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EX-1.1 - EX-1.1 - PAB BANKSHARES INC | g20707a3exv1w1.htm |
EX-5.1 - EX-5.1 - PAB BANKSHARES INC | g20707a3exv5w1.htm |
EX-23.1 - EX-23.1 - PAB BANKSHARES INC | g20707a3exv23w1.htm |
Table of Contents
As filed with the Securities and Exchange Commission on May 11, 2010
Registration No. 333-162317
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Pre-Effective Amendment No. 3
to
Form S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
UNDER
THE SECURITIES ACT OF 1933
PAB BANKSHARES, INC.
(Exact Name of Registrant as Specified in Its Charter)
Georgia | 6022 | 58-1473302 | ||
(State or Other Jurisdiction of | (Primary Standard Industrial | (IRS Employer | ||
Incorporation or Organization) | Classification Number) | Identification Number) |
3250 North Valdosta Road
Valdosta, Georgia 31602
(229) 241-2775
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrants Principal Executive Offices)
Valdosta, Georgia 31602
(229) 241-2775
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrants Principal Executive Offices)
Donald J. Torbert, Jr.
President and Chief Executive Officer
PAB Bankshares, Inc.
3250 North Valdosta Road
Valdosta, Georgia 31602
(229) 241-2775
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)
President and Chief Executive Officer
PAB Bankshares, Inc.
3250 North Valdosta Road
Valdosta, Georgia 31602
(229) 241-2775
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)
Copies of Communications to:
Thomas O. Powell | J. Brennan Ryan | |
David W. Ghegan | Charles D. Vaughn | |
Troutman Sanders LLP | Nelson Mullins Riley & Scarborough LLP | |
600 Peachtree Street, N.E., Suite 5200 | 201 17th Street NW, Suite 1700 | |
Atlanta, Georgia 30308 | Atlanta, Georgia 30363 | |
(404) 885-3000 | (404) 322-6000 |
Approximate date of commencement of proposed sale to the public: As soon as practicable after
the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box:
o
If this Form is filed to register additional securities for an offering pursuant to
Rule 462(b) under the Securities Act, please check the following box and list the Securities Act
registration statement number of the earlier effective registration statement for the same
offering: o
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities
Act, check the following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering: o
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities
Act, check the following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering: o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one):
Large accelerated filer o
|
Accelerated filer o | Non-accelerated filer o | Smaller reporting company þ | |||
(Do not check if a smaller reporting company) |
CALCULATION OF REGISTRATION FEE
Proposed | ||||||||
Maximum | ||||||||
Title of each Class of | Aggregate | Amount of | ||||||
Securities to be Registered | Offering Price(1) | Registration Fee(2) | ||||||
Common Stock, no par value per share |
$92,000,000 | $6,559.60 | ||||||
(1) | Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(o). | |
(2) | Previously paid. |
The Registrant hereby amends this Registration Statement on such date or dates as may be
necessary to delay its effective date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may
determine.
Table of Contents
The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state or jurisdiction where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED MAY 11, 2010
PRELIMINARY PROSPECTUS
$80,000,000 of Common Stock
[] Shares of Common Stock
We are offering $80,000,000 of our common stock. The number of shares that we will offer
will be determined based on the public offering price per share. Our common stock is listed on the
NASDAQ Global Select Market under the symbol PABK. The last reported sales price of our common
stock on May 10, 2010 was $2.52 per share. Assuming an offering price of $[] per share, we are
offering [] shares of our common stock.
Investing in our common stock involves risks. You should read the Risk Factors section
beginning on page 16 before you make your investment decision.
Per Share | Total | |||||||
Public Offering Price |
$ | $ | 80,000,000 | |||||
Underwriting Discount(1) |
$ | $ | ||||||
Proceeds, before expenses, to PAB Bankshares, Inc. |
$ | $ |
(1) | The underwriting discount is $[] per share, except with respect to up to an aggregate maximum purchase price of $[] reserved for sale to our officers, directors and employees for which the underwriting discount is $[] per share. See Underwriting on page 35. | |
The underwriters have the option to purchase up to [] additional shares of common stock
at the public offering price, less the underwriting discount, within 30 days from the date of this
prospectus solely to cover over-allotments, if any.
Our shares of common stock are unsecured, not deposits, savings accounts or other obligations
of any bank and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency.
Neither the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or determined if this prospectus is accurate or
complete. Any representation to the contrary is a criminal offense.
The underwriters expect to deliver the common stock on or about [], 2010 only in book-entry
form through the facilities of The Depository Trust Company.
BB&T Capital Markets | ||
The date of this prospectus is [], 2010.
TABLE OF CONTENTS
ABOUT THIS PROSPECTUS
You should rely only on the information contained or incorporated by reference in this
prospectus. We have not authorized any other person to provide you with different information. If
anyone provides you with different or inconsistent information, you should not rely on it. We are
not making an offer to sell shares of common stock in any jurisdiction where the offer or sale is
not permitted. You should assume that the information appearing in this prospectus is accurate
only as of the date on the front cover of this prospectus regardless of the time of delivery of
this prospectus or any sale of the common stock. Our business, financial condition, results of
operations and prospects may have changed since the date of this prospectus.
In this prospectus, we rely on and refer to information and statistics regarding the banking
industry and the banking markets in Georgia and Florida. We obtained this market data from
independent publications or other publicly available information.
No action is being taken in any jurisdiction outside the United States to permit a public
offering of our shares of common stock or possession or distribution of this prospectus in such a
jurisdiction. Persons who come into possession of this prospectus in jurisdictions outside the
United States are required to inform themselves about and to observe any restrictions as to this
offering and the distribution of this prospectus applicable to those jurisdictions.
Unless the context indicates otherwise, all references in this prospectus to PAB, we, us
and our refer to PAB Bankshares, Inc. and our wholly owned subsidiary, The Park Avenue Bank,
except that in the discussion of our capital stock and related matters, these terms refer solely to
PAB Bankshares, Inc. and not to its subsidiary. All references to the Bank refer to The Park
Avenue Bank only.
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SUMMARY
The following summary contains material information about us and this offering. Because it is
a summary, it may not contain all of the information that is important to you. Before making a
decision to invest in our common stock, you should read this prospectus carefully, including the
section entitled Risk Factors, and the information incorporated by reference in this prospectus,
including our audited consolidated financial statements and the accompanying notes in our Annual
Report on Form 10-K for the year ended December 31, 2009, and our unaudited consolidated financial
statements in our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2010.
Overview
PAB Bankshares, Inc. is a bank holding company headquartered in Valdosta, Georgia. Our
company was organized and incorporated in 1982 under the laws of the State of Georgia as the
holding company for The Park Avenue Bank, a state chartered bank that was founded in 1956. We have
a tradition of community banking in South Georgia spanning more than five decades. In 2000, we
expanded into higher growth metropolitan markets in North Georgia and Florida to leverage the
excess deposits of our South Georgia franchise. Currently, the Bank operates with 13 branches
located in seven counties in South Georgia, where we have developed a leading market share in
several of these communities; four branches located in three counties in North Georgia; and one
branch located in Ocala, Florida. As of March 31, 2010, we had:
| total assets of $1.25 billion, | ||
| total loans of $757.7 million, | ||
| total deposits of $1.07 billion and | ||
| stockholders equity of $46.0 million. | ||
As further described below, we have been operating under a Written Agreement with the Board of
Governors of the Federal Reserve System (the Federal Reserve) and the Georgia Department of
Banking and Finance (the Georgia Department) since July 14, 2009.
We provide a sophisticated banking platform that is competitive with larger institutions while
maintaining a level of service that is typical of a community bank. As a result, we believe our
customer service exemplifies our motto that we are Large enough to serve your needs... Small enough
to know your name. The Bank offers traditional banking products and services to commercial and
individual customers in our markets. Our product line includes loans to small- and medium-sized
businesses, residential and commercial construction and development loans, commercial real estate
loans, farmland and agricultural production loans, residential mortgage loans, home equity loans,
consumer loans and a variety of commercial and consumer demand, savings and time deposit products.
We originate conforming residential mortgages for customers in our markets and sell these mortgages
to third-party mortgage investors. We also offer internet banking, on-line cash management,
electronic bill payment services, safe deposit box rentals, telephone banking, credit and debit
card services, remote depository products and the availability of a network of ATMs to our
customers. In addition, through an agreement with a third-party broker-dealer and investment
advisory firm, we offer securities brokerage and investment advisory services to our customers.
In response to the current economic downturn that has severely affected our financial
condition, we have proactively taken measures to address our credit quality, improve our capital
position and preserve our liquidity, including the following:
| we raised $13.4 million in Tier 1 capital in September 2009 through two private placements of preferred stock that immediately converted into common stock; | ||
| we restructured our executive management team; | ||
| we strengthened our credit department through the creation of a Special Assets Group and the recruitment of several senior personnel whose sole focus is the resolution of our problem assets; |
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| we improved the identification, tracking and resolution of our problem assets by implementing a robust credit review process and creating an internal accounting system that isolates and tracks all of our nonperforming assets into a virtual bad bank; | ||
| we entered into a definitive agreement in February 2010 to sell five of our branches in markets that do not fit within our long term strategic plan, a transaction that we expect to be accretive to our earnings and capital position; | ||
| we reduced our operational costs by 13% (on an annualized basis) through the implementation of several cost cutting measures over the past 18 months; and | ||
| we maintained a strong liquidity position while reducing our reliance on brokered deposits by approximately $92.9 million, or 45%, from December 31, 2008 to March 31, 2010. | ||
As a result of these aggressive responses to the economic situation, and with the additional
capital we expect to raise upon the successful completion of this offering, we believe we will be
able to liquidate substantially all of our nonperforming assets over the next 18 months, subject to
prevailing market conditions. Consequently, we expect to return to profitability in 2012 with a
healthy balance sheet and a strong capital position to take advantage of future strategic
opportunities in our markets. From August 2008 through April 2010, over 60 institutions in Georgia
and Florida were placed into FDIC receivership. We anticipate that the current economic
environment will continue to create significant market dislocation and consolidation, particularly
in our North Georgia and Florida markets, resulting in both organic and strategic opportunities in
these markets.
Our Current Situation
Like many financial institutions across the United States, our operations have been severely
affected by the current economic crisis. The recession has reduced liquidity and credit quality
within the banking system and the labor, capital and real estate markets. Dramatic declines in the
housing market, specifically in our North Georgia and Florida markets, have negatively affected the
credit performance of our residential construction and development loans. The economic recession
has also lowered commercial real estate values in all of our markets and substantially reduced
general business activity and investment. Combined, the deterioration in the residential and the
commercial real estate markets has materially increased our level of nonperforming assets and
charge-offs of problem loans. These market conditions and the tightening of credit have led to
increased delinquencies in our loan portfolio, increased market volatility, added pressure on our
capital, a lower net interest margin and net losses.
Credit Quality
In response to the deteriorating economic conditions, we have taken a number of measures to
address our credit quality. Early in 2008, we formed the Special Assets Group, which reports to
our Chief Credit Officer and is comprised of bankers, workout specialists, real estate
professionals and collections and recovery department personnel. Once a loan is classified as a
troubled loan or falls into a default or collection/ workout situation, it is turned over to our
Special Assets Group to manage the resolution process. The Special Assets Group provides
assessments and progress reports, supplemented with independent reviews conducted by our credit
administration and internal audit departments, to our Problem Asset Committee. Our Problem Asset
Committee consists of senior members of management with expertise in credit administration,
collections, accounting and real estate. The Problem Asset Committee has direct responsibility for
assessing the adequacy of the risk-grading process, determining the specific allowance valuations
and affirming the methodology used for determining the adequacy of our allowance for loan losses.
The Problem Asset Committee reviews the assessments on all nonperforming assets over $100,000 on a
quarterly basis and all nonperforming assets over $500,000 on a monthly basis.
In December 2009, we adopted a plan that we believe will reduce our nonperforming assets over
a three- to four-year period without the infusion of any additional capital. The plan establishes
priorities for the orderly liquidation of real estate properties over periods that vary by type of
real estate. We have written these assets down to carrying values that reflect our anticipated
holding periods.
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Also in December 2009, we adopted a plan to segregate our nonperforming assets from our core
banking operations by placing them under the direct supervision of the Special Assets Group. This
organizational structure enables the Special Assets Group to address our nonperforming assets while
our bankers manage our ongoing core banking operations and serve our customer base without the
distractions created by the nonperforming assets. To lead our Special Assets Group, in January
2010 we recruited W. Keith Morris, an experienced banker who will focus solely on resolving our
problem assets. Mr. Morris has over 30 years experience in lending, credit management and problem
asset resolution for various community banks and super regional banks in North Georgia.
To better track our success in managing our nonperforming assets, we used our technology
platform to develop an internal accounting system that separates these nonperforming assets into a
virtual bad bank with branches created along our market lines that allow us to track those
assets within our different markets. We believe this internal accounting system will not only help
us manage our nonperforming assets, it will help us assess and maximize our core banking
operations, which will be our platform for future growth upon the successful completion of this
offering and the resolution of our nonperforming assets.
We have also engaged an independent, external loan review firm to perform quarterly targeted
reviews of a cross-section of our loan portfolio. These independent loan reviews are designed to
verify the accuracy of our internal risk-grading process and compliance with our loan policy and
regulatory and accounting guidance. Further, we have engaged a commercial real estate firm to
advise us on the management, marketing and disposition of our other real estate owned (OREO).
Written Agreement with the Federal Reserve and the Georgia Department of Banking and Finance
On July 14, 2009, we entered into a Written Agreement with the Federal Reserve and 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 was required to prepare and submit written plans and
reports to the regulators that address the following items: strengthening the Banks credit risk
management practices; improving loan underwriting and loan administration; improving asset quality,
including improving the Banks position on problem loans through repayment, additional collateral
or other means; reviewing and revising as necessary the Banks 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 Banks earnings; and improving the Banks
liquidity position and funds management practices. We submitted the requested plans to the
regulators for their review on August 26, 2009. We provide quarterly updates on these plans to our
regulators and may supplement these plans and reports in the future 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 Bankshares, Inc. 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. As described above under Credit Quality, we have also implemented plans to
strengthen our problem asset management function and to reduce the level of problem assets on our
balance sheet over time. We are engaged in ongoing dialogue with our regulators to remain in
compliance 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 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.
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Loan Review
As discussed above, we engage an external loan review firm to review our loan portfolio on a
quarterly basis. During 2009, the external firm reviewed a sample of loans from all categories
that totaled approximately $498.7 million, or 45.1% of the average of our loans outstanding at the
time of those reviews. The most recent review completed in March 2010 covered approximately 11% of
our total loans outstanding at the time of the review. The purpose of these reviews is to evaluate
the accuracy of our risk grading process, identify potential problem loans, and assess the level of
compliance with our loan policy.
Although these external loan reviews are effective for their stated purpose, we conducted a
further internal loan review to develop a deeper understanding of the potential risks in our real
estate loan portfolio. We used the results from this internal review to identify potential
deficiencies within the loan portfolio not already recognized, to measure the level of resources
needed to manage the problem assets held by our Special Assets Group, and to project the migration
and resolution of those problem assets over time.
During the fourth quarter of 2009, our credit analysts examined substantially all of our real
estate-dependent loans in excess of $500,000. The scope of this review included loans secured by
nonowner-occupied commercial real estate, commercial real estate under construction or development,
residential real estate under construction or development, and other undeveloped land loans
(excluding loans secured by real estate with active agricultural operations). The loans included
in this review represented $291.8 million, or 67.1% of all loans within those categories and 36.2%
of the total loan portfolio as of December 31, 2009. This review was performed on the riskiest
elements of our loan portfolio using guidance provided in the policy statement for prudent
commercial real estate loan workouts published by the federal banking regulators in November 2009.
Our review included an assessment of:
| potential collateral deficiencies based on updated appraisals or discounted appraisals that took into account distressed market conditions and observed market valuations for these types of assets; | ||
| potential impairment issues (due to weaknesses in the debt service capabilities of the borrower or a lack of financial support from the guarantor); and | ||
| potential issues with problem loan management to be addressed by credit administration and our Special Assets Group. |
Stress Test
In May 2009, the Federal Reserve announced the results of the Supervisory Capital Assessment
Program, or the SCAP, commonly referred to as the stress test, of the near-term capital needs of
the 19 largest U.S. bank holding companies. Although we were not subject to the Federal Reserves
review under the SCAP, we have conducted our own internal cumulative loss analysis or stress test
of the Banks capital position using many of the same methodologies of the SCAP and applying
varying loan loss assumptions to estimate a range of potential losses given the composition of our
loan portfolio. We conducted our stress test in 2009 based on the composition of our loan portfolio
at December 31, 2008. The SCAP test attempts to assess the near-term capital needs of a company
using a two-year cumulative loan loss assumption under two scenarios, a baseline scenario that
assumes a consensus forecast for certain economic variables and a more adverse than expected
scenario to project a more significant downturn. These scenarios use the assumptions developed by
the Federal Reserve with input from the 19 largest U.S. bank holding companies and therefore do not
reflect specific adjustments based on more current economic data reflective of the market areas in
which our loans are located or the specific characteristics of our loan portfolio. Results of our
hypothetical stress test projected $63 million of additional potential losses under the two-year
cumulative loss more adverse SCAP scenario. These are not the actual losses that we expect to
incur but rather are projected losses in our loan portfolio that could occur if economic conditions
were to significantly worsen.
