Selected Financial Ratios | ||||
| ||||
As of and for the nine months ended September 30, | ||||
|
| 2005 | 2004 | |
|
| (unaudited) | ||
|
| |||
Significant Operating Ratios Based on Earnings | ||||
Return on average assets | 1.33 | % | 1.31 | |
Return on average equity | 16.24 | 15.92 | ||
Net interest margin | 4.66 | 4.60 | ||
Efficiency ratio | 61.86 | 62.31 | ||
Significant Capital Ratios | ||||
Average equity to average assets | 8.17 | % | 8.21 | |
Equity to assets at period end | 8.20 | 8.17 | ||
Tier 1 risk based capital | 9.35 | 9.44 | ||
Total risk based capital | 10.29 | 10.49 | ||
Tier 1 leverage ratio | 7.91 | 7.75 | ||
Significant Credit Quality Ratios | ||||
Nonaccrual loans to total assets | 0.25 | % | 0.36 | |
Net charge-offs to average loans | ||||
less mortgage loans held for sale | 0.17 | 0.27 | ||
Bank Notes
The Palmetto Bank presented a $10,906 donation to the American Red Cross-Upstate SC Chapter. The Palmetto Bank matched employee contributions to the American Red Cross in an effort to assist those affected by hurricanes Katrina and Rita.
NEW OFFICER APPOINTMENTS
The Palmetto Bank has announced the following new officer appointments:
John R. Hanson was appointed to vice president, consumer lending. John holds a Bachelor of Science and a Master of Business Administration from Hawthorne University and a Doctorate of Business Administration. He brings 34 years of executive management and lending experience in the banking industry.
Kimberly A. Blackwell was appointed to vice president, branch manager and loan officer of the Seneca office. Kimberly is a graduate of both Clemson University and Southern Wesleyan University, and attends SC Bankers School. She has six years banking experience in lending, business development and branch management.
Eric M. Hudgens was appointed to financial advisor of the Palmetto Trust & Investment Group office located in Laurens. He is a graduate of The Citadel and brings 9 years experience in financial services.
Missy F. Johnson was appointed to assistant branch manager and loan officer of the Mauldin office. Missy is an Upstate native with 15 years of experience in retail banking.
To Our Shareholders:
We are pleased to report on another successful quarter and nine month period in the growth and profitability of your company. In the third calendar quarter of 2005 financial markets addressed further increases from the Federal Reserve in short-term rates due to continued expansion in the U.S. domestic economy. Eleven rate increases since interest rates bottomed out in June of 2003 have put upward pressure on mortgage rates, consumer credit and other loans tied to the prime rate. In spite of rising rates growth in loans continued to fuel asset growth this year. In general the Upstate area continues to support a healthy and growing economy. While all good news has been overshadowed by the devastation of hurricanes Katrina and Rita, gasoline shortages and the prospects for higher inflation ahead, we remain optimistic in our economic outlook for the remainder of this year and into 2006.
Operating results in the quarter ending September 30, 2005 were excellent. Net income of $3.3 million was a 6% increase over the $3.1 million posted in the 3rd quarter of 2004 resulting in per diluted share earnings of $0.52 and $0.49, respectively. For the nine-month period ending September 30, 2005 net income was running 15% ahead of the same period in 2004. Net income per diluted share for the same periods was ahead of last year's mark by 13% totaling $1.60 and $1.41, respectively. Profitability ratios continue to be excellent with return on average assets of 1.33% and return to average equity of 16.24% as of September 30, 2005. For both the three and nine month periods ended September 30, 2005, net income has been strongly supported by growth in net interest income of 14% and 15%, respectively. At the same time we continue to build on a growing base of non-interest income primarily from fees contributed by our Trust and Investment Group and income relative to the Bank's mortgage lending activities. Additionally, improved loan quality continues to be reflected in bottom line results through further reductions this year to the loan loss provision.
