ATLANTA, June 21 /PRNewswire/ -- Premier Bancshares, Inc. (NYSE: PMB)
announced today it would not meet consensus earnings expectations, estimating
that it will report 14 to 16 cents for the second quarter of 1999. The
company also believes that the consensus estimate for 1999 of approximately
$1.10 per share is optimistic. The company's revised earnings goal for the
year 1999 is now approximately $.80 to $.84 per share (excluding the impact of
the three recently announced acquisitions). The shortfall in projected
earnings for the second quarter is due to earnings pressure on its mortgage
banking subsidiary, a lower than expected profitability in its commercial
banking activities, and certain non-recurring expenses.
Mortgage Banking
The earnings shortfall in the company's mortgage banking subsidiary is
largely interest rate driven, as rates on 30-year mortgages have spiked almost
100 basis points during the quarter. As a result, secondary marketing income,
or revenues on current production, has declined from historic levels.
Additionally, mortgage production, while up significantly over last year's
level, is below budgeted levels for the second quarter. Mortgage profits were
also adversely impacted during the quarter as a result of overhead associated
with an aggressive expansion of the company's mortgage office footprint. Late
last year, Premier opened six new regional mortgage origination offices.
Although these offices continue to ramp-up, their level of loan production and
revenue is behind plan.
Commercial Banking
Over the last several years, Premier has aggressively expanded its banking
franchise, through both external and internal growth. Today, Premier is the
second largest Georgia-based, independent banking franchise in the Atlanta and
North Georgia markets, with significant presence in such attractive markets as
Cobb, Fulton, Gwinnett, DeKalb, Forsyth, Henry, and Spalding counties. During
the second quarter, the company continued its aggressive acquisition strategy,
announcing the acquisition of three community banks located in Atlanta,
Decatur, and Summerville, Georgia, respectively.
The profitability and growth of the banking division continue at above
average levels, reflecting numerous ongoing initiatives. All the Atlanta
banking offices have been consolidated into a single operating system; this
having been completed without significant customer interruption. It had been
originally anticipated that this consolidation and the resulting cost savings
would have occurred much earlier. Additionally, Premier has experienced
delays in implementing internal growth at its recently acquired banks due to
delays in data processing conversion schedules.
The recent adverse trend in the interest rate environment has also
adversely impacted the interest rate margin in Premier's banking operations.
Short-term deposit costs have risen over the past ninety days, while the
company's variable rate assets, which are principally linked to the prime
rate, have not moved correspondingly.
Finally, in the second quarter Premier incurred certain non-recurring
expenses related to its pending acquisitions and the settlement of a lawsuit.
1999 Outlook
The new earnings goal of 1999 reflects management's response to a proposed
change in the accounting practice for acquisitions. During the second
quarter, the Financial Accounting Standards Board (FASB) announced its
intention to discontinue the use of "pooling of interests" accounting
treatment after the year 2000. This proposed change is a major shift in the
way that the majority of mergers and acquisitions have been accounted for
historically. Premier's revised plan to generate increased shareholder value
includes an acceleration of its acquisition activities while the benefits of
"pooling of interests" accounting is still available. This accelerated growth
plan will require additional operational facilities, equipment, and personnel
to manage the company as well as to continue to deliver premier service to its
customers. The costs associated with these additional facilities, equipment,
and personnel are included in the revised earnings estimate for 1999.
Both the common stock of Premier Bancshares, Inc. and the preferred
securities of Premier Capital Trust I are traded on the New York Stock
Exchange under the symbols PMB and PMB.PR, respectively.
With the exception of historical information, the matters discussed in
this news release are forward-looking statements that involve risks and
uncertainties.
Visit Premier Bancshares, Inc. web site located at
http://www.premierbancshares.com .
SOURCE Premier Bancshares, Inc.
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Related links:
http://www.premierbancshares.com
Company News On-Call:
http://www.prnewswire.com/comp/283325.html or fax,
800-758-5804, ext. 283325
CONTACT:
Darrell D. Pittard, Chairman and Chief
Executive Officer, 404-814-3090, or Michael E. Ricketson,
Executive Vice President and Chief Financial Officer,
770-476-3209, both of Premier Bancshares, Inc.
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