ELLIJAY, Ga., Oct. 31, 2008 (GLOBE NEWSWIRE) -- Appalachian Bancshares, Inc. (Nasdaq:APAB), holding company for Appalachian Community Bank, Appalachian Community Bank, F.S.B., and Appalachian Real Estate Holdings, Inc. reported consolidated total assets of $1.1 billion, as of September 30, 2008, compared to $898.0 million on September 30, 2007, an increase of 24.66%. Total gross loans were $894.1 million, an increase of $141.1 million, or 18.74%, when compared with $753.0 million on September 30, 2007. Deposits grew to $961.8 million as of September 30, 2008, an increase of $195.0 million, or 25.44%, when compared to $766.7 million on September 30, 2007.
Tracy Newton, President and Chief Executive Officer, stated that, "The increasing risks pertaining to our overall loan quality, which is primarily due to further deterioration of local economic conditions during the quarter, required us to increase the allowance for loan losses significantly. This increase to the allowance for loan losses, however, will allow us to continue to be very aggressive in dealing with problem assets."
Net loss for the third quarter of 2008 was $2.6 million, or $0.49 per diluted share, which is a 286.21% decrease in net income when compared to $1.4 million, or $0.27 per diluted share, for the same quarter in 2007. Net loss for the first nine months of 2008 was $782 thousand, or $0.15 per diluted share, which is a 117.51% decrease per diluted share compared to $4.5 million, or $0.85 per diluted share, for the same period in 2007. Our decrease in net income for the third quarter and the first nine months of 2008 was primarily due to our provision for loan losses of $4.7 million and $7.1 million, respectively, which represents increases of $4.0 million and $4.9 million over the same periods in 2007. In addition, the other than temporary impairment of $816 thousand caused by a required write down of Freddie Mac preferred stock and a decreasing net interest margin in the third quarter of 2008, contributed to our net losses. Our net interest margin decreased 1.25% during the third quarter of 2008 compared to the same period in 2007 and 0.88% for the first nine months of 2008 compared to the same period in 2007.
"In spite of decreased earnings, we continue to implement our strategic business plan by raising additional core deposits in our expansion markets. We also remain focused on reducing overhead and continuing to deliver quality customer service with the right mix of products in our markets," Newton stated.
Return on average shareholders' equity was (13.70%) annualized for third quarter 2008, compared to 7.84% for the same period in 2007. For the first nine months of 2008, return on average shareholders' equity was (1.38%) annualized compared to 8.62% for the same period in 2007. Return on average assets was (0.95%) annualized for the third quarter 2008, compared to 0.63% for the same period in 2007. For the first nine months of 2008, return on average assets was (0.10%) annualized compared to 0.71% for this period in 2007.
Mr. Newton commented that, "Consistent with our previous efforts, we continue to quickly identify and address our problem assets. Our non-performing assets to total assets ratio increased to 1.77% at September 30, 2008 from 0.87% at June 30, 2008, 0.64% at December 31, 2007 and 0.82% at September 30, 2007, our non-performing loans to total loans ratio was 1.81% at September 30, 2008 compared to 0.77% at September 30, 2007. Our net charge-off ratio for the first nine months of 2008 is 0.36% as compared 0.14% at September 30, 2007, and consistent with our budgeted ratio. After careful consideration of increasing risks in our loan portfolio, we feel confident that increasing our loan loss reserves to 1.55% of gross loans outstanding at September 30, 2008 compared to 1.22% at June 30, 2008 and 1.19% at September 30, 2007 adequately prepares us for identified potential future losses. As always, if conditions should worsen, additional loan loss reserve provisions will be provided."
Our net interest margin was 3.33% for the quarter ended September 30, 2008, compared to 4.58% the same quarter in 2007 and 4.07% during the second quarter of 2008. During the first nine months of 2008, our net interest margin was 3.88% compared to 4.76% for the same period in 2007. Due to placing loans on non-accrual, we reversed interest during the third quarter which represents a 35 basis point decrease of our margin. Likewise, we reversed interest during the first nine months of 2008, which represents a 16 basis points decrease of our margin.
Total revenue, net of interest expense, was $8.9 million for the third quarter of 2008 and $10.9 million for the third quarter 2007. This represented a decrease of 18.5%. During the first nine months of 2008, total revenue, net of interest expense, was $30.7 million compared to $31.8 million for the same period in 2007, a decrease of 3.4%. Total revenue, net of interest expense, decreased during the third quarter of 2008 and the first nine months of 2008 compared to the same periods in 2007. This decrease is primarily due to the decrease in our net interest margin and the other than temporary impairment for the Freddie Mac preferred stock.
