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| 8-K - FORM 8-K - PALMETTO BANCSHARES INC | d8k.htm |
 Annual Meeting of Shareholders
May 19, 2011
Exhibit 99.1
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 2
Forward Looking Statements
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)
the
risk
that
the
preliminary
financial
information
reported
herein
and
our
current
preliminary
analysis
will
be
different
when
our
review
is
finalized;
(3)
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
(4)
actions
taken
by
banking
regulatory
agencies
related
to
the
banking
industry
in
general
and
the
Company
specifically.
Although
we
believe
that
the
assumptions
underlying
the
forward-looking
statements
are
reasonable,
any
of
the
assumptions
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
and
Form
10-K/A,
Quarterly
Reports
on
Form
10-Q
and
Current
Reports
on
Form
8-K)
filed
with
the
SEC
and
available
at
the
SEC’s
Internet
site
(http://www.sec.gov).
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
circumstances
or
events
that
occur
after
the
date
the
forward-looking
statements
are
made. |
 3
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 104-year old
institution
6.
Protect the reputation of The Palmetto Bank
7.
Work hard with dedication and perseverance
to recover and optimize shareholder value |
 Industry, Economic and Market Context
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 Industry Context -
FDIC Fourth Quarter 2010
Industry Statistics
•
Number of banks = 6,529 -
down 754 (10%) from 7,283 at 12/31/07
•
325 failed banks since 12/31/07 (5 in South Carolina)
•
Problem institutions at 884 (up from 702 at 12/31/09)
•
Industry on the mend but at a sluggish pace -
“industry is stuck in
neutral”
•
Declining loans
•
Reduction in nonperforming assets, but increase in restructured
loans
•
Declining service charges and deposit fees (down 20% from 2009)
and increasing noninterest expenses (compliance, foreclosed
assets, and FDIC premiums)
•
Improving profitability, but through reduction in loan loss provision
(fourth quarter = lowest in three years) and gains from asset sales
5 |
 6
Additional Economic and Market Context
•
Difficult
economy
but
optimism
for
improvement
with
signs
of
recovery
•
Credit
quality
concerns
and
depressed
real
estate
values
that
may
not
yet have hit bottom
•
Anemic
loan
growth
and
very
competitive
loan
pricing
for
credit
worthy
borrowers
•
Low
interest
rate
environment
and
excess
cash
resulting
in
compressed
net interest margin
•
Focus
on
higher
than
normal
capital
levels,
with
expectations
of
higher
required
capital
levels
in
the
future
•
Regulatory
attitudes
and
enforcement
(20+
banks
in
South
Carolina
with
written
agreements)
•
Congressional
actions
with
higher
costs
and
additional
regulatory
oversight,
including
the
Dodd-Frank
Act
and
Consumer
Financial
Protection
Bureau
•
Continued
market
disruption
in
the
Upstate
(Toronto
Dominion,
Wells
Fargo,
First
National
in
Spartanburg,
Community
South
in
Easley,
etc.) |
 Company Context
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 8
The Numbers Speak for Themselves
•
Net earnings
–
Net loss for the three months ended March 31, 2011 = $(6.1)
million
–
2010 net loss = $(60.2) million and 2009 net loss = $(40.1) million
–
Compared to 2008 net income = $13.6 million
•
First quarter 2011 improvements –
progress on the path to profitability
–
Smaller net loss
–
Improving credit quality: reductions in chargeoffs, loans migrating
to nonperforming status, delinquent borrowers, and nonperforming
assets
–
Appraisal values may be starting to stabilize
–
Process improvement and automation for more efficient
operations
–
Focus on expense reductions
–
Improved net interest margin driven by reinvesting cash into
securities, paying off borrowings, and paying lower deposit rates
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 9
We Have Made Progress
•
Private placement and follow-on offerings completed in 2010 and
2011
•
Fresh start coming off two very tough years in 2009 and 2010
•
Hard work the past two years has laid the groundwork for
profitability and growth –
organizational realignment, line of
business delineation, employee expertise, go to market strategies,
process improvement, and risk management
•
Transitioning from “workout”
mode to “business development”
mode -
more of an offensive posture with focus on external market
and clients
•
Heightened focus on new business resulting in improved loan
originations (although still well below historical levels)
•
Clarity of the path forward -
more focused corporate, department,
and individual objectives and expectations with better defined and
articulated action plans and accountabilities |
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We are Making Loans! |
 Moving to the Future
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Our Iceberg is Melting
It doesn’t work to leap a 20 foot chasm in
two 10 foot jumps… |
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1. Possibility Thinking
2. Positive Change
3. Passion & Commitment
4. Pride
5. Profitability
Dream Big and Lead from a Big Mission!