Loss Analysis
Using the results of our fourth quarter 2009 internal loan review and a more customized stress
test on the remainder of our loan portfolio, we projected the level of potential losses on the
liquidation of our nonperforming assets based on our balance sheet as of December 31, 2009. Our
projections assume the
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migration of currently performing loans to classified or nonperforming status and the subsequent
orderly liquidation of the underlying collateral on those loans, plus the liquidation of our
existing nonperforming assets. Based in part on this loss analysis, and subject to prevailing
market conditions, we believe that we can liquidate virtually all of our nonperforming assets over
a three- to four-year period if we do not raise additional capital, and that we can liquidate
virtually all of our nonperforming assets over an accelerated one- to two-year period with the
infusion of the additional capital provided by this offering.
Based on the results of our loss analysis, and the assumptions and estimates used in our
projections, we believe that following the successful completion of this offering, we will be well
capitalized from a regulatory capital perspective and have sufficient capital to withstand the
economic challenges facing our company if the local and national economies were to become weaker in
the future than is currently expected. However, if economic conditions were to improve over the
next couple of years, we believe our strong capital position would permit us to take advantage of
strategic opportunities within our market areas.
Recent Capital Raising Efforts
On September 9, 2009, we completed the private placement of shares of two series of our
convertible preferred stock aggregating $13.4 million that immediately converted into 4,470,633
shares of common stock (collectively, the Private Placements). The participants in the Private
Placements also received warrants to purchase an aggregate of 1,072,960 shares of common stock upon
the conversion of the preferred stock. We are using this additional capital to support the
operations of the Bank. Our directors and executive officers demonstrated their confidence in our
operations and future prospects by investing approximately $5.2 million of the approximately
$13.4 million we raised in the Private Placements. We believe that the funds received from the
Private Placements and from this offering will provide the flexibility necessary to address our
nonperforming assets in the near term and also position us to capitalize on the significant
business opportunities that we believe will become available in our markets.
Sale of Branches
On February 23, 2010, we entered into a definitive agreement to sell five of our South Georgia
branches to HeritageBank of the South, including two branches located in Statesboro, one branch in
Baxley, one branch in Hazlehurst, and one branch in Adel, Georgia. Under the terms of our
agreement, we agreed to sell some of our assets and HeritageBank of the South agreed to assume some
of our liabilities, primarily deposits at the affected branches. We expect the sale to result in a
transfer of approximately $52 million in loans; $72 million in demand deposits, savings and money
market accounts; and $26 million in certificates of deposit. Because the amount of liabilities
assumed by HeritageBank of the South will likely exceed the value of the assets purchased, we
anticipate that we will also transfer approximately $42 million in cash to HeritageBank of the
South in connection with the closing of the transaction. We expect the transaction to close on
May 24, 2010. We believe this transaction will be accretive to our capital position. If the
transaction had been completed as of March 31, 2010, it would have increased our total risk based
capital ratio by 50 basis points. We also believe this transaction will be accretive to our
earnings stream based on the net interest margin of those branches and the reduction in operating
costs and corporate overhead costs associated with those branches. Strategically, we believe this
branch sale will allow us to focus on our core markets where we have a stronger presence and market
share.
Liquidity
Although historically we had not used brokered deposits as a substantial funding source for
our banking operations, in 2008 we elected to use brokered deposits and advances from the FHLB,
both of which were then at lower rates than retail deposits in our markets, to fund our balance
sheet. Then, during the third quarter of 2008, as concerns over global market instability and
economic weakness increased, we further utilized brokered deposits to build up our liquidity and
strengthen our balance sheet. During 2008, brokered deposits increased by $171 million, and
advances from the FHLB increased $23.4 million. The total increase in brokered deposits excludes
$46.7 million in retail deposits placed in the Certificate of Deposit Account Registry Service, or
CDARS, reciprocal deposits program during 2008. CDARS deposits must be classified as brokered
deposits under applicable banking regulations.
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As of March 31, 2010, the Bank did not meet the regulatory capital ratios required to meet
well-capitalized standards. Accordingly, we are unable to renew any brokered certificates of
deposit or attract new brokered certificates of deposit without prior regulatory approval.
However, because we have successfully increased our liquidity while reducing our reliance on
brokered deposits from 18.4% of our total deposits at December 31, 2008 to 10.7% at March 31, 2010,
we do not believe that these restrictions will adversely affect us. At March 31, 2010, we had
approximately $197.8 million, or approximately 15.8% of our total assets, in cash balances on
account at the Federal Reserve. This is approximately three times the level of liquidity that we
would normally expect to carry for our banking operations.
Under the Written Agreement, we were required to submit to our banking regulators a timetable
to reduce our reliance on borrowing and short-term wholesale funding, including brokered deposits,
and we have complied with the timetable we submitted. We believe we have sufficient liquidity and
funding sources available to replace these brokered deposits as they come due. In the future, we
plan to rely primarily on retail deposits in our markets to fund our banking operations.
Regulatory restrictions on the rates offered for deposit accounts in our markets took effect in
January 2010, and we believe those restrictions will help reduce aggressive pricing of many of our
competitors in North Georgia and Florida and eventually lower our cost of funds in these markets.
Cost Savings
We have taken prudent measures to control expenses and reduce unnecessary overhead to maintain
a core level of operating earnings to cover the cost of managing our credit problems. We closed
our Jacksonville, Florida and Gwinnett County, Georgia branch offices in January 2009. We have
eliminated 62 employee positions, which equals 19% of our total payroll, since June 2008. Although
our total noninterest expense increased in 2009 due to elevated FDIC insurance premiums, severance
compensation paid to former employees and carrying costs on our nonperforming assets such as OREO
and collection expenses, we have significantly reduced our other controllable noninterest expenses.
In December 2009, in light of limited loan demand and capital limitations on our ability to grow
our loan portfolio, we closed our loan production offices in Forsyth County, Georgia and St.
Augustine, Florida to further reduce our overhead expenses. Through the implementation of these
cost cutting measures, we have reduced our operational costs by 13% (on an annualized basis) over
the past 18 months and expect to realize the benefits of these cost savings in future years. We
also believe that our pending sale of five branches in South Georgia will further reduce our
ongoing operating expenses.
Our Management Team
We have assembled a deeply talented and experienced management team with extensive banking and
financial management backgrounds. In October 2009, we completed the restructuring of our executive
management team to increase our operational efficiency. As part of our restructuring, Donald J.
Jay Torbert, Jr. was elected President and Chief Executive Officer, and the roles and
responsibilities of our executive officers reporting to Mr. Torbert have been realigned and more
clearly defined to better reflect the most essential components of our business. Specifically, we
created the position of Chief Banking Officer to manage our core community banking operations and
oversee our various market presidents. We strengthened our credit administration by consolidating
all functions, including our Special Assets Group, under our Chief Credit Officer and we improved
the depth of expertise in this area with the addition of Mr. Morris to lead our Special Assets
Group.
Our executive management team now consists of the following members:
Donald J. Jay Torbert, Jr. was appointed to serve as our President and Chief Executive
Officer in April 2009 upon the retirement of M. Burke Welsh, Jr., our former President and Chief
Executive Officer. Mr. Torbert joined PAB in 2000 and had previously served as our Executive Vice
President and Chief Financial Officer since 2001. Mr. Torbert is a certified public accountant
with over 16 years experience in bank financial management, audit and accounting, taxation and
regulatory matters. Mr. Torberts strong financial background, organizational and risk management
skills and strategic focus complement our other executive officers who have extensive experience in
managing loan portfolios and banking operations.
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George D. Henderson, an Executive Vice President, has served since October 2009 as our Chief
Banking Officer, a new position in our management structure. Mr. Henderson had previously served
as our Chief Credit Officer since April 2007, where he was primarily responsible for identifying
potential problem loans within the loan portfolio, establishing the Special Assets Group and the
Problem Asset Committee, and supervising the transition of those problem assets from banking
personnel to the Special Assets Group. In his new position as Chief Banking Officer, Mr. Henderson
manages the community banking operations in our Georgia and Florida markets. Mr. Henderson has
been with PAB since 2002 and has over 33 years of experience in commercial banking with various
financial institutions in Georgia, including significant experience in restructuring of banking
institutions.
David H. Hammond was appointed to serve as an Executive Vice President and our Chief Credit
Officer in October 2009. Mr. Hammond has been with PAB since 2005 and has over 25 years experience
in credit positions with various financial institutions. In his role as Chief Credit Officer, Mr.
Hammond is responsible for the overall administration, mentoring and policy management of the
Banks loan portfolio. The Special Assets Group reports to Mr. Hammond. Before joining PAB, Mr.
Hammond served as a senior credit officer for SouthTrust until it was acquired by Wachovia in 2004.
W. Keith Morris recently joined PAB in January 2010 as a Senior Vice President and will lead
our Special Assets Group in resolving our problem loans and reporting to the Problem Asset
Committee. Mr. Morris has over 30 years experience in lending, credit management and problem asset
resolution for various community banks and super regional banks in North Georgia. Before joining
PAB, Mr. Morris was a founder and chief executive officer of a Georgia community bank that was
merged with another Georgia community bank in 2008.
Nicole S. Stokes has served as our Chief Financial Officer since April 2009 and was promoted
from Senior Vice President to Executive Vice President in October 2009. Ms. Stokes previously
served as our Vice President and Controller since December 2005. Before joining PAB, Ms. Stokes
was a CPA in private practice and worked as an accountant for seven years for a regional and a
community bank.
R. Wesley Fuller, an Executive Vice President, has served since October 2009 as our Chief
Administrative Officer, a new position in our management structure, and our Treasurer. Mr. Fuller
previously served as our Director of Operations, where he was responsible for overseeing various
aspects of our banking operations, including loan and deposit activities, data processing,
information technology, compliance, marketing and human resources. With his recent appointment as
our Chief Administrative Officer and Treasurer, Mr. Fuller is now responsible for managing all
corporate administrative functions and our non-traditional banking activities with an emphasis on
expanding our non-interest income generation, managing our liquidity and funding sources and
managing our investment portfolio. Mr. Fuller has been with PAB since 2001 and has over 25 years
of banking experience, including significant experience in the integration of banking acquisitions.
Judith S. Kelly was appointed as Executive Vice President and Chief Operations Officer in
October 2009. Ms. Kelly has been with PAB since 1975 and has previously served in various roles
that included managing our deposit operations area.
We have recently added even more depth to our management team by hiring two individuals with
talents and experience in key areas.
David Rogers, our new Controller, is a certified public accountant with 11 years of bank
accounting and financial reporting experience. Before joining PAB, Mr. Rogers worked as an
accountant in the finance department of a regional bank.
Derek Watkins was recently hired as a Senior Vice President to develop and manage our new
mortgage banking division. This division will provide a competitive product in our markets to
complement our other banking products and to generate additional noninterest income. Mr. Watkins
has over 18 years of experience in mortgage banking in a community banking environment.
Our Strengths
We believe that our core banking operations, developed from more than 50 years of experience
in community banking, and our geographically diverse footprint will provide us with an advantage in
the future
7
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when economic conditions improve. We believe the following core strengths distinguish us from
our competitors.
| Strong Core Deposits. Customer deposits are our primary source of liquidity and funding. We have a strong core deposit base in our South Georgia market that has helped to solidify our balance sheet. We believe that a strong deposit base is crucial for a bank to maintain its stability in this market. As market conditions improve and rates for deposits become less competitive, we expect that we will be able to enhance our deposit franchise in our North Georgia and Florida markets. | ||
| Geographic Market Diversification. Our historically strong presence and core deposit base in South Georgia, which has not been as negatively affected by the recent downturn as other areas, has provided a level of stability to our balance sheet not available to other financial institutions whose operations are primarily focused in metropolitan Atlanta or Florida. | ||
| Longer-Term Growth Opportunity in Attractive North Georgia and Florida Markets. We believe that the communities in our North Georgia and Florida markets need banks that provide banking services to small businesses and local residents in those markets that the larger financial institutions are not well positioned to provide. We anticipate that the current economic environment will result in significant market dislocation and consolidation in the banking segment, particularly in our North Georgia and Florida markets, as some of our competitors may be unable to survive the severity of this downturn. From August 2008 through April 2010, over 60 institutions in Georgia and Florida were placed into FDIC receivership, and we believe that many other institutions in Georgia and Florida will not be able to survive this financial storm. While our stable franchise in South Georgia has helped us weather the current crisis, we believe that our presence in North Georgia and Florida positions us to take advantage of future market dislocation, consolidation and reduced competition for lending activities, and that we will be well positioned to attract available banking talent and grow our market share in those markets upon the successful completion of this offering. | ||
| Core Earnings. We believe our core operations provide a strong banking platform from which we can return to profitability in the future. Our core deposit franchise and favorable geographic footprint, combined with our decreased operational costs from our internal cost-cutting measures, has resulted in the potential for strong earnings from our core operations and a return to profitability when economic conditions improve. Our new bifurcated internal accounting system allows our management team to focus on our core operations without the distraction of our existing nonperforming assets, so that we may continue to identify and capitalize on those areas where we have a strategic advantage and improve in others. | ||
| Restructured Management Team. We recently completed the restructuring of our executive management team to increase our operational efficiency. Under our new organizational structure, our executive-level officers are responsible for overseeing the details of their areas of responsibility, in the context of their strategic goals, and reporting to the Chief Executive Officer and the Board of Directors on a frequent basis. We believe the realignment of duties and responsibilities, especially in credit administration and our Special Assets Group, will allow our management team to better assess the performance of our performing assets. | ||
| Problem Asset Resolution. Our nonperforming asset resolution process separates our nonperforming assets from our core banking operations and places them under the supervision of our Special Assets Group. Our Special Assets Group then handles the resolution of these assets under the leadership of a recently recruited banker with significant experience handling loan workouts in leadership roles. We have created an internal accounting system that separates our nonperforming assets into a virtual bad bank that allows us to track those assets within our different markets. We believe this internal accounting system allows us to segregate and effectively manage our nonperforming assets and our core banking operations. | ||
| Distinctive Combination of Service and Systems. Our senior management team has extensive banking experience and a long-standing commitment to PAB and the communities we serve. We are focused on maintaining our strong service-oriented culture among our employees. Our |
8
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mission is to develop lasting, quality banking relationships through exemplary customer service. We believe there is significant value in relationship banking relative to transactional banking. Over the past several years, we have invested in systems and support to provide a product line that we believe gives us a competitive edge over many of the smaller financial institutions in our markets. Our competitive advantage is providing a sophisticated banking platform that is competitive with larger institutions while maintaining a level of service that is typical of a community bank. As a result, we believe our customer service exemplifies our motto that we are Large enough to serve your needs... Small enough to know your name. We believe our systems are scaleable, which will allow for growth when economic conditions improve, and that our culture is strong enough to continue to provide the personal touch banking our customers value even as we grow. |
The Investment Opportunity
In summary, our executive management team has undertaken an in depth analysis of our
organization and implemented a number of proactive measures that we believe will position our
organization to increase our franchise value and reinvigorate our income stream when market
conditions improve. Due to our efforts to strengthen our credit administration processes by
placing our nonperforming assets under the supervision of our Special Assets Group and creating an
internal bad bank, we believe we will be able to more effectively identify, monitor and resolve
our nonperforming assets. Through a combination of our internal and external loan analyses, our
stress test and our nonperforming assets loss analysis, we believe we have developed a clear
understanding of the amount of capital required to liquidate our nonperforming assets over the next
18 months. By removing these nonperforming assets from our balance sheet, we expect that we will
be able to benefit from our core earnings stream, enhanced by our recent cost cutting measures, and
use our favorable tax position to protect our future earnings and increase our book value.
We believe that after we dispose of our nonperforming assets, the capital from this offering
and the earnings generated through our core balance sheet will enable us to take advantage of
anticipated future market dislocation, consolidation and reduced competition for lending activities
in our markets. While our North Georgia and Florida markets have been severely affected by this
economic crisis, we believe that a more favorable future competitive landscape will emerge from
this crisis that will allow us to attract available banking talent and organically grow our market
share when the economy in each of these markets improves. Furthermore, we believe that we can
capitalize on our strengthened strategic position after the liquidation of our nonperforming assets
to acquire deposits, branches or banks when attractive opportunities arise in our markets.
