Porter Bancorp, Inc. Reports Second Quarter Results

  Porter Bancorp, Inc. Reports Second Quarter Results

Second Quarter 2013 Net Loss Available to Common Shareholders of $1.7 million

Business Wire

LOUISVILLE, Ky. -- July 30, 2013

Porter Bancorp, Inc. (NASDAQ: PBIB), parent company of PBIBank, with
18full-service banking offices in Kentucky, today reported unaudited results
for the second quarter of 2013.

The Company reported a net loss available to common shareholders of $1.7
million, or ($0.14) per diluted share, for the second quarter of 2013 compared
with a net loss of $319,000, or ($0.03) per diluted share, for the second
quarter of 2012. Net loss available to common shareholders for the six months
ended June 30, 2013, was $2.2 million, or ($0.19) per diluted common share,
compared with net income available to common shareholders of $661,000, or
$0.06 per diluted share, for the six months ended June 30, 2012.

The second quarter 2013 loss of $1.7 million represents a decline of $1.4
million compared with the $319,000 loss reported in the second quarter of
2012. This was primarily due to decreased non-interest income and increased
non-interest expense, compared with the second quarter of 2012, countered by a
$4.0 million reduction in the provision for loan losses. Additionally, our net
interest margin improved to 3.24% for the second quarter of 2013 compared to
3.07% in the first quarter of 2013 and declined from 3.35% for the second
quarter of 2012.

The $2.2 million loss for the six months ended June 30, 2013 represents a
decline of $2.9 million compared to the six months ended June 30, 2012. This
was primarily due to decreased net interest income driven by the reduction of
the size of our loan portfolio, a decline in our net interest margin, a
reduction of $2.8 million in gains on sales of investment securities, and
increased non-interest expense. This was offset by a decrease in the provision
for loan losses expense from $7.8 million for the six months ended June 30,
2012, to $450,000 for the six months ended June30, 2013.

No provision for loan losses was recorded in the second quarter of 2013, which
is a significant decrease compared to $4.0 million in the second quarter of
2012. The decrease was attributable to the $52.3 million reduction in loan
portfolio size, lower net loan charge-offs during the quarter, and a reduction
in loans migrating downward in risk grade classification.

We have successfully reduced the size of our balance sheet in accordance with
our capital plan. Average assets were $1.1 billion in the second quarter of
2013 compared to $1.4 billion in the second quarter of 2012. This was
accomplished primarily by reducing our commercial real estate and construction
and development loans within our loan portfolio and through the redemption of
higher cost certificates of deposit accounts. The reduction of our balance
sheet was the primary driver for net interest income declining by $2.4 million
to $8.4 million in the second quarter of 2013 compared to $10.8 million in the
second quarter of 2012. Additionally, our net interest margin declined to
3.24% in the second quarter of 2013 compared to 3.35% in the second quarter of
2012, but improved from 3.07% in the first quarter of 2013.

Financial performance continues to be negatively impacted by the Bank’s high
level of non-performing loans and other real estate owned. Non-performing
assets, which include loans past due 90 days and still accruing, loans
onnonaccrual, and other real estate owned, decreased in dollars to $159.3
million, or 14.86% of total assets at June30, 2013, compared with
$165.1million, or 14.58% of total assets, at March 31, 2013.

Non-performing loans decreased to $112.3 million, or 14.49% of total loans, at
June 30, 2013, compared with $120.9million, or 14.62% of total loans, at
March 31, 2013. In addition, net charge-offs decreased from $17.3million in
the first quarter of 2013 to $2.3 million in the second quarter of 2013.

Total past due and nonaccrual loans decreased approximately $8.1 million to
$123.8 million at June 30, 2013 from $132.0 million at March 31, 2013.

                                                                  Increase/
                            June 30, 2013   March 31, 2013              
                                                                  (Decrease)
                             (in thousands)
Past Due Loans:                                              
30 – 59 Days                 $   8,600         $    8,052         $  548
60 – 89 Days                     2,979              2,960            19
90 Days and Over                 71                 —                71
                                                                             
Nonaccrual Loans                 112,185           120,943         (8,758  )
Total Past Due and           $   123,835      $    131,955      $  (8,120  )
Nonaccrual Loans

Foreclosed properties at June 30, 2013 increased to $47.0 million compared
with $44.2 million at March 31, 2013, but decreased from $54.4 million at June
30, 2012. The Company acquired $11.9 million in other real estate owned and
sold $8.1 million in other real estate owned during the second quarter of
2013. Fair value write-downs arising from new appraisals or lower marketing
prices totaled $977,000 in the second quarter of 2013 compared to $350,000 in
the second quarter of 2012 and $307,000 in the first quarter of 2013.

