Porter Bancorp, Inc. Announces Third Quarter 2012 Results

  Porter Bancorp, Inc. Announces Third Quarter 2012 Results

                  PBIB Announces Third Quarter 2012 Results

Business Wire

LOUISVILLE, Ky. -- October 30, 2012

Porter Bancorp, Inc. (NASDAQ: PBIB), parent company of PBIBank, with
18full-service banking offices in Kentucky, today reported unaudited results
for the third quarter of 2012.

The Company reported net loss to common shareholders of $26.9 million, or
($2.29) per diluted share, for the third quarter of 2012 compared with net
loss to common shareholders of $12.2 million, or ($1.04) per diluted share,
for the third quarter of 2011.Net loss to common shareholders for the nine
months ended September 30, 2012, was $26.4million, or ($2.25) per diluted
common share, compared with net loss to common shareholders of $50.8million,
or ($4.34) per diluted share, for the nine months ended September 30, 2011.
The loss for the nine months ended September 30, 2011 includes a non-recurring
100% goodwill impairment charge of $23.8 million recorded in the second
quarter of 2011.

Financial performance continues to be negatively impacted by the Bank’s high
level of nonperforming loans and other real estate owned. Non-performing loans
increased to $90.1 million, or 9.47% of total loans, at September30,2012,
compared with $81.7million, or 7.85% of total loans, at June 30, 2012.
Non-performing assets increased to $139.0 million, or 10.8% of total assets,
compared with $136.1 million, or 10.2% of total assets, at June30, 2012.

Foreclosed properties at September 30, 2012, decreased to $48.8 million
compared with $54.4 million at June30,2012, and increased compared with
$44.9 million at September 30, 2011. During the third quarter of 2012, the
Company acquired $3.4 million of OREO, sold $4.7 million of OREO, and recorded
OREO fair value write-downs totaling $4.3 million to reflect new appraisals or
marketing prices during the third quarter of 2012.

Provision for loan losses totaled $25.5 million for the third quarter of 2012
compared to $4.0 million in the second quarter of 2012, and $8.0 million in
the third quarter of 2011. Provision for loan losses totaled $33.3 million for
the nine months ended September 30, 2012, compared to $26.8 million for the
nine months ended September 30, 2011.

The increase in the provision for loan losses in the third quarter of 2012 is
primarily attributable to collateral value declines for certain larger
commercial real estate loans as evidenced by new appraisals received during
the third quarter, higher net charge-offs, and a continued decline in credit
trends in our loan portfolio. In addition, the third quarter 2012 provision
for loan losses was negatively impacted by a strategy change during the
quarter related to impaired loans whereby we expect to accelerate the
remediation process through litigation or foreclosure. For impaired loans
subject to such an expectation, we applied an additional fair value discount
to the underlying collateral in our impairment analysis estimates for the
third quarter of 2012, due to our experience that resolution of this nature
generally results in receiving lower values for real estate collateral in a
more aggressive sales environment.

Net loan charge-offs totaled $23.1 million for the third quarter of 2012
compared to $6.4 million in the second quarter of 2012, and $7.2 million in
the third quarter of 2011. Net loan charge-offs totaled $31.8 for the nine
months ended September 30, 2012, compared to $21.6 million for the nine months
ended September 30, 2011.

Our net interest income also continued to decline in the three months and nine
months ended September 30 2012, compared with the same periods in 2011, as
average earning assets, primarily loans, declined $252.5 million and net
interest margin declined 11 basis points between the nine months ended
September 30, 2012, and the nine months ended September30, 2011.

The Bank remains focused on executing its strategic plans to address the
challenges related to a higher-than-normal level of non-performing loans and
OREO, and the continuation of soft market conditions affecting the value and
marketability of real estate. As part of the plan, John T. Taylor was hired in
July as President and CEO of PBI Bank and President of Porter Bancorp, and
John R. Davis joined the credit administration team in August and was
subsequently approved by our primary regulators as Chief Credit Officer.
Additionally, management remains diligently focused on assessing risk and
determining the appropriate strategies to accelerate the reduction of the risk
profile of the bank while formulating strategies and executing upon
opportunities to increase revenue through improved net interest margin and
non-interest income growth. We are also diligently focused on credit cost
reduction and non-interest expense reductions as part of our plan to increase
the long-term profitability of the bank.