We can impact the world, enjoy our jobs, and still make money!
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 Strategic Perspective
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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
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 16
2011 Corporate Imperatives
1.
Ensure compliance with the regulatory written agreement.
2.
Reduce classified loans and criticized assets.
3.
Position for growth by adapting structure, policies and procedures to fit both the
current and future size and business activities of the Company, with a
particular emphasis on automation and leveraging technology to improve the
customer experience and internal processes.
4.
Apply a risk management mindset to how we run our day to day business,
including collaboration with other departments to coordinate and
communicate
regarding decision making, changes, and company-wide initiatives.
5.
Engage and develop our employees through communication, training, coaching,
mentoring, etc. Recruit new employees with relevant experience and subject
matter expertise.
6.
Attract, develop, earn their loyalty, and retain profitable customer relationships,
including renewed external focus on customers and prospects and emphasis on
developing more of a sales culture.
7.
Provide timely and appropriate engagement and communication with
other key
external stakeholders (shareholders, regulators, business partners, general
pubic, etc.) to keep them informed and “tell our story.”
8.
Improve net interest margin, including proper balance of profitability and risks
with focus on both assets and liabilities. Originate and obtain new loans
and deposits to meet targeted growth goals based on specified volume,
interest rate and type.
9.
Improve earnings through generation of additional non-interest income and
reduction in expenses. |
 17
Summarized into Strategic Priorities for 2011
1.
Progress on the path to profitability
2.
Improve asset quality
3.
Exit regulatory agreement
4.
Grow loans
5.
Complete infrastructure catch up
6.
Position for growth
Control our own destiny to continue the long
legacy and rich heritage of The Palmetto Bank! |
 Performance Culture
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 19
It Starts at the Top
If the people at the top do not communicate
effectively, are indecisive, or do not hold people
accountable, their behavior permeates down
throughout the organization and can kill
organizational effectiveness.
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 Characteristics of High Performing Companies
•
Roles are clearly defined for executives, managers and
employees
•
Business needs and visions are consistently communicated
deep into the organization
•
Performance measurement is continuous and aligned with
the strategy
•
Leaders are held accountable –
both personally and for their
teams
We are working every day with healthy intensity and a clear
sense of urgency –
with a keen focus on the day-to-day
actions needed to return to profitability
20 |
 Enhanced Board Governance
•
Reconstituted Board of Directors
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Board leadership:
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Separation of the Chairman and Chief Executive Officer
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Independent Lead Director
•
Annual self-assessments, including anonymous director surveys
of peers
–
Annual written performance plans and evaluations of the Chief
Executive Officer and Chief Operating Officer
•
Board committees
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Written charters published on our website
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Annual written objectives by Committee
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Addition of enterprise risk management in 2011
•
Executive sessions of independent directors at Board and
Committee meetings
21 |
 We
Have High Expectations •
Committed to returning to a high performing bank
•
Direct and unambiguous communication of what is
required to cultivate a performance culture
•
Winning mindset -
we are very competitive –
and we don’t
like losing
•
Totally acceptable (expected!) to acknowledge negative
reality –
but whining or victim mentality is not acceptable
•
Problems need to be presented with solutions
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Results, not activity
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Sense of urgency!
Acceptable mediocrity is no substitute for quality!
22 |
 Execution Momentum
Focus X Competence X Passion = Adherence
•
Exponential relationship between the three
components.
•
Results in self-reinforcing cycle of achievement.
