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| 8-K - FORM 8-K - PALMETTO BANCSHARES INC | d355848d8k.htm |
 NASDAQ: PLMT
1
Annual Meeting of Shareholders
May 17, 2012
Exhibit 99.1 |
 NASDAQ: PLMT
2
Informational Update to Shareholders:
Mike Glenn, Chairman of the Board |
 NASDAQ: PLMT
Board Governance
1.
Reconstituted Board of Directors in October 2010 (2011 = first full year)
2.
Board leadership:
–
Separation of the Chairman and Chief Executive Officer
–
Independent Chairman beginning in January 2012 (and therefore
eliminated the role of the Lead Director in January 2012)
3.
Annual Board and Committee self-assessments, including anonymous
Director surveys of peers
–
Attendance at various Directors colleges and conferences
4.
Board committees
–
Written charters updated annually and published on our website
–
Annual written objectives by Committee
–
Addition of Board oversight of enterprise risk management in 2011
5.
Executive sessions of independent Directors at Board and Committee
meetings
6.
Annual written performance plan and evaluation of the Chief Executive
Officer
3 |
 NASDAQ: PLMT
General Board Perspective
•
Observations from an article titled, “Banking’s Secret
Sauce,”
by Jack Milligan in Bank Director Magazine,
1
Quarter
2012
•
The article summarized observations based on a
ranking of the 150 largest publically traded banks
and thrifts in the country based on profitability,
capital strength and asset quality
•
The
article
identifies
a
list
of
traits
that
most
top
ranked banks
have in common
4
st |
 NASDAQ: PLMT
Trait #1: Leadership
•
CEOs
are
highly
skilled
managers
–
Who are backed by knowledgeable and
engaged boards
•
These
CEOs
are
leaders
–
Who understand their markets, their
strategies and what it takes to be successful
–
Are strategists who can execute
5 |
 NASDAQ: PLMT
Trait #2: Sustainable Strategies
•
The banks employ strategies that:
–
Avoid
activities
that
entail
excessive
risk:
for
example, commercial real estate
concentrations or high-risk residential
mortgages (sub-prime)
–
Escape
the
wasting
effects
of
commoditization:
low-margin and plain vanilla products and
services, and strategies that do not
differentiate in price or features
6 |
 NASDAQ: PLMT
Trait #3: Organizational Clarity
•
From the Board flowing through the bank, all
have
a
shared
sense
of
what
it
takes
to
be
successful
•
The
Board
and
senior
management
are
fully
aligned
on strategy
–
And management understands what levers to
pull to deliver optimal performance
7 |
 NASDAQ: PLMT
The Palmetto Bank is on the Right Track
1.
A leadership team that understands our
industry and markets
2.
A knowledgeable and engaged Board
3.
A proactive and tailored strategy that is
being consistently executed and showing
continuously improving results
4.
A sense of urgency with clear focus and
strategic actions to return to profitability
5.
Positioned in the attractive Upstate market
that is exhibiting signs of stability and growth
8 |
 NASDAQ: PLMT
Informational Update to Shareholders:
Sam Erwin, Chief Executive Officer
Lee Dixon, Chief Operating and Chief Risk Officer
9 |
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10
Non-GAAP Measures and Forward Looking Statements
This presentation contains financial information determined by methods other than in
accordance with Generally Accepted Accounting Principles (“GAAP”)
such as net loss and pre-tax loss excluding credit-related items and one-time charges. Non-
GAAP measures should not be considered as an alternative to any measure of
performance as promulgated under GAAP. Investors
should
consider
the
Company’s
recording
of
provision
for
loan
losses,
loan
workout
expenses,
foreclosed
real
estate
write
downs
and
expenses
and
losses
on
commercial
loans
held
for
sale
in
the
periods
presented
when
assessing
the
performance of the Company. Non-GAAP measures have limitations as analytical
tools, and investors should not consider them in isolation or as a
substitute for analysis of the Company’s results as reported under GAAP.