Book value per share stood at $13.70 at September 30, 2008, compared to $13.66 per share at September 30, 2007, an increase of approximately 0.3%. At December 31, 2007 our book value per share was $13.94.
Conference Call
The Company will hold a conference call on Friday, October 31, 2008 at 11:00 a.m. ET, to discuss its financial results and strategic initiatives and to entertain questions. Listeners will be able to participate in the question-and-answer session. The telephone number for the conference call is 1-800-860-2442. The conference call also will be available by webcast, through the Company's website, www.apab.com, by clicking on the Investor Relations' section. A replay of the call will be archived on the Company's website for one year.
About Appalachian Bancshares, Inc.
The Company is based in Ellijay, Georgia, and is the holding company of Appalachian Community Bank, a Georgia state-chartered bank, Appalachian Community Bank, F.S.B., a federally-chartered thrift and Appalachian Real Estate. The Company, through Appalachian Community Bank (which also operates in Gilmer County, Georgia, under the trade name of Gilmer County Bank) and Appalachian Community Bank, F.S.B., provides a full range of community banking services to individuals and to small and medium-sized businesses, through its thirteen banking offices, located in Ellijay, East Ellijay, Blue Ridge, Blairsville, Chatsworth, Dawsonville, McCaysville, Dahlonega and Dalton, Georgia, and in Ducktown, Tennessee, and Murphy, North Carolina. The Company's common stock trades on the NASDAQ Global Market under the symbol APAB. For more information, please visit the Company's website at www.apab.com.
Certain statements in this news release 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. These forward-looking statements are subject to risks and uncertainties, including, but not limited to, economic conditions, competition, interest rate sensitivity and exposure to regulatory and legislative changes, and other risks and uncertainties described in our company's filings with the Securities and Exchange Commission. 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. We undertake no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
APPALACHIAN BANCSHARES, INC. AND SUBSIDIARIES SELECTED CONSOLIDATED FINANCIAL DATA (Unaudited) (Dollars in thousands, except shares and per share data) Three Months Ended Nine Months Ended September 30, September 30, -------------------- -------------------- 2008 2007 2008 2007 --------- --------- --------- --------- Summary Results of Operations Data: Interest income $ 16,871 $ 18,529 $ 52,914 $ 53,059 Interest expense 8,465 9,154 25,258 25,380 --------- --------- --------- --------- Net interest income 8,406 9,375 27,656 27,679 Provision for loan losses 4,665 677 7,116 2,260 --------- --------- --------- --------- Net interest income after provision for loan losses 3,741 8,698 20,540 25,419 Noninterest income 453 1,499 3,060 4,131 Noninterest expense 8,558 8,085 25,346 22,817 --------- --------- --------- --------- Income (loss) before taxes (4,364) 2,112 (1,746) 6,733 Income tax expense (benefit) (1,744) 705 (964) 2,266 --------- --------- --------- --------- Net income (loss) $ (2,620) $ 1,407 $ (782) $ 4,467 ========= ========= ========= ========= Per Share Data: Net income (loss), basic $ (0.49) $ 0.27 $ (0.15) $ 0.85 Net income (loss), diluted (0.49) 0.27 (0.15) 0.85 Book value 13.70 13.66 13.70 13.66 Weighted average number of shares outstanding: Basic 5,372,505 5,298,509 5,364,695 5,256,568 Diluted 5,372,505 5,298,509 5,364,695 5,270,801 Performance Ratios: Return on average assets(1) -0.95% 0.63% -0.10% 0.71% Return on average equity(1) -13.70% 7.84% -1.38% 8.62% Net interest margin(1) (2) 3.33% 4.58% 3.88% 4.76% Efficiency ratio(3) 88.36% 74.35% 80.38% 71.73% Growth Ratios and Other Data: Percentage change in net income -286.21% -117.51% Percentage change in diluted net income per share -281.48% -117.65% APPALACHIAN BANCSHARES, INC. AND SUBSIDIARIES SELECTED CONSOLIDATED FINANCIAL DATA (Unaudited) (Dollars in thousands, except shares and per share data) At September 30, ------------------------ 2008 2007 ---------- ---------- Summary Balance Sheet Data: