $20.5 million in the second and third quarters 2014, respectively.

●

Trading asset income, before account management expenses, declined $77 thousand due to lower trading activity and a reduction in pricing spreads.

●

These decreases were partially offset by an increase in service charges on deposit accounts of $236 thousand. The increase reflects the impact of the revenue enhancement initiatives that were implemented on July 1 and September 1, 2014, as well as increases in deposit transaction volumes. The Company also refined the features of select deposit products and introduced new products effective September 1, 2014. The increase in noninterest income from the revenue enhancement initiatives and product changes implemented during the third quarter are expected to result in incremental revenues in the fourth quarter 2014 and in 2015.

 

Noninterest Expense

Total noninterest expense increased $398 thousand during the third quarter 2014, primarily due to the following:

●

The Company recorded a non-recurring writedown of $253 thousand to reflect a reduction in the estimated fair values of vacant land and a branch facility that are being marketed for sale.

●

Salaries and other personnel expense increased $100 thousand due to an increase in performance-based incentive accruals. Base salaries declined $82 thousand in the third quarter 2014 compared to the second quarter 2014 reflecting the reduction in full-time equivalent employees (including contractors) from 300 at June 30, 2014 to 291 at September 30, 2014 as a result of process improvement projects implemented during 2014.

 

 
 
 

 



●

Professional services expense increased $70 thousand primarily due to expenses associated with the revenue enhancement initiatives implemented during the third quarter 2014.

●

The second and third quarter 2014 included writedowns of $478 thousand and $337 thousand, respectively, related to a single real estate development included in foreclosed real estate. The third quarter 2014 writedown reflects the execution of a contract to sell 16 residential lots located in one particular development and represents 10% of the Company’s book value concentration in this overall development. The sale is expected to close in the fourth quarter 2014.

 

The Company continues its focus on strategic efficiency to address net interest margin challenges, revenue pressures on fee income and increased regulatory compliance costs. During the third quarter 2014, the Company continued the implementation of various process improvement projects such as continuing the transition to part-time staffing in the branches, direct recruiting in lieu of paying staffing agencies, further consolidation of telephone providers and renegotiation of equipment maintenance contracts. The process improvement projects generated expense reductions during the second and third quarters 2014 and are expected to have a continued positive impact on the Company’s financial results over the remainder of 2014 and in 2015. The Company has additional process improvement projects that will result in further expense reductions over the remainder of 2014 and in 2015.

 

Credit Quality

Nonperforming assets decreased $1.4 million from the second quarter 2014 to $21.3 million at September 30, 2014 as a result of continued problem asset resolutions.

●

Net recoveries were $270 thousand during the third quarter 2014 compared to net charge-offs of $647 thousand during the second quarter 2014 (0.34% of average loans, annualized). Net recoveries include an $833 thousand recovery on one borrower relationship previously charged-off. Excluding the impact of this recovery, net charge-offs were $563 thousand (0.30% of average loans, annualized) during the third quarter 2014.

●

Past due loans were 0.47% of loans outstanding at September 30, 2014 compared to 0.38% at June 30, 2014 and have remained below 1.00% for seven consecutive quarters.

●

The amount of the Company’s allowance for loan losses was reduced given the continued overall improvement in credit quality and reduced risk profile of the loan portfolio. The allowance for loan losses coverage ratio was 1.98% at September 30, 2014 compared to 2.07% at June 30, 2014. Absent unexpected negative trends in credit quality, the Company expects its allowance for loan losses coverage ratio to be further reduced in the fourth quarter 2014.

 

Balance Sheet and Capital

Total assets increased $5.5 million from June 30, 2014 to $1.1 billion at September 30, 2014 primarily due to an increase in cash from growth in deposits during the third quarter 2014.

