ex99-1.htm

EX-99.1 2 ex99-1.htm EXHIBIT 99.1 ex99-1.htm

Exhibit 99.1


FOR IMMEDIATE RELEASE	For More Information Contact:
April 22, 2015	Roy D. Jones, Chief Financial Officer and Treasurer
	(864) 240-5104 or rjones@palmettobank.com

The Palmetto Bank Reports First Quarter Net Income of $2.7 Million

Net Loan Growth of $27.0 Million (3.4%) and Deposit Growth of $38.7 Million (4.2%),

from the Fourth Quarter 2014

Greenville, S.C. – ☐Palmetto Bancshares, Inc. (NASDAQ: PLMT) (the “Company”) reported first quarter 2015 net income of $2.7 million ($0.21 per diluted common share) compared to $3.3 million ($0.26 per diluted common share) for the fourth quarter 2014. The primary variance between these two quarters related to the provision for loans losses which was $400 thousand in the first quarter 2015 and negative $1.8 million in the fourth quarter 2014. Income before provision for income taxes and provision for loan losses was $4.6 million in the first quarter 2015 compared to $3.4 million in the fourth quarter 2014. The Company also declared a quarterly cash dividend of $0.08 per common share payable on May 18, 2015 to shareholders of record on May 4, 2015.

“Our financial results for the first quarter reflect the underlying strength of our franchise as evidenced by our strong loan growth, increased core deposits, higher noninterest income and lower expenses,” said Samuel L. Erwin, Chairman and Chief Executive Officer. “Entering 2015, we believed that our hard work over the past few years would manifest itself in our financial results this year, and our first quarter results are tangible confirmation of our efforts. The strong results were across all of our lines of business in Commercial, Retail and Wealth Management as we continued to serve our clients in the personal and business aspects of their lives.”

Highlights for the first quarter 2015 are summarized as follows, and the discussion of the Company’s results of operations and financial condition is supplemented by the accompanying financial tables.

●	Net income was $2.7 million, a decrease of $586 thousand from the fourth quarter 2014.

The decrease was driven primarily by a return to a more normalized provision for loan losses, and two fewer days in the quarter as compared to the prior quarter.

●	Net interest income increased $192 thousand from the fourth quarter 2014.

The increase in net interest income was partially offset by two fewer days in the first quarter 2015 as compared to the fourth quarter 2014. Net interest margin increased 2 basis points from the fourth quarter 2014 to 3.72% due to an increase in average loans of $41.9 million, lower reversals of accrued interest on nonaccrual loans and higher other earning asset balances and yields.

The overall yield on the loan portfolio continued to decline as higher-yielding loans matured and were replaced with new loan originations and purchases at lower rates in the current low interest rate and competitive banking environment.

The overall cost of deposits, including noninterest bearing deposits, declined one basis point to 0.04% during the first quarter 2015, reflecting a reduction in time deposit rates and the Company’s strong core deposit franchise. Core deposits, defined as total deposits less time deposits $100 thousand and over, represent 93% of total deposits at March 31, 2015.

●	The provision for loan losses was $400 thousand compared to a negative provision of $1.8 million in the fourth quarter 2014.

The provision in the first quarter 2015 reflects a provision for growth in the loan portfolio, offset by a continued reduction in the level of the allowance for loan losses coverage ratio to reflect continued improvement in the risk profile of the loan portfolio and lower charge-offs.

The allowance for loan losses coverage ratio was 1.55% at March 31, 2015 compared to 1.60% at December 31, 2014. Absent unexpected negative trends in credit quality, the Company expects its allowance for loan losses coverage ratio to be further reduced in 2015.

●	Noninterest income increased $267 thousand from the fourth quarter 2014.

Mortgage banking income increased $376 thousand due to an increase in mortgage loan sales of $9.2 million and an increase in income from the market value adjustment for mortgage banking derivatives. The increase in mortgage loan sales reflects a higher level of overall mortgage loan production, as well as a return to an “originate-to-sell” strategy during the first quarter 2015.

Gain on sales of SBA loans was $123 thousand during the first quarter 2015. There were no sales of SBA loans during the fourth quarter 2014.

Fees for trust and investment management and brokerage services increased $46 thousand due to increased account activity and growth in assets under management.

These increases were partially offset by a seasonal reduction of $312 thousand in nonsufficient funds, overdraft, service charges on deposits and debit card/ATM income. Income from these sources continues to benefit from the revenue enhancement initiatives implemented in 2014.