Expense increases in the quarter and nine month period ended September 30, 2005 reflect the costs associated with opening the new Palmetto Bank office for Easley, South Carolina. A hard working team led by Senior Vice President Pruitt Martin, Vice President Hamp Johnson and Branch Manager Tripp Martin saw one of the most successful grand openings in our history on September 12. Early responses to our Easley presence combined with local community bank board member support brought deposits from new customers to over $10 million at September 30. These record numbers set a new standard for branch openings and one that truly reflects determination, persistence and overwhelming local community support for the Palmetto Bank brand. The Easley location is The Palmetto Bank's first location in Pickens County, one of the Upstate's fastest growing regions, and where we fully intend to be a participant and partner in its dynamic growth.
Total assets at September 30, 2005 stood at $1.065 billion, an all time high and 10% increase over 3rd quarter 2004. Asset quality continues to be excellent as reflected by our best delinquency experience in the loan portfolio in recent years. Non-performing loans continue to decline as a percentage of total loans and stood at 0.32% on September 30, 2005 compared to 0.46% on September 30, 2004. Charge-off experience continues to fall also and was 0.17% through the first nine months of 2005 compared to 0.27% at the same time in 2004. We continue to see excellent growth in total loans - both traditional bank and residential mortgage activity. Total loans have grown almost $100 million in the 12-month period ending September 30, 2005, an increase of over 13%. While growth in loans and interest income has a great impact on our bottom line, we continue to emphasize the necessity of a strong and positive credit culture to future earnings results.
We remain optimistic about the full year 2005 for your company. Results for the nine months have been excellent. Much has been accomplished in our plans for this year. We now begin to look ahead to 2006 and our 100th anniversary year. We look forward to this great celebration event and to sharing in the excitement of this time with our employees, shareholders, and customers in the communities where we operate. As the good name of The Palmetto Bank continues to spread across the Upstate we look forward to the beginning of another century of service to South Carolina. Thank you for your continued loyalty and support.
Sincerely,
L. Leon Patterson
Chairman and Chief Executive Officer
Consolidated Balance Sheets | |||||||
(in thousands, except share data) | |||||||
| September 30, | ||||||
2005 | 2004 | ||||||
(unaudited) | |||||||
Assets | |||||||
Cash and due from banks | $ | 50,312 | 27,935 | ||||
Federal funds sold | 306 | 976 | |||||
Total cash and cash equivalents | 50,618 | 28,911 | |||||
Federal Home Loan Bank (FHLB) stock, at cost | 4,799 | 2,725 | |||||
Investment securities available for sale, at fair market value | 124,412 | 148,611 | |||||
Mortgage loans held for sale | 3,504 | 3,560 | |||||
Loans | 845,320 | 747,010 | |||||
Less allowance for loan losses | (8,356) | (8,170) | |||||
Loans, net | 836,964 | 738,840 | |||||
Premises and equipment, net | 22,658 | 22,214 | |||||
Accrued interest receivable | 4,589 | 4,087 | |||||
Other assets | 17,406 | 16,461 | |||||
Total assets | $ | 1,064,950 | 965,409 | ||||
Liabilities and shareholders' equity | |||||||
Liabilities | |||||||
Deposits | |||||||
Noninterest-bearing | $ | 133,176 | 124,136 | ||||
Interest-bearing | 741,346 | 659,109 | |||||
Total deposits | 874,522 | 783,245 | |||||
Retail repurchase agreements | 16,873 | 19,779 | |||||
Commercial paper (Master notes) | 18,103 | 16,564 | |||||
Federal funds purchased | - | 7,070 | |||||
FHLB borrowings | 62,400 | 54,500 | |||||
Other liabilities | 5,692 | 5,410 | |||||
Total liabilities | 977,590 | 886,568 | |||||
Shareholders' Equity | |||||||