9
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Special Shareholders Meeting
On January 26, 2010, at a special meeting of our shareholders, our shareholders approved an
amendment to our amended and restated articles of incorporation increasing the number of authorized
shares of common stock from 98,500,000 shares to 300,000,000 shares and of preferred stock from
1,500,000 shares to 10,000,000 shares.
Modification of Existing Warrants
In
the Private Placements during 2009, we issued warrants for the purchase of 1,072,960 shares of our
common stock at an exercise price of $3.75 per share for a term of seven years. Following
completion of this offering, we intend to modify the warrants issued in the Private Placements to
provide the warrant holders with an enhanced economic benefit for their earlier investment. We
propose to offer to each warrant holder the opportunity to exchange the holders existing warrant
for a new warrant with: a reduced exercise price equal to 125% of the offering price of the shares
of common stock sold in this offering; an increase of three times the number of shares that may be
purchased under the warrant; and a shortened term of five years. In evaluating this transaction,
our Board of Directors engaged an outside firm to perform a valuation analysis of the proposed
transaction. The 397,120 warrants held by members of our Board of Directors and executive officers
will not be modified and will remain under the terms of their initial issuance. We expect to
modify the 675,840 warrants that are not held by directors or executive officers. Upon completion
of this proposed transaction, we expect that warrants to purchase a maximum of 2,424,640 shares of
common stock will be outstanding.
Corporate Information
Our principal executive office is located at 3250 North Valdosta Road, Valdosta,
Georgia 31602. Our telephone number is (229) 241-2775. Information about PAB is available on our
internet website www.pabbankshares.com and information about the Bank is available at
www.parkavebank.com. The information contained on our websites or that can be accessed
through our websites does not constitute part of this prospectus and is not incorporated in any
manner into this prospectus.
Our common stock trades on the NASDAQ Global Select Market under the ticker symbol
PABK.
10
Table of Contents
THE OFFERING
Common stock offered by PAB
Bankshares, Inc.
|
[] shares (or [] shares if the underwriters exercise in full their over-allotment option to purchase additional shares) (1) |
|
Common stock to be outstanding after
this offering
|
[] shares (or [] shares if the underwriters exercise in full their over-allotment option to purchase additional shares)(1) (2) |
|
Net proceeds
|
The net proceeds, after the underwriting discount and estimated expenses, to us from the sale of the common stock offered will be approximately $[] million (or approximately $[] million if the underwriters exercise their over-allotment option in full). | |
Use of proceeds
|
We intend to use the proceeds of the offering to improve our regulatory capital position, to invest in the Bank to improve its regulatory capital position and to retain the remainder of any proceeds at PAB for general corporate purposes. | |
The NASDAQ Global Select Market
|
Our shares of common stock are currently listed for trading on the NASDAQ Global Select Market under the ticker symbol PABK. | |
Risk factors
|
Investing in our common stock involves risks. Before investing, you should carefully consider risks described in the section entitled Risk Factors, beginning on page 16 of this prospectus. |
(1) | Based on an assumed offering price of $[] per share (which is the last reported sales price of our common stock on the NASDAQ Global Select Market on May [], 2010). | |
(2) | The number of shares of common stock that will be outstanding after the closing of this offering includes 13,795,040 shares of common stock outstanding as of May 10, 2010, but does not include: | |
| [] shares of common stock issuable pursuant to the underwriters over-allotment option; | ||
| [] shares of common stock that may be issued upon the exercise of options outstanding, with a weighted average exercise price of $[] per share; and | ||
| [] shares of common stock reserved for issuance upon the exercise of warrants, with a weighted average exercise price of $[] per share. |
11
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SELECTED CONSOLIDATED FINANCIAL DATA
Our selected consolidated financial data presented below as of and for the years ended
December 31, 2005 through 2009 are derived from our audited consolidated financial statements. Our
selected consolidated financial data as of and for the three months ended March 31, 2010 and the
three months ended March 31, 2009 are derived from our unaudited interim consolidated financial
statements. In the opinion of our management, these amounts contain all adjustments (consisting of
only normal recurring adjustments) necessary to present fairly our financial position and results
of operations for such periods in accordance with generally accepted accounting principles. Our
results for the quarter ended March 31, 2010 are not necessarily indicative of our financial
position or results of operations for any future period.
You should read the following selected consolidated financial data in conjunction with our
consolidated financial statements and related notes and Managements Discussion and Analysis of
Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the
year ended December 31, 2009 and in our Quarterly Report on Form 10-Q for the quarter ended March
31, 2010, which have been incorporated in this prospectus by reference.
Quarter ended March 31, | Year ended December 31, | |||||||||||||||||||||||||||
(In thousands, except per share and other data) | 2010 | 2009 | 2009 | 2008 | 2007 | 2006 | 2005 | |||||||||||||||||||||
Summary of Operations: |
||||||||||||||||||||||||||||
Interest income |
$ | 10,931 | $ | 16,15 | $ | 59,881 | $ | 70,984 | $ | 84,676 | $ | 77,566 | $ | 59,371 | ||||||||||||||
Interest expense |
6,328 | 8,958 | 31,571 | 36,218 | 42,210 | 33,555 | 20,398 | |||||||||||||||||||||
Net interest income |
4,603 | 7,192 | 28,310 | 34,766 | 42,466 | 44,011 | 38,973 | |||||||||||||||||||||
Provision for loan losses |
2,000 | 1,750 | 51,188 | 18,050 | 2,400 | | 1,189 | |||||||||||||||||||||
Other income |
206 | 2,106 | 4,535 | 4,403 | 5,991 | 5,380 | 5,813 | |||||||||||||||||||||
Other expense |
8,140 | 8,126 | 40,573 | 30,584 | 29,590 | 28,167 | 24,778 | |||||||||||||||||||||
Income (loss) before income tax expense (benefit) |
(5,331 | ) | (578 | ) | (58,916 | ) | (9,465 | ) | 16,467 | 21,224 | 18,819 | |||||||||||||||||
Income tax expense (benefit) |
| (283 | ) | (7,744 | ) | (3,554 | ) | 5,681 | 7,488 | 6,366 | ||||||||||||||||||
Net income (loss) |
$ | (5,331 | ) | $ | (295 | ) | $ | (51,172 | ) | $ | (5,911 | ) | $ | 10,786 | $ | 13,736 | $ | 12,453 | ||||||||||
Balance Sheet: |
||||||||||||||||||||||||||||
Total assets |
$ | 1,249,684 | $ | 1,347,068 | $ | 1,231,945 | $ | 1,350,103 | $ | 1,198,671 | $ | 1,120,804 | $ | 1,017,326 | ||||||||||||||
Earning assets |
1,113,021 | 1,256,085 | 1,095,456 | 1,259,495 | 1,116,776 | 1,048,239 | 957,918 | |||||||||||||||||||||
Loans |
757,732 | 940,279 | 805,314 | 956,687 | 921,349 | 820,304 | 752,938 | |||||||||||||||||||||
Allowance for loan losses |
30,529 | 20,403 | 29,314 | 19,374 | 12,906 | 11,006 | 11,079 | |||||||||||||||||||||
Deposits |
1,067,207 | 1,105,298 | 1,045,215 | 1,123,703 | 980,149 | 908,483 | 815,681 | |||||||||||||||||||||
Stockholders equity |
46,020 | 90,694 | 50,587 | 91,601 | 97,676 | 95,316 | 87,001 | |||||||||||||||||||||
Per Share Data*: |
||||||||||||||||||||||||||||
Outstanding at year or period end |
13,795,040 | 9,324,407 | 13,795,040 | 9,324,407 | 9,406,956 | 9,688,708 | 9,652,756 | |||||||||||||||||||||
Weighted average outstanding |
13,795,040 | 9,324,407 | 10,708,466 | 9,335,376 | 9,602,535 | 9,683,173 | 9,698,514 | |||||||||||||||||||||
Diluted weighted average outstanding |
13,795,040 | 9,324,407 | 10,708,466 | 9,335,376 | 9,744,063 | 9,890,728 | 9,870,633 | |||||||||||||||||||||
Book value per common share |
$ | 3.34 | $ | 9.73 | $ | 3.67 | $ | 9.82 | $ | 10.38 | $ | 9.84 | $ | 9.01 | ||||||||||||||
Tangible book value per common share |
3.34 | 9.08 | 3.67 | 9.18 | 9.75 | 9.22 | 8.39 | |||||||||||||||||||||
Net income (loss) basic |
(0.39 | ) | (0.03 | ) | (4.78 | ) | (0.63 | ) | 1.12 | 1.42 | 1.28 | |||||||||||||||||
Net income (loss) diluted |
(0.39 | ) | (0.03 | ) | (4.78 | ) | (0.63 | ) | 1.11 | 1.39 | 1.26 | |||||||||||||||||
Dividends declared |
| | | 0.24 | 0.57 | 0.53 | 0.47 | |||||||||||||||||||||
Dividend payout ratio |
| | | 37.16 | % | 50.43 | % | 37.36 | % | 36.29 | % | |||||||||||||||||
Profitability Ratios: |
||||||||||||||||||||||||||||
Return (loss) on average assets |
n/m | n/m | n/m | n/m | 0.93 | % | 1.29 | % | 1.31 | % | ||||||||||||||||||
Return (loss) on average equity |
n/m | n/m | n/m | n/m | 11.00 | % | 14.99 | % | 14.58 | % | ||||||||||||||||||
Net interest margin (fully tax equivalent) |
1.71 | % | 2.34 | % | 2.38 | % | 3.04 | % | 3.93 | % | 4.43 | % | 4.40 | % | ||||||||||||||
Efficiency ratio |
131.90 | % | 85.29 | % | 95.74 | % | 70.01 | % | 60.74 | % | 55.88 | % | 54.94 | % |
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Quarter ended March 31, | Year ended December 31, | |||||||||||||||||||||||||||
2010 | 2009 | 2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||||||||
Liquidity Ratios: |
||||||||||||||||||||||||||||
Total loans to total deposits |
71.00 | % | 85.07 | % | 77.05 | % | 85.14 | % | 94.00 | % | 90.29 | % | 92.31 | % | ||||||||||||||
Average loans to average earning assets |
71.15 | % | 74.79 | % | 75.97 | % | 81.95 | % | 80.53 | % | 78.84 | % | 79.30 | % | ||||||||||||||
Noninterest-bearing deposits to total deposits |
8.92 | % | 10.09 | % | 9.61 | % | 8.11 | % | 9.12 | % | 11.11 | % | 13.23 | % | ||||||||||||||
Nonbrokered deposits to total deposits** |
88.14 | % | 80.65 | % | 84.45 | % | 77.46 | % | 96.37 | % | 95.84 | % | 94.84 | % | ||||||||||||||
Capital Adequacy Ratios: |
||||||||||||||||||||||||||||
Tangible common equity to tangible assets |
3.7 | % | 6.3 | % | 4.1 | % | 6.4 | % | 7.7 | % | 8.0 | % | 8.0 | % | ||||||||||||||
Tangible equity to tangible assets |
3.7 | % | 6.3 | % | 4.1 | % | 6.4 | % | 7.7 | % | 8.0 | % | 8.0 | % | ||||||||||||||
Tier 1 leverage ratio |
4.4 | % | 6.8 | % | 4.7 | % | 7.0 | % | 8.5 | % | 9.1 | % | 9.2 | % | ||||||||||||||
Tier 1 risk-based capital ratio |
6.6 | % | 9.2 | % | 6.8 | % | 9.0 | % | 10.0 | % | 11.1 | % | 11.1 | % | ||||||||||||||
Total risk-based capital ratio |
7.9 | % | 10.5 | % | 8.1 | % | 10.3 | % | 11.3 | % | 12.3 | % | 12.4 | % | ||||||||||||||
Asset Quality Ratios: |
||||||||||||||||||||||||||||
Net charge-offs to average loans |
0.41 | % | 0.31 | % | 4.50 | % | 1.21 | % | 0.06 | % | 0.01 | % | (0.12 | )% | ||||||||||||||
Nonperforming loans to total loans |
18.37 | % | 6.70 | % | 11.57 | % | 5.79 | % | 1.24 | % | 0.49 | % | 1.04 | % | ||||||||||||||
Nonperforming assets to total assets |
18.78 | % | 7.01 | % | 15.04 | % | 5.98 | % | 1.49 | % | 0.45 | % | 0.78 | % | ||||||||||||||
Allowance for loan losses to total loans |
4.03 | % | 2.17 | % | 3.64 | % | 2.03 | % | 1.40 | % | 1.34 | % | 1.47 | % | ||||||||||||||
Allowance for loan losses to nonperforming loans |
21.94 | % | 32.39 | % | 31.46 | % | 34.96 | % | 112.79 | % | 271.95 | % | 140.98 | % | ||||||||||||||
Nonperforming assets to stockholders
equity plus loan loss reserves |
306.55 | % | 85.04 | % | 231.89 | % | 72.71 | % | 16.10 | % | 4.74 | % | 8.05 | % | ||||||||||||||
Other Data: |
||||||||||||||||||||||||||||
Number of locations |
18 | 18 | 20 | 20 | 23 | 22 | 21 | |||||||||||||||||||||
Number of employees |
264 | 287 | 270 | 299 | 327 | 321 | 300 |
* | 2007 and prior periods adjusted for 2% stock dividend paid on July 15, 2008. | |
** | Nonbrokered deposits exclude time deposits and brokered deposits placed in the CDARS programs. | |
n/m means not meaningful |
GAAP Reconciliation and Management Explanation for Non-GAAP Financial Measures is included
below the following two tables.
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Table of Contents
Summary of Nonperforming Assets
At March 31, 2010, our nonperforming loans consisted of:
Net | ||||||||
Carrying | Average Carrying | |||||||
Category | Value * | Collateral Description | Value/ Unit | |||||
Construction and
Development
|
$54.2 million | 31 parcels of undeveloped land totaling 4,765 acres | $11,000 per residential
acre $11,800 per commercial acre |
|||||
Construction and
Development
|
$8.3 million | 309 residential lots | $27,000 per lot | |||||
1-4 Family
Residential
|
$16.2 million | 109 houses | $148,700 per house | |||||
Commercial Real
Estate
|
$35.3 million | 32 commercial properties | $1.1 million per property | |||||
Agriculture
|
$7.8 million | 7 parcels of farm land totaling 1,495 acres | $5,200 per acre | |||||
Commercial and
Industrial
|
$ | 686,000 | Non-real estate collateral | $42,900 per loan | ||||
Multi-Family
Residential
|
$1.4 million | 8 condominium units | $175,700 per unit | |||||
Consumer
|
$ | 376,000 | Non-real estate collateral | $37,600 per loan | ||||
Total
|
$124.3 million |
* | The term net carrying value represents the book value of the loan less any allocated allowance for loan losses. |
At March 31, 2010, our foreclosed real estate included:
Category | Book Value | Description | Average Value/ Unit | |||
Construction and
Development
|
$43.3 million | 40 parcels of undeveloped land totaling 1,881 acres | $10,400 per
residential acre $82,700 per commercial acre |
|||
Construction and
Development
|
$17.9 million | 839 residential lots | $21,300 per lot | |||
1-4 Family
Residential
|
$9.3 million | 64 houses | $145,000 per house | |||
Commercial Real
Estate
|
$19.1 million | 26 commercial properties | $735,800 per property | |||
Multi-Family
Residential
|
$5.0 million | 7 condominium units | $710,700 per unit | |||
Total
|
$94.6 million |
14
Table of Contents
GAAP Reconciliation and Management Explanation for Non-GAAP Financial Measures
Certain financial information included in Selected Consolidated Financial Data above is
determined by methods other than in accordance with GAAP. Tangible book value per common share,
tangible common equity to tangible assets and tangible equity to tangible assets are non-GAAP
financial measures that our management uses in its analysis of our performance.
Tangible book value per common share is defined as total equity reduced by recorded
intangible assets divided by total common shares outstanding. This measure is important to
investors interested in changes from period to period in book value per share exclusive of changes
in intangible assets. Goodwill, an intangible asset that is recorded in a purchase business
combination, has the effect of increasing total book value while not increasing the tangible assets
of the company. For companies that have engaged in multiple business combinations, purchase
accounting can result in the recording of significant amounts of goodwill related to such
transactions.
Tangible common equity to tangible assets is defined as total common equity reduced by
recorded intangible assets divided by total assets reduced by recorded intangible assets. This
measure is important to investors interested in the equity to assets ratio exclusive of the effect
of changes in intangible assets on equity and total assets.
Tangible equity to tangible assets is defined as total equity reduced by recorded intangible
assets divided by total assets reduced by recorded intangible assets. This measure is important to
investors interested in the equity to assets ratio exclusive of the effect of changes in intangible
assets on equity and total assets.
