pab bankshares, inc. - SNL Financial

The three primary reasons for this decline in earnings are an increase in provision for loan loss expense, a decrease in net
interest income and an increase in noninterest expenses. We recorded a $51.19 million provision for loan loss expense in
2009, compared to the $18.05 million provision for loan loss expense recorded in 2008. During 2009, our net interest
income decreased $6.5 million, from $34.8 million in 2008 to $28.3 million in 2009, and our net interest margin declined
66 basis points from 3.04% in 2008 to 2.38% in 2009. Our noninterest expenses increased 33%, from $30.6 million in
2008 to $40.6 million in 2009. This increase in noninterest expenses is attributable to carrying charges on our
nonperforming assets, goodwill impairment, and increased deposit insurance premiums. Earnings from core operations
were $16.7 million for 2009, a 9% increase compared to $15.3 million for 2008. The improvement in earnings from core
operations is primarily the result of operating expense control. We define earnings from core operations as pre-tax, preprovision
earnings less other identified items as shown below in the reconciliation of earnings from core operations to net
loss. Additional discussion regarding our earnings for 2009 and our outlook for 2010 are outlined in the section titled
“Results of Operations” below.
Management uses the non-GAAP measure of “earnings from core operations” in our analysis of our performance. This
measure, as we use it, adjusts 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 following table. Because certain of these items and their
impact on our 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 our core business and
assessing trends in our 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) as determined in accordance with GAAP, nor are they necessarily
comparable to non-GAAP performance measures that may be presented by other companies. The reconciliation of net loss
to earnings from core operations, as defined as net loss adjusted to exclude provision for loan loss expense, charges and
losses related to nonperforming assets and income tax benefit follows:
Twelve months ended
12/31/09 12/31/08 12/31/07
(Dollars In Thousands)
Net income (loss) $ (51,172) $ (5,911) $ 10,786
Provision for loan losses 51,188 18,050 2,400
Loss (gain) on sale and writedown of other assets 5,015 1,853 (81)
Carrying charges related to nonperforming assets 3,291 956 199
Lost interest on nonaccrual loans 5,951 3,593 753
Deposit insurance premiums 4,138 327 108
Goodwill impairment 5,985 - -
Valuation allowance for deferred tax assets 11,136 - -
Current income tax expense (benefit) (18,880) (3,554) 5,681
Earnings from core operations $ 16,652 $ 15,314 $ 19,846
Loan and Deposit Composition
Total assets decreased $118.2 million, or 8.8%, from $1.35 billion at the end of 2008 to $1.23 billion at the end of 2009.
Total loans decreased $151.4 million, or 15.8%, to $805.3 million and total deposits decreased $78.5 million, or 7.0%, to
$1.05 billion during 2009. In our South Georgia market, loans decreased $32.9 million, or 8.4%, in 2009 due primarily to
a $21.5 million decrease in residential mortgages and a $6.7 million decrease in commercial loans, while deposits
decreased $68.1 million, or 10.8%. In our North Georgia market, loans decreased $98.1 million, or 22.3%, due primarily
to a $78.5 million decrease in construction and development loans and a $9.6 million decrease in commercial loans, while
deposits only decreased 0.6%. In our Florida market, loans decreased $30.0 million, or 29.6%, due to a $28.7 million
decrease in construction and development loans, while deposits increased $15.0 million, or 9.4%.
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