●

During the third quarter 2014, gross loans increased $23.9 million reflecting organic growth in commercial and consumer loans, a strategic decision to retain a larger portion of mortgage loan production in the loan portfolio, and the purchase of $14.0 million of ARM loans. The decision to retain mortgage loan production and the ARM loan purchase were intended to supplement the Company’s organic loan originations. To the extent organic loan growth slows or unscheduled payoffs exceed organic loan growth, the Company may consider additional loan pool purchases in the future. The loans purchased during the third quarter 2014 are comprised of 16 performing jumbo hybrid ARM loans secured by residential real estate located primarily in and around Atlanta, Georgia.

●

While loan origination volume increased during the third quarter 2014, the overall economic environment remains sluggish and the level of competition for lending relationships is increasing. As a result, loan demand is uneven and the pricing on new loan originations remains extremely competitive.

●

Investment securities available for sale increased $5.0 million during the third quarter 2014 to $214.6 million as excess liquidity was redeployed into higher-yielding earning assets. At September 30, 2014, an after-tax net unrealized loss on the investment securities portfolio of $1.5 million was recorded in accumulated other comprehensive loss, compared to $1.0 million at June 30, 2014. The Company continues to evaluate the interest rate sensitivity of its investment securities portfolio in anticipation of rising interest rates. At September 30, 2014, the estimated percentage decrease in fair value resulting from an instantaneous 100 basis point increase in interest rates was 4.09%.

 

 
 
 


 

●

Noninterest bearing deposits increased $13.6 million while time deposits decreased $6.0 million, demonstrating the Company’s continued ability to both attract low cost deposits and achieve further reductions in higher-cost time deposits.

●

The Company remains focused on executing several strategies to continue growing core deposits through increasing balances in existing accounts as well as growth in the number of households. These strategies include proactively retaining clients, attracting new clients, utilizing teammates with specialized deposit product knowledge, and enhancing existing deposit products. Growth in deposits is expected to be used primarily to fund future loan growth.

●

The Company’s banking subsidiary, The Palmetto Bank, met all regulatory required minimum capital ratios and continued to be categorized as “well-capitalized” at September 30, 2014.

●

In October 2014, the Company declared a quarterly cash dividend of $0.05 per common share, reflecting sustained profitability and strong capital levels. The dividend is payable on November 17, 2014 to shareholders of record on November 3, 2014.

 

“Our organic loan production improved notably during the third quarter,” continued Erwin. “However, we continue to experience an elevated level of unscheduled loan payoffs and uneven loan demand. Accordingly, during the third quarter we executed several tactical strategies to continue to increase our earning assets to generate interest income. In addition, we implemented revenue enhancement and expense reduction initiatives during the third quarter to further improve our financial results. We expect all of these actions to result in bottom line improvement in the fourth quarter.”

 

About The Palmetto Bank: Headquartered in Greenville, South Carolina, The Palmetto Bank is a 108-year old community bank and is the second largest banking institution headquartered in South Carolina. The Palmetto Bank has assets of $1.1 billion and serves the Upstate of South Carolina through 25 branch locations in nine counties along the economically attractive I-85 corridor, as well as 24/7/365 service through online and mobile banking, ATMs and telephone. The Bank has a unique understanding of the Upstate market and delivers local decision making with greater responsiveness to clients. Through its Retail, Commercial and Wealth Management lines of business, the Bank specializes in providing financial solutions to consumers and small to mid-size businesses with deposit and cash management products, loans (including consumer, mortgage, credit card, automobile, Small Business Administration, commercial, and corporate), lines of credit, trust, brokerage, private banking, financial planning and insurance. The Bank provides solutions that improve the client experience by providing clients the ability to bank whenever they want, wherever they want. Additional information may be found at the Bank's website at palmettobank.com or on Facebook.

