Greenville, S.C. – Palmetto Bancshares, Inc. reported a net loss for the fourth quarter 2010 of $32.6 million, compared to a net loss for the third quarter 2010 of $13.8 million. Included in the fourth quarter and third quarter net losses, respectively, were noncash charges of $14.1 million to establish a valuation allowance against the Company’s deferred tax asset at December 31, 2010 and $3.7 million to write off goodwill related to prior branch acquisitions at September 30, 2010. These noncash charges had no effect on the liquidity, regulatory capital, or daily operations of the Company. Fourth quarter results also included a nonrecurring gain of $1.2 million on the sale of the Company’s credit card portfolio.
Excluding the noncash charges and nonrecurring item described above, the fourth quarter 2010 pre-tax loss was $19.7 million compared to a third quarter 2010 pre-tax loss of $17.7 million. Similar to the previous quarter, the fourth quarter pre-tax loss was driven primarily by the continued elevated levels of credit losses on problem assets based on declining real estate values.
In September 2010, as part of its strategic plan to address credit quality issues and accelerate its return to profitability, the Company began marketing for sale a pool of commercial real estate assets to reduce both the level of nonperforming assets and concentration in commercial real estate. During the fourth quarter, the Company entered into sales contracts for $14.7 million of these assets, of which $10.4 million closed in the fourth quarter with the remainder scheduled to close in the first quarter of 2011. As a result, the fourth quarter credit losses included $3.8 million of losses related to these asset sales. “In the fourth quarter we made the strategic decision to accept bids on certain assets that were lower than their carrying values,”said Samuel L. Erwin, Chief Executive Officer. “In making this decision, we attempted to balance the negative impact of selling assets at a loss with the positive impact of reducing our nonperforming assets and to reduce the significant ongoing carrying costs related to these problem assets. As a result of the sales and our ongoing problem asset resolution efforts, our nonperforming assets declined for the third consecutive quarter and have decreased over 20% from their quarterly peak earlier in 2010. We are hopeful this declining trend in our problem assets will continue as we reposition the Company for the future.”
As previously announced, on October 7, 2010 the Company completed the execution of another key component of its strategic plan by consummating a $103 million private placement of its common stock with institutional investors. The Company contributed substantially all of the net proceeds as a capital contribution to The Palmetto Bank, which resulted in the Bank’s capital adequacy ratios exceeding the minimum capital levels required to be categorized as well capitalized. In addition, as a condition of the private placement the Company conducted an incremental $10 million follow-on offering of common stock to its shareholders and the investors in the private placement that has been fully subscribed. Erwin continued, “Raising capital and reducing problem assets are two critically important priorities of our strategic plan as we manage through the effects of the extended recession of the past two years. We are encouraged by the early signs of an improving economy, and we are working very hard on the execution of our strategic plan to return the Company to profitability.”
Headquartered in Greenville, South Carolina, The Palmetto Bank is a 104-year old independent state-chartered commercial bank and is the fifth-largest banking institution headquartered in South Carolina. The Palmetto Bank has assets of $1.4 billion and serves the Upstate through 29 banking locations in Abbeville, Anderson, Cherokee, Greenville, Greenwood, Laurens, Oconee, Pickens, Spartanburg and York counties. The Bank specializes in providing personalized community banking services to individuals and small to mid-size businesses including Retail and Commercial Banking, Mortgage, Trust, Brokerage, and Insurance. Additional information may be found at the company’s web site at (www.palmettobank.com).