At June 30, 2013, PBI Bank’s Tier 1 leverage ratio was 6.08% compared to 5.95%
at March 31, 2013 and its Total risk-based capital ratio was 10.60% at June
30, 2013 compared to 10.29% at March 31, 2013, which are below the minimums of
9.0% and 12.0% required by the Bank’s Consent Order. At June 30, 2013, Porter
Bancorp’s leverage ratio was 4.91%, compared with 4.91% at March 31, 2013 and
4.50% at December 31, 2012, and its Total risk-based capital ratio was 10.46%
compared with 10.16% at March 31, 2013, and 9.81% at December 31, 2012.

On July 16, 2013, a jury in Louisville, Kentucky returned a verdict against
PBI Bank awarding the plaintiffs compensatory damages of $1.5 million and
punitive damages of $5.5 million. The verdict is subject to post-trial motions
and has not yet been entered as a judgment. After conferring with our legal
advisors, we believe the findings and damages are excessive and contrary to
the law, and that we have meritorious grounds to seek reconsideration of the
verdict and to appeal. The Bank intends to file motions to reduce or overturn
the award and otherwise for reconsideration of the case. In accordance with
U.S. generally accepted accounting principles (GAAP), we record contingent
liabilities resulting from claims against us when a loss is assessed to be
probable and the amount of the loss is reasonably estimable. As such, we
accrued $1.5 million related to this matter during the quarter ended June 30,
2013.

We are continuing our efforts to strengthen our capital levels and comply with
the Consent Order. 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. These include, among other
things, a possible public offering or private placement of common stock to new
and existing shareholders. As previously announced, Sandler O’Neill &
Partners, LP is acting as our financial advisor and assisting our Board in
this evaluation. Asset quality remediation, capital restoration, and lowering
the risk profile of the Company continue to be major objectives during 2013 as
well as delivering quality financial products and services to our customers
throughout the Commonwealth of Kentucky.

PBIB-G

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,” “possible,” “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 indicated by forward-looking statements due to various risks and
uncertainties, including our ability to reduce our level of higher risk loans
such as commercial real estate and real estate development loans, reduce our
level of non-performing loans and other real estate owned, and increase net
interest income in a low interest rate environment, as well as our need to
increase capital. These and other risks and uncertainties are described in
greater detail 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 second quarter ending
June 30, 2013 follows.

               
PORTER BANCORP, INC.

Unaudited Financial Information

(in thousands, except share and per share data)
                                                                             
                 Three          Three          Three          Six            Six
                 Months         Months         Months         Months         Months
                 Ended          Ended          Ended          Ended          Ended
                 6/30/13        3/31/13        6/30/12        6/30/13        6/30/12
                                             
Income
Statement Data
Interest         $ 11,168       $ 11,258       $ 14,812       $    22,426    $ 30,567
income
Interest           2,816          2,960          4,017             5,776       8,318
expense
                                             
Net interest       8,352          8,298          10,795            16,650      22,249
income
Provision for      —              450            4,000             450         7,750
loan losses
                                                                          
Net interest
income after       8,352          7,848          6,795             16,200      14,499
provision
                                                                               
Service
charges on         506            493            556               999         1,110
deposit
accounts
Income from
fiduciary          —              517            291               517         542
activities
Bank card
interchange        196            172            199               368         376
fees
Other real
estate owned       230            112            24                342         62
income
Gains (losses)
on sales of        703            —              1,511             703         3,530
securities,
net
Income from
bank owned         305            79             79                384         158
life insurance
Other              208            274            358               482         685
                                             
Non-interest       2,148          1,647          3,018             3,795       6,463
income
                                                                               
Salaries &
employee           3,999          4,139          3,982             8,138       8,294
benefits
Occupancy and      913            931            969               1,844       1,855
equipment
Other real
estate owned       1,657          791            1,205             2,448       2,462
expense
FDIC insurance     650            639            832               1,289       1,705
Franchise tax      537            537            592               1,074       1,184
Loan
collection         2,407          1,035          586               3,442       946
expense
Professional       499            406            567               905         923
fees
Communications     179            175            168               354         348
expense
Postage and        102            113            109               215         231
delivery
Insurance          160            151            104               311         200
expense
Other              706            647            548               1,353       1,161
                                             