 

# # #

 

 

 

 
 
 

 



Addendum to News Release – Forward-Looking Statements

 

Certain statements in this News Release contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, such as statements relating to future plans and expectations, and are thus prospective. Such forward-looking statements are identified by words such as “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “targets,” and “projects,” as well as similar expressions. Forward-looking statements are subject to risks, uncertainties, and other factors which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Factors which could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements include, but are not limited to: (1) the strength of the United States economy in general and the strength of the local economies in which the Company conducts its operations which could result in, among other things, a deterioration in the credit quality or a reduced demand for credit, including the resultant effect on our loan portfolio and allowance for loan losses and the rate of delinquencies and amounts of charge-offs, or adverse changes in asset quality in our loan portfolio, which may result in increased credit risk-related losses and expenses; (2) adverse conditions in the stock market, the public debt market and other capital markets (including changes in interest rate conditions) and the impact of such conditions on the Company, and the timing and amount of future capital raising activities by the Company, if any; and (3) actions taken by banking regulatory agencies related to the banking industry in general and the Company or the Bank specifically. The assumptions underlying the forward-looking statements could prove to be inaccurate. Therefore, we can give no assurance that the results contemplated in the forward-looking statements will be realized. The inclusion of this forward-looking information should not be construed as a representation by our Company or any person that the future events, plans, or expectations contemplated by our Company will be achieved. Additional factors that could cause our results to differ materially from those described in the forward-looking statements can be found in our reports (such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K) filed with the U.S. Securities and Exchange Commission (the “SEC”) and available at the SEC’s Internet site (http://www.sec.gov), including the “Risk Factors” included therein. All subsequent written and oral forward-looking statements concerning the Company or any person acting on its behalf is expressly qualified in its entirety by the cautionary statements above. We do not undertake any obligation to update any forward-looking statement to reflect changes in circumstances or events that occur after the date the forward-looking statements are made.

 

 

 

 

 

 

 

 

 

 
 
 

  

Palmetto Bancshares, Inc. and Subsidiary

Consolidated Balance Sheets

(dollars in thousands, except per share data)

(unaudited) 

 

                                           

September 30,

  
   

September 30,

    

June 30,

    

March 31,

    

December 31,

    

September 30,

    

2014 vs. 2013

  
   

2014

    

2014

    

2014

    

2013

    

2013

    

% Change

  
                                                 

Cash and cash equivalents

   $ 43,383     $ 60,104     $ 65,942     $ 38,178     $ 55,743       (22.2 )%

Investment securities available for sale, at fair value

    214,582       209,617       208,772       214,383       227,079       (5.5 )

Trading account assets, at fair value

     5,458       5,381       5,247       5,118       5,027       8.6  

Mortgage loans held for sale

    268       4,874       2,474       1,722       1,865       (85.6 )
                                                 

Loans, gross

     776,947       753,049       755,878       767,513       756,814       2.7  

Less: allowance for loan losses

     (15,366 )     (15,596 )     (16,243 )     (16,485 )     (16,706 )     (8.0 )

Loans, net

     761,581       737,453       739,635       751,028       740,108       2.9  
                                                 

Foreclosed real estate

     6,595       7,335       7,490       7,502       7,928       (16.8 )

Deferred tax asset, net

     18,109       18,875       20,546       22,087       22,197       (18.4 )

Bank-owned life insurance

     11,845       11,767       11,691       11,617       1,571       654.0  

Other assets

     35,354       36,259       37,610       38,594       38,379       (7.9 )

Total assets

   $ 1,097,175     $ 1,091,665     $ 1,099,407     $ 1,090,229     $ 1,099,897       (0.2 )%
                                                 
                                                 
                                                 

Noninterest bearing deposits

   $ 212,813     $ 199,169     $ 191,474     $ 178,075     $ 187,150       13.7 % 

Interest bearing deposits

     723,476       729,084       736,559       729,285       757,662       (4.5 )

Total deposits

     936,289       928,253       928,033       907,360       944,812       (0.9 )
                                                 

Retail repurchase agreements

     24,050       17,867       17,319       18,175       24,640       (2.4 )

FHLB advances

     -       10,000       20,000       35,000       -       -  

Other liabilities

     5,501       5,291       7,103       5,877       9,499       (42.1 )

Total liabilities

     965,840       961,411       972,455       966,412       978,951       (1.3 )
                                                 

Shareholders' equity

     131,335       130,254       126,952       123,817       120,946       8.6  
                                                 

Total liabilities and shareholders' equity

  $ 1,097,175     $ 1,091,665     $ 1,099,407     $ 1,090,229     $ 1,099,897       (0.2 )%
                                                 