23 |
 The Path Forward
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 25
General Positioning
1.
Take
advantage
of
local
market
disruption
and
growth
opportunities.
2.
Expand
service
culture
to
include
an
advisory
fulfillment
culture
by
building on historical strength of high touch, relationship, and
customer
service-oriented culture to add a proactive, product and services
sales- oriented culture to provide personalized customer service from
a community bank perspective. This includes continued leverage of our
heritage as a 104-year old institution that has adapted over the years with
innovative products and services.
3.
Return to relationship banking
from more recent transaction oriented
(real estate) lending to be proactive and relationship-based bankers with a
focus on providing comprehensive banking services to small and medium
sized operating companies.
4.
Adapt the infrastructure
to fit our current size and scope of operations
and provide a platform for future expansion.
5.
Invest in technology
to invest in the future, and rationalization of
technology investments versus our historical investment in facilities.
6.
Adapt products and services and related pricing and fees
to remain
relevant to our current and evolving customer base and to be competitive in
our markets, and development of broader, more convenient, and accessible
distribution channels for our products and services.
7.
Apply
a
more
sophisticated
risk
management
approach,
including
a
comprehensive
view
of
risk,
processes
and
procedures,
expertise,
and
the
“way we do business.” |
 26
Directional Timeline
•
6 months
(remainder of 2011):
stabilization
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Complete Nasdaq stock exchange listing
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Confirmation of sustained improvement in asset quality
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Continue disposition of problem assets
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Substantially complete infrastructure catch up (business processes,
people, technology, policies, etc.)
–
Complete organizational changes and selective hiring of key leaders
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Organic growth resulting from market disruption
•
12
–
18
months
(through
2012):
positioning
for
long-term
growth
–
Continued organic growth resulting from continued market disruption
–
Exit regulatory agreement
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Continued investment in people and technology
–
Evaluate strategic acquisition opportunities (people, teams, branches,
niche businesses, etc.)
•
2
–
5
years
(2013
–
2016):
return
to
high
performing
bank
and
achieve
“optimized”
annual earnings
–
Potential growth through strategic acquisitions: people, platforms, and
markets
–
Evaluate dividend in the context of capital needed to support organic
growth and acquisitions |
 Summary Thoughts on the Path Forward
1.
Progress on the path to profitability
2.
Transitioning from “workout”
mode to “business
development”
mode
3.
Clarity of the path forward -
more focused corporate,
department, and individual objectives and
expectations
4.
We have high expectations to cultivate a performance
culture
5.
Sense of urgency continues and we insist on results,
not activity
6.
We are moving the Company forward –
weekly
question of “did I make a difference this week”?
27 |
 Value of The Franchise
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Investment Considerations
•
104 year history with strong brand recognition and customer loyalty
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Premier deposit-gathering franchise in an attractive banking market
–
4
th
largest
bank
headquartered
in
South
Carolina
–
7
th
in
deposit
share
in
the
Upstate,
behind
only
one
bank
headquartered in South Carolina (Columbia)
–
29 branches in the economically attractive Upstate market along the
Interstate 85 corridor between Atlanta and Charlotte
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Heritage of high touch customer service provides platform for enhanced
sales culture
•
Asset quality is being aggressively addressed
–
Credit
problems
have
been
identified
and
are
generally
isolated
to
a
specific
pool
of
problem
assets
•
Energized
management
team
with
relevant
expertise
and
commitment
to
excellence
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Combination
of
experienced
and
tenured
management
team
with
local
market relationships
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Proactive, comprehensive and focused strategic plan being executed
|
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Rich Heritage of The Palmetto Bank
•
Long legacy as a 104 year old Company
•
Strong franchise and deposit gathering capability
•
Loyal customer and shareholder base
•
Dedicated and proud employees
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Record of innovation
•
Well earned reputation in the state and community banking
industry
•
Excellent long-term financial results and shareholder value
•
Hard earned capital raise in a very difficult environment
Signs of economic recovery are encouraging and first quarter
2011 results demonstrate progress on the path to
profitability. |
 Thank you for your support!
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