These disclosures should not be viewed as a substitute for results determined in accordance
with GAAP, and are not necessarily comparable to non-GAAP performance measures that other companies
may use. The following reconciliation table provides a more detailed analysis of these non-GAAP
performance measures.
March 31, | Year ended December 31, | |||||||||||||||||||||||||||
2010 | 2009 | 2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||||||||
Book value per common share* |
$ | 3.34 | $ | 9.73 | $ | 3.67 | $ | 9.82 | $ | 10.38 | $ | 9.84 | $ | 9.01 | ||||||||||||||
Effect of intangible assets per share* |
| 0.65 | | 0.64 | 0.63 | 0.62 | 0.62 | |||||||||||||||||||||
Tangible book value per common share* |
$ | 3.34 | $ | 9.08 | $ | 3.67 | $ | 9.18 | $ | 9.75 | $ | 9.22 | $ | 8.39 | ||||||||||||||
Equity** |
$ | 46,020 | $ | 90,694 | $ | 50,587 | $ | 91,601 | $ | 97,676 | $ | 95,316 | $ | 87,001 | ||||||||||||||
Intangible Assets |
| 5,985 | | 5,985 | 5,985 | 5,985 | 5,985 | |||||||||||||||||||||
Tangible Equity** |
$ | 46,020 | $ | 84,709 | $ | 50,587 | $ | 85,616 | $ | 91,691 | $ | 89,331 | $ | 81,016 | ||||||||||||||
Assets |
$ | 1,249,684 | $ | 1,231,945 | $ | 1,231,945 | $ | 1,350,103 | $ | 1,198,671 | $ | 1,120,804 | $ | 1,017,326 | ||||||||||||||
Intangible Assets |
| 5,985 | | 5,985 | 5,985 | 5,985 | 5,985 | |||||||||||||||||||||
Tangible Assets |
$ | 1,249,684 | $ | 1,225,960 | $ | 1,231,945 | $ | 1,344,118 | $ | 1,192,686 | $ | 1,114,819 | $ | 1,011,341 | ||||||||||||||
Equity to Assets** |
3.7 | % | 6.7 | % | 4.1 | % | 6.8 | % | 8.1 | % | 8.5 | % | 8.6 | % | ||||||||||||||
Effect of Intangible Assets |
| 0.4 | % | | 0.4 | % | 0.4 | % | 0.5 | % | 0.6 | % | ||||||||||||||||
Tangible Equity to Tangible Assets** |
3.7 | % | 6.3 | % | 4.1 | % | 6.4 | % | 7.7 | % | 8.0 | % | 8.0 | % | ||||||||||||||
* | 2007 and prior periods adjusted for 2% stock dividend paid on July 15, 2008. | |
** | As of March 31, 2010 and for all prior periods, we do not have and have not previously had at any year end any preferred stock outstanding. As a result, tangible equity and tangible common equity are the same. | |
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RISK FACTORS
An investment in our common stock involves a high degree of risk. In evaluating an investment
in the common stock, you should consider carefully the risks described below, which discuss the
most significant factors that affect an investment in our common stock, together with the other
information included or incorporated by reference in this prospectus, including the risk factors
set forth in our Annual Report on Form 10-K for the year ended December 31, 2009 and the risks we
have highlighted in other sections of this prospectus. If any of the events described in the
following risk factors actually occurs, or if additional risks and uncertainties not presently
known to us or that we currently deem immaterial, materialize, then our business, results of
operations and financial condition could be materially adversely affected. The risks discussed
below include forward-looking statements, and our actual results may differ substantially from
those discussed in these forward-looking statements.
Risks Related to Our Company
We have entered into a written agreement with our regulators that requires us to take specified
actions.
On July 14, 2009, we entered into a Written Agreement with the Federal Reserve Bank of Atlanta
and the Georgia Department of Banking and Finance. The failure to comply with the terms of the
Written Agreement could result in significant enforcement actions against us of increasing
severity, up to and including a regulatory takeover of our bank subsidiary. Under the terms of the
Written Agreement, the Bank has prepared and submitted written plans and reports to the regulators
that address the following items: strengthening the Banks credit risk management practices;
improving loan underwriting and loan administration; improving asset quality, including improving
the Banks position on problem loans through repayment, additional collateral or other means;
reviewing and revising as necessary the Banks 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 Banks earnings; and improving the Banks liquidity
position and funds management practices. We may supplement these plans and reports in the future
in response to comments and requests from our regulators. In addition, we may have to agree to
maintain higher capital ratios than we currently maintain.
While the Written Agreement remains in place, we may not pay dividends and take certain other
actions, and we may not increase debt or redeem any shares of our stock without the prior written
consent of the regulators. The Banks regulators have considerable discretion in whether to grant
required approvals, and we may not be able to obtain those approvals if requested, which would
affect our ability to resume payments of dividends or distributions in the future.
If we fail to comply with the terms of our Written Agreement, the regulators have broad
authority to take additional actions against PAB, including assessing civil fines and penalties,
imposing cease and desist orders and removing officers and directors, as well as taking control of
the Bank.
Difficult market conditions and economic trends have adversely affected our industry and our
business and may continue to do so.
Our business has been directly affected by market conditions, trends in industry and finance,
legislative and regulatory changes, and changes in governmental monetary and fiscal policies and
inflation, all of which are beyond our control. Beginning in the second half of 2007 and
continuing into 2010, the financial markets were highlighted by significant volatility
associated with subprime mortgages, including adverse impacts on credit quality and liquidity
within the financial markets. As a result of this significant downturn, we have experienced
dramatic declines in the housing market with decreasing home prices and increasing delinquencies
and foreclosures, which have negatively impacted the credit performance of our loans and resulted
in increases in the level of our nonperforming assets and charge-offs of problem loans. At the
same time, competition among depository institutions for deposits has increased significantly.
Bank and bank holding company stock prices have been negatively affected, as has the ability of
banks and bank holding companies to raise capital or borrow in the debt markets compared to recent
years. These market conditions and the tightening of credit have led to increased deficiencies in
our loan portfolio, increased market volatility and widespread reduction in general business
activity.
As a result of the negative developments in the financial industry, new federal and state laws
and regulations regarding lending and funding practices and liquidity standards have been enacted,
and bank regulatory agencies have been, and are expected to continue to be, aggressive in
responding to concerns and trends identified in examinations. Difficult market conditions and the
impact of the new legislation in response to those developments could restrict our business
operations, including our ability to originate loans. If the communities in which we
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operate do not recover and grow as anticipated or if prevailing economic conditions locally or
nationally do not improve, our business may continue to be negatively impacted. The current
economic downturn, increase in unemployment, and other events that have negatively affected
household and/or corporate incomes both nationally and locally have decreased the demand for loans
and our other products and services and have increased the number of customers who fail to pay
interest or principal on their loans. Furthermore, if the economy improves in the future, we may
not benefit from any market growth or favorable economic conditions in our market areas if they do
occur.
Due to our high concentration of loans secured by real estate, deteriorating conditions in our
North Georgia and Florida markets have adversely affected us and may continue to do so, leading to
higher loan charge-offs or an increase in our provision for loan losses.
As of March 31, 2010, approximately 87% of our total loans were secured by real estate. In
2007, the housing and real estate sectors in our markets experienced an economic downturn that
accelerated through 2009 and has continued in 2010. The downturn has most affected us in our North
Georgia market, particularly on the south side of Atlanta, and in our Florida market. We had a
significant presence in residential construction and development lending in both of these markets.
At March 31, 2010, approximately 46% of our residential construction and development loans, 27% of
our residential mortgages and approximately 61% of our nonperforming assets were in our North
Georgia markets, while approximately 15% of our residential construction and development loans, 6%
of our residential mortgages and 20% of our nonperforming assets were in our Florida market. The
majority of our customers who were residential builders carried inventories of lots for new
construction. The supply of vacant, developed lots has increased dramatically as the number of new
building permits and housing starts decreased. In addition to residential real estate, we also
have a significant amount of commercial real estate loans, which began experiencing significant
weakness during the third quarter of 2009. Banking regulators consider a bank to have a
concentration if its total commercial real estate loans exceed 300% of regulatory capital. At
March 31, 2010, our level of commercial real estate loans accounted for 530% of our total
regulatory capital, representing a concentration in commercial real estate lending.
Between August 2008 and April 2010, the FDIC placed over 60 Georgia- and Florida-based
financial institutions into receivership, and we believe that others will be placed in receivership
in the future. The subsequent sale of the assets of these financial institutions at depressed
prices could continue to negatively affect the value of our real estate collateral and other real
estate owned. We believe that it may take more than five years for the market to fully absorb the
existing lot inventories in some areas on the south side of the Atlanta market. If economic
conditions continue to worsen or deteriorate, it could lead to additional charge-offs and further
increases in our allowance for loan losses.
If our allowance for loan losses is not sufficient to cover actual loan losses, or if credit
delinquencies increase, our losses could increase.
Our success depends, to a significant extent, on the quality of our assets, particularly
loans. Like other financial institutions, we face the risk that our customers will not repay their
loans, that the collateral securing the payment of those loans may be insufficient to assure
repayment, and that we may be unsuccessful in recovering the remaining loan balances. The risk of
loss varies with, among other things, general economic conditions, the type of loan being made, the
creditworthiness of the borrower over the term of the loan and, for many of our loans, the value of
the real estate and other assets serving as collateral. Management makes various assumptions and
judgments about the collectibility of our loan portfolio after considering these and other factors.
Based in part on those assumptions and judgments, we maintain an allowance for loan losses in an
attempt to cover any loan losses that may occur. In determining the size of the allowance, we also
rely on an analysis of our loan portfolio based on historical loss experience, volume and types of
loans, trends in classification, delinquencies and non-accruals, national and local economic
conditions and other pertinent information, including the results of external loan reviews.
Despite our efforts, our loan assessment techniques may fail to properly account for potential loan
losses, and, as a result, our established loan loss reserves may prove insufficient. If we are
unable to generate income to compensate for these losses, they could have a material adverse effect
on our operating results.
In addition, federal and state regulators periodically review our allowance for loan losses
and may require us to increase our allowance for loan losses or recognize further loan charge-offs,
based on judgments different than those of our management. Higher charge-off rates and an increase
in our allowance for loan losses may hurt our overall financial performance and may increase our
cost of funds. For the quarter ended March 31, 2010, we recorded $2.0 million as a provision for
loan losses, which was consistent with the $1.75 million recorded during the same period in 2009.
For the year ended December 31, 2009, we recorded $51.19 million as a provision for loan losses,
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compared to $18.05 million recorded in 2008. The increase was due primarily to the
$37.8 million increase in the level of nonperforming loans during 2009. Although we expect to
continue to increase our allowance for loan losses in 2010, our allowance may not be adequate to
cover future loan losses given current and future market conditions.
We are subject to extensive regulation that could limit or restrict our activities and adversely
affect our earnings.
We operate in a highly regulated industry and are subject to examination, supervision and
comprehensive regulation by various federal and state agencies. Our compliance with these
regulations is costly and restricts certain of our activities, including payment of dividends,
mergers and acquisitions, investments, loans and interest rates charged, interest rates paid on
deposits and locations of offices. Our failure to comply with these requirements can lead to,
among other remedies, administrative enforcement actions, termination or suspension of our
licenses, rights of rescission for borrowers, and class action lawsuits. Many of these regulations
are intended to protect depositors, the public and the FDIC rather than shareholders. The laws and
regulations applicable to the banking industry are changing rapidly to reflect the governments
concerns about the economy and the banking system, and these changes may adversely affect our
business and profitability. Changes to statutes, regulations or regulatory policies, and the
interpretation and implementation of new statutes, regulations or policies could affect us in
substantial and unpredictable ways, including limiting the types of financial services and products
we may offer and/or increasing the ability of nonbanks to offer competing financial services and
products.
In addition, like other registrants, we are subject to the requirements of the Sarbanes-Oxley
Act of 2002. Failure to have in place adequate programs and procedures could cause us to have gaps
in our internal control environment, putting PAB and its shareholders at risk of loss.
These and other potential changes in government regulation or policies could increase our
costs of doing business and could adversely affect our operations and the manner in which we
conduct our business.
Recent legislative and regulatory initiatives to address the current difficult market and economic
conditions may not achieve the desired effect.
Beginning in October 2008, a host of legislation has been enacted in response to the financial
crises affecting the banking system and financial markets and the threats to investment banks and
other financial institutions. These include the following:
| On October 3, 2008, President Bush signed into law the Emergency Economic Stabilization Act (EESA), under which the U.S. Treasury Department has the authority, among other things, to purchase up to $700 billion of mortgages, mortgage-backed securities and certain other financial instruments from financial institutions under the Troubled Asset Relief Program for the purpose of stabilizing and providing liquidity to the U.S. financial markets. | ||
| On October 14, 2008, the Treasury Department announced the Capital Purchase Plan under the EESA pursuant to which it would purchase senior preferred stock and warrants to purchase common stock from participating financial institutions. | ||
| On November 21, 2008, the FDIC adopted a Final Rule with respect to its Temporary Liquidity Guarantee Program pursuant to which the FDIC will guarantee certain newly-issued unsecured debt of banks and certain holding companies and also guarantee, on an unlimited basis, non-interest bearing bank transaction accounts. | ||
| On February 10, 2009, the Treasury Department announced the Financial Stability Plan under the EESA, which is intended to further stabilize financial institutions and stimulate lending across a broad range of economic sectors. | ||
| On February 18, 2009, President Obama signed the American Recovery and Reinvestment Act, a broad economic stimulus package that included additional restrictions on, and potential additional regulation of, financial institutions. | ||
| On March 18, 2009, the Federal Reserve announced its decision to purchase as much as $300 billion of long-term treasuries in an effort to maintain low interest rates. | ||
| On March 23, 2009, the Treasury Department announced the Public-Private Investment Program, which will purchase real estate related loans from banks and securities from the broader markets, and is intended to create a market for those distressed debt and securities. |
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Each of these programs was implemented to help stabilize and provide liquidity to the
financial system. However, the long-term effect that these or any other governmental program may
have on the financial markets or our business or financial performance is unknown. A continuation
or worsening of current financial market conditions could materially and adversely affect our
business, financial condition, results of operations, access to credit or the trading price of our
common stock.
Regulatory reform of the U.S. banking system may adversely affect us.
On June 17, 2009, the Obama Administration announced a comprehensive plan for regulatory
reform of the financial services industry. The plan set forth five separate initiatives that will
be the focus of the regulatory reform, including requiring strong supervision and appropriate
regulation of all financial firms, strengthening regulation of core markets and market
infrastructure, strengthening consumer protection, strengthening regulatory powers to effectively
manage failing institutions and improving international regulatory standards and cooperation.
Other recent developments include:
| the Federal Reserves proposed guidance on incentive compensation policies at banking organizations; | ||
| proposals to limit a lenders ability to foreclose on mortgages or make such foreclosures less economically viable, including by allowing Chapter 13 bankruptcy plans to cram down the value of certain mortgages on a consumers principal residence to its market value and/or reset interest rates and monthly payments to permit defaulting debtors to remain in their home; and | ||
| accelerating the effective date of various provisions of the Credit Card Accountability Responsibility and Disclosure Act of 2009, which restrict certain credit and charge card practices, require expanded disclosures to consumers and provide consumers with the right to opt out of interest rate increases (with limited exceptions). |
These initiatives may increase our expenses or decrease our income by, among other things,
making it harder for us to foreclose on mortgages. Further, the overall effects of these and other
legislative and regulatory efforts on the financial markets remain
uncertain and these efforts may even have unintended harmful consequences on
the U.S. financial system and our business. Should these or other legislative or regulatory
initiatives have unintended effects, our business, financial condition, results of operations and
prospects could be materially and adversely affected.
In addition, we may need to modify our strategies and business operations in response to these
changes. We may also incur increased capital requirements and constraints or additional costs to
satisfy new regulatory requirements. Given the volatile nature of the current market and the
uncertainties underlying efforts to mitigate or reverse disruptions, we may not timely anticipate
or manage existing, new or additional risks, contingencies or developments in the current or future
environment. Our failure to do so could materially and adversely affect our business, financial
condition, results of operations and prospects.
Our
net interest income has been and could continue to be negatively affected by the lower level of short-term interest
rates, recent developments in the credit and real estate markets and competition in our primary
market area.
As a financial institution, our earnings significantly depend on our net interest income,
which is the difference between the income that we earn on interest-earning assets, such as loans
and investment securities, and the expense that we pay on interest-bearing liabilities, such as
deposits and borrowings. Therefore, any change in general market interest rates, including changes
resulting from changes in the Federal Reserves fiscal and monetary policies, affects us more than
non-financial institutions and can have a significant effect on our net interest income and net
income.