Quarterly Average Balances

                                                

Loans(1)

   $ 753,711     $ 755,199     $ 764,526     $ 766,454     $ 749,201       0.6 % 

Investment securities

     210,929       207,575       212,186       220,412       243,955       (13.5 )

Trading account assets

     5,410       5,314       5,178       5,067       652       729.8  

Total assets

     1,090,636       1,099,617       1,094,578       1,096,881       1,080,900       0.9  

Noninterest-bearing deposits

     205,257       200,933       186,852       188,603       188,477       8.9  

Interest-bearing deposits

     728,880       733,452       726,707       751,974       763,746       (4.6 )

Retail repurchase agreements

     18,177       18,383       18,269       22,638       19,521       (6.9 )

FHLB advances and other borrowings

     2,174       13,193       31,276       2,271       24    

n/m

 

Shareholders' equity

     131,094       128,612       125,664       123,299       100,795       30.1  
                                                 

Other Data and Ratios

                                                

Past due loans

     0.47

%

    0.38

%

    0.81

%

    0.42

%

    0.63

%

    (25.4 )%

Nonperforming loans

   $ 14,611     $ 15,269     $ 14,035     $ 15,108     $ 14,735       (0.8 )

Nonperforming assets

     21,256       22,693       21,538       22,654       22,706       (6.4 )

90-days past due and still accruing interest

     243       731       -       -       1,723       (85.9 )

ALL as % of loans held for investment

     1.98

%

    2.07

%

    2.15

%

    2.15

%

    2.21

%

    (10.4 )

Net (recoveries) charge-offs (quarterly)

   $ (270 )   $ 647     $ 242     $ 2,021     $ 1,157       (123.3 )

Net charge-offs to average loans (annualized)

  

n/m

      0.34

%

    0.13

%

    1.05

%

    0.61

%

    (100.0 )
                                                 

Outstanding common shares

     12,793,543       12,791,621       12,792,509       12,784,605       12,783,019       0.1  

Book value per common share

   $ 10.27     $ 10.18     $ 9.92     $ 9.68     $ 9.46       8.6  

Closing market price per common share

     14.14       14.39       14.09       12.96       13.04       8.4  
                                                 

Tier 1 risk-based capital (consolidated)(2)

     15.41

%

    15.29

%

    14.82

%

    14.24

%

    14.26

%

    8.1  

Total risk-based capital (consolidated)(2)

     16.67       16.54       16.08       15.49       15.52       7.4  

Tier 1 leverage ratio (consolidated)(2)

     12.01       11.69       11.37       11.03       10.95       9.7  
                                                 

Full Time Equivalent Employees - including contractors

     290.5       299.8       308.0       305.0       306.0       (5.1 )

(1)

Includes Mortgage and Other loans held for sale.

(2)

September 30, 2014 ratios are estimated and may be subject to change pending the filing of the Company's FR Y-9C with the Federal Reserve; all other periods are presented as filed.

 

 
 
 

 

Palmetto Bancshares, Inc. and Subsidiary

Consolidated Statements of Income

(dollars in thousands, except per share data)

(unaudited)

 

    For the Three Months Ended        
   

September 30,

2014

    

June 30,

2014

    

March 31,

2014

    

December 31,

2013

    

September 30,

2013

    

September 30,

2014 vs. 2013

% Change

  

Interest income

                                                

Interest earned on cash and cash equivalents

   $ 25     $ 32     $ 14     $ 17     $ 24       4.2 % 

Dividends received on FHLB stock

     15       25       14       10       8       87.5  

Interest earned on trading account assets

     47       45       46       33       5       n/m  

Interest earned on investment securities available for sale

     944       1,015       1,004       1,033       1,010       (6.5 )

Interest and fees earned on loans

     8,840       8,803       8,998       9,330       9,476       (6.7 )

Total interest income

     9,871       9,920       10,076       10,423       10,523       (6.2 )
                                                 

