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PLMT > SEC Filings for PLMT > Form 10-Q on 1-May-2013All Recent SEC Filings

Show all filings for PALMETTO BANCSHARES INC | Request a Trial to NEW EDGAR Online Pro

Form 10-Q for PALMETTO BANCSHARES INC


1-May-2013

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Throughout this Quarterly Report on Form 10-Q, "the Company," "we," "us," or "our" refers to Palmetto Bancshares, Inc. and our consolidated subsidiaries, including The Palmetto Bank (sometimes referred to as the "Bank" as a separate legal entity), except where the context indicates otherwise.

The following discussion and analysis presents the more significant factors impacting our financial condition as of March 31, 2013 and results of operations and cash flows for the three months ended March 31, 2013. This discussion should be read in conjunction with, and is intended to supplement, all of the other Items presented in this Quarterly Report on Form 10-Q and our Consolidated Financial Statements and the notes thereto for the year ended December 31, 2012 included in our 2012 Annual Report on Form 10-K. Results for the three months ended March 31, 2013 are not necessarily indicative of the results for the year ended December 31, 2013 or any future period. Percentage calculations contained herein have been calculated based on actual not rounded results.

Forward-Looking Statements

This report, including information included in or incorporated by reference into this document, contains statements which constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements relate to the financial condition, results of operations, plans, objectives, future performance and business of our Company. Forward-looking statements are based on many assumptions and estimates and are not guarantees of future performance. Our actual results may differ materially from those anticipated in any forward-looking statements as they will depend on factors about which we are unsure including many factors which are beyond our control. The words "may," "would," "could," "should," "will," "expect," "anticipate," "predict," "project," "potential," "continue," "assume," "believe," "intend," "plan," "forecast," "goal" and "estimate," as well as similar expressions, are meant to identify such forward-looking statements. Factors that may cause our actual results to differ materially from those anticipated in our forward-looking statements include, but are not limited to, the following:

Larger than expected credit losses in the sectors of our loan portfolio secured by real estate due to economic factors including declining real estate values, increasing interest rates, increasing unemployment or changes in payment behavior or other factors,

Larger than expected credit losses because our loans are concentrated by loan type, industry segment, borrower type or location of the borrower or collateral,

Additional sales of problem assets at discounted prices to accelerate the resolution of our problem assets,

The rate of delinquencies and amounts of loans charged-off,

Our allowance for loan losses and the amount of loan loss provisions required in future periods,

Our ability to complete the sale of the remainder of our other loans held for sale at values equal to or greater than the currently recorded carrying balances avoiding additional writedowns,

Our ability to maintain appropriate levels of capital including the potential that the regulatory agencies may require higher levels of capital above the current standard regulatory-mandated minimums and the impact of the proposed capital rules under Basel III,

Our ability to comply with regulatory restrictions and potential regulatory actions if we fail to comply,

Results of examinations by our regulatory authorities including the possibility that the regulatory authorities may, among other things, require us to increase our allowance for loan losses or writedown assets,

Our ability to attract and retain key personnel,

Our ability to retain our existing clients including our deposit relationships,

The rate of loan growth in recent years and the lack of seasoning of a portion of our loan portfolio,

The amount of our loan portfolio collateralized by real estate and weakness in the real estate market,

Changes in availability of wholesale funding sources including increases in collateral margin requirements,

Changes in the interest rate environment which could reduce anticipated or actual margins,

Changes in political conditions and the legislative or regulatory environment including the impact of recent financial reform legislation on the banking and financial services industries,


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General economic conditions, either nationally or regionally and especially in our primary markets, becoming less favorable than expected, resulting in, among other things, deterioration in credit quality,

Risks associated with a failure in or breach of our operations or security systems or infrastructure or those of our third party vendors,

Changes in accounting principles, policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the SEC and the FASB,

Potential limitations on our ability to utilize net operating loss carryforwards and net realized built-in losses for income tax purposes,

Risks associated with income taxes including the potential for adverse adjustments and the inability to reverse valuation allowances on deferred tax assets,

Our ability to maintain effective internal control over financial reporting,

Our reliance on available secondary funding sources such as FHLB borrowings, Federal Reserve Discount Window borrowings, sales of investment securities and loans and lines of credit from correspondent banks to meet our liquidity needs,

Adverse changes in asset quality and resulting credit-related losses and expenses,

The market value of our common stock including our continued listing on a national stock exchange and the resulting impact on our stock price as a result of such listing,

Loss of consumer confidence and economic disruptions resulting from terrorist activities or other military actions, and / or

Other risks and uncertainties detailed in this Quarterly Report on Form 10-Q and from time to time in our other filings with the SEC.

The Company does not undertake, and specifically disclaims any obligation, to update any of the "forward- looking statements" to reflect occurrences or unanticipated events or circumstances after the date of such statements except as required by the federal securities laws.

You should carefully consider these factors and the risk factors outlined under Item 1A. Risk Factors in our 2012 Annual Report on Form 10-K.

Critical Accounting Policies and Estimates

The Company's accounting and financial reporting policies are in conformity, in all material respects, with accounting principles generally accepted in the U.S. and with general practices within the financial services industry. The preparation of financial statements in conformity with such principles requires management to make estimates and assumptions that impact the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities during the reporting period and the reported amounts of income and expense during the reporting period. While we base estimates on historical experience, current information and other factors deemed to be relevant, actual results could differ from those estimates. On an annual basis, management, in conjunction with our independent registered public accounting firm, discusses the critical accounting estimates with the Audit Committee of our Board of Directors.

We consider accounting policies and estimates to be critical to our financial condition, results of operations or cash flows if the accounting policy or estimate requires management to make assumptions about matters that are highly uncertain and for which different estimates that management reasonably could have used for the accounting estimate in the current period, or changes in the accounting estimate that are reasonably likely to occur from period to period, could have a material impact on our financial condition, results of operations or cash flows.

Of those significant accounting policies, we have determined that accounting for our allowance for loan losses and the related reserve for unfunded commitments, valuation of other loans held for sale, servicing rights, foreclosed real estate, the realization of our net deferred tax asset, defined benefit pension plan and the determination of fair value of financial instruments are deemed critical because of the valuation techniques used and the sensitivity of the amounts recorded in our Consolidated Financial Statements to the methods, assumptions and estimates underlying these balances. Accounting for these critical areas requires subjective and complex judgments and could be subject to revision as new information becomes available. For additional information regarding our critical accounting policies and estimates, refer to our 2012 Annual Report on Form 10-K.


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