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- 2012 - April - 9th -

Jacksonville Bancorp’s year-end numbers ‘not so ugly’

by Mark Basch, Contributing Writer

The Jacksonville Bank reported a net profit of $3.3 million in 2011 in its year-end reports filed two months ago with banking regulators. Yet, when its parent company, Jacksonville Bancorp Inc., filed its year-end report with the Securities and Exchange Commission at the end of March, it showed a net loss of $24.1 million.

So why the discrepancy? It mainly has to do with accounting issues that don’t affect the bank’s operations.

“It looks ugly but as far as the bank is concerned, it’s not so ugly,” said President and CEO Price Schwenck.

Between the time the bank reported its numbers and the holding company filed its report, Jacksonville Bancorp’s outside auditor, Crowe Horwath LLP, identified some issues that had to be recorded in the fourth quarter, Schwenck said.

That included a goodwill impairment charge of $12.1 million and a deferred tax charge of $11.1 million. Those two items, which accounted for most of the net loss, are non-cash charges.

“It had absolutely no impact on regulatory capital but they run it through the income statement,” Schwenck said.

The auditors did tell the bank that it had to increase its provision for loan losses, which does affect its capital. Schwenck said the increased provision was related to loans that were charged off in February and March of this year, but the auditors determined the bank had to record the charges in the fourth quarter. He also said Jacksonville Bank will be filing a revised report with regulators to account for the additional loan loss provision.

Even with those additional charges, the bank was categorized as “adequately capitalized” at year-end, according to its annual report, with a ratio of risk-based capital to assets of 9.85 percent.

However, the bank is “committed” to having a capital ratio of 10 percent, which would meet the regulatory definition of being “well-capitalized,” the report said.

So, the bank is looking to raise additional capital. Schwenck said the bank is working with a group of four investors led by CapGen Capital Group , which invested $35 million in the bank in 2010 as Jacksonville Bancorp merged with another local banking company, Atlantic BancGroup Inc.

Besides an additional capital investment from that group, the bank may also make a public stock offering to local shareholders, he said.

“We are way into the process of raising capital,” Schwenck said. “It’s going to be done really fast.”

Status quo at ParkerVision

ParkerVision Inc.’s year-end report indicated that everything is status quo. The Jacksonville-based company, which has been developing wireless radio technology, had no revenue in 2011 and the company didn’t say when there might be revenue coming in.

ParkerVision has been working with a San Diego-based company called VIA Telecom Inc. that provides processors used by mobile device manufacturers to possibly use ParkerVision’s technology. In the company’s quarterly conference call last week, CEO Jeff Parker did not say when that relationship might lead to any revenue.

ParkerVision has also talked a lot about a patent infringement lawsuit against Qualcomm Inc. Even if ParkerVision gets anything from that suit, it’s not scheduled for trial until August 2013, according to ParkerVision’s annual report.

During the conference call, Chief Financial Officer Cindy Poehlman said ParkerVision is using up about $1 million in cash per month and had $5.2 million in cash and securities available for sale at the end of 2011. So ParkerVision will need more cash “at some time during 2012,” she said.

Both Poehlman and Parker expressed optimism that the company will be able to raise additional capital — and Parker maintains a sunny outlook overall.

“Personally, I think every day here at the company is getting more and more encouraging and I think it’s a great opportunity we have with the technology we’re developing,” he said.

Michaels going public again

After going private in 2006, Michaels Stores Inc. is going public again.

The Texas-based arts and crafts retailer, which has a major distribution center in Jacksonville, filed a registration statement with the SEC to sell an unspecified number of shares in an initial public offering.

Michaels was a public company before being acquired by well-known buyout firms Blackstone Group LLC and Bain Capital LLC in 2006. The deal was valued at $6 billion, according to Bloomberg News.

Blackstone and Bain currently own 93 percent of Michaels. The filing does not say what percentage of the company will be sold to the public.

Michaels says in its SEC filing that it is the largest arts and crafts retailer in North America with as many stores as its two largest competitors combined. The company operates 1,066 Michaels stores and 130 Aaron Brothers stores.

Total sales grew 4.4 percent to $4.2 billion last year, and comparable-store sales rose 3.2 percent. Michaels had net income of $176 million in 2011, up from $103 million in 2010.

The company’s distribution network includes a 776,000- square-foot. center that the company leases in Jacksonville.

Michaels intends to list its shares on the New York Stock Exchange under the ticker symbol “MIK.”

Global Axcess COO resigns

Global Axcess Corp. said in an SEC filing last week that Chief Operating Officer Marc Caramuta resigned. The company provided no other details.

Jacksonville-based Global Axcess, which operates automated teller machine and DVD kiosk networks, has several openings in the executive suite. Vice Chairman Lock Ireland has been serving as interim CEO for the past year but the company is not conducting an active search for a permanent replacement, Ireland said in response to an investor’s question in the company’s March 29 conference call.

Ireland said the company is considering “a number of situations” including the possibility that a new CEO would come from a company that is acquired by Global Axcess.

“So as interim CEO, it makes it a lot easier for myself and the board to continue as we are right now for at least the next three or four months,” he said.

Analyst gets positive vibes from FIS

Before Fidelity National Information Services Inc. announced a reshuffling of top management positions last week, Robert W. Baird analyst David Koning met with the executives and came away with a good feeling from them.

“We viewed management’s commentary to be positive, with banks slowly becoming increasingly comfortable with capital ratios, general economic trends, and the ability to navigate through recent regulatory headwinds,” Koning said in his report after the meeting.

Fidelity National Information, or FIS, provides technology services for banks. Koning said banks may be spending more money on FIS’ services.

“After several years of constrained spending, financial institutions could eventually begin to spend at increased rates. This could happen over the next several quarters as capital ratios are beginning to get back toward targeted levels, economic data has been reasonably positive, and financial institutions have delayed spending for some time,” he said in the report.

But Koning said FIS’ bank technology business did OK even during the recession.

“During the worst year of the downturn, revenue was flat and EPS growth was 11 percent. Since then, revenue growth has accelerated to 5%, and could eventually improve further (long-term target 6-9%) with a better economy,” he said.

Last week, FIS announced that CEO Frank Martire was also elected chairman by the board of directors, with former chairman Bill Foley remaining on the board as vice chairman.

FNF completes tender offer for O’Charleys

Meanwhile, the other Jacksonville-based Fidelity basically gained control of the O’Charley’s Inc. restaurant company last week.

Fidelity National Financial Inc. announced that 74.9 percent of O’Charley’s fully diluted shares were tendered as part of FNF’s offer to buy the shares for $9.85 each.

That means FNF has enough shares for control and O’Charley’s will become an indirect, wholly-owned subsidiary of Jacksonville-based FNF. The remaining shares that were not tendered will be cancelled, and those stockholders will have the right to exchange their shares for $9.85 in cash.

O’Charley’s operates more than 340 restaurants under the O’Charley’s, Ninety Nine and Stoney River names.

Although FNF is mainly a title insurance company, it has a history of investing excess cash into non-title businesses like restaurants. It also owns 45 percent of a company called American Blue Ribbon Holdings, which operates the Village Inn, Bakers Square and Max & Erma’s chains.

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