Certain
statements
in
this
presentation
contain
“forward-looking
statements”
within
the
meaning
of
the
Private
Securities
Litigation Reform Act of 1995, such as statements relating to future plans and
expectations, and are thus prospective. Such forward-looking
statements
are
identified
by
words
such
as
“believes,”
“expects,”
“anticipates,”
“estimates,”
“intends,”
“plans,”
“targets,”
and “projects,”
as well as similar expressions. Forward-looking statements are subject
to risks, uncertainties, and other factors which could cause actual results
to differ materially from future results expressed or implied by such forward-looking
statements. Factors which could cause actual results to differ materially from the
anticipated results or other expectations expressed in the
forward-looking statements include, but are not limited to: (1) the strength of the United States economy in
general and the strength of the local economies in which the Company conducts its
operations which could result in, among other
things,
a
deterioration
in
the
credit
quality
or
a
reduced
demand
for
credit,
including
the
resultant
effect
on
our
loan
portfolio
and allowance for loan losses and the rate of delinquencies and amounts of
charge-offs, or adverse changes in asset quality in our loan portfolio,
which may result in increased credit risk-related losses and expenses; (2) adverse conditions in the stock
market, the public debt market and other capital markets (including changes in
interest rate conditions) and the impact of such conditions on the Company,
and the timing and amount of future capital raising activities by the Company, if any; and (3) actions
taken by banking regulatory agencies related to the banking industry in general and
the Company or the Bank specifically. The assumptions underlying the
forward-looking statements could prove to be inaccurate. Therefore, we can give no assurance that
the results contemplated in the forward-looking statements will be realized.
The inclusion of this forward-looking information should not be
construed as a representation by our Company or any person that the future events, plans, or expectations
contemplated
by
our
Company
will
be
achieved.
Additional
factors
that
could
cause
our
results
to
differ
materially
from
those
described in the forward-looking statements can be found in our reports (such
as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and
Current Reports on Form 8-K) filed with the U.S. Securities and Exchange Commission (the “SEC”)
and
available
at
the
SEC’s
Internet
site
(http://www.sec.gov),
including
the
“Risk
Factors”
included
therein.
All
subsequent
written
and oral forward-looking statements concerning the Company or any person acting
on its behalf is expressly qualified in its entirety
by
the
cautionary
statements
above.
We
do
not
undertake
any
obligation
to
update
any
forward-looking
statement
to
reflect changes in circumstances or events that occur after the date the
forward-looking statements are made. |
 NASDAQ: PLMT
11
Commitments to our Shareholders
1.
Communicate regularly
2.
Provide clear and transparent information
3.
Be accessible and visible
4.
Listen to concerns and suggestions
5.
Continue the rich legacy of our 105-year old
institution
6.
Protect the reputation of The Palmetto Bank
7.
Work hard with dedication and perseverance
to recover and optimize shareholder value |
 NASDAQ: PLMT
Industry, Economic and Market Context
12 |
 NASDAQ: PLMT
Industry Context: FDIC Fourth Quarter 2011 Statistics
•
Number of institutions = 7,357 at 12/31/11
–
Down
1,177
(14%)
from
8,534
at
12/31/07
–
Down
7,801
(51%)
from
15,158
at
12/31/90
•
417
failed
banks
since
12/31/07
(7
in
South
Carolina)
•
Industry
on
the
mend
with
highest
net
income
since
2006
and
the
fourth-quarter being the lowest level for quarterly charge-offs since
first quarter 2008
•
Reduction
in
nonperforming
loans
for
seventh
quarter
in
a
row
•
Improving
loan
growth
with
the
fourth
quarter
representing
the
largest quarterly increase since fourth quarter 2007
•
Net
interest
income
and
noninterest
income
both
declined
in
2011 given
–
low interest rate environment
–
regulatory pressure on service charges and fees (second
consecutive year and the fourth year in the last five years)
13 |
 NASDAQ: PLMT
14
Additional Economic and Market Context
•
Difficult economy but optimism for improvement with signs of growth in
some markets in the Upstate
•
Credit
quality
concerns
remain,
but
general
improvement
noted
-
real
estate values remain depressed, but stabilization in certain segments
and markets
•
Tepid loan growth overall and very competitive loan pricing for credit
worthy commercial borrowers
•
Low interest rate environment and high levels of deposits resulting in
compressed net interest margin
•
Focus
on
higher
than
normal
capital
levels,
with
expectations
of
higher
required capital levels in the future
•
Congressional actions with higher costs and additional regulatory
oversight, including the Dodd-Frank Act and Consumer Financial
Protection Bureau |
 NASDAQ: PLMT
The Palmetto Bank:
2011 in Review and
2012 Outlook
15 |
 NASDAQ: PLMT
Overall Thoughts on 2011
•
Great progress!
