Paragon National Bank (OTCBB: PGNN) today reported net income of $24,910, or $0.01 per share, for the first quarter of 2008, compared with a net loss of $80,137, or $(0.02) per share, in the first quarter of 2007.
Highlights for the first quarter of 2008 include the following:
- Total assets ended the quarter at $324.5 million, an increase of 26.54% over the first quarter of 2007 and 3.05% for the quarter.
- Total loans grew to $214.9 million, an increase of 18.27% over the same quarter as the previous year, and .65% for the quarter.
- Total deposits increased 25.60% over the same quarter as the previous year and 6.84% for the current quarter, totaling $252.6 million at March 31, 2008. More importantly, total deposits, excluding certificates of deposit, increased $20.9 million since March 31, 2007 and $6.1 million during the current quarter.
- Net interest income increased approximately $207,000 thousand, or 10.63% over the same period in the prior year. This increase in net interest income was the result of continued growth in loans and investments over the past twelve months, partially offset by a decline in net interest margin.
- Loan yields decreased by 130 basis points when comparing the first quarter of 2008 to the first quarter of 2007. The pricing of a significant portion of our loan portfolio is tied to the prime interest rate which decreased throughout the fourth quarter of 2007 and first quarter of 2008. During the period from October 1, 2007 through March 31, 2008, the Federal Open Market Committee decreased the Federal funds target rate from 5.25% to 3.00%.
- The net interest margin was 2.86% for the first quarter of 2008 compared to 3.43% for the same period in 2007. The decrease in net interest margin resulted primarily from a 106 basis point decrease in the yield on earning assets while interest expense as a percentage of earning assets decreased by 72 basis points. We expect our margin to improve in the second quarter as higher cost CDs mature.
- Non-interest income increased approximately $313,000 or 160.2% over the same period in the prior year. The increase in non-interest income was primarily related to gains realized from the sale of investment securities, which totaled $275,288 for the first quarter of 2008 compared to $14,721 for the same period in 2007.
- Non-interest expenses totaled approximately $2.5 million for the first quarter of 2008, an 18.9% increase when compared to the same period in 2007. A number of factors contributed to the increase in non-interest expense between the two periods. Principal among these factors include personnel additions and other expenses which tend to increase relative to Paragon’s growth.
- Paragon’s provision for loan losses was $150,948 for the first quarter of 2008, up from $130,122 in the first quarter of last year. The increase was due to growth in loans and management’s continuing analysis of impaired loans and related reserves on these loans.
- The allowance for loan losses was at March 31, 2008 was $3.2 million, or 1.49% of period end loans, compared to $3.1 million, or 1.45% at December 31, 2007.
Finally, Paragon’s capital position remains very strong and significantly exceeds all regulatory guidelines for being “well capitalized”. Total risk-based capital and Tier 1/risk-based capital ratios at March 31, 2008 were 13.24% and 11.99%, respectively, compared with minimum regulatory capital requirements of 10% and 6% to be considered “well capitalized”.
Cautionary Statement Regarding Forward-Looking Statements
Certain statements in this letter include "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, which statements generally can be identified by the use of forward-looking terminology, such as "may," "will," "expect," "estimate," "anticipate," "believe," "target," "plan," "project" or "continue" or the negatives thereof or other variations thereon or similar terminology, and are made on the basis of management's plans and current analyses of Paragon National Bank (the "Company"), its business and the industry as a whole. These forward-looking statements are subject to risks and uncertainties, including, but not limited to, economic conditions in the Memphis market, the bank's short operating history, its startup losses, possible borrower credit problems, potential loss of key executives and employees, competition, interest rate sensitivity and exposure to regulatory and legislative changes. The above factors, in some cases, have affected, and in the future could affect the Company's financial performance and could cause actual results for the current fiscal year and beyond to differ materially from those expressed or implied in such forward-looking statements. The Company does not undertake to publicly update or revise its forward-looking statements.