●	Noninterest expense decreased $692 thousand during the first quarter 2015.

The provision for unfunded commitments declined $587 thousand due to a change in the mix of unfunded commitments to lend.

Foreclosed real estate writedowns and expenses and loan workout expenses declined $296 thousand as a result of continued improvement in credit quality. Results for the first quarter 2015 and fourth quarter 2014 included gains of $197 thousand and $290 thousand, respectively, on the individual sale of two and five lots, respectively, in a single real estate development.

Professional services expense declined $142 thousand. Results for the fourth quarter 2014 included the final expenses associated with the Company’s revenue enhancement project completed in 2014.

The decline in noninterest expense was partially offset by increases in salaries and other personnel expense and FDIC deposit insurance assessments. Salaries and other personnel expense in the first quarter 2015 reflects a seasonal increase in payroll-related taxes of $114 thousand and annual merit increases, as well as normalized levels of pension expense and incentive accruals. Results for the fourth quarter 2014 included a one-time reduction in FDIC insurance to reflect improvement in the risk tier of the Company’s banking subsidiary, The Palmetto Bank (the “Bank”).

First quarter 2015 results included the continuing benefits of various process improvement projects implemented during 2014 such as transition to part-time staffing in the branches, direct recruiting in lieu of paying staffing agencies, consolidation of telephone providers and renegotiation of equipment maintenance contracts.

●	Total period-end loans held for investment increased $27.0 million reflecting organic growth in commercial and consumer loans and the purchase of $12.3 million of hybrid adjustable rate residential mortgage loans.

Organic loan balances increased $18.1 million (2.4%) on a linked-quarter basis. The face amount of organic loan origination volume was $84 million during the first quarter 2015 compared to $87 million during the fourth quarter 2014.

●	Non-maturity deposits increased $46.2 million while time deposits decreased $7.6 million.

The increase in non-maturity deposits includes $10.5 million of trust account deposits placed with the Bank during the first quarter 2015 and the results of refined consumer and business strategies to grow balances through new money deposits. During the first quarter 2015, the Company also implemented a retention strategy to proactively reach out to time deposit clients in an effort to retain maturing time deposit balances. This strategy contributed to increased retention of maturing time deposits during the first quarter 2015 as compared to the fourth quarter 2014.

The Company remains focused on executing specific strategies to grow core deposits through increasing balances in existing accounts as well as through growth in the number of new households. These strategies include proactively retaining clients, attracting new clients including in markets with local bank disruption, utilizing teammates with specialized deposit product knowledge, providing rewards programs for referrals and use of debit cards, and enhancing existing deposit products. Growth in deposits is expected to be used primarily to fund future loan growth.

●	Nonperforming assets decreased $2.3 million from the fourth quarter 2014 to $16.1 million, reflecting ongoing repayments and dispositions of problem loans and foreclosed assets.

Net charge-offs were $406 thousand (0.20% of average loans, annualized) during the first quarter 2015 compared to $646 thousand (0.33% of average loans, annualized) during the fourth quarter 2014.

Past due loans were 0.36% of loans outstanding at March 31, 2015 compared to 0.51% of loans outstanding at December 31, 2014 and have remained below 1.00% for nine consecutive quarters.

●	The Bank met all regulatory required minimum capital ratios and continued to be categorized as “well-capitalized” at March 31, 2015.

“We are very pleased with our financial results for the first quarter, which were a result of the successful execution of our strategies to generate growth in quality earning assets, increase deposits through growth in households, and realize the ongoing benefits from our revenue enhancement and expense reduction initiatives implemented during 2014,” continued Erwin. “We expect to continue our focus on earning asset and deposit growth over the remainder of the year and believe we are well positioned to achieve our objectives.”

As announced and further described in a separate press release issued by the Company today, the Company has entered into a merger agreement with United Community Banks, Inc.

About The Palmetto Bank: Headquartered in Greenville, South Carolina, The Palmetto Bank is a 108-year old community bank and is the third largest banking institution headquartered in South Carolina. The Palmetto Bank has assets of $1.2 billion and serves the Upstate of South Carolina through 25 branch locations in nine counties along the economically attractive I-85 corridor, as well as 24/7/365 service through online and mobile banking, ATMs and telephone. The Bank has a unique understanding of the Upstate market and delivers local decision making with greater responsiveness. Through its Retail, Commercial and Wealth Management lines of business, the Bank specializes in providing financial solutions to consumers and small to mid-size businesses with deposit and cash management products, loans (including consumer, mortgage, credit card, automobile, Small Business Administration, commercial, and corporate), lines of credit, trust, brokerage, private banking, financial planning and insurance. The Bank provides solutions that improve the client experience by providing clients the ability to bank whenever they want, wherever they want. Additional information may be found at the Bank's website at palmettobank.com or on Facebook.