•
Improved credit quality and lower credit losses
•
Increased revenues
•
Reduced expenses
•
Improved earnings
•
Stabilized infrastructure
•
Ongoing talent management
All resulting in a better and sustainable earnings picture
(but not there yet…)
16 |
 NASDAQ: PLMT
17
Strategic
Initiative
Results
(2011 vs. 2010)
Change
from 2010
Branch Loan
Growth
Production up 66% over 2010
($24.5 million vs. $14.8 million)
Began to outpace runoff
Core Deposit
Growth
Grew core deposits over $37 million
($666 million vs. $629 million)
Fee Income
Growth
Flat growth
($16.8 million vs. $17 million)
Mortgage
Flat production
($90 million vs. $91 million)
Indirect
Increased production by 47%
($24.5 million vs. $16.7 million)
2011 in Review: Retail |
 NASDAQ: PLMT
18
Strategic
Initiative
Results
(2011 vs. 2010)
Change
from 2010
Commercial Loan
Portfolio
6% decrease
($549 million vs. $583 million)
New Loan
Production
Documented Calls
395% increase
($109 million vs. $22 million)
Intentional effort to grow business
(2,949 vs. 0 in 2010)
Treasury
Deposits
1.8% increase
($163 million vs. $160 million)
Loan Fees
87% increase
($866 thousand vs. $463 thousand)
2011 in Review: Commercial |
 NASDAQ: PLMT
Strategic Initiative
Results
(2011 vs. 2010)
Change
from 2010
Trust
Asset Growth
Assets up $18 million
(7% increase)
Trust
Account Growth
Grew number of accounts 39
(5% increase)
Trust
Net Income
Growth
Net income increase
(22.8% increase)
Brokerage
Asset Growth
Assets down $851 thousand
(5% decrease)
Brokerage
Net Income
Growth
Net income increase
(82% increase)
2011 in Review: Wealth Management
19 |
 NASDAQ: PLMT
2012 Outlook
•
Many of the general economic challenges we faced over the
course of 2011 are continuing into 2012; however some have
begun to moderate
•
Net interest income improvement through continued reduction
in time deposits balances and rates
•
Improving loan production but still a challenge and very
competitive
•
Focus on fee income with elimination of certain deposit service
charge waivers
•
Recurring credit losses expected to be lower, although ongoing
strategic evaluation of problem asset resolution strategies
•
Sustained focus on efficiency and expense reductions
Projected to return to quarterly profitability in 2012
20 |
 NASDAQ: PLMT
Strategic Focus
21 |
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Evolution of Big Picture Strategic Focus
•
2009
–
Quantify depth of credit loss hole
–
Strategic Project Plan to survive
and thrive
–
Prepare for regulatory agreement
•
2010
–
Raise capital
–
Process improvement
–
Change management
•
2011
–
Performance culture and talent
management
–
Operating earnings
–
Client focus
22
•
2012
–
Profitability
–
Expense reductions
–
Technology
enhancements
–
Palmetto Partnership |
 NASDAQ: PLMT
23
Overall Big Picture Strategy
1.
Retail Bank: primarily manage funding cost through low
cost deposits
2.
Commercial Bank: primarily generate income through
loans
3.
Wealth Management: primarily generate incremental
revenue
4.
Support departments: enable the above with disciplined
expense management and sound risk management
Out-service the big banks and
out-muscle the little banks! |
 NASDAQ: PLMT
2012 Strategic Priorities
24 |
 NASDAQ: PLMT
25
2012 Strategic Priorities
1.
Return to profitability
2.
Improve asset quality
3.
Exit regulatory agreement
4.
Execute on client service and support
through Palmetto Partnership
5.
Develop a high performing culture and
winning team
Control our own destiny and earn the right to
keep doing it our way! |
 NASDAQ: PLMT
1. Return to Profitability
26 |
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Net Interest Margin
27 |
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Efficiency Ratio
28 |
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Operating Earnings
29 |
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Pre-Tax (Loss) Income
30 |
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Return to Profitability
•
$6.2
million
of
annual
expense
Savings
through
Automation,
Vendor
management
and
Efficiency
•
Asset-liability management and Internal Audit co-
sourcing began January 1
•
Branches:
–
Two consolidations completed on March 30
–
Two sales targeted to close in the second quarter
•
Check processing outsourcing and related deposit
statements process on April 27
Most savings start showing up in
second quarter
financial results.
31 |
 NASDAQ: PLMT
Compensation and Benefit Reductions
•
Headcount reduced 20% from peak of 420 at
12/31/08
•
Salary freeze re-instated in 2012
•
Regular 401(k) Plan employer match suspended
in 2012
32 |
 NASDAQ: PLMT
The Path to Profitability
•
Making money on an operating basis even given
–
Low interest rates and flat yield curve
(compressed net interest margin)
–
Higher regulatory costs and revenue
restrictions (lower service charges, higher
FDIC premiums, etc.)