The Federal Reserve reduced interest rates on three occasions in 2007 by a total of 100 basis
points, to 4.25%, and by another 400 basis points, to a range of 0% to 0.25%, during 2008. Rates
remained steady in 2009. A
significant portion of our loans, including residential construction and development loans and
other commercial loans, bears interest at variable rates. The interest rates on a significant part
of these loans decrease when the Federal Reserve reduces interest rates, while the interest that we
earn on our assets may not change in the same amount or at the same rates. Accordingly, increases
in interest rates may reduce our net interest income. In addition, an increase in interest rates
may decrease the demand for consumer and commercial credit, including real estate loans, which are
a major component of our loan portfolio.
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Furthermore, increases in interest rates will add to the expenses of our borrowers, which may
adversely affect their ability to repay their loans with us.
Changes in the level of interest rates also may negatively affect our ability to originate
real estate loans, the value of our assets and our ability to realize gains from the sale of our
assets, all of which ultimately affect our earnings. A decline in the market value of our assets
may limit our ability to borrow additional funds or result in our lenders requiring additional
collateral from us under our loan agreements. As a result, we could be required to sell some of
our loans and investments under adverse market conditions, upon terms that are not favorable to us,
to maintain our liquidity. If those sales are made at prices lower than the recorded amounts of
the investments and loans, we will incur losses. Changes in Federal Reserve Board policies and
laws are beyond our control.
Increased nonperforming loans and the decrease in interest rates reduced our net interest
income during 2008, 2009 and the first quarter of 2010 and could cause additional pressure on net interest income in future
periods. This reduction in net interest income may also be exacerbated by the high level of
competition that we face in our primary market area in South Georgia. Any significant reduction in
our net interest income could negatively affect our business and could have a material adverse
impact on our capital, financial condition and results of operations.
We may fail to complete the proposed sale of our five South Georgia branches or realize the
anticipated benefits of the disposition.
The proposed sale of our five South Georgia branches is subject to a variety of conditions,
including customary closing conditions and regulatory approvals for
both the buyer and us. All regulatory approvals have been received
from the appropriate regulators. However, the parties may
be unable to satisfy all of the remaining closing conditions. Even if we sell the braches as we expect, we may
not realize the anticipated benefits to our capital and earnings.
We face strong competition from other financial services providers.
We operate in competitive markets for the products and services we offer. The competition
among financial services providers to attract and retain customers is strong. Customer loyalty can
be easily influenced by a competitors new products, especially offerings that could provide cost
savings or a higher return to the customer. Some of our competitors may be better able to provide
a wider range of products and services over a greater geographic area. We compete with commercial
banks, credit unions, savings and loan associations, mortgage banking firms, consumer finance
companies, securities brokerage firms, insurance companies, money market funds, and other mutual
funds, as well as other super-regional, national and international financial institutions that
operate in our market areas and elsewhere. Moreover, this competitive industry could become even
more competitive as a result of legislative, regulatory and technological changes and continued
consolidation. Many of our competitors have fewer regulatory constraints and some have lower cost
structures. While we believe we can and do successfully compete with these other financial
institutions in our market areas, we may face a competitive disadvantage as a result of our smaller
size, lack of geographic diversification and inability to spread our marketing costs across a
broader market.
As of March 31, 2010, we are not considered well capitalized by our banking regulators. As a
result, we are unable to access brokered deposits, which may adversely affect our liquidity and our
ability to meet our obligations, including the payout of deposit accounts.
As of March 31, 2010, the Bank did not meet the regulatory capital ratios required to meet
well-capitalized standards. As of March 31, 2010, the Bank had a Total Capital to Risk Weighted
Assets ratio of 8.1% and a Tier 1 Capital to Average Assets ratio of 4.5%, which were below the
well-capitalized standards of 10.0% and 5.0%, respectively. Because we do not have sufficient
capital to maintain our well capitalized status, we are unable to renew any brokered certificates
of deposit or attract new brokered certificates of deposit without prior regulatory approval. As
of March 31, 2010, we had approximately $114 million in brokered deposits, which represented
approximately 10.7% of our total deposits, a reduction from 18.39% as of December 31, 2008. If we
are unable to continue to attract deposits and maintain sufficient liquidity, our ability to meet
our obligations, including the payout of deposit accounts, may be adversely affected. If our
liquidity becomes severely impaired and we are unable to meet our financial obligations, including
the payout of deposit accounts, our banking regulators may subject the Bank to regulatory
enforcement action, including receivership.
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If we were to suffer loan losses similar to those predicted by a SCAP test, those losses could have
a material adverse effect on our results of operation, our capital and the price, and market for,
our common stock.
The federal banking regulators, in connection with the Federal Reserves Supervisory Capital
Assessment Program, or SCAP, administered a stress test to the nations 19 largest U.S. bank
holding companies during the first quarter of 2009. Neither the Federal Reserve nor any other bank
regulatory authority has administered a SCAP test to test our loan portfolio. The SCAP
test attempts to assess the near-term capital needs of a company using a two-year cumulative loan
loss assumption under two scenarios, a baseline scenario that assumes a consensus forecast for
certain economic variables and a more adverse than expected scenario to project a more
significant downturn. These scenarios use the assumptions developed by the Federal Reserve with
input from the 19 largest U.S. bank holding companies and therefore do not reflect specific
adjustments based on more current economic data reflective of the market areas in which our loans
are located or the specific characteristics of our loan portfolio. We conducted our SCAP test in
2009 based on our loan portfolio as of December 31, 2008. After applying the SCAP methodology to
our loan portfolio, our potential cumulative loan losses over the next two years under either
scenario of the SCAP test would be significantly higher than the level of loan losses we have
incurred historically. Results of our hypothetical stress test project $63 million of potential
losses under the two-year cumulative loss more adverse SCAP scenario.
The results of the SCAP test involve many assumptions about the economy and future loan losses
and default rates, and may not accurately reflect the impact on our financial condition if the
economy does not improve or continues to deteriorate. Any continued deterioration of the economy
could result in credit losses that are significantly higher than we have historically experienced
or those that may be predicted by the SCAP test. Accordingly, if we were to suffer loan losses
similar or higher in amounts to those that were predicted by the SCAP test, these losses could have
a material adverse effect on our results of operation and on the price and market for our stock.
In addition, these losses could reduce our capital and thus require us to seek additional capital
on unfavorable terms.
Departures of our key personnel may harm our ability to operate successfully.
Our success has been and continues to depend largely on the services of our senior management
team, including our senior loan officers, and our board of directors, many of whom have significant
relationships with our customers. In addition, like many financial institutions, our junior loan
officers have not experienced an economic downturn of this magnitude and are less knowledgeable
about dealing with credit risk in a troubled market. As a result, particularly in the current
economic environment, our success will depend, to a significant extent, on the continued service of
our key senior personnel. The unexpected loss of any additional members of our senior management
team could have an adverse effect on our financial condition and results of operations. We cannot
be assured of the continued service of our senior management team or our board of directors.
Our new executive team may not be able to successfully work together to meet our business
objectives, which would adversely affect our business.
During our recent management restructuring, a significant number of our executive officers
were promoted to positions of greater responsibility. Since their promotion, the new management
team has devoted substantial efforts to significantly change our business strategy and related
activities. While this new management team has previously worked together at PAB and the Bank,
they have not worked together in their new positions and may not be able to successfully implement
our strategy in this difficult economic environment. The failure of the new management team to
address our new business objectives and strategy could materially adversely affect our business and
our future operating results.
We may need to raise additional capital in the future, but that capital may not be available when
we need it or may be dilutive.
We are required by federal and state regulatory authorities to maintain adequate levels of
capital to support our operations. We may at some point need to raise additional capital to
support our operations and any future growth, as well as to protect against any further
deterioration in our loan portfolio.
Our ability to raise additional capital, if needed, will depend on conditions in the capital
markets at that time and on our financial performance. Recently, the volatility and disruption in
the capital and credit markets have reached unprecedented levels. In some cases, the markets have
produced downward pressure on stock prices and
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credit availability for certain issuers without regard to those issuers underlying financial
strength. If current levels of market disruption and volatility continue or worsen, our ability to
raise additional capital may be disrupted. If we cannot raise additional capital when needed, our
results of operations and financial condition may be adversely affected, and our banking regulators
may subject the Bank to regulatory enforcement action, including receivership. In addition, the
issuance of additional shares of our common stock will dilute the ownership interest of our common
shareholders.
Diminished access to alternative sources of liquidity could adversely affect our net income, net
interest margin and overall liquidity.
We have historically had access to a number of alternative sources of liquidity, but given the
recent and dramatic downturn in the credit and liquidity markets, we may not be able to obtain
liquidity on terms that are favorable to us, or at all. As noted above, we are presently unable to
renew any brokered certificates of deposit or attract new brokered certificates of deposit without
prior regulatory approval. In addition, financial institutions may be unwilling to extend credit
to banks because of concerns about the banking industry and the economy generally, and there may
not be a viable market for raising equity capital. If our access to these sources of liquidity is
diminished, or if it is only available on unfavorable terms, then our net income, net interest
margin and overall liquidity could be adversely affected.
Fluctuations in our expenses and other costs may hurt our financial results.
Our expenses and other costs, such as operating and marketing expenses, directly affect our
earnings results. In light of the extremely competitive environment in which we operate, and
because the size and scale of many of our competitors provides them with increased operational
efficiencies, we must successfully manage those expenses. As our business develops, changes or
expands, additional expenses can arise.
Higher FDIC deposit insurance premiums and assessments could adversely affect our financial
condition.
FDIC insurance premiums increased substantially in 2009, and we expect to pay significantly
higher FDIC premiums in the future. As the large number of recent bank failures continues to
deplete the Deposit Insurance Fund, the FDIC adopted a revised risk-based deposit insurance
assessment schedule in February 2009, which raised deposit insurance premiums. The FDIC also
implemented a five basis point special assessment of each insured depository institutions assets
minus Tier 1 capital as of June 30, 2009. This special assessment amount was capped at 10 basis
points times the institutions assessment base for the second quarter of 2009. The amount of our
special assessment on September 30, 2009 was approximately $600,000. In addition, the FDIC
required financial institutions, such as the Bank, to prepay their estimated quarterly risk-based
assessments for the fourth quarter of 2009 and for all of 2010 through and including 2012 to
re-capitalize the Deposit Insurance Fund, although the FDIC exempted the Bank from this prepayment
requirement. The rule also provides for increasing the FDIC-assessment rates by three basis points
effective January 1, 2011. Our FDIC insurance premiums were
approximately $882,000 in the first quarter of 2010. If FDIC deposit insurance premiums and assessments continue to
increase, it could adversely affect our financial condition.
We must respond to rapid technological changes, which may be more difficult or expensive than
anticipated.
If our competitors introduce new products and services embodying new technologies, or if new
industry standards and practices emerge, our existing product and service offerings, technology and
systems may become obsolete. Further, if we fail to adopt or develop new technologies or to adapt
our products and services to emerging industry standards, we may lose current and future customers,
which could have a material adverse effect on our business, financial condition and results of
operations. The financial services industry is changing rapidly, and to remain competitive, we
must continue to enhance and improve the functionality and features of our products, services and
technologies. These changes may be more difficult or expensive than we anticipate.
Our directors and executive officers own a significant portion of our common stock.
Our directors and executive officers, as a group, beneficially owned approximately 29% of our
outstanding common stock as of March 31, 2010. As a result of their ownership, our directors and
executive officers currently have the ability, by voting their shares in concert, to significantly
influence the outcome of all matters submitted to our shareholders for approval, including the
election of directors. Following this offering, however, our directors and executive officers will
likely own a much smaller portion of our common stock. Accordingly, their ability to significantly
influence the outcome of matters submitted to our shareholders for approval will likely be
significantly diminished.
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Risks Related to this Offering and our Common Stock
Our common stock trading volume has been low compared with larger bank holding companies.
The trading volume in our common stock on the NASDAQ Global Select Market has generally been
lower than other similarly sized bank holding companies since our shares began trading on the
NASDAQ Global Select Market. Furthermore, this trading volume does not compare with more seasoned
companies listed on other stock exchanges. Thus, the market in our common stock is somewhat
limited in scope relative to some other companies, and a more active and liquid trading market for
our common stock may not develop in the future. As a result, it may be more difficult for you to
sell a substantial number of shares for the same price at which you could sell a smaller number of
shares.
Sales of substantial amounts of common stock in the market, or the potential for large amounts
of sales in the market, may cause the price of our common stock to decline or impair our future
ability to raise capital through sales of our common stock.
The price of our common stock may fluctuate significantly, which may make it difficult for you to
resell common stock at times or at prices you find favorable.
Our stock price has been volatile in the past, and several factors could cause the price to
fluctuate substantially in the future. These factors include:
| actual or anticipated variations in earnings; | ||
| changes in analysts recommendations or projections; | ||
| our announcements of developments related to our businesses; | ||
| operating and stock performance of other companies deemed to be peers; | ||
| actions by government regulators; | ||
| new technology used or services offered by traditional and non-traditional competitors; and | ||
| news reports of trends, concerns and other issues related to the financial services industry. |
Our stock price may fluctuate significantly in the future, and these fluctuations may be
unrelated to our performance. General market price declines or market volatility in the future
could adversely affect the price of our common stock, and the current market price of our common
stock may not be indicative of future market prices.
In addition, in recent months, the stock market in general has experienced extreme price and
volume fluctuations. This volatility has had a significant effect on the market price of
securities issued by many companies and particularly those in the financial services and banking
sector, including for reasons unrelated to their operating performance. These broad market
fluctuations may adversely affect our stock price, notwithstanding our operating results.
If we fail to continue to meet all applicable continued listing requirements of the NASDAQ Global
Select Market and NASDAQ determines to delist our common stock, the market liquidity and market
price of our common stock could decline, and our ability to access the capital markets could be
negatively affected.
Our common stock is listed on the NASDAQ Global Select Market. To maintain that listing, we
must satisfy minimum financial and other continued listing requirements. For example, NASDAQ rules
require that we maintain a minimum bid price of $1.00 per share for our common stock. Our common
stock has recently traded near this minimum bid price requirement, and it may fall below the
requirement in the future. If our stock price falls below $1.00 or we fail to meet other
requirements for continued listing on the NASDAQ Global Select Market, and we are unable to cure
the events of noncompliance in a timely or effective manner, our common stock could be delisted
from the NASDAQ Global Select Market. If our common stock were threatened with delisting from the
NASDAQ Global Select Market, we may, depending on the circumstances, seek to extend the period for
regaining compliance with NASDAQ listing requirements by moving our common stock to the NASDAQ
Capital Market. If our common stock is not eligible for quotation on another market or exchange,
trading of our common stock could be conducted
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in the over-the-counter market or on an electronic bulletin board established for unlisted
securities such as the Pink OTC Markets or the OTC Bulletin Board. In that event, it could become
more difficult to dispose of, or obtain accurate quotations for the price of, our common stock, and
there would likely also be a reduction in our coverage by the news media, which could cause the
price of our common stock to decline further. In addition, the delisting of our common stock from
a national exchange could materially adversely affect our access to the capital markets, and any
limitation on market liquidity or reduction in the price of our common stock as a result of that
delisting could adversely affect our ability to raise capital, if needed, on terms acceptable to us
or at all.
This offering will substantially dilute the ownership of our existing shareholders, and the
ownership of our common stock may change significantly.
We intend to raise significant capital through this offering. Our directors and executive
officers and individuals who reside in our markets currently hold a significant percentage of our
common stock. Upon the successful completion of this offering, existing shareholders will be
substantially diluted unless they purchase shares in this offering in an amount proportional to
their existing ownership. As a result, following this offering a significant portion of our common
stock will likely be held by individuals and institutions outside of our market area whose
interests may differ significantly from our current shareholders. In addition, one or more
individuals or institutions may seek to acquire a significant percentage of ownership in our common
stock in this offering, subject to applicable regulatory approvals. If this occurs, those
shareholders may be able to exert influence over management and affairs requiring shareholder
approval, including approval of significant corporate transactions. Those shareholders may have
interests that differ from those of our current shareholder base, and they may vote in a way with
which our current shareholders disagree. Any concentration of ownership in our common stock may
have the effect of delaying, preventing or deterring a change of control, depriving shareholders of
an opportunity to receive a premium for their common stock as part of a sale of PAB or may
ultimately affect the market price of our common stock.
Because our management will have broad discretion over the use of the net proceeds from the
offering, you may not agree with how we use the proceeds, and we may not invest the proceeds
successfully.
We currently anticipate that we will use the net proceeds of this offering to improve our
regulatory capital position, to invest in the Bank to improve its regulatory capital position and
to retain the remainder of any proceeds at PAB for general corporate purposes. Our management may
allocate the proceeds among these purposes as it deems appropriate. In addition, market factors
may require our management to allocate portions of the proceeds for other purposes. Accordingly,
you will be relying on the judgment of our management with regard to the use of the proceeds from
this offering, and you will not have the opportunity, as part of your investment decision, to
assess whether we are using the proceeds appropriately. We may invest the proceeds in a way that
does not yield a favorable, or any, return for us.
