The Palmetto Bank Reports Improved Fourth Quarter Financial Results

GREENVILLE, SC – January 27, 2012 – Palmetto Bancshares, Inc. (NASDAQ: PLMT) reported a reduced consolidated net loss for the fourth quarter 2011 of $2.3 million, compared to a consolidated net loss for the third quarter 2011 of $5.5 million.  The primary contributor to the net loss in both quarters was credit-related costs resulting from depressed real estate values which declined to $5.9 million in the fourth quarter 2011 from $11.1 million in the third quarter 2011.

Results for the fourth quarter 2011 also included $343 thousand of one-time charges related to the Company’s previously announced strategic decisions to sell and consolidate four branches and outsource certain operational functions. Excluding the credit-related items and one-time charges, pre-tax operating earnings were $3.8 million in the fourth quarter 2011, compared to $4.3 million in the third quarter 2011. The quarterly reduction in net loss is a direct result of the Company’s continued execution of its strategic plan.
 
Highlights for the fourth quarter 2011 are summarized as follows:
 

• Credit-related costs decreased to $5.9 million from $11.1 million in the third quarter 2011 (credit-related costs include the provision for loan losses, loan workout expenses, foreclosed real estate writedowns and expenses, and loss on commercial loans held for sale).
• Net charge-offs decreased to $3.3 million from $5.7 million in the third quarter 2011.
• Nonperforming assets decreased $9.0 million during the quarter, which represents a 43% decline from the peak at March 31, 2010 and the sixth quarterly decline in the last seven quarters.
• Net interest margin increased 12 basis points to 3.65% and has now increased for four consecutive quarters.
• Noninterest income decreased $504 thousand from the third quarter 2011 as a result of reduced mortgage banking, Trust and credit card servicing income, as well as lower service charges on deposits.
• Non-credit expenses increased $272 thousand from the third quarter 2011 due to $343 thousand of one-time charges associated with the Company’s previously announced strategic decisions to sell and consolidate four branches and outsource certain operational functions; absent these one-time charges, non-credit related expenses decreased $71 thousand.
• In December 2011 the Company announced that it completed its previously announced project to determine the strategic actions necessary to accelerate the Company’s return to profitability in 2012.

These actions include the sale and consolidation of four branches, and the outsourcing of certain operational functions. The Company is in discussions with a potential buyer for the sale of two branches, although a definitive agreement has not yet been executed. Overall, these actions are expected to have an ongoing positive impact to 2012 annual earnings of $6.2 million as compared to 2011 earnings. Remaining one-time charges related to these actions of $425 thousand are expected to be recorded in the first quarter 2012.
 
“Our results for the fourth quarter continue to reflect the significant improvement in virtually all areas of the Bank that we have been working tirelessly to achieve over the last several years,” said Samuel L. Erwin, Chief Executive Officer. “During the fourth quarter we also took additional strategic actions to accelerate our return to profitability and we expect continued improvement in our financial results in 2012. While the banking industry in general continues to deal with fundamental issues such as volatile market conditions, low interest rates, slow loan growth, depressed real estate values, increased regulatory costs, and revenue challenges, our results for the fourth quarter are evidence that the proactive actions we have taken are yielding positive results.”
 

About The Palmetto Bank
Headquartered in Greenville, South Carolina, The Palmetto Bank is a 105-year old independent state-chartered commercial bank and is the fourth largest banking institution headquartered in South Carolina. The Palmetto Bank has assets of $1.2 billion and after completion of the reduction in the branch network will serve the Upstate through 25 banking locations in the nine counties of Abbeville, Anderson, Cherokee, Greenville, Greenwood, Laurens, Oconee, Pickens, and Spartanburg. The Bank specializes in providing personalized community banking services to individuals and small to mid-size businesses including Retail Banking (including Mortgage and Credit Cards), Commercial Banking (including Business Banking, Treasury Management and Merchant Services), and Wealth Management (including Trust, Brokerage, Financial Planning, and Insurance).  Additional information may be found at the Company’s web site at www.palmettobank.com.