Interest expense

                                                

Interest expense on deposits

     124       123       127       385       475       (73.9 )

Interest expense on retail repurchase agreements

     -       1       -       1       -       -  

Interest paid on FHLB advances

     2       7       16       1       -    

n/m

 

Total interest expense

     126       131       143       387       475       (73.5 )
                                                 

Net interest income

    9,745       9,789       9,933       10,036       10,048       (3.0 )
                                                 

Provision for loan losses

     (500 )     -       -       1,800       645    

n/m

 
                                                 

Net interest income after provision for loan losses

     10,245       9,789       9,933       8,236       9,403       9.0  
                                                 

Noninterest income

                                                

Service charges on deposit accounts, net

     1,929       1,693       1,562       1,883       1,862       3.6  

Fees for trust and investment management and brokerage services

     179       177       146       151       214       (16.4 )

Mortgage-banking

     275       516       461       498       375       (26.7 )

Debit card and automatic teller machine, net

     603       618       586       652       648       (6.9 )

Bankcard services

     76       70       67       67       70       8.6  

Investment securities gains (losses), net

     -       -       85       23       (44 )     (100.0 )

Trading asset income, net

     98       175       171       134       36       172.2  

Other

    248       241       288       167       118       110.2  

Total noninterest income

     3,408       3,490       3,366       3,575       3,279       3.9  
                                                 

Noninterest expense

                                                

Salaries and other personnel

     4,823       4,723       4,790       4,837       4,862       (0.8 )

Occupancy and equipment

     2,038       2,045       2,142       2,037       2,004       1.7  

Professional services

     705       635       813       609       491       43.6  

FDIC deposit insurance assessment

     351       356       356       356       355       (1.1 )

Marketing

    290       222       255       304       267       8.6  

Foreclosed real estate writedowns and expenses

     661       717       313       468       173       282.1  

Loan workout expenses

     135       119       131       204       410       (67.1 )

Other

    1,479       1,267       1,289       1,397       1,273       16.2  

Total noninterest expense

     10,482       10,084       10,089       10,212       9,835       6.6  
                                                 

Income before provision (benefit) for income taxes

     3,171       3,195       3,210       1,599       2,847       11.4  
                                                 

Provision (benefit) for income taxes

     1,189       1,168       1,182       (224 )     (19,386 )     (106.1 )
                                                 

Net income

   $ 1,982     $ 2,027     $ 2,028     $ 1,823     $ 22,233       (91.1 )%
                                                 

Earnings per Share and Results of Operations

                                                

Basic net income per common share

   $ 0.15     $ 0.16     $ 0.16     $ 0.14     $ 1.74       (91.4 )%

Diluted net income per common share

     0.15       0.16       0.16       0.14       1.74       (91.4 )

Weighted average shares outstanding, diluted

     12,771,634       12,744,931       12,707,444       12,689,245       12,674,743       0.8  

Efficiency ratio

     79.7

%

     75.9

%

     75.9

%

     75.0

%

     73.8

%

     8.0  

Return on average assets

     0.72       0.74       0.75       0.66       8.16       (91.2 )

Return on average equity

     6.00       6.32       6.54       5.87       87.51       (93.1 )
                                                 

Yields and Rates

                                                

Loans (1)

     4.65

%

     4.68

%

     4.77

%

     4.83

%

     5.02

%

     (7.4 )%

Investment securities available for sale

     1.79       1.96       1.89       1.87       1.66       7.8  

Trading account assets

     3.45       3.40       3.60       2.58       3.04       13.5  

Transaction deposits

     0.01       0.01       0.01       0.01       0.01       -  

Money market deposits

     0.03       0.03       0.03       0.03       0.02       50.0  

Savings deposits

     0.01       *       0.01       0.01       0.01       -  

Time deposits

     0.22       0.23       0.22       0.64       0.75       (70.7 )

Retail repurchase agreements

     *       0.02       *       0.02       *    

n/m

 

FHLB advances and other borrowings

     0.36       0.21       0.21       0.17       -    

n/m

 

Net interest margin

     3.77       3.81       3.94       3.86       3.83       (1.6 )

(1)

Includes Mortgage and Other loans held for sale.