We suspended payment of dividends during the third quarter of 2008 and currently are not permitted
to declare or pay any dividend without the prior written approval of our regulators. As a result,
capital appreciation, if any, of our common stock may be your sole opportunity for gains on your
investment for the foreseeable future.
In the third quarter of 2008, we suspended payment of dividends on our common stock. In
addition, as a result of the Written Agreement, we are not permitted to declare or pay any dividend
without the prior written approval of our regulators. As a result, we currently cannot declare a
dividend on our common shares. We do not expect to be granted a waiver or be released from this
restriction until our financial performance improves significantly. Assuming our regulators permit
us to pay dividends in the future, our ability to pay dividends will be limited by regulatory
restrictions and the need to maintain sufficient consolidated capital. Holders of our common stock
are only entitled to receive the dividends that our board of directors declares out of funds
legally available for those payments.
If, as a result of this offering or otherwise, an entity holds as little as a 5% interest in our
outstanding securities, that entity could, under certain circumstances, be subject to regulation as
a bank holding company.
Any entity, including a group composed of natural persons, owning or controlling with the
power to vote 25% or more of our outstanding securities, or 5% or more if the holder otherwise
exercises a controlling influence over us, may be subject to regulation as a bank holding
company in accordance with the Bank Holding Company Act of 1956, as amended (the BHC Act). In
addition, (a) any bank holding company or foreign bank with a U.S. presence may be required to
obtain the approval of the Federal Reserve under the BHC Act to acquire or retain 5%
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or more of our outstanding securities and (b) any person not otherwise defined as a company by
the BHC Act and its implementing regulations may be required to obtain the approval of the Federal
Reserve under the Change in Bank Control Act to acquire or retain 10% or more of our outstanding
securities. Becoming a bank holding company imposes statutory and regulatory restrictions and
obligations, such as providing managerial and financial strength for its bank subsidiaries.
Regulation as a bank holding company could require the holder to divest all or a portion of the
holders investment in our securities or those nonbanking investments that may be deemed
impermissible or incompatible with bank holding company status, such as a material investment in a
company unrelated to banking.
We may issue additional securities in the future, which would dilute your ownership if you did not,
or were not permitted to, invest in the additional issuances.
In the future, we may seek to raise capital through offerings of our common stock, preferred
stock, securities convertible into common stock, or rights to acquire such securities or our common
stock. Under our amended and restated articles of incorporation, we have additional authorized
shares of common stock and preferred stock that we can issue from time to time at the discretion of
our board of directors, without further action by the shareholders, except where shareholder
approval is required by law or the NASDAQ Global Select Market. The issuance of any additional
shares of common stock, preferred stock or convertible securities could be substantially dilutive
to shareholders of our common stock. Moreover, to the extent that we issue restricted stock,
restricted stock units, stock options, stock appreciation rights, options, or warrants to purchase
our common stock in the future (such as the warrants issued to the investors in the Private
Placements) and those awards, rights, options, or warrants are exercised or as the restricted stock
units vest, our shareholders may experience further dilution. By modifying the warrants that were
issued to the investors in the Private Placements, we will be increasing the number of shares of
common stock that are able to be purchased upon exercise of the warrants and decreasing the
exercise price of the warrants which will make it more likely that the warrants will be exercised.
Holders of our shares of common stock have no preemptive rights that entitle them to purchase their
pro-rata shares of any offering of shares of any class or series and, therefore, our shareholders
may not be permitted to invest in future issuances of our common stock and as a result will be
diluted.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in, or incorporated by reference into, this prospectus are
forward-looking statements within the meaning of the federal securities laws, including, without
limitation, statements regarding our outlook on earnings, asset quality, projected growth, capital
position, our plans regarding our nonperforming assets, business opportunities in our markets and
economic conditions, and are based upon managements beliefs as well as assumptions made based on
data currently available to management. When we use words like believe, intend, plan, may,
continue, project, would, expect, estimate, could, should, will and similar
expressions, you should consider them as identifying forward-looking statements. These
forward-looking statements are not guarantees of future performance, and a variety of factors could
cause our actual results to differ materially from the anticipated or expected results expressed in
these forward-looking statements. Many of these factors are beyond our ability to control or
predict, and readers are cautioned not to put undue reliance on such forward-looking statements.
The following list, which is not intended to be an all-encompassing list of risks and uncertainties
affecting us, summarizes several factors that could cause our actual results to differ materially
from those anticipated or expected in these forward-looking statements:
| general economic conditions (both generally and in our markets) may be less favorable than expected, resulting in, among other things, a continued deterioration in credit quality, a further reduction in demand for credit and/or a further decline in real estate values; | ||
| the results of our most recent internal stress test may not accurately predict the adverse effects on our financial condition if the economy were to continue to deteriorate; | ||
| the general decline in the real estate and lending market, particularly the market areas surrounding metropolitan Atlanta, may continue to negatively affect our financial results; | ||
| our ability to raise additional capital may be impaired if current levels of market disruption and volatility continue or worsen; | ||
| restrictions or conditions imposed by our regulators on our operations, including the terms of our written agreement with the Federal Reserve Board, may make it more difficult for us to achieve our goals; | ||
| legislative or regulatory changes, including changes in accounting standards and compliance requirements, may adversely affect the businesses in which we are engaged; | ||
| competitive pressures among depository and other financial institutions may increase significantly; | ||
| changes in the interest rate environment may reduce margins or the volumes or values of the loans we make; | ||
| competitors may have greater financial resources and develop products that enable those competitors to compete more successfully than we can; | ||
| our ability to attract and retain key personnel can be affected by the increased competition for experienced employees in the banking industry; | ||
| adverse changes may occur in the bond and equity markets; | ||
| war or terrorist activities may cause further deterioration in the economy or cause instability in credit markets; | ||
| we may not close the sale of five of our South Georgia branches when we anticipate or at all; | ||
| economic, governmental or other factors may prevent the projected population, residential and commercial growth in the markets in which we operate; and | ||
| we will or may continue to face the risk factors discussed from time to time in the periodic reports we file with the SEC, including our Annual Report on Form 10-K for the year ended December 31, 2009. |
We undertake no obligation to, and we do not intend to, update or revise these statements
following the date of this filing, whether as a result of new information, future events or
otherwise, except as may be required by law.
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All written or oral forward-looking statements attributable to us are expressly qualified in
their entirety by this Cautionary Note. Our actual results may differ significantly from those we
discuss in these forward-looking statements. For other factors, risks and uncertainties that could
cause our actual results to differ materially from estimates and projections contained in these
forward-looking statements, please read the Risk Factors section of this prospectus. Any
forward-looking statement speaks only as of the date that the statement was made, and, except as
required by law, we expressly disclaim any obligation or undertaking to disseminate any updates or
revisions to any forward-looking statement to reflect events or circumstances after the date on
which we made the statement or to reflect the occurrence of unanticipated events.
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USE OF PROCEEDS
We estimate that the net proceeds to us from the sale of our common stock in this offering,
after deducting the underwriting discount and our estimated offering expenses, will be
approximately $74.65 million. If the underwriters exercise their over-allotment option in full, we
estimate that our net proceeds will be approximately $85.93 million. For purposes of calculating
the net proceeds of this offering, we have assumed that no shares will be sold to our officers and
directors. We intend to use the proceeds of this offering to improve our regulatory capital
position, to invest in the Bank to improve its regulatory capital position and to retain the
remainder of any proceeds at PAB for general corporate purposes. We believe a strengthened capital
position will provide us with the flexibility to address our nonperforming assets, whether we
choose to dispose of those assets or hold them until market conditions improve, as well as
positioning us to take advantage of long-term strategic opportunities that may become available to
us after our financial condition and economic conditions improve.
Our management will retain broad discretion in deciding how to allocate the net proceeds of
this offering. Until we designate the use of the net proceeds, we will invest them temporarily in
liquid short-term securities. The precise amounts and timing of our use of the net proceeds will
depend upon market conditions and the availability of other funds, among other factors.
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CAPITALIZATION
The following table shows our:
| historical consolidated capitalization at March 31, 2010; | ||
| pro forma consolidated capitalization after giving effect to the sale of our five South Georgia branches; and | ||
| pro forma consolidated capitalization after giving effect to the sale of five of our South Georgia branches and to give effect to the sale of [] shares of common stock at an assumed offering price of $[] per share, after deducting estimated underwriting discounts and commissions of []% (assuming that no shares will be sold to our officers and directors) and estimated offering costs and expenses of $550,000 to be paid by us. |
For the purposes of this Capitalization section, we determined the assumed number of shares by
dividing (x) $80,000,000 that we anticipate raising in this offering, excluding any shares that may
be sold upon the underwriters exercise of the over-allotment option, by (y) an assumed offering
price of $[] per share, which is the last reported sales price of our common stock on May
[], 2010. The actual number of shares sold in this offering will be determined by dividing
(x) $80,000,000 by (y) the public offering price as mutually
determined by the underwriters and us.
You should read this table in conjunction with Selected Historical Consolidated Financial
Data and with our consolidated financial statements and the notes to those financial statements
included in the documents incorporated by reference in this prospectus.
As of March 31, 2010 | ||||||||||||
(unaudited) | ||||||||||||
(in thousands) | ||||||||||||
Pro Forma | ||||||||||||
Pro Forma | Branch Sale & | |||||||||||
Actual | Branch Sale | Offering(1) | ||||||||||
Long-term debt: |
||||||||||||
Trust preferred securities |
$ | 10,310 | $ | 10,310 | $ | [] | ||||||
Total long-term debt |
10,310 | 10,310 | [] | |||||||||
Stockholders equity: |
||||||||||||
Preferred Stock, no par value; authorized
1,500,000 shares; no shares issued;
no shares issued and outstanding pro forma |
| | | |||||||||
Common Stock1, no par value;
authorized 98,500,000 shares; 13,795,040
shares issued and outstanding; []
shares issued and outstanding pro forma |
1,217 | 1,217 | [] | |||||||||
Surplus |
37,466 | 37,466 | [] | |||||||||
Retained earnings |
5,964 | 6,364 | [] | |||||||||
Accumulated other comprehensive income |
1,373 | 1,373 | [] | |||||||||
Total stockholders equity |
46,020 | 46,420 | [] | |||||||||
Per share data: |
||||||||||||
Common shares outstanding |
13,795,040 | 13,795,040 | [] | |||||||||
Tangible book value per common share |
$ | 3.34 | $ | 3.37 | $ | [] | ||||||
Capital ratios: |
||||||||||||
Tangible common equity to tangible assets |
3.7 | % | 4.0 | % | [] | % | ||||||
Tangible equity to tangible assets |
3.7 | % | 4.0 | % | [] | % | ||||||
Leverage ratio |
4.4 | % | 4.8 | % | [] | % | ||||||
Tier 1 risk-based capital ratio |
6.6 | % | 7.0 | % | [] | % | ||||||
Total risk-based capital ratio |
7.9 | % | 8.4 | % | [] | % |
(1) | If the underwriters exercise their over-allotment option in full, [] shares of common stock would be sold (under the above assumptions), resulting in estimated net proceeds of $[]. | |
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PRICE RANGE OF OUR COMMON STOCK AND DIVIDEND INFORMATION
Our common stock is listed for quotation on the NASDAQ Global Select Market under the symbol
PABK. As of May 10, 2010, we had 13,795,040 shares of common stock outstanding and approximately
2,137 shareholders of record. The last reported sales price of our common stock on May 10, 2010
was $2.52 per share.
The table below provides, for the periods indicated, the high and low sales price per share of
our common stock, as quoted on the NASDAQ Global Select Market, and the cash dividends declared per
share.
Year Ending | Year Ended | Year Ended | ||||||||||||||||||||||||||||||||||
December 31, 2010 | December 31, 2009 | December 31, 2008 | ||||||||||||||||||||||||||||||||||
Low | High | Dividend | Low | High | Dividend | Low | High | Dividend | ||||||||||||||||||||||||||||
1st Quarter |
$ | 1.05 | $ | 2.65 | * | * | $ | 1.98 | $ | 4.90 | * | * | $ | 11.59 | $ | 14.02 | $ | 0.142 | ||||||||||||||||||
2nd Quarter |
$ | 1.76 | (1) | $ | 3.12 | (1) | | $ | 2.51 | $ | 4.20 | * | * | $ | 8.33 | $ | 14.40 | $ | 0.093 | * | ||||||||||||||||
3rd Quarter |
| | | $ | 2.35 | $ | 3.69 | * | * | $ | 6.66 | $ | 9.02 | * | * | |||||||||||||||||||||
4th Quarter |
| | | $ | 1.06 | $ | 3.35 | * | * | $ | 3.87 | $ | 6.95 | * | * |
* | Plus a 2% stock dividend. | |
** | We suspended payments of our dividends in the third quarter of 2008. | |
(1) | Through May 10, 2010. | |
In the third quarter of 2008, we suspended payment of dividends on our common stock.
Further, under the terms of the Written Agreement, we are not permitted to declare or pay any
dividend without the prior written approval of our regulators. As a result, we currently cannot
declare a dividend on our common shares. We do not expect to be granted a waiver or be released
from this restriction until our financial performance improves significantly. Assuming our
regulators permit us to pay dividends in the future, our ability to pay dividends will be limited
by regulatory restrictions and the need to maintain sufficient consolidated capital. Holders of
our common stock are only entitled to receive the dividends that our board of directors declare out
of funds legally available for those payments. We can provide no assurances regarding whether, and
if so when, we will be able to resume payments of dividends in the future.
In addition, on September 4, 2009, we began exercising our right to defer quarterly interest
payments on our Floating Rate Junior Subordinated Debentures we issued to PAB Bankshares Capital
Trust, a statutory business trust created for the sole purpose of issuing trust preferred
securities and investing the proceeds in the debentures. We expect to defer the interest payments
indefinitely. During this period of deferral, we are precluded from paying dividends on our common
stock.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the shares of our common stock
owned as of April 30, 2010, (a) by each person who beneficially owned more than 5% of the shares of
our common stock, (b) by each of our directors and named executive officers, and (c) by all of our
directors and executive officers as a group.