At September 30, 2012, PBI Bank’s Tier 1 leverage ratio was 5.53% and its
Total risk-based capital ratio was 9.85%, which are below the minimums of 9.0%
and 12.0% required by the Bank’s Consent Order with its primary regulators. At
September 30, 2012, Porter Bancorp’s Tier 1 leverage ratio was 5.00%, compared
with 7.56% at June30, 2012, and 6.53% at December31, 2011, and its Total
risk-based capital ratio was 10.01% compared with 11.94% at June 30, 2012, and
11.22% at December 31, 2011.

Management and the Board of Directors are evaluating appropriate strategies
for increasing the company’s capital in order to meet the capital requirements
of our Consent Order. A key component of that evaluation is reviewing the
opportunity to sell common stock through either a public offering or private
placement to new and existing shareholders. At Porter Bancorp’s 2012 annual
shareholders’ meeting, shareholders approved an increase in our common shares
authorized for issuance from 19 million shares to 86 million shares.

PBIB-G PBIB-F

Forward-Looking Statements

Statements in this press release relating to Porter Bancorp’s plans,
objectives, expectations or future performance are forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
The words “believe,” “may,” “should,” “anticipate,” “estimate,” “expect,”
“intend,” “objective,” “seek,” “plan,” “strive” or similar words, or negatives
of these words, identify forward-looking statements. These forward-looking
statements are based on management’s current expectations. Porter Bancorp’s
actual results in future periods may differ materially from those currently
expected due to various risks and uncertainties, including those discussed
under “Risk Factors” in the Company’s Form 10-K and subsequent periodic
reports filed with the Securities and Exchange Commission. The forward-looking
statements in this press release are made as of the date of the release and
Porter Bancorp does not assume any responsibility to update these statements.

Additional Information

Unaudited supplemental financial information for the third quarter ending
September 30, 2012 follows.




PORTER BANCORP, INC.
Unaudited Financial Information
(in thousands, except share and per share data)

                Three           Three           Three           Nine            Nine
                 Months           Months           Months           Months           Months
                 Ended            Ended            Ended            Ended            Ended
                 9/30/12          6/30/12          9/30/11          9/30/12          9/30/11
                                                 
Income
Statement Data
Interest         $ 13,987         $ 14,812         $ 18,103         $44,554          $ 56,917
income
Interest          3,855          4,017          5,448         12,173           17,053     
expense
                                                 
Net interest       10,132           10,795           12,655         32,381             39,864
income
Provision for     25,500         4,000          8,000         33,250           26,800     
loan losses
                                                                                  
Net interest
income after       (15,368    )     6,795            4,655          (869         )     13,064
provision
                                                                                     
Service
charges on         563              556              690            1,673              1,979
deposit
accounts
Income from
fiduciary          261              291              237            803                738
activities
Bank card
interchange        180              196              168            553                500
fees
Other real
estate owned       180              25               93             242                147
rental income
Gains on sales
of loans           138              77               123            260                664
originated for
sale
Gains on sales
of securities,     —                1,511            —              3,530              1,108
net
Other             399            362            389           1,123            1,216      
                                                 
Non-interest       1,721            3,018            1,700          8,184              6,352
income
                                                                                     
Salaries &
employee           4,264            3,982            3,780          12,558             12,084
benefits
Occupancy and      971              969              957            2,826              2,910
equipment
Goodwill           —                —                —              —                  23,794
impairment
Other real
estate owned       5,204            1,205            17,029         7,666              40,505
expense
FDIC insurance     559              832              930            2,264              2,640
Loan
collection         792              586              802            1,738              1,989
expense
Professional       776              567              329            1,699              963
fees
Franchise tax      496              592              582            1,680              1,746
Communications     175              168              176            523                509
expense
Postage and        108              109              117            339                368
delivery
Advertising        44               28               93             105                282
Other             761            624            628           2,061            1,787      
                                                 
Non-interest       14,150           9,662            25,423         33,459             89,577
expense
                                                                                     
Income (loss)
before income      (27,797    )     151              (19,068    )   (26,144      )     (70,161    )
taxes
Income tax
expense           (65        )    —              (6,906     )   (65          )    (18,809    )
(benefit)
                                                 
Net income         (27,732    )     151              (12,162    )   (26,079      )     (51,352    )
(loss)
Less:
Dividends on
preferred          437              438              437            1,312              1,312
stock
Accretion on
preferred          44               45               45             134                133
stock
Earnings
(loss)
allocated to      (1,264     )    (13        )    (463       )   (1,095       )    (1,995     )
participating
securities
                                                                                     