Assets $1,119,514 $ 898,027 Average earning assets QTD 1,014,984 820,311 Average earning assets YTD 962,072 784,442 Investment securities 78,789 78,768 Loans held for sale 2,376 4,187 Loans 894,117 752,988 Allowance for loan losses 13,850 8,966 Deposits 961,763 766,726 Short-term borrowings 13,419 9,125 Accrued interest 2,071 1,979 Federal Home Loan Bank advances 52,100 37,450 Subordinated long-term capital notes 12,311 6,186 Other liabilities 4,279 4,266 Shareholders' equity 73,571 72,295 Asset Quality Ratios: Nonperforming loans to total loans 1.81% 0.77% Nonperforming assets to total assets 1.77% 0.82% Net charge-offs to average total loans 0.36% 0.14% Allowance for loan losses to nonperforming loans 85.37% 154.08% Allowance for loan losses to total loans 1.55% 1.19% At September 30, ----------------------------------------- 2008 2007 % of % of Total Total Loans by Category Amount Loans Amount Loans -------- -------- -------- -------- Real estate - acquisition & development $397,655 44.47% $399,214 53.02% Real estate - commercial 175,000 19.57% 141,812 18.83% Real estate - residential 216,461 24.21% 129,504 17.20% Commercial business 67,355 7.53% 47,457 6.30% Other loans 37,646 4.22% 35,001 4.65% -------- -------- Total Loans $894,117 $752,988 ======== ======== APPALACHIAN BANCSHARES, INC. AND SUBSIDIARIES SELECTED CONSOLIDATED FINANCIAL DATA (Unaudited) (Dollars in thousands, except shares and per share data) At September 30, ----------------------------------------- 2008 2007 ------------------- ------------------- % of % of Nonperforming Total Total assets by Non- Non- category: Amount performing Amount performing Loans -------- -------- -------- -------- Real estate - acquisition & development $ 6,361 32.06% $ 2,712 36.92% Real estate - commercial 4,953 24.96% 674 9.18% Real estate - residential 3,906 19.68% 1,777 24.19% Commercial business 743 3.74% 518 7.05% Other loans 260 1.31% 138 1.88% Other Real Estate Real estate - acquisition & development 1,938 9.77% 532 7.24% Real estate - commercial -- 0.00% 540 7.35% Real estate - residential 1,609 8.11% 455 6.19% Other Repossessed Property Other loans 74 0.37% -- 0.00% -------- -------- Total Nonperforming Assets $ 19,844 $ 7,346 ======== ======== At September 30, ----------------------------------------- 2008 2007 ------------------- ------------------- % of Total % of Total Average Average Amount Loans Amount Loans -------- -------- -------- -------- Quarter-to-Date Net Charge-Offs by Category Real estate - acquisition & development $ 262 0.03% $ 229 0.03% Real estate - commercial -- 0.00% 55 0.01% Real estate - residential 820 0.09% 121 0.01% Commercial business 117 0.01% 51 0.01% Other loans 260 0.03% 135 0.02% -------- -------- Total Net Charge-Offs $ 1,459 0.16% $ 591 0.08% ======== ======== 2008 2007 ------------------- ------------------- % of Total % of Total Average Average Amount Loans Amount Loans -------- -------- -------- -------- Year-to-Date Net Charge-Offs by Category Real estate - acquisition & development $ 1,335 0.16% $ 283 0.04% Real estate - commercial 7 0.00% 145 0.02% Real estate - residential 1,076 0.13% 176 0.02% Commercial business 174 0.02% 80 0.01% Other loans 482 0.05% 280 0.04% -------- -------- Total Net Charge-Offs $ 3,074 0.36% $ 964 0.13% ======== ======== Growth Ratios and Other Data: Percentage change in assets 24.66% Percentage change in loans 18.74% Percentage change in deposits 25.44% Percentage change in equity 1.76% Loans to deposits ratio 92.97% ------------------------------------------------------------------ (1) Annualized. (2) Taxable equivalent. (3) Computed by dividing noninterest expense by the sum of the net interest income and noninterest income. APPALACHIAN BANCSHARES, INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (Dollars in thousands, except per share data) Three Months Ended Nine Months Ended September 30, September 30, ---------------------- ---------------------- 2008 2007 2008 2007 ---------- ---------- ---------- ---------- Interest Income Interest and fees on loans $ 15,599 $ 17,546 $ 49,637 $ 50,152 Interest on securities: Taxable securities 833 719 2,414 2,116 Nontaxable securities 149 165 467 475 Interest on deposits with other banks 6 