Number of | Percentage | |||||||
Name of Beneficial Owner(1) | Shares | Ownership(2) | ||||||
R. Bradford Burnette |
221,353 | (3) | 1.45 | |||||
Dewar Family, L.P. |
1,659,310 | (4) | 10.88 | |||||
James L. Dewar, Jr. |
2,932,616 | (5) | 19.22 | |||||
R. Wesley Fuller |
87,667 | (6) | * | |||||
James W. Godbee, Jr. |
38,626 | (7) | * | |||||
Michael H. Godwin |
98,025 | (8) | * | |||||
GreenSky Trade Credit, LLC |
1,240,000 | (9) | 8.13 | |||||
David H. Hammond |
4,064 | (10) | * | |||||
George D. Henderson |
68,043 | (11) | * | |||||
Judith S. Kelly |
26,442 | (12) | * | |||||
Thompson Kurrie, Jr. |
63,472 | (13) | * | |||||
James B. Lanier, Jr. |
54,256 | (14) | * | |||||
John E. Mansfield, Jr. |
155,495 | (15) | 1.02 | |||||
Kennith D. McLeod |
217,216 | (16) | 1.42 | |||||
Douglas W. McNeill |
243,340 | (17) | 1.60 | |||||
Paul E. Parker |
82,626 | (18) | * | |||||
F. Ferrell Scruggs, Sr. |
134,604 | (19) | * | |||||
Nicole S. Stokes |
5,953 | (20) | * | |||||
Donald J. Torbert, Jr. |
43,724 | (21) | * | |||||
All directors and executive officers
as a group (17 persons) |
4,477,522 | 29.36 | ||||||
* | Less than 1 percent. | |
(1) | Under the rules of the SEC, a person is deemed to be a beneficial owner of a security if he or she has or shares the power to vote or to direct the voting of such security, or the power to dispose or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities owned by such persons spouse, children or relatives living in the same household. Accordingly, more than one person may be deemed to be a beneficial owner of the same securities. A person is also deemed to be a beneficial owner of any securities that such person has the right to acquire beneficial ownership of within 60 days. Unless otherwise indicated, the persons named in the above table have sole voting and investment power with respect to all shares shown as beneficially owned by them. The information as to beneficial ownership has been provided by the respective persons listed in the above table. | |
(2) | Based on 13,795,040 shares outstanding as of April 30, 2010 plus shares underlying outstanding stock options or warrants which are exercisable within 60 days of such date are deemed to be outstanding for purposes of calculating the percentage owned by such holder. | |
(3) | Includes 5,878 shares held by Mr. Burnettes wife and 6,642 shares held for Mr. Burnettes minor grandchildren by Mr. Burnettes wife as custodian. Mr. Burnette disclaims beneficial ownership of those shares held by his wife. Also includes 20,000 common stock warrants and 12,232 options exercisable within 60 days. | |
(4) | The Dewar Family, L.P. is a limited partnership and Mr. Dewar, Jr., is its general partner. The mailing address is P.O. Box 2285, Valdosta, Georgia 31604. |
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(5) | Includes 1,659,310 shares owned by the Dewar Family, L.P. Mr. Dewar, Jr. is a general partner of the Dewar Family, L.P. and possesses the sole power to vote all shares owned by the limited partnership. Also includes 240,000 common stock warrants, 14,272 options exercisable within 60 days and 6,486 shares held by Mr. Dewar, Jr.s wife. Includes 1,020 shares held by Mr. Dewar, Jr.s wife and stepchildren. Mr. Dewar, Jr. disclaims beneficial ownership of the shares held by his wife and those held by his wife and stepchildren. Mr. Dewar, Jr.s mailing address is P. O. Box 2285, Valdosta, Georgia 31604. | |
(6) | Includes 8,000 common stock warrants and 25,500 options exercisable within 60 days. Also includes 236 shares held by Mr. Fullers minor children, over which shares Mr. Fuller has custodial power. | |
(7) | Includes 8,000 common stock warrants and 945 options exercisable within 60 days. | |
(8) | Includes 16,000 common stock warrants and 10,192 options exercisable within 60 days. | |
(9) | Includes 240,000 common stock warrants. The mailing address for GreenSky Trade Credit, LLC is 1797 Northeast Expressway NE, Suite 100 Atlanta, Georgia 30329. | |
(10) | Includes 2,652 options exercisable within 60 days. | |
(11) | Includes 479 shares held by Mr. Hendersons son, of which Mr. Henderson disclaims beneficial ownership. Also includes 8,000 common stock warrants and 17,034 options exercisable within 60 days. | |
(12) | Includes 12,472 options exercisable within 60 days. | |
(13) | Includes 10,400 common stock warrants and 6,120 options exercisable within 60 days. | |
(14) | Includes 4,000 common stock warrants and 14,272 options exercisable within 60 days. | |
(15) | Includes 98,461 shares held in a family partnership, of which shares Mr. Mansfield has sole voting power. Also, includes 8,000 common stock warrants, 6,112 options exercisable within 60 days and 1,582 shares held by Mr. Mansfields minor children, over which shares Mr. Mansfield has custodial power. | |
(16) | Includes 33,782 shares held by Mr. McLeods wife, of which shares Mr. McLeod disclaims beneficial ownership. Also includes 20,000 common stock warrants and 6,928 options exercisable within 60 days. | |
(17) | Includes 184,282 shares held in a trust, of which shares Mr. McNeill shares voting power with his wife. Includes 40,000 common stock warrants and 5,296 options exercisable within 60 days. | |
(18) | Includes 5,920 common stock warrants and 14,272 options exercisable within 60 days. | |
(19) | Includes 16,440 shares held by Mr. Scruggs wife, of which shares Mr. Scruggs disclaims beneficial ownership and 14,619 shares held by a family limited partnership. Also includes 8,000 common stock warrants and 14,272 options exercisable within 60 days. | |
(20) | Includes 3,467 options exercisable within 60 days. | |
(21) | Includes 800 common stock warrants and 31,254 options exercisable within 60 days. |
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DESCRIPTION OF CAPITAL STOCK
General
Our amended and restated articles of incorporation authorize us to issue up to 300,000,000
shares of common stock, no par value per share, and 10,000,000 shares of preferred stock, no par
value per share. As of May 10, 2010, there were 13,795,040 shares outstanding of our common stock,
all of which were validly issued, fully paid and nonassessable.
On September 9, 2009, our board of directors designated and issued, through the Private
Placements, shares of two series of preferred stock entitled Contingent Convertible Perpetual
Non-Cumulative Series A Preferred Stock and Contingent Convertible Perpetual Non-Cumulative
Series B Preferred Stock. All of the preferred stock we issued in the Private Placements has
converted into shares of our common stock, and no shares of preferred stock are currently
outstanding.
All shares of our common stock are entitled to share equally in dividends from funds legally
available therefor, when, as and if declared by our board of directors. All shares of our common
stock, upon our liquidation, dissolution or winding-up, whether voluntary or involuntary, shall be
entitled to share equally and ratably in all of our assets legally available for distribution to
the shareholders after payment of all of the our debts and liabilities and the liquidation
preference of any outstanding preferred stock.
Each share of our common stock is entitled to one vote in all matters that may be presented to
the shareholders. The shares of our common stock are not convertible into any other security, nor
are the shares subject to any call, assessment or redemption. There are no sinking fund provisions
with respect to the shares of our common stock. The holders of the shares of our common stock do
not have preemptive rights to subscribe to authorized but unissued shares of common stock.
Anti-Takeover Provisions
The provisions of Georgia law and our amended and restated articles of incorporation and
amended and restated bylaws, summarized below, may have anti-takeover effects, or may delay, defer
or otherwise hinder a tender offer or other takeover attempt, including those attempts that might
result in a premium over the market price for shares of common stock, or may make removal of our
management more difficult.
Authorized but Unissued Stock. Authorized but unissued shares of our common stock and
preferred stock are available for issuance upon approval by our board of directors without further
approval by our shareholders, except where shareholder approval is required by law or the NASDAQ
Global Select Market. These shares are available for issuance for a range of corporate purposes,
which may include public offerings to raise additional capital, acquisitions and employee benefits.
Additionally, our board of directors could issue shares of stock to persons deemed friendly to our
management, which may have the effect of discouraging or otherwise making more difficult an attempt
to obtain control of us by means of a proxy contest, tender offer, merger or otherwise.
Board of Directors. Our amended and restated bylaws provide that the number of directors
shall be fixed from time to time by the majority vote of our directors, but may not be fewer than
nine. Currently, there are 11 directors. Our amended and restated articles of incorporation and
amended and restated bylaws divide the board of directors into three classes of directors serving
staggered three-year terms. Because of these provisions, approximately one-third of our board of
directors is elected at each annual meeting of the shareholders. Together with the ability of the
remaining directors to fill vacancies, an effect of the classified board of directors may make it
more difficult for shareholders to alter the composition of our board of directors. It may require
at least two annual meetings of shareholders for our shareholders to change a majority of the
directors, whether or not a majority of our shareholders believes that such a change would be
desirable.
Transfer Agent and Registrar
Registrar and Transfer Company serves as the transfer agent for our common stock. Its address
is 10 Commerce Drive Cranford, NJ 07016 and its phone number is (908) 497-2300.
Listing
Our common stock is listed on the NASDAQ Global Select Market under the ticker symbol PABK.
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UNDERWRITING
We are offering the shares of our common stock described in this prospectus in an underwritten
offering in which Sandler ONeill & Partners, L.P. is acting as representative of the underwriters.
We will enter into an underwriting agreement with Sandler ONeill & Partners, L.P., acting as
representative of the underwriters named below, with respect to the common stock being offered.
Subject to the terms and conditions contained in the underwriting agreement, each underwriter has
agreed to purchase the representative number of shares of our common stock set forth opposite its
name below being offered by this prospectus:
Number | ||||
of Shares | ||||
Sandler ONeill & Partners, L.P. |
||||
BB&T Capital Markets, a division of Scott & Stringfellow, LLC |
||||
Total |
The underwriting agreement provides that the underwriters obligation to purchase shares of
our common stock depends on the satisfaction of the conditions contained in the underwriting
agreement, including:
| the representations and warranties made by us are true and agreements have been performed; | ||
| there is no material adverse change in the financial markets or in our business; and | ||
| we deliver customary closing documents. |
Subject to these conditions, the underwriters are committed to purchase and pay for all shares
of our common stock offered by this prospectus, if any such shares are purchased. However, the
underwriters are not obligated to take or pay for the shares of our common stock covered by the
underwriters over-allotment option described below, unless and until that option is exercised.
Over-Allotment Option. We have granted the underwriters an option, exercisable no later than
30 days after the date of the underwriting agreement, to purchase up to an aggregate of the number
of additional shares of common stock equal to 15% of the total shares sold in the offering at the
public offering price, less the underwriting discount set forth on the cover page of this
prospectus. Based on an assumed offering price of $[] per share (which is the last reported sales
price of our common stock on the NASDAQ Global Select Market on May [], 2010), the over-allotment
option will allow the underwriters to purchase up to [] additional shares. We will be obligated
to sell these shares of common stock to the underwriters to the extent the over-allotment option is
exercised. The underwriters may exercise this option only to cover over-allotments, if any, made
in connection with the sale of our common stock offered by this prospectus.
Commissions and Expenses. The underwriters propose to offer our common stock directly to the
public at the offering price set forth on the cover page of this prospectus and to dealers at the
public offering price less a concession not in excess of $[] per share. The underwriters may
allow, and the dealers may re-allow, a concession not in excess of $[] per share on sales to other
brokers and dealers. After the public offering of our common stock, the underwriters may change
the offering price, concessions and other selling terms.
The following table shows the per share and total underwriting discount and commissions that
we will pay to the underwriters and the proceeds we will receive before expenses. These amounts are
shown assuming both no exercise and full exercise of the underwriters option to purchase
additional shares of our common stock.
Total Without | Total With Full | |||||||||||
Over-Allotment | Over-Allotment | |||||||||||
Per Share | Exercise | Exercise | ||||||||||
Public offering price |
||||||||||||
Underwriting discount(1) |
||||||||||||
Proceeds to us (before expenses) |
(1) | The underwriting discount is $[] per share, except with respect to up to an aggregate maximum purchase price of $[] reserved for sale to our officers, directors and employees for which the underwriting discount is $[] per share. |
In addition to the underwriting discount, we will reimburse the underwriters for their
reasonable out-of-pocket expenses up to $200,000, incurred in
connection with their engagement as
underwriters, regardless of whether this offering is consummated, including, without limitation,
legal fees and expenses, marketing, syndication and travel
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expenses. We estimate that the total expenses of this offering, exclusive of the underwriting
discounts and commissions, will be approximately $550,000 (including the $200,000 in reimbursable
expenses described above), and are payable by us.
Indemnity. We have agreed to indemnify the underwriters, and persons who control the
underwriters, against certain liabilities, including liabilities under the Securities Act, and to
contribute to payments that the underwriters may be required to make in respect of these
liabilities.
Right
of First Refusal. We have granted Sandler ONeill & Partners, L.P. during
the term of its engagement and for a period of twelve months thereafter a right of first refusal to
act as:
| lead manager or lead placement agent, as the case may be, in connection with any subsequent capital raising transactions; and | ||
| financial advisor in connection with any merger, consolidation, reorganization or other business combination, or the acquisition, directly or indirectly, by a second party of more than 33.4% of our capital stock, or all or a substantial portion of our assets, by way of a tender or exchange offer, whether effected in one transaction or a series of transactions. |
During this period, if we pursue a capital raising transaction or business combination with
the assistance of another lead manager, lead placement agent or financial advisor, as the case may
be, and Sandler ONeill & Partners, L.P. is not offered its right of first refusal, Sandler
ONeill & Partners, L.P. will be entitled to a payment for the waiver or termination of the right of
first refusal, which will be negotiated at that time and will be in accordance with market and
competitive practices.
Lock-Up Agreement. We and each of our directors and executive officers, have agreed, for a
period of 90 days after the date of this prospectus, not to sell, offer, agree to sell, contract to
sell, hypothecate, pledge, grant any option to sell, make any short sale or otherwise dispose of or
hedge, directly or indirectly, any common shares or securities convertible into, exchangeable or
exercisable for any common shares or warrants or other rights to purchase our common shares or
other similar securities without, in each case the prior written consent of Sandler ONeill &
Partners, L.P. These restrictions are expressly agreed to preclude us, and our executive officers
and directors, from engaging in any hedging or other transactions or arrangement that is designed
to, or which reasonably could be expected to, lead to or result in a sale, disposition or transfer,
in whole or in part, of any of the economic consequences of ownership of our common shares, whether
the transaction would be settled by delivery of common shares or other securities, in cash or
otherwise. The 90-day restricted period described above will be automatically extended if
(1) during the period that begins on the date that is 15 calendar days plus three business days
before the last day of the 90-day restricted period, we issue an earnings release or material news
or a material event relating to us occurs or (2) before the expiration of the 90-day restricted
period, we announce we will release earnings results or become aware that material news or a
material event will occur during the 16-day period beginning on the last day of the 90-day
restricted period, in which case the restricted period will continue to apply until the expiration
of the period ending on the date that is 15 calendar days plus three business days after the date
on which the earnings release is issued or the material news or material event related to us.
Stabilization. In connection with this offering, the underwriters may engage in stabilizing
transactions, over-allotment transactions, syndicate covering transactions and penalty bids.
| Stabilizing transactions permit bids to purchase shares of common stock so long as the stabilizing bids do not exceed a specified maximum, and are engaged in for the purpose of preventing or retarding a decline in the market price of the common stock while the offering is in progress. | ||
| Over-allotment transactions involve sales by the underwriters of shares of common stock in excess of the number of shares the underwriters are obligated to purchase. This creates a syndicate short position that may be either a covered short position or a naked short position. In a covered short position, the number of shares of common stock over-allotted by the underwriters is not greater than the number of shares that they may purchase in the over-allotment option. In a naked short position, | ||
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the number of shares involved is greater than the number of shares in the over-allotment option. The underwriters may close out any short position by exercising their over-allotment option and/or purchasing shares in the open market. | |||
| Syndicate covering transactions involve purchases of common stock in the open market after the distribution has been completed in order to cover syndicate short positions. In determining the source of shares to close out the short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared with the price at which they may purchase shares through exercise of the over-allotment option. If the underwriters sell more shares than could be covered by exercise of the over-allotment option and, therefore, have a naked short position, the position can be closed out only by buying shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that after pricing there could be downward pressure on the price of the shares in the open market that could adversely affect investors who purchase in the offering. | ||
| Penalty bids permit the underwriters to reclaim a selling concession from a syndicate member when the common stock originally sold by that syndicate member is purchased in stabilizing or syndicate covering transactions to cover syndicate short positions. | ||
These stabilizing transactions, syndicate covering transactions and penalty bids may have the
effect of raising or maintaining the market price of our common stock or preventing or retarding a
decline in the market price of our common stock. As a result, the price of our common stock in the
open market may be higher than it would otherwise be in the absence of these transactions. Neither
we nor the underwriters make any representation or prediction as to the effect that the
transactions described above may have on the price of our common stock. These transactions may be
effected on the NASDAQ Global Select Market, in the over-the-counter market or otherwise and, if
commenced, may be discontinued at any time.
Passive Market Making. In connection with this offering, the underwriters and selected
dealers, if any, who are qualified market makers on the NASDAQ Global Select Market, may engage in
passive market making transactions in our common stock on the NASDAQ Global Select Market in
accordance with Rule 103 of Regulation M under the Securities Act. Rule 103 permits passive market
making activity by the participants in our common stock offering. Passive market making may occur
before the pricing of our offering, or before the commencement of offers or sales of our common
stock. Each passive market maker must comply with applicable volume and price limitations and must
be identified as a passive market maker. In general, a passive market maker must display its bid
at a price not in excess of the highest independent bid for the security. If all independent bids
are lowered below the bid of the passive market maker, however, the bid must then be lowered when
purchase limits are exceeded. Net purchases by a passive market maker on each day are limited to a
specified percentage of the passive market makers average daily trading volume in the common stock
during a specified period and must be discontinued when that limit is reached. The underwriters
and other dealers are not required to engage in passive market making and may end passive market
making activities at any time.
Our Relationship with the Underwriters. Sandler ONeill & Partners, L.P. and some of its
affiliates, have performed and expect to continue to perform financial advisory and investment
banking services for us in the ordinary course of their businesses, and have received, and may
continue to receive, compensation for those services. We paid Sandler ONeill & Partners, L.P.,
total commissions of approximately $280,000 for its services as placement agent for the Private
Placements.
Our common stock is being offered by the underwriters, subject to prior sale, when, as and if
issued to and accepted by it, subject to approval of certain legal matters by counsel for the
underwriters and other conditions.
EXPERTS
The consolidated financial statements of PAB as of December 31, 2009 and 2008, and for each of
the years in the three-year period ended December 31, 2009, appearing in PABs Annual Report on
Form 10-K for the year ended December 31, 2009 have been incorporated by reference herein in
reliance upon the report of Mauldin & Jenkins, LLC, independent registered public accounting firm,
incorporated by reference herein, and upon the authority of said firm as experts in accounting and
auditing.