Net income
(loss)           $ (26,949    )   $ (319       )   $ (12,181    )   $(26,430     )   $ (50,802    )
available to
common
                                                 
                                                                                     
Weighted
average shares     11,751,818       11,733,156       11,721,591       11,732,835       11,713,040
– Basic
Weighted
average shares     11,751,818       11,733,156       11,721,591       11,732,835       11,713,040
– Diluted
                                                                                     
Basic earnings
(loss) per       $ (2.29      )   $ (0.03      )   $ (1.04      )   $ (2.25      )   $ (4.34      )
common share
Diluted
earnings         $ (2.29      )   $ (0.03      )   $ (1.04      )   $ (2.25      )   $ (4.34      )
(loss) per
common share
Cash dividends
declared per     $ 0.00           $ 0.00           $ 0.00           $ 0.00           $ 0.02
common share




PORTER BANCORP, INC.

Unaudited Financial Information

(in thousands, except share and per share data)

               Three           Three          Three           Nine            Nine
                Months           Months          Months           Months           Months
                Ended            Ended           Ended            Ended            Ended
                9/30/12          6/30/12         9/30/11          9/30/12          9/30/11
                                               
Average
Balance Sheet
Data
Assets          $ 1,326,457      $ 1,363,340     $ 1,625,590      $ 1,367,318      $ 1,690,386
Loans             1,008,053        1,078,497       1,227,024        1,068,356        1,261,790
Earning           1,261,864        1,307,520       1,506,384        1,306,590        1,559,065
assets
Deposits          1,196,580        1,231,281       1,405,543        1,235,573        1,453,121
Long-term
debt and          38,328           38,959          50,463           38,944           50,034
advances
Interest
bearing           1,126,045        1,159,447       1,361,537        1,164,309        1,409,069
liabilities
Stockholders’     81,029           83,987          151,055          83,217           169,269
equity
                                                                                   
                                                                                   
Performance
Ratios
Return on
average           (8.32     )%     0.04      %     (2.97     )%     (2.55     )%     (4.06     )%
assets
Return on
average           (136.16   )      0.72            (31.94    )      (41.86    )      (40.56    )
equity
Yield on
average
earning           4.45             4.59            4.81             4.59             4.92
assets (tax
equivalent)
Cost of
interest          1.36             1.39            1.59             1.40             1.62
bearing
liabilities
Net interest
margin (tax       3.23             3.35            3.38             3.35             3.46
equivalent)
Efficiency        119.38           78.54           177.10           90.34            145.83
ratio
                                                                                   
                                                                                   
Loan
Charge-off
Data
Loans           $ (23,487   )    $ (6,438    )   $ (7,367    )    $ (32,507   )    $ (21,830   )
charged-off
Recoveries       412            79            142            697            237       
                                                               
Net             $ (23,075   )    $ (6,359    )   $ (7,225    )    $ (31,810   )    $ (21,593   )
charge-offs
                                                                                   
                                                                                   
Non-Accrual
Loan Activity
Non-accrual
loans at        $ 81,653         $ 97,230        $ 60,331         $ 92,020         $ 59,799
beginning of
period
Loans
returned to       —                —               (929      )      —                —
accrual
status
Net principal     (5,768    )      (4,084    )     (3,059    )      (15,092   )      (9,920    )
pay-downs
Charge-offs       (13,442   )      (4,902    )     (4,804    )      (20,656   )      (15,538   )
Loans
foreclosed
and               (3,339    )      (15,243   )     (3,613    )      (22,411   )      (17,043   )
transferred
to OREO
Loan
collateral        —                —               (10       )      —                —
repossessed
Loans placed
on
non-accrual      29,528         8,652         11,216         54,771         41,834    
during the
period
                                                                                   
Non-accrual
loans at end    $ 88,632        $ 81,653       $ 59,132        $ 88,632        $ 59,132    
of period
                                                                                   
                                                                                   
                                                                                   
Other Real
Estate Owned
(OREO)
Activity (Net
of Allowance)
OREO at
beginning of    $ 54,365         $ 35,574        $ 49,913         $ 41,449         $ 67,635
period
Real estate       3,405            23,910          15,971           31,531           31,232
acquired
Valuation
adjustment        (4,260    )      (350      )     (15,265   )      (5,090    )      (30,702   )
write-downs
Proceeds from
sales of          (4,140    )      (4,223    )     (5,189    )      (17,573   )      (17,279   )
properties
Gain (loss)       (533      )      (546      )     (673      )      (1,481    )      (7,549    )
on sales, net
Capital          —              —             176            1              1,596     
improvements
                                                                                   
OREO at end     $ 48,837        $ 54,365       $ 44,933        $ 48,837        $ 44,933    
of period




PORTER BANCORP, INC.