# # #

Non-GAAP Reconciliation

Pre-tax, pre-provision income, which is derived by adding provision for loan losses to pre-tax income, is a non-GAAP financial measure which should be viewed in addition to, and not as a substitute for, the Company’s reported results. Management believes this information helps investors understand the effect of provision for loan losses on reported results and provides an alternate presentation of the Company’s performance.

	For the Three Months Ended
(unaudited, in thousands)	March 31, 2015		December 31, 2014
Pre-tax, pre-provision income	$	4,599	$	3,448
Provision for loan losses	$	400	$	(1,800	)
Income before provision for income taxes (GAAP)	$	4,199	$	5,248

Addendum to News Release – Forward-Looking Statements

Certain statements in this News Release 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; (3) actions taken by banking regulatory agencies related to the banking industry in general and the Company or the Bank specifically; and (4) risks and uncertainties set forth in the Company press release issued the date hereof with respect to the merger agreement entered into by the Company and United Community Banks, Inc. 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.

Palmetto Bancshares, Inc. and Subsidiary

Consolidated Balance Sheets

(dollars in thousands, except per share data)

(unaudited)

																March 31,
	March 31,			December 31,			September 30,			June 30,			March 31,			2015 vs. 2014
	2015			2014			2014			2014			2014			% Change

Cash and cash equivalents	$	57,488		$	36,887		$	43,383		$	60,104		$	65,942			(12.8	)%
Investment securities available for sale, at fair value		211,968			211,511			214,582			209,617			208,772			1.5
Trading account assets, at fair value		10,114			5,513			5,458			5,381			5,247			92.8
Mortgage loans held for sale		3,600			1,125			268			4,874			2,474			45.5

Loans, gross		832,029			805,059			776,947			753,049			755,878			10.1
Less: allowance for loan losses		(12,914	)		(12,920	)		(15,366	)		(15,596	)		(16,243	)		(20.5	)
Loans, net		819,115			792,139			761,581			737,453			739,635			10.7

Premises and equipment, net		21,858			22,006			22,233			22,630			22,980			(4.9	)
Foreclosed real estate		5,756			5,949			6,595			7,335			7,490			(23.2	)
Deferred tax asset, net		15,127			17,053			18,109			18,875			20,546			(26.4	)
Bank-owned life insurance		12,000			11,923			11,845			11,767			11,691			2.6
Other assets		16,196			14,705			13,121			13,629			14,630			10.7
Total assets	$	1,173,222		$	1,118,811		$	1,097,175		$	1,091,665		$	1,099,407			6.7	%



Noninterest-bearing deposits	$	208,338		$	196,219		$	212,813		$	199,169		$	191,474			8.8	%
Interest-bearing deposits		758,652			732,101			723,476			729,084			736,559			3.0
Total deposits		966,990			928,320			936,289			928,253			928,033			4.2

Retail repurchase agreements		13,149			15,921			24,050			17,867			17,319			(24.1	)
FHLB advances		50,000			35,000			-			10,000			20,000			150.0
Other liabilities		7,055			6,526			5,501			5,291			7,103			(0.7	)
Total liabilities		1,037,194			985,767			965,840			961,411			972,455			6.7

Shareholders' equity		136,028			133,044			131,335			130,254			126,952			7.1

Total liabilities and shareholders' equity	$	1,173,222		$	1,118,811		$	1,097,175		$	1,091,665		$	1,099,407			6.7	%

Quarterly Average Balances
Loans⁽¹⁾	$	814,489		$	772,621		$	753,711		$	755,199		$	764,526			6.5	%
Investment securities		210,892			212,301			210,929			207,575			212,186			(0.6	)
Trading account assets		10,009			5,474			5,410			5,314			5,178			93.3
Total assets		1,141,944			1,100,296			1,090,636			1,099,617			1,094,578			4.3
Noninterest-bearing deposits		198,614			208,073			205,257			200,933			186,852			6.3
Interest-bearing deposits		739,354			726,829			728,880			733,452			726,707			1.7
Retail repurchase agreements		14,938			25,330			18,177			18,383			18,269			(18.2	)
FHLB advances and other borrowings		48,057			2,669			2,174			13,193			31,276			53.7
Shareholders' equity		134,186			132,823			131,094			128,612			125,664			6.8