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LEGAL MATTERS
The validity of the issuance of the shares of common stock offered hereby will be passed upon
for us by Troutman Sanders LLP, Atlanta, Georgia. Certain legal matters relating to the sale of the
common stock offered hereby will be passed upon for the underwriters by Nelson Mullins Riley &
Scarborough LLP, Atlanta, Georgia.
INCORPORATION BY REFERENCE
We file annual, quarterly and current reports, proxy statements and other information with the
SEC, which allows us to incorporate by reference the information we file with it. This means
that we can disclose important information to you by referring you to those documents filed
separately with the SEC. The information we incorporate by reference is an important part of this
prospectus. We incorporate by reference the documents listed below, except to the extent that any
information contained in those documents is deemed furnished in accordance with SEC rules. The
documents we incorporate by reference include:
| Annual Report on Form 10-K for the year ended December 31, 2009; |
| Quarterly Report on Form 10-Q for the quarter ended March 31, 2010; and | ||
| Current Reports on Form 8-K filed January 29, 2010, February 25, 2010, March 10, 2010 (solely with respect to Item 5.03 and Exhibit 3.1 included therein) and April 29, 2010. | ||
Any statement contained in a document that is incorporated by reference will be modified or
superseded for all purposes to the extent that a statement contained in this prospectus modifies or
is contrary to that previous statement. Any statement so modified or superseded will not be deemed
a part of this prospectus except as so modified or superseded.
You may request a copy of any of these filings at no cost, by writing or telephoning us at the
following address or telephone number:
PAB Bankshares, Inc.
3250 North Valdosta Road
Valdosta, Georgia 31602
(229) 241-2775
3250 North Valdosta Road
Valdosta, Georgia 31602
(229) 241-2775
We have filed with the SEC a registration statement under the Securities Act with respect to
the common stock offered hereby. As permitted by the rules and regulations of the SEC, this
prospectus does not contain all the information set forth in the registration statement. Such
information can be examined without charge at the public reference facilities of the SEC located at
100 F. Street, N.E., Washington, D.C. 20549, and copies of such material can be obtained from the
SEC at prescribed rates. The SEC telephone number is 1-800-SEC-0330. In addition, the SEC
maintains a web site (www.sec.gov) that contains periodic reports, proxy and information statements
and other information regarding registrants that file electronically with the SEC, including us.
The statements contained in this prospectus as to the contents of any contract or other document
filed as an exhibit to the registration statement are, of necessity, brief descriptions of the
material terms of, and should be read in conjunction with, such contract or document.
In addition, we make available, without charge, through our website, www.pabbankshares.com,
electronic copies of our filings with the SEC, including copies of annual reports on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to these filings, if
any. Information on our website should not be considered a part of this prospectus, and we do not
intend to incorporate into this prospectus any information contained in our website.
37
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$80,000,000 of Common Stock
[] Shares of Common Stock
PROSPECTUS
BB&T Capital Markets | ||
[], 2010
Table of Contents
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. | Other Expenses of Issuance and Distribution. |
SEC registration fee |
$ | 6,560 | ||
FINRA filing fee |
$ | 9,000 | ||
NASDAQ Global Select Market listing fee |
$ | 5,000 | ||
*Accounting fees and expenses |
$ | 50,000 | ||
*Legal fees and expenses |
$ | 250,000 | ||
*Printing and engraving expenses |
$ | 25,000 | ||
*Miscellaneous |
$ | 204,440 | (1) | |
*Total |
$ | 550,000 | ||
* | Estimated pursuant to Item 511 of Regulation S-K. | |
(1) | Includes up to $200,000 of reasonable out-of-pocket expenses for which we have agreed to reimburse the underwriters. Such amount includes reimbursement for legal fees and expenses, marketing, syndication and travel expenses. | |
Item 14. Indemnification of Directors and Officers.
Under our Amended and Restated Articles of Incorporation and our Amended and Restated Bylaws,
each of our directors and officers has the right to be indemnified by us to the maximum extent
permitted by law against (i) actual and reasonable expenses incurred in connection with any
threatened, pending or completed civil, criminal, administrative, investigative or arbitrative
action, suit or proceeding seeking to hold the person liable by reason of his or her actions in
such capacity and (ii) actual and reasonable payments made by the person in connection with the
defense or settlement of such action or suit, subject to certain limitations. This right to
indemnification includes the right to the advancement of reasonable expenses by us, to the maximum
extent permitted by law.
Pursuant to the Georgia Code, a Georgia corporation has the power to indemnify its directors
and officers provided that they act in good faith and reasonably believe that their conduct was
lawful and in the corporations best interest (or not opposed thereto), as set forth in the Georgia
Code. Under the Georgia Code, a corporation must indemnify a director or officer who is wholly
successful, on the merits or otherwise, in the defense of any proceeding to which he or she was a
party because he or she is or was a director or officer, against reasonable expenses incurred by
the director or officer in connection with the proceeding. The Georgia Code permits a corporation
to pay for or reimburse reasonable expenses in advance of final disposition of an action, suit or
proceeding only upon: (i) the directors certification that he or she acted in good faith and in
the corporations best interest (or not opposed thereto); and (ii) the director furnishing a
written undertaking to repay the advance if it is ultimately determined that he or she did not meet
this standard of conduct.
Under our Amended and Restated Articles of Incorporation, no director of PAB will be liable to
us or our shareholders for monetary damages for breach of his or her fiduciary duty as a director,
to the maximum extent permitted by law.
The Georgia Code also empowers a corporation to provide insurance for directors and officers
against liability arising out of their positions, even though the insurance coverage may be broader
than the corporations power to indemnify. We maintain directors and officers liability insurance
for the benefit of our directors and officers.
Item 15. Recent Sales of Unregistered Securities.
PAB Bankshares, Inc. announced on September 9, 2009 that it completed two Private Placements
of an aggregate $13,412,000 of additional capital that are being used to support the operations of
The Park Avenue Bank, PABs wholly owned banking subsidiary (the Bank). The Private Placements
included approximately $8.3 million of PABs Series A Contingent Convertible Perpetual
Non-cumulative Preferred Stock, no par value per share (the Series A Preferred Stock), along
with an additional approximate $5.1 million of PABs Series B Contingent Convertible Perpetual
Non-cumulative Preferred Stock, no par value per share (the Series B Preferred Stock). The
terms of the Series A Preferred Stock are more fully described in Item 1.01 Entry into a Material
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Definitive Agreement of PABs Current Report on Form 8-K filed March 10, 2009, which is
incorporated herein by reference, and are contained in the Articles of Amendment filed as Exhibit
3.1 to the same Current Report on Form 8-K. The terms of the Series B Preferred Stock are more
fully described in Item 1.01 Entry into a Material Definitive Agreement of PABs Current Report
on Form 8-K filed September 15, 2009, which is incorporated herein by reference, and are contained
in the Articles of Amendment filed as Exhibit 3.1 to the same Current Report on Form 8-K.
As a result of shareholder approval of the issuance of more than 20% of our outstanding common
stock upon conversion of the preferred stock that we obtained at our 2009 Annual Meeting of
Shareholders held on June 23, 2009, both series of the preferred stock were immediately converted
into shares of common stock at a conversion price of $3.00 per share. Also, upon conversion, the
investors received warrants to purchase additional shares of common stock equal to 30% of the
aggregate value of their investment. Accordingly, no shares of the Series A Preferred Stock or
Series B Preferred Stock are outstanding.
PAB conducted the Private Placements of the Series A Preferred Stock and the Series B
Preferred Stock to the investors in reliance upon an exemption from the registration requirements
of Section 5 of the Securities Act, afforded by Section 4(2) thereunder, and, in particular, the
safe harbor provisions afforded by Regulation D (Regulation D), as promulgated thereunder. Each
of the investors represented to PAB that he or she is an accredited investor as defined in Rule
501(a) of Regulation D.
PAB paid the placement agent for the Private Placements, Sandler ONeill & Partners, L.P.,
total commissions of approximately $280,000. PAB is using and expects to use the net proceeds of
the Private Placements, which it estimates to be approximately $12.6 million, to increase the
Banks capital and for general corporate purposes.
Item 16. | Exhibits and Financial Statement Schedules. |
Exhibit | ||
Number | Description | |
1.1*
|
Form of Underwriting Agreement | |
2.1
|
Purchase and Assumption Agreement between HeritageBank of the South and The Park Avenue Bank dated as of February 23, 2010 (incorporated by reference to Exhibit 2.1 to the Registrants Current Report on Form 8-K filed February 25, 2010). | |
3.1
|
Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the Registrants Annual Report on Form 10-K for the fiscal year ended December 31, 2009). | |
3.2
|
Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to the Registrants Current Report on Form 8-K filed May 18, 2009). | |
4.1
|
Amended and Restated Trust Agreement among PAB Bankshares, Inc., as Depositor, Wilmington Trust Company, as Property Trustee and Delaware Trustee, and the Administrative Trustees named therein dated as of October 5, 2006 (incorporated by reference to Exhibit 4.1 to the Registrants Current Report on Form 8-K filed October 6, 2006). | |
4.2
|
Junior Subordinated Indenture between PAB Bankshares, Inc. and Wilmington Trust Company, as Trustee dated as of October 5, 2006 (incorporated by reference to Exhibit 4.2 to the Registrants Current Report on Form 8-K filed October 6, 2006). | |
4.3
|
Guarantee Agreement between PAB Bankshares, Inc., as Guarantor, and Wilmington Trust Company, as Guarantee Trustee dated as of October 5, 2006 (incorporated by reference to Exhibit 4.3 to the Registrants Current Report on Form 8-K filed October 6, 2006). | |
4.4***
|
Specimen Certificate for Shares of Common Stock. | |
5.1*
|
Opinion of Troutman Sanders LLP. |
2
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Exhibit | ||
Number | Description | |
10.1
|
PAB Bankshares, Inc. Fourth Amended and Restated Dividend Reinvestment and Common Stock Purchase Plan (incorporated by reference to Exhibit 10.1 to the Registrants Annual Report on Form 10-K for the fiscal year ended December 31, 2007). | |
10.2
|
PAB Bankshares, Inc. 1994 Employee Stock Option Plan, as amended (incorporated by reference to Exhibit 10.3 to the Registrants Annual Report on Form 10-K for the fiscal year ended December 31, 1998). | |
10.3
|
Form of Executive Salary Continuation Agreement, with attached Schedule of Terms (incorporated by reference to Exhibit 10.5 to the Registrants Annual Report on Form 10-K for the fiscal year ended December 31, 1998). | |
10.4
|
PAB Bankshares, Inc. 1999 Stock Option Plan, as amended and restated (incorporated by reference to Exhibit 10.1 to the Registrants Registration Statement on Form S-8 (No. 333-137316) filed with the Commission on September 14, 2006). | |
10.5
|
Rescission Agreement, dated December 31, 2001, by and between R. Bradford Burnette and the Registrant (incorporated by reference to Exhibit 10.10 to the Registrants Annual Report on Form 10-K for the fiscal year ended December 31, 2001). | |
10.6
|
PAB Bankshares, Inc. Employee and Director Stock Purchase Program, dated July 1, 2002 and amended March 25, 2003 (incorporated by reference to Exhibit 10.9 to the Registrants Annual Report on Form 10-K for the fiscal year ended December 31, 2002). | |
10.7
|
Employment Agreement, dated May 1, 2008, by and between M. Burke Welsh, Jr., the Bank and the Registrant (incorporated by reference to Exhibit 10.9 to the Registrants Current Report on Form 8-K filed May 5, 2008). | |
10.8
|
Employment Agreement, dated January 1, 2003, by and between R. Wesley Fuller and the Bank (incorporated by reference to Exhibit 10.12 to the Registrants Annual Report on Form 10-K for the fiscal year ended December 31, 2002). | |
10.8.1
|
First Amendment to Employment Agreement, dated May 1, 2008, by and between R. Wesley Fuller and the Bank (incorporated by reference to Exhibit 10.10.1 to the Registrants Current Report on Form 8-K filed May 5, 2008). | |
10.9
|
Employment Agreement, dated January 1, 2003, by and between Donald J. Torbert, Jr. and the Bank (incorporated by reference to Exhibit 10.13 to the Registrants Annual Report on Form 10-K for the fiscal year ended December 31, 2002). | |
10.9.1
|
First Amendment to Employment Agreement, dated August 26, 2003, by and between Donald J. Torbert, Jr. and the Bank (incorporated by reference to Exhibit 10.15 to the Registrants Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2003). | |
10.9.2
|
Second Amendment to Employment Agreement, dated May 1, 2008, by and between Donald J. Torbert, Jr. and the Bank (incorporated by reference to Exhibit 10.11.2 to the Registrants Current Report on Form 8-K filed May 5, 2008). | |
10.10
|
Employment Agreement, dated May 1, 2008, by and between George D. Henderson, the Bank and the Registrant (incorporated by reference to Exhibit 10.14 to the Registrants Current Report on Form 8-K filed May 5, 2008). | |
10.11
|
Written Agreement with the Federal Reserve Bank of Atlanta and the Georgia Department of Banking and Finance, dated July 14, 2009 (incorporated by reference to Exhibit 10.1 to the Registrants Current Report on Form 8-K filed July 20, 2009). |
3
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Exhibit | ||
Number | Description | |
10.12
|
Form of Amendment to Investment Agreement (incorporated by reference to Exhibit 10.2 to the Registrants Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2009). | |
10.13
|
Compensatory Arrangement with Thompson Kurrie, Jr. dated April 28, 2009, the terms of which are described on the Registrants Current Report on Form 8-K dated April 28, 2009 (incorporated by reference to Exhibit 10.3 to the Registrants Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2009). | |
10.14
|
Employment Termination Agreement among PAB Bankshares, Inc., The Park Avenue Bank and M. Burke Welsh, Jr., dated April 6, 2009 (incorporated by reference to Exhibit 10.1 to the Registrants Current Report on Form 8-K filed April 7, 2009). | |
10.15
|
Consulting Agreement among PAB Bankshares, Inc., The Park Avenue Bank and M. Burke Welsh, Jr., dated April 6, 2009 (incorporated by reference to Exhibit 10.2 to the Registrants Current Report on Form 8-K filed April 7, 2009). | |
10.16
|
Form of Investment Agreement for Series B Preferred Stock (incorporated by reference to Exhibit 10.1 to the Registrants Current Report on Form 8-K filed September 15, 2009). | |
10.17
|
Employment Agreement, dated October 28, 2008, by and between Nicole S. Stokes, the Bank and the Registrant (incorporated by reference to Exhibit 10.1 to the Registrants Current Report on Form 8-K filed October 1, 2009). | |
10.18
|
Form of Investment Agreement for Series A Preferred Stock (incorporated by reference to Exhibit 10.2 to the Registrants Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2009). | |
10.19
|
Form of Amendment to Investment Agreement for Series A Preferred Stock (incorporated by reference to Exhibit 10.2 to the Registrants Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2009). | |
21.1
|
Subsidiaries of the Registrant (incorporated by reference to Exhibit 21.1 to the Registrants Annual Report on Form 10-K for the fiscal year ended December 31, 2008). | |
23.1*
|
Consent of Mauldin & Jenkins, LLC. | |
24.1***
|
Power of Attorney. |
* | Filed herewith. | |
** | To be filed by amendment. | |
*** | Previously filed. |
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(1) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy as expressed in
the Act, and is, therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person in connection with
the securities being registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a
4
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court of appropriate jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final adjudication of such issue.
(2) For purposes of determining any liability under the Securities Act of 1933, the
information omitted from the form of prospectus filed as part of this registration statement in
reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to
Rule 424(b)(1), or (4), or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(3) For the purpose of determining any liability under the Securities Act of 1933, each
post-effective amendment that contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering thereof.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has
duly caused this registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Valdosta, State of Georgia, on May 11, 2010.
PAB BANKSHARES, INC. |
||||
By: | /s/ Donald J. Torbert, Jr. | |||
Donald J. Torbert, Jr. | ||||
President and Chief Executive Officer: (Principal Executive Officer) |
||||
Pursuant to the requirements of the Securities Act of 1933, as amended, this registration
statement has been signed by the following persons in the capacities and on the dates indicated.
Signature | Title | Date | ||
/s/ Donald J. Torbert, Jr.
|
President and Chief Executive Officer (Principal Executive Officer) |
May 11, 2010 | ||
/s/ Nicole S. Stokes
|
Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) | May 11, 2010 | ||
*
|
Director | May 11, 2010 | ||
*
|
Director | May 11, 2010 | ||
*
|
Director | May 11, 2010 | ||
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Director | May 11, 2010 | ||
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Director | May 11, 2010 | ||
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Director | May 11, 2010 | ||
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Director | May 11, 2010 | ||
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Director | May 11, 2010 | ||
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Director | May 11, 2010 |
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Signature | Title | Date | ||
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Director | May 11, 2010 | ||
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Director | May 11, 2010 |
* By:
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/s/ Donald J. Torbert, Jr.
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Table of Contents