pab bankshares, inc. - SNL Financial

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The table below provides basic information and summary demographic data on each of our current markets. Further discussion regarding local real estate market conditions is provided in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of this Report. Market/ County Number Of Offices Total Loans 1 Total Deposits 1 Market Population Share (%) 2 Population 3 Growth (%) 4 Employment Growth (%) 5 Unemployment Rate (%) 6 South Georgia Lowndes 4 $ 239,918 $ 244,465 20.32 104,583 13.5 -3.4 8.2 Cook 7 1 11,688 49,558 26.04 16,608 5.3 -3.3 12.0 Decatur 3 38,295 114,200 29.64 28,823 2.1 -2.3 12.7 Grady 1 11,423 20,287 8.48 25,115 6.2 -2.6 9.8 Appling 7 1 13,200 37,771 15.39 18,038 3.6 2.0 10.3 Jeff Davis 7 1 8,966 47,874 29.14 13,486 6.3 -4.2 14.2 Bulloch 7 2 32,737 50,515 4.87 67,761 21.0 -2.1 9.2 13 $ 356,227 $ 564,670 North Georgia Henry 2 $161,750 $65,780 3.47 191,502 60.5 -6.7 10.3 Hall 1 138,732 39,084 1.62 184,814 32.7 -5.5 9.2 Oconee 1 41,926 15,515 1.97 32,221 22.9 -2.8 6.2 4 $342,408 $120,379 State of Georgia 20.1 -5.5 10.3 Florida Marion 1 $71,407 $174,221 3.36 329,628 27.3 -4.7 13.0 State of Florida 16.0 -4.6 11.1 National Total 9.1 -3.7 9.6 Employees As of December 31, 2009, we had a total of 270 full-time and seven part-time employees. We consider our relationship with our employees to be excellent. Availability of Information More information on the Company is available on our internet website at www.pabbankshares.com and on the Bank at www.parkavebank.com. We are not incorporating by reference into this Report the information contained on our websites and, therefore, the content of our websites is not a part of this Report. Copies of this Report and other reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, including exhibits, are available free of charge on our website under the “Investor Relations” link as soon as reasonably practicable after they have been filed or furnished electronically to the SEC. Copies of these filings may also be obtained free of charge on the SEC’s website at www.sec.gov. 1 Dollar amounts are presented in thousands as of December 31, 2009. Amounts exclude $35.3 million in loans and $185.9 million in deposits assigned to the “Treasury” that are not allocated to any particular market (i.e. participation loans, employee and director accounts, brokered deposits, official checks, etc.). 2 Based on the FDIC/OTS Summary of Deposits report as of June 30, 2009. 3 Estimated July 1, 2008 population provided by the U.S. Census Bureau. 4 Estimated percentage population change from 2000 to 2008 for counties and change from 2000 to 2009 for states and national totals provided by the U.S. Census Bureau. 5 Total employment growth (not seasonally adjusted) for the Third Quarter 2009 Year-To-Date percentage change from the prior year’s Year-To-Date data provided by the Bureau of Labor Statistics Household Survey. 6 Unemployment rate (not seasonally adjusted) for the Third Quarter 2009 provided by the Bureau of Labor Statistics. 7 We entered into a Purchase and Assumption Agreement on February 23, 2010 to sell our branches in these markets. 8
Supervision and Regulation The banking industry is heavily regulated at both the federal and state levels. Legislation and regulations authorized by legislation influence, among other things: • How, when and where we may expand geographically; • Into what product or service market we may enter; • How we must manage our assets; and • Under what circumstances money may or must flow between the parent bank holding company and the subsidiary bank. Written Agreement with the Federal Reserve and the Georgia Department On July 14, 2009, we entered into a Written Agreement with the Board of Governors of the Federal Reserve (the “Federal Reserve”) and the Georgia Department of Banking and Finance (the “Georgia Department”). The Written Agreement is based on the findings of the Federal Reserve and the Georgia Department during an examination conducted as of January 19, 2009 (the “Examination”). Under the terms of the Written Agreement, the Bank is required to prepare and submit written plans and reports to the regulators that address the following items: strengthening the Bank’s credit risk management practices; improving loan underwriting and loan administration; improving asset quality, including improving the Bank’s position on problem loans through repayment, additional collateral or other means; reviewing and revising as necessary the Bank’s allowance for loan and lease losses policy; maintaining sufficient capital at the Bank; revising and implementing a profitability plan and comprehensive budget to improve and sustain the Bank’s earnings; and improving the Bank’s liquidity position and funds management practices. We initially submitted the requested plans to the regulators for their review on August 26, 2009 and we continue to supplement these plans and reports in response to comments and requests from our regulators. While the Written Agreement remains in place, we may not pay dividends and we may not increase debt or redeem any shares of our stock without the prior written consent of our regulators. Since the completion of the Examination, the boards of directors of PAB and the Bank have aggressively taken steps to address the findings of the Examination. We have taken an active role in working with the Federal