Other Data and Ratios
Past due loans		0.36	%		0.51	%		0.47	%		0.38	%		0.81	%		(55.6	)%
Nonperforming loans	$	10,362		$	12,463		$	14,611		$	15,269		$	14,035			(26.2	)
Nonperforming assets		16,139			18,447			21,256			22,693			21,538			(25.1	)
90-days past due and still accruing interest		233			238			243			731			-		n/m
ALL as % of loans held for investment		1.55	%		1.60	%		1.98	%		2.07	%		2.15	%		(27.9	)
Net charge-offs (recoveries) (quarterly)	$	406		$	646		$	(270	)	$	647		$	242			67.8
Net charge-offs to average loans (annualized)		0.20	%		0.33	%	n/m				0.34	%		0.13	%		53.8

Outstanding common shares		12,814,574			12,810,388			12,793,543			12,791,621			12,792,509			0.2
Book value per common share	$	10.62		$	10.39		$	10.27		$	10.18		$	9.92			7.1
Closing market price per common share		19.00			16.70			14.14			14.39			14.09			34.8

Tier 1 risk-based capital (consolidated)^{(2) (3)}		14.37	%		15.00	%		15.41	%		15.29	%		14.82	%		(3.0	)
Total risk-based capital (consolidated)^{(2) (3)}		15.63			16.26			16.67			16.54			16.08			(2.8	)
Tier 1 leverage ratio (consolidated)^{(2) (3)}		11.86			12.15			12.01			11.69			11.37			4.3
Common equity tier 1 (consolidated)^{(2) (3)}		14.37		n/a			n/a			n/a			n/a			n/a

Full Time Equivalent Employees - including contractors		291.8			288.3			290.5			299.8			308.0			(5.3	)


⁽¹⁾	Includes Mortgage and Other loans held for sale.
⁽²⁾	March 31, 2015 ratios are estimated and may be subject to change pending the filing of the Company's FR Y-9C with the Federal Reserve; all other periods are presented as filed.
⁽³⁾	Preliminary capital ratios as of March 31, 2015 reflect the provisions of the Basel III framework which was effective for the Company as of January 1, 2015. Prior period capital ratios reflect the amounts as determined under the existing capital framework in effect at that time.

Palmetto Bancshares, Inc. and Subsidiary

Composition of Loans Held for Investment

(dollars in thousands)

(unaudited)

											March 31,
	March 31,		December 31,		September 30,		June 30,		March 31,		2015 vs. 2014
	2015		2014		2014		2014		2014		% Change

1-4 Family⁽¹⁾	$	217,174	$	204,439	$	193,874	$	177,179	$	176,454		23.1	%
Multifamily		8,868		9,025		17,970		9,294		9,983		(11.2	)
Owner-Occupied Commercial Real Estate (CRE)		150,349		154,473		151,496		149,663		149,124		0.8
Non-Owner Occupied CRE		222,879		218,464		228,037		210,788		211,673		5.3
Construction & Development - Land		32,612		26,901		28,352		31,560		34,196		(4.6	)
Construction & Development - Other		15,390		21,162		20,393		39,865		40,177		(61.7	)
Commercial and Industrial⁽²⁾		96,237		80,927		73,563		72,260		72,477		32.8
Indirect Auto⁽³⁾		65,655		66,277		42,251		40,502		40,089		63.8
Direct Consumer		10,266		10,707		10,820		11,347		11,230		(8.6	)
Other		12,599		12,684		10,191		10,591		10,475		20.3
Total loans, gross	$	832,029	$	805,059	$	776,947	$	753,049	$	755,878		10.1	%

(1)	Reflects the purchase of a $12.3 million and $14.0 million performing jumbo hybrid adjustable-rate mortgage loan pool during the three months ended March 31, 2015 and September 30, 2014, respectively.
(2)	Reflects the purchase of a $5.0 million loan participation during the three months ended December 31, 2014.
(3)	Reflects the purchase of a $22.1 million performing indirect auto loan pool during the three months ended December 31, 2014.