Unaudited Financial Information

(in thousands, except share and per share data)

                As of           As of           As of           As of
                 9/30/12          6/30/12          12/31/11         9/30/11
                                                 
Assets
Loans            $ 952,021        $ 1,041,292      $ 1,136,717      $ 1,206,341
Loan loss         (54,019    )    (51,594    )    (52,579    )    (39,492    )
reserve
                                                                   1
Net loans          898,002          989,698          1,084,138        1,166,849
Securities
available for      198,148          194,091          158,833          158,813
sale
Federal funds
sold &
interest           69,928           30,762           92,034           93,062
bearing
deposits
Cash and due
from financial     11,854           5,599            13,928           27,319
institutions
Premises and       20,955           21,223           21,541           21,791
equipment
Other real         48,837           54,365           41,449           44,933
estate owned
Deferred tax       —                —                —                24,005
assets
Accrued
interest          38,317         39,114         43,501         41,251     
receivable and
other assets
                                                                 
Total Assets     $ 1,286,041     $ 1,334,852     $ 1,455,424     $ 1,578,023  
                                                                 
                                                                    
Liabilities
and Equity
Certificates     $ 882,303        $ 909,504        $ 1,024,333      $ 1,075,226
of deposit
Interest           80,524           82,208           87,653           77,229
checking
Money market       63,594           60,704           64,302           79,790
Savings           39,703         39,509         36,357         36,508     
                                                                 
Total interest
bearing            1,066,124        1,091,925        1,212,645        1,268,753
deposits
Demand            111,403        112,797        111,118        104,694    
deposits
                                                                 
Total deposits     1,177,527        1,204,722        1,323,763        1,373,447
Federal funds
purchased &        2,403            2,501            1,738            11,328
repurchase
agreements
FHLB advances      5,960            6,398            7,116            13,155
Junior
subordinated       32,200           32,200           32,650           32,875
debentures
Accrued
interest
payable and       12,967         7,526          7,628          8,000      
other
liabilities
                                                                 
Total              1,231,057        1,253,347        1,372,895        1,438,805
liabilities
Stockholders’     54,984         81,505         82,529         139,218    
equity
                                                                 
Total
Liabilities
and              $ 1,286,041     $ 1,334,852     $ 1,455,424     $ 1,578,023  
Stockholders’
Equity
                                                                 
                                                                    
Ending shares      12,007,127       11,934,872       11,824,472       11,830,581
outstanding
Book value per   $ 1.39           $ 3.62           $ 3.74           $ 8.53
common share
Tangible book
value per          1.22             3.44             3.54             8.32
common share
                                                                    
Asset Quality
Data
Loan 90 days
or more past     $ 1,486          $ 88             $ 1,350          $ 655
due still on
accrual
Non-accrual       88,632         81,653         92,020         59,132     
loans
                                                                 
Total
non-performing     90,118           81,741           93,370           59,787
loans
Real estate
acquired           48,837           54,365           41,449           44,933
through
foreclosures
Other
repossessed       5              5              5              19         
assets
                                                                 
Total
non-performing   $ 138,960       $ 136,111       $ 134,824       $ 104,739    
assets
                                                                 
Non-performing
loans to total     9.47       %     7.85       %     8.22       %     4.96       %
loans
Non-performing
assets to          10.81            10.20            9.26             6.64
total assets
Allowance for
loan losses to     59.94            63.12            56.31            66.05
non-performing
loans
Allowance for
loan losses to     5.68             4.96             4.63             3.27
total loans
                                                                    
Risk-based
Capital Ratios
Tier 1             5.00       %     7.56       %     6.53       %     9.72       %
leverage ratio
Tier 1
risk-based         7.03             9.95             9.23             13.13
capital ratio
Total
risk-based         10.01            11.94            11.22            15.07
capital ratio
                                                                    
FTE employees      291              300              291              298

Contact:

Porter Bancorp, Inc.
Maria L. Bouvette, Chairman and CEO, 502-499-4800
or
John T. Taylor, President, 502-499-4800
 
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