9 14 73 Interest on federal funds sold 284 90 382 243 ---------- ---------- ---------- ---------- Total Interest Income 16,871 18,529 52,914 53,059 ---------- ---------- ---------- ---------- Interest Expense Interest on deposits 7,818 8,553 23,076 23,659 Interest on short-term borrowings 27 79 272 191 Interest on Federal Home Loan Bank advances 525 389 1,609 1,129 Interest on subordinated long-term capital notes 95 133 301 401 ---------- ---------- ---------- ---------- Total Interest Expense 8,465 9,154 25,258 25,380 ---------- ---------- ---------- ---------- Net Interest Income 8,406 9,375 27,656 27,679 Provision for loan losses 4,665 677 7,116 2,260 ---------- ---------- ---------- ---------- Net Interest Income After Provision for Loan Losses 3,741 8,698 20,540 25,419 ---------- ---------- ---------- ---------- Noninterest Income Customer service fees 696 586 1,920 1,647 Mortgage origination commissions 299 483 1,163 1,476 Net losses on securities (826) -- (817) -- Other operating income 284 430 794 1,008 ---------- ---------- ---------- ---------- Total Noninterest Income 453 1,499 3,060 4,131 ---------- ---------- ---------- ---------- Noninterest Expenses Salaries and employee benefits 5,000 4,870 15,035 13,808 Occupancy, furniture and equipment expense 1,088 937 3,190 2,700 Other operating expenses 2,470 2,278 7,121 6,309 ---------- ---------- ---------- ---------- Total Noninterest expense 8,558 8,085 25,346 22,817 ---------- ---------- ---------- ---------- Income (loss) before income taxes (4,364) 2,112 (1,746) 6,733 Income tax expense (benefit) (1,744) 705 (964) 2,266 ---------- ---------- ---------- ---------- Net Income (Loss) $ (2,620) $ 1,407 $ (782) $ 4,467 ========== ========== ========== ========== Earnings (Loss) Per Common Share Basic $ (0.49) $ 0.27 $ (0.15) $ 0.85 Diluted (0.49) 0.27 (0.15) 0.85 Cash Dividends Declared Per Common Share -- -- -- -- Weighted Average Shares Outstanding Basic 5,372,505 5,298,509 5,364,695 5,256,568 Diluted 5,372,505 5,298,509 5,364,695 5,270,801 APPALACHIAN BANCSHARES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited) (Dollars in thousands) Sept. 30, Dec. 31, Sept. 30, 2008 2007 2007 ---------- ---------- --------- Assets Cash and due from banks $ 19,124 $ 13,392 $ 11,280 Interest-bearing deposits with other banks 701 310 509 Federal funds sold 70,436 12,797 728 ---------- ---------- --------- Cash and Cash Equivalents 90,261 26,499 12,517 Securities available-for-sale 78,789 80,510 78,768 Loans, held for sale 2,376 6,503 4,187 Loans, net of unearned income 894,117 807,522 752,988 Allowance for loan losses (13,850) (9,808) (8,966) ---------- ---------- --------- Net Loans 880,267 797,714 744,022 Premises and equipment, net 37,742 32,966 31,868 Accrued interest 8,598 9,797 9,666 Cash surrender value on life insurance 9,060 8,778 8,690 Intangibles, net 1,992 2,179 2,315 Other assets 10,429 6,254 5,994 ---------- ---------- --------- Total Assets $1,119,514 $ 971,200 $ 898,027 ========== ========== ========= Liabilities and Shareholders' Equity Liabilities Noninterest-bearing deposits $ 51,843 $ 56,559 $ 62,877 Interest-bearing deposits 909,920 751,038 703,849 ---------- ---------- --------- Total Deposits 961,763 807,597 766,726 Short-term borrowings 13,419 21,048 9,125 Accrued interest 2,071 2,059 1,979 Federal Home Loan Bank advances 52,100 57,350 37,450 Subordinated long-term capital notes 12,311 6,186 6,186 Other liabilities 4,279 3,297 4,266 ---------- ---------- --------- Total Liabilities 1,045,943 897,537 825,732 ---------- ---------- --------- Shareholders' Equity Preferred Stock, 20,000,000 shares authorized, none issued -- -- -- Common stock, par value $0.01 per share, 20,000,000 shares authorized, 5,372,505 shares issued at September 30, 2008, 5,285,026 shares issued at December 31, 2007 and 5,294,026 shares issued at September 30, 2007 54 53 53 Paid-in capital 44,923 43,998 44,039 Retained earnings 28,549 29,331 28,228 Accumulated other comprehensive income (loss) 45 281 (25) ---------- ---------- --------- Total Shareholders' Equity 73,571 73,663 72,295 ---------- ---------- --------- Total Liabilities and Shareholders' Equity $1,119,514 $ 971,200 $ 898,027 ========== ========== =========