pab bankshares, inc. - SNL Financial

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 12. INCOME TAXES The components of income tax expense (benefit) for the years ended December 31, 2009, 2008 and 2007 follow. 2009 2008 2007 Current $ (15,591,672) $ (882,879) $ 6,325,504 Deferred tax valuation allowance (3,287,991) (2,671,456) (644,268) Change in valuation allowance 11,135,938 - - $ (7,743,725) $ (3,554,335) $ 5,681,236 The Company's income tax expense (benefit) differs from the amounts computed by applying the federal income tax statutory rates to income before income taxes. A reconciliation of the differences for the years ended December 31, 2009, 2008 and 2007 follows. 2009 2008 2007 Tax (benefit) at statutory rate $ (20,031,347) $ (3,218,304) $ 5,763,433 Increase (decrease) resulting from: Deferred tax valuation allowance 11,208,869 - - Goodwill impairment 2,034,765 - - Tax exempt income, net (402,519) (543,628) (512,746) Other items, net (553,493) 207,597 430,549 Income tax expense (benefit) $ (7,743,725) $ (3,554,335) $ 5,681,236 The components of deferred income taxes at December 31, 2009 and 2008 follow. 2009 2008 Deferred tax assets (liabilities): Accrued severance payable $ 12,155 $ 36,425 Allowance for loan losses 9,966,809 6,587,033 Deferred compensation 662,306 609,929 Deferred loan origination cost (454,593) (505,136) Deferred loan origination fees 483,024 599,691 Other real estate owned Impaired loan interest 582,680 317,132 262,062 454,508 Accrued lease payable Excess charitable contributions Other assets 47,379 54,571 7,977 255,239 29,558 9,657 Premises and equipment (712,558) (602,306) Nonqualified stock options 169,056 111,288 State NOL carryforward 340,891 267,960 Deferred tax valuation allowance (11,476,829) (267,960) Unrealized gain on cash flow hedge derivative instrument (137,777) (1,131,607) Unrealized gain on securities available for sale (236,262) (770,210) Net deferred tax assets (liabilities) $ (374,039) $ 5,946,131 82
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 12. INCOME TAXES (Continued) The Company has invested in affordable housing projects to receive State of Georgia low income housing tax credits to help reduce state income tax expense. The investment in these projects totaled $1,973,283 and $2,302,919 at December 31, 2009 and 2008, respectively. The projected availability of the unused credits follows: Year of projected availability: Amount 2010 $ 797,521 2011 797,521 2012 797,521 2013 797,521 2014 769,318 Later 823,629 Total $ 4,783,031 NOTE 13. EMPLOYEE BENEFIT PLANS The Company provides an employee 401(k) plan for qualified employees. The 401(k) plan allows participants to defer a portion of their compensation and provides that the Company may match a portion of the participants’ deferred compensation. The plan also provides for non-elective and discretionary profit sharing contributions to be made by the Company at the sole discretion of the Board of Directors. The Company did not accrue a discretionary profit sharing contribution for 2009 and 2008. Approximately 3.0% of the participants’ eligible compensation was accrued as the discretionary profit sharing contributions for 2007. The employer contributions are on a five-year vesting schedule. All full-time and part-time employees are eligible to participate in the plan provided they have met the eligibility requirements. Generally, a participant must have completed one month of employment to become eligible, with employer contributions beginning after six months of employment. Aggregate expense under the plan charged to salaries and employee benefits expense during 2009, 2008 and 2007 amounted to $268,211, $440,288 and $862,419, respectively. NOTE 14. DEFERRED COMPENSATION AND RETIREMENT PLANS Under separate deferred compensation agreements executed in prior years with certain officers, deferred compensation is to be payable over a fifteen-year period beginning at the earlier of age 65, death, or disability of each officer. Annual accruals were made based on actuarial assumptions for the present value of the future obligations. In 2001, the Board of Directors elected to terminate these plans. At that time, the Company recorded an expense and an accrual of approximately $898,000 for the net present value of the liability covering two executive officers that were retiring at the end of 2001. The total accrued liability for these deferred compensation plans was $1,947,960 and $1,793,908 at December 31, 2009 and 2008, respectively. On an annual basis, the Company re-evaluates the net present value of these future obligations and records an additional expense (benefit) to account for the accrual. Changes in interest rates affect the computation of net present value of these obligations. The expense (benefit) for these deferred compensation plans charged to salaries and employee benefits expense were $319,139, ($70,817) and $99,457 during 2009, 2008 and 2007, respectively. 83
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2009 Annual Report
Page 3 and 4:
UNITED STATES SECURITIES AND EXCHAN
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TABLE OF CONTENTS Item Page Caution
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PART I ITEM 1. BUSINESS General PAB
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North Georgia During the fourth qua
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Supervision and Regulation The bank
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Payment of Dividends PAB is a legal
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An institution that is categorized
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USA Patriot Act of 2001 In October
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If our allowance for loan losses is
Page 21 and 22:
Our net interest income could be ne
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We may need to raise additional cap
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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
Page 53 and 54: Income Taxes The provision for inco
Page 55 and 56: We have reduced the level of asset-
Page 57 and 58: MANAGEMENT’S REPORT ON INTERNAL C
Page 59 and 60: Because of its inherent limitations
Page 61 and 62: PAB BANKSHARES, INC. AND SUBSIDIARI
Page 69 and 70: NOTES TO CONSOLIDATED FINANCIAL STA
Page 83: NOTES TO CONSOLIDATED FINANCIAL STA
Page 109 and 110: JAMES W. GODBEE, JR Certified Publi
Page 111 and 112: KENNITH D. MCLEOD Certified Public
Page 113 and 114: The Audit Committee is a separately
Page 115 and 116: SECTION 16(a) BENEFICIAL OWNERSHIP
Page 117 and 118: Compensation Benchmarks and Use of
Page 119 and 120: The following table summarizes in t
Page 121 and 122: Base Salaries The Company’s philo
Page 125 and 126: (1) The listed stock option grants
Page 127 and 128: Potential Payments Upon Termination
Page 131 and 132: (5) Includes 1,659,310 shares owned
Page 133 and 134: All related party transactions set
Page 135 and 136:
10.5 Rescission Agreement, dated De
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SIGNATURES Pursuant to the requirem
Page 139 and 140:
Shareholder Information Corporate O
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