Common stock - par value $5.00 per share; authorized 10,000,000 | |||||||
shares; issued and outstanding 6,324,285 and 6,281,185 at | |||||||
September 30, 2005 and September 30, 2004, respectively. | 31,621 | 31,406 | |||||
Capital surplus | 623 | 358 | |||||
Retained earnings | 55,172 | 45,794 | |||||
Accumulated other comprehensive income (loss), net of tax | (56) | 1,283 | |||||
Total shareholders' equity | 87,360 | 78,841 | |||||
Total liabilities and shareholders' equity | $ | 1,064,950 | 965,409 | ||||
Assets under management | |||||||
Palmetto Bancshares, Inc. less trust deposits | $ | 1,029,853 | 965,409 | ||||
Trust | 279,572 | 260,132 | |||||
Investment | 152,827 | 136,930 | |||||
Mortgage loans serviced for others | 301,054 | 267,264 | |||||
Total assets under management | $ | 1,763,306 | 1,629,735 | ||||
Consolidated Statements of Income | ||||||||||||
(in thousands, except share data) | ||||||||||||
For the three months ended September 30, | For the nine months ended September 30, | |||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||
(unaudited) |
| (unaudited) | ||||||||||
Interest income | ||||||||||||
Interest and fees on loans | $ | 14,946 | 11,542 | 41,936 | 34,045 | |||||||
Interest and dividends on investment securities available for sale | 1,171 | 1,368 | 3,810 | 3,337 | ||||||||
Interest on federal funds sold | 75 | 7 | 130 | 36 | ||||||||
Dividends on FHLB stock | 63 | 21 | 165 | 60 | ||||||||
Total interest income | 16,255 | 12,938 | 46,041 | 37,478 | ||||||||
Interest expense | ||||||||||||
Interest on deposits including retail repurchase agreements | 3,953 | 2,581 | 10,486 | 7,474 | ||||||||
Interest on securities sold under agreements to repurchase and | ||||||||||||
reverse repurchase agreements | - | - | - | 32 | ||||||||
Interest on federal funds purchased | 13 | 23 | 78 | 54 | ||||||||
Interest on FHLB advances | 694 | 259 | 1,356 | 304 | ||||||||
Interest on commercial paper (Master notes) | 129 | 30 | 288 | 75 | ||||||||
Total interest expense | 4,789 | 2,893 | 12,208 | 7,939 | ||||||||
Net interest income | 11,466 | 10,045 | 33,833 | 29,539 | ||||||||
Provision for loan losses | 600 | 650 | 1,800 | 2,150 | ||||||||
Net interest income after provision for loan losses | 10,866 | 9,395 | 32,033 | 27,389 | ||||||||
Noninterest income | ||||||||||||
Service charges on deposit accounts | 2,148 | 2,164 | 5,987 | 6,444 | ||||||||
Fees for trust and brokerage services | 612 | 722 | 2,163 | 2,269 | ||||||||
Mortgage banking income | 287 | 213 | 1,043 | 539 | ||||||||
Investment securities gains | 12 | (18) | 81 | 90 | ||||||||
Other | 864 | 709 | 2,431 | 2,131 | ||||||||
Total noninterest income | 3,923 | 3,790 | 11,705 | 11,473 | ||||||||
Noninterest expense | ||||||||||||
Salaries and other personnel | 5,740 | 4,617 | 16,312 | 14,302 | ||||||||
Occupancy | 659 | 591 | 1,918 | 1,780 | ||||||||
Furniture and equipment | 890 | 878 | 2,695 | 2,616 | ||||||||
Postage and supplies | 295 | 301 | 927 | 895 | ||||||||
Marketing and advertising | 328 | 285 | 851 | 871 | ||||||||
Telephone | 181 | 189 | 547 | 558 | ||||||||
Professional services | 218 | 238 | 618 | 650 | ||||||||
Other | 1,483 | 1,457 | 4,411 | 3,993 | ||||||||
Total noninterest expense | 9,794 | 8,556 | 28,279 | 25,665 | ||||||||
Net income before income taxes | 4,995 | 4,629 | 15,459 | 13,197 | ||||||||
Provision for income taxes | 1,673 | 1,482 | 5,178 | 4,223 | ||||||||
Net income | $ | 3,322 | 3,147 | 10,281 | 8,974 | |||||||
Share Data | ||||||||||||
Net income - basic | $ | 0.53 | 0.50 | 1.63 | 1.43 | |||||||
Net income - diluted | 0.52 | 0.49 | 1.60 | 1.41 | ||||||||
Cash dividends | 0.16 | 0.14 | 0.48 | 0.42 | ||||||||
Book value | 13.81 | 12.55 | 13.81 | 12.55 | ||||||||
Weighted average common shares outstanding - basic | 6,319,613 | 6,272,918 | 6,314,431 | 6,267,991 | ||||||||
Weighted average common shares outstanding - diluted | 6,421,407 | 6,382,823 | 6,418,032 | 6,378,884 |