Pilot Bank First Quarter Results 2011

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Jul 27, 2011, 06:00 ET

TAMPA, Fla., July 27, 2011 /PRNewswire/ --

Dear Shareholders:

(Logo: http://photos.prnewswire.com/prnh/20110727/CL40209LOGO )

We are pleased to provide this update on your company's financial performance and management initiatives.

First Quarter Results

Attached are unaudited consolidated financial statements for the first quarter of 2011. Total assets remained relatively flat in the first quarter of 2011, increasing less than 1% since year end 2010. Net loans outstanding fell 4.1% in the first quarter primarily due to the transfer of nonaccrual loans to other real estate owned to $153,410,836. Also, $4 million in previously classified loans were transferred to nonaccrual status during the quarter.

We continued to improve the deposit mix. Importantly, demand deposits increased by $3,296,246 or 16.9% during the first quarter. This shift in deposit mix had a positive impact on interest expense and net interest margin.

The company realized a loss of $150,650. This loss was primarily the result of two events. The first was the interest income impact of the loans transferred to nonaccrual status. Second, was the recognition of additional impairment in our other real estate owned (OREO) portfolio and subsequent write-down of several assets in the amount of $252,530.

Management Initiatives

The Pilot Bank executive management team is focused on three primary areas:

Promptly returning to profitability through resolution of non-performing assets, vigorously controlling expenses and prudent loan growth
Increasing the mix of demand and low interest deposits
Maintaining a well capitalized position as defined by the banking regulators

During the fourth quarter of fiscal year 2010 and continuing into the first quarter, the executive management team developed a comprehensive loan migration and non-performing asset disposition model. The objective was to gain clarity with respect to credit quality trends and in turn develop quarterly targets for reductions in our nonperforming asset portfolio.

In addition to the development of the loan migration /disposition model, the Board of Directors and executive management team moved decisively to identify problem loans, mitigate potential loss due to loan impairment and dispose of nonperforming loans in a manner consistent with maximizing shareholder value. The view that emerged from this process was that nonperforming assets and associated impairments will likely peak in the second or early third quarter of 2011 and begin a steady decline through fiscal year end 2011 and throughout 2012. Likewise, impairments and associated losses are projected to peak during this period with Pilot Bank stabilizing and returning to operating profitability during the late third to early fourth quarter of 2011.

We continue to manage our company to meet all regulatory standards as it relates to capital. As of the end of first quarter, Pilot Bank continued to exceed regulatory standards for being well capitalized in each of our four capital ratio categories.

Thank you for your continued support. As always, we welcome your input.

Sincerely,
John W. Puffer, III
Chairman

Roy N. Hellwege
President and Chief Executive Officer

Balance Sheet			Income Statement
(Unaudited)			(Unaudited)
($ in thousands, except per share amounts)			($ in thousands, except per share amounts)

	At March 31,			March 31,
	2011	2010		2011	2010
Assets			Interest income:
Cash and due from banks	$15,564	$18,543	Loan Income	$2,482	$2,871
Securities available for sale	21,206	17,289	Securities	155	179
Securities held to maturity	3,229	3,269	Other interest-earning assets	13	13
Loans, net of allowance for loan losses	153,411	168,067
of $4,759 in 2011 and $4,741 in 2010			Total interest income	2,650	3,063
Premises and equipment, net	12,939	13,402
Foreclosed Real Estate	4,461	5,451	Interest expense:
Federal Reserve Bank stock, at cost	612	584	Deposits	651	953
Federal Home Loan Bank stock, at cost	833	933	Junior subordinated debentures	102	102
Accrued interest receivable	773	797	Other borrowings	15	64
Cash surrender value of bank owned life insurance	4,997	4,820
Deferred income tax asset	5,016	4,468	Total interest expense	768	1,119
Other assets	900	1,071
			Net Interest Income	1,882	1,944
Total	$223,941	$238,694
			Provision for loan losses	300	405
Liabilities and Stockholders' equity
			Net interest income after provision for
Liabilities:			loan losses	1,582	1,539
Noninterest-bearing demand deposits	22,810	20,063
Savings, NOW and money-market deposits	87,628	86,893	Noninterest income:
Time Deposits	86,121	98,984	Fees and service charges	82	102
			Loan brokerage fees	48	122
Total Deposits	196,559	205,940	Bank owned life insurance	43	47
			Other-than-temporary impairment of securities		(11)
Federal Home Loan Bank advances	1,000	5,233	Other	85	71
Junior subordinated debentures	5,671	5,671
Other borrowings	2,187	3,266	Total noninterest income	258	331
Accrued interest payable	818	467
Other liabilities	1,944	2,504	Noninterest expenses:
			Salaries and employee benefits	868	867
Total Liabilities	208,179	223,081	Occupancy	410	429
			Data processing	114	128
Stockholders' equity:			Professional Fees	80	80
Common stock	286	253	Advertising and Promotion	11	12
Additional paid-in capital	23,795	22,974	Stationery and supplies	20	16
(Accumulated deficit) retained earnings	(8,149)	(7,411)	FDIC insurance	157	123
Accumulated other comprehensive loss	(170)	(203)	Foreclosed real estate	253	49
			Other	327	256
Total Stockholders' Equity	15,762	15,613
			Total noninterest expenses	2,240	1,960
Total	$223,941	$238,694
			Loss before income tax benefit	(400)	(90)
			Income tax benefit	(151)	(72)

			Net loss	(249)	(18)
			Income per share*	$ (0.09)	($0.01)
			* 2010 Income per share adjusted to reflect current shares issued and outstanding.