*

Rounds to less than .01% for the period.

 

 
 
 

 

Palmetto Bancshares, Inc. and Subsidiary

Consolidated Statements of Income

(dollars in thousands, except per share data)

(unaudited)

 

   

For the Nine Months Ended

September 30,

    

2014 vs. 2013

  
   

2014

    

2013

    

% Change

  

Interest income

                        

Interest earned on cash and cash equivalents

   $ 71     $ 83       (14.5

)%

Dividends received on FHLB stock

     54       29       86.2  

Interest on trading account assets

     138       5    

n/m

 

Interest earned on investment securities available for sale

     2,963       2,984       (0.7 )

Interest and fees earned on loans

     26,641       29,014       (8.2 )

Total interest income

     29,867       32,115       (7.0 )
                         

Interest expense

                        

Interest expense on deposits

     374       1,872       (80.0 )

Interest expense on retail repurchase agreements

     1       1       -  

Interest paid on FHLB advances

     25       -    

n/m

 

Total interest expense

     400       1,873       (78.6 )
                         

Net interest income

    29,467       30,242       (2.6 )
                         

Provision for loan losses

     (500 )     1,665       (130.0 )
                         

Net interest income after provision for loan losses

     29,967       28,577       4.9  
                         

Noninterest income

                        

Service charges on deposit accounts, net

     5,184       5,019       3.3  

Fees for trust and investment management and brokerage services

     502       1,888       (73.4 )

Mortgage-banking

     1,252       1,510       (17.1 )

Debit card and automatic teller machine, net

     1,807       1,748       3.4  

Bankcard services

     213       194       9.8  

Investment securities gains, net

     85       287       (70.4 )

Trading asset income, net

     444       36    

n/m

 

Other

    777       579       34.2  

Total noninterest income

     10,264       11,261       (8.9 )
                         

Noninterest expense

                        

Salaries and other personnel

    14,336       15,270       (6.1 )

Occupancy and equipment

     6,225       5,936       4.9  

Professional services

     2,153       1,474       46.1  

FDIC deposit insurance assessment

     1,063       1,083       (1.8 )

Marketing

    767       747       2.7  

Foreclosed real estate writedowns and expenses

     1,691       2,905       (41.8 )

Gain on other loans held for sale

     -       (326 )     (100.0 )

Loan workout expenses

     385       862       (55.3 )

Other

    4,035       4,170       (3.2 )

Total noninterest expense

     30,655       32,121       (4.6 )
                         

Income before provision (benefit) for income taxes

     9,576       7,717       24.1  
                         

Provision (benefit) for income taxes

     3,539       (18,191 )     (119.5 )
                         

Net income

   $ 6,037     $ 25,908       (76.7

)%

                         

Earnings per Share and Results of Operations

                        

Basic net income per common share

   $ 0.47     $ 2.03       (76.8

)%

Diluted net income per common share

     0.47       2.03       (76.8 )

Weighted average shares oustanding, diluted

     12,741,976       12,655,473       0.7  

Efficiency ratio

     77.2

%

     77.4

%

     (0.3 )

Return on average assets

     0.74       3.16       (76.7 )

Return on average equity

     6.28       34.39       (81.7 )
                         

Yields and Rates

                        

Loans (1)

     4.70

%

     5.22

%

     (10.0

)%

Investment securities available for sale

     1.88       1.54       22.1  

Trading account assets

     3.48       3.04       14.5  

Transaction deposits

     0.01       0.01       -  

Money market deposits

     0.03       0.02       50.0  

Savings deposits

     0.01       0.01       -  

Time deposits

     0.22       0.91       (75.8 )

Retail repurchase agreements

     0.01       0.01       -  

FHLB advances and other borrowings

     0.22       -    

n/m

 

Net interest margin

     3.84       3.84       -  

(1)

Includes Mortgage and Other loans held for sale.