–
High operating expenses from workout mode
and catch up in infrastructure and technology
The core franchise is generating income
on a day-to-day basis.
33 |
 NASDAQ: PLMT
2. Improve Asset Quality
34 |
 NASDAQ: PLMT
Return to Profitability and
Improve Credit Quality
•
Objectives are inter-related with financial results driven primarily by
credit losses
•
Significant reduction in problem assets and improving quarterly
trends -
reduced
–
Number of assets
–
Size of assets
–
Losses on assets
•
Strategic decisions continue to sell problem assets at discounts
given ongoing cost to carry (taxes, insurance, legal fees, utilities,
repairs, etc.)
•
Also evaluating sell vs. hold in relation to:
–
Regulatory and investor perspective on aggregate total amount
–
Morale and public perception of quarterly losses
35 |
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Nonperforming Assets
36 |
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Nonaccrual Loans -
Gross Additions
37 |
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Commercial Real Estate Loans
38 |
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Commercial Real Estate Loans
as a Percentage of Total Risk Based Capital
39 |
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Provision for Loan Losses
40 |
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3. Exit Regulatory Agreement
41 |
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Regulatory Examinations
42
•
FDIC insurance premiums are based in part on the
overall ratings from the annual Safety and
Soundness examinations
–
Starting in the second quarter 2012, our annual
premiums will be reduced by $1 million based
on current deposit levels |
 NASDAQ: PLMT
4. Execute on Client Service and Support
through Palmetto Partnership
43 |
 NASDAQ: PLMT
The Path To Profitability!
Project
SAVE
The Palmetto
Partnership
Profitability
Driven by...
Executing
Clients
44 |
 NASDAQ: PLMT
Technology Upgrades to Meet Client Expectations:
Second Quarter
Upgraded
ATM fleet, locations and capability
March
Upgraded
Telephone Automatic Voice Response Unit
May
Upgraded
Remote Deposit Capture
May
Upgraded
Real Time Internet Banking
May
Upgraded
E-Statement System
May
New
Mobile Friendly Web Site
May
New Mobile Banking
June
New
Deposit Taking/Imaging ATMs
June
New
Electronic Notices Delivered for Loans & Deposits
June
New
Automated Wire Transfer System
June
45 |
 NASDAQ: PLMT
Technology Upgrades to Meet Client Expectations:
Third Quarter
46
New
Lockbox System
July
New
Person to Person Payments
July
New
Online Personal Finance System
July
Upgraded
Web Site
July
New
Commercial Positive Pay
September
New ACH Fraud Control
September
New
Electronic Check Recovery
September |
 NASDAQ: PLMT
5. Develop a High Performing Culture and
Winning Team
47 |
 NASDAQ: PLMT
Critical Elements of Our Evolving Culture
1.
Continuous improvement culture (including
possibility thinking “out of the red box”,
automation, and expense consciousness)
2.
Client service and support culture
Palmetto
Partnership
3.
Performance culture (personally and corporately)
4.
Winning culture!
48
We
Win! |
 NASDAQ: PLMT
Closing Thoughts
49 |
 NASDAQ: PLMT
Summary Thoughts on the Path Forward
1.
Significant progress on the path to profitability
2.
Asset quality is being aggressively improved
3.
Substantially completed the transition from “workout”
mode to
“business development”
mode
4.
Clarity of the path forward -
more focused Bank, department, and
individual objectives and expectations
5.
Dedicated team and pride in our service
6.
High expectations to cultivate a performance culture and winning
team
7.
Sense of urgency continues and we insist on results, not activity
8.
We are moving the Bank forward –
with intense focus on the
bulls eye of profitability
Proactive, comprehensive and focused strategic plan being executed
50 |
 NASDAQ: PLMT
51
Value of the Franchise
•
105 year legacy with excellent reputation and strong brand
recognition
•
Historical high performing financial results, with history of innovation
and balanced and fair pricing to our clients
•
Premier deposit-gathering franchise in an attractive banking market
with strong deposit gathering capability
–
4
th
largest bank headquartered in South Carolina
–
6
th
in deposit share in the Upstate and 1
st
of banks
headquartered in South Carolina
–
25 branches in the economically attractive Upstate market along
the Interstate 85 corridor between Atlanta and Charlotte
•
Heritage of deep client relationships and loyalty, with high touch
client service platform to be leveraged for enhanced sales culture
|