Palmetto Bancshares, Inc. and Subsidiary

Consolidated Statements of Income

(dollars in thousands, except per share data)

(unaudited)

	For the Three Months Ended
	March 31, 2015			December 31, 2014			September 30, 2014			June 30, 2014			March 31, 2014			March 31, 2015 vs. 2014 % Change
Interest income
Interest earned on cash and cash equivalents	$	13		$	22		$	25		$	32		$	14			(7.1	)%
Dividends received on FHLB stock		12			11			15			25			14			(14.3	)
Interest earned on trading account assets		78			42			47			45			46			69.6
Interest earned on investment securities available for sale		936			857			944			1,015			1,004			(6.8	)
Interest and fees earned on loans		8,947			8,851			8,840			8,803			8,998			(0.6	)
Total interest income		9,986			9,783			9,871			9,920			10,076			(0.9	)

Interest expense
Interest expense on deposits		104			120			124			123			127			(18.1	)
Interest expense on retail repurchase agreements		-			1			-			1			-			-
Interest expense on FHLB advances and other borrowings		30			2			2			7			16			87.5
Total interest expense		134			123			126			131			143			(6.3	)

Net interest income		9,852			9,660			9,745			9,789			9,933			(0.8	)

Provision for loan losses		400			(1,800	)		(500	)		-			-		n/m

Net interest income after provision for loan losses		9,452			11,460			10,245			9,789			9,933			(4.8	)

Noninterest income
Service charges on deposit accounts, net		1,580			1,843			1,929			1,693			1,562			1.2
Fees for trust and investment management and brokerage services		186			140			179			177			146			27.4
Mortgage-banking		633			257			275			516			461			37.3
Debit card and automatic teller machine, net		581			630			603			618			586			(0.9	)
Bankcard services		71			75			76			70			67			6.0
Investment securities gains, net		29			40			-			-			85			(65.9	)
Trading account income, net		105			57			98			175			171			(38.6	)
Other		356			232			248			241			288			23.6
Total noninterest income		3,541			3,274			3,408			3,490			3,366			5.2

Noninterest expense
Salaries and other personnel		4,746			4,414			4,823			4,723			4,790			(0.9	)
Occupancy and equipment		2,015			2,065			2,038			2,045			2,142			(5.9	)
Professional services		588			730			705			635			813			(27.7	)
FDIC deposit insurance assessment		176			79			351			356			356			(50.6	)
Marketing		244			291			290			222			255			(4.3	)
Foreclosed real estate writedowns and expenses		(79	)		136			661			717			313			(125.2	)
Loan workout expenses		39			120			135			119			131			(70.2	)
Other		1,065			1,651			1,479			1,267			1,289			(17.4	)
Total noninterest expense		8,794			9,486			10,482			10,084			10,089			(12.8	)

Income before provision for income taxes		4,199			5,248			3,171			3,195			3,210			30.8

Provision for income taxes		1,467			1,930			1,189			1,168			1,182			24.1

Net income	$	2,732		$	3,318		$	1,982		$	2,027		$	2,028			34.7	%

Earnings per Share and Results of Operations
Basic net income per common share	$	0.21		$	0.26		$	0.15		$	0.16		$	0.16			31.3	%
Diluted net income per common share		0.21			0.26			0.15			0.16			0.16			31.3
Weighted average common shares, diluted		12,851,076			12,814,738			12,771,634			12,744,931			12,707,444			1.1
Efficiency ratio		65.7	%		73.3	%		79.7	%		75.9	%		75.9	%		(13.4	)
Return on average assets		0.97			1.20			0.72			0.74			0.75			29.1
Return on average equity		8.26			9.91			6.00			6.32			6.54			26.2

Yields and Rates
Loans ⁽¹⁾		4.45	%		4.54	%		4.65	%		4.68	%		4.77	%		(6.7	)%
Investment securities available for sale		1.78			1.61			1.79			1.96			1.89			(5.8	)
Trading account assets		3.16			3.04			3.45			3.40			3.60			(12.2	)
Transaction deposits		0.01			0.01			0.01			0.01			0.01			-
Money market deposits		0.03			0.03			0.03			0.03			0.03			-
Savings deposits		0.01			0.01			0.01			*			0.01			-
Time deposits		0.19			0.22			0.22			0.23			0.22			(13.6	)
Retail repurchase agreements		*			0.02			*			0.02			*		n/m
FHLB advances and other borrowings		0.25			0.30			0.36			0.21			0.21			19.0
Net interest margin		3.72			3.70			3.77			3.81			3.94			(5.6	)

⁽¹⁾ Includes Mortgage and Other loans held for sale.

* Rounds to less than .01% for the period.