Reserve and the Georgia Department to improve the condition of the Bank and are addressing the items included in the Written Agreement on a continuing basis, including establishing new commercial real estate loan concentration limits, new policies on the use of interest reserves, and comprehensive underwriting criteria for commercial credit analysis. We have also developed plans to strengthen our problem asset management function and to reduce the level of problem assets on our balance sheet over a period of time. We are engaged in ongoing dialogue with our regulators to comply with the terms of the Written Agreement. In September 2009, the Federal Reserve and Georgia Department conducted a subsequent examination. In response to concerns raised by our regulators in this examination, we have engaged an independent consultant to evaluate the qualifications of our directors and executive officers, and we hired W. Keith Morris, a banker with over 30 years experience in lending, credit management and problem asset resolution, to lead our Special Assets Group in resolving our problem loans. If we fail to adequately address the regulatory concerns in the Written Agreement, our banking regulators may take further action including, but not limited to, additional requirements for maintaining sufficient capital under the Written Agreement. An ongoing failure to adequately address the concerns of our regulators could ultimately result in the eventual appointment of a receiver or conservator of the Bank’s assets. Set forth below is an explanation of the major pieces of legislation affecting our industry and how that legislation affects our actions. General PAB is a bank holding company registered with the Federal Reserve and the Georgia Department under the Bank Holding Company Act of 1956, as amended (the “BHC Act”) and the Financial Institutions Code of Georgia, respectively. The Bank is a member of the Federal Deposit Insurance Corporation (“FDIC”), and as such, our deposits are insured by the FDIC to the maximum extent provided by law. The Bank is also a state member bank of the Federal Reserve and it is subject to regulation, supervision, and examination by the Federal Reserve and the Georgia Department. These regulatory agencies regularly examine our operations and are given authority to approve or disapprove mergers, consolidations, the establishment of branches, and similar corporate actions. The agencies also have the power to prevent the continuance or development of unsafe or unsound banking practices or other violations of law. 9
Page 1 and 2: 2009 Annual Report
Page 3 and 4: UNITED STATES SECURITIES AND EXCHAN
Page 5 and 6: TABLE OF CONTENTS Item Page Caution
Page 7 and 8: PART I ITEM 1. BUSINESS General PAB
Page 9: North Georgia During the fourth qua
Page 13 and 14: Payment of Dividends PAB is a legal
Page 15 and 16: An institution that is categorized
Page 17 and 18: USA Patriot Act of 2001 In October
Page 19 and 20: If our allowance for loan losses is
Page 21 and 22: Our net interest income could be ne
Page 23 and 24: We may need to raise additional cap
Page 25 and 26: If we fail to continue to meet all
Page 27 and 28: Performance Graph The following gra
Page 29 and 30: GAAP Reconciliation and Management
Page 31 and 32: The three primary reasons for this
Page 33 and 34: At December 31, 2009, commercial re
Page 35 and 36: Average Balances, Interest and Yiel
Page 37 and 38: Loan Portfolio We make both secured
Page 39 and 40: A summary of loans from each market
Page 41 and 42: The following table summarizes our
Page 43 and 44: The first component of the allowanc
Page 45 and 46: Summary of Loan Loss Experience The
Page 47 and 48: The following table summarizes our
Page 49 and 50: On September 4, 2009, the Company b
Page 51 and 52: Provision for Loan Losses The provi
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Page 55 and 56: We have reduced the level of asset-
Page 57 and 58: MANAGEMENT’S REPORT ON INTERNAL C
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PAB BANKSHARES, INC. AND SUBSIDIARI
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NOTES TO CONSOLIDATED FINANCIAL STA
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JAMES W. GODBEE, JR Certified Publi
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KENNITH D. MCLEOD Certified Public
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The Audit Committee is a separately
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SECTION 16(a) BENEFICIAL OWNERSHIP
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Compensation Benchmarks and Use of
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The following table summarizes in t
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Base Salaries The Company’s philo
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(1) The listed stock option grants
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Potential Payments Upon Termination
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(5) Includes 1,659,310 shares owned
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All related party transactions set
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10.5 Rescission Agreement, dated De
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SIGNATURES Pursuant to the requirem
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Shareholder Information Corporate O
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