Non-interest       11,809         9,564          9,662             21,373      19,309
expense
                                                                               
Income (loss)
before income      (1,309     )   (69        )   151               (1,378  )   1,653
taxes
Income tax
expense            —              —              —                 —           —
(benefit)
                                             
Net income         (1,309     )   (69        )   151               (1,378  )   1,653
(loss)
Less:
Dividends on
preferred          437            438            438               875         875
stock
Accretion on
preferred          45             45             45                90          90
stock
Earnings
(loss)
allocated to       (110       )   (28        )   (13        )      (131    )   27
participating
securities
                                                                             
Net income
(loss)           $ (1,681     ) $ (524       ) $ (319       ) $    (2,212  ) $ 661
available to
common
                                             
                                                                               
Weighted
average shares     11,761,788     11,847,907     11,733,156     11,801,663     11,701,655
– Basic
Weighted
average shares     11,761,788     11,847,907     11,733,156     11,801,663     11,701,655
– Diluted
                                                                               
Basic earnings
(loss) per       $ (0.14      ) $ (0.04      ) $ (0.03      ) $ (0.19      ) $ 0.06
common share
Diluted
earnings         $ (0.14      ) $ (0.04      ) $ (0.03      ) $ (0.19      ) $ 0.06
(loss) per
common share
Cash dividends
declared per     $ 0.00         $ 0.00         $ 0.00         $ 0.00         $ 0.00
common share

               
PORTER BANCORP, INC.

Unaudited Financial Information

(in thousands, except share and per share data)
                                                                                     
                 Three         Three         Three         Six           Six
                 Months        Months        Months        Months        Months
                 Ended         Ended         Ended         Ended         Ended
                 6/30/13       3/31/13       6/30/12       6/30/13       6/30/12
                                           
Average
Balance Sheet
Data
Assets           $ 1,104,807   $ 1,151,816   $ 1,363,340   $ 1,128,182   $ 1,387,973
Loans              806,941       872,505       1,078,497     839,542       1,098,839
Earning assets     1,050,515     1,111,469     1,307,520     1,080,824     1,329,199
Deposits           1,008,102     1,053,884     1,231,281     1,030,867     1,255,284
Long-term debt     36,652        37,169        38,959        36,909        39,255
and advances
Interest
bearing            941,059       983,481       1,159,447     962,153       1,183,651
liabilities
Stockholders’      46,904        47,749        83,987        47,324        84,323
equity
                                                                                     
                                                                                     
Performance
Ratios
Return on          (0.48)    %   (0.02)    %   0.04      %   (0.25)    %   0.24      %
average assets
Return on          (11.19)       (0.59)        0.72          (5.87)        3.94
average equity
Yield on
average
earning assets     4.31          4.15          4.59          4.23          4.66
(tax
equivalent)
Cost of
interest           1.20          1.22          1.39          1.21          1.41
bearing
liabilities
Net interest
margin (tax        3.24          3.07          3.35          3.15          3.40
equivalent)
Efficiency         120.54        96.17         78.54         108.26        76.68
ratio
                                                                                     
                                                                                     
Loan
Charge-off
Data
Loans            $ (3,404    ) $ (17,962   ) $ (6,438    ) $ (21,366   ) $ (9,020    )
charged-off
Recoveries         1,124         671           79            1,795         285
                                                                    
Net              $ (2,280    ) $ (17,291   ) $ (6,359    ) $ (19,571   ) $ (8,735    )
charge-offs
                                                                                     
                                                                                     
Nonaccrual
Loan Activity
Nonaccrual
loans at         $ 120,943     $ 94,517      $ 97,230      $ 94,517      $ 92,020
beginning of
period
Net principal      (8,118    )   (4,105    )   (4,084    )   (12,223   )   (9,324    )
pay-downs
Charge-offs        (3,256    )   (17,472   )   (4,902    )   (20,728   )   (7,214    )
Loans
foreclosed and     (11,875   )   (3,648    )   (15,243   )   (15,523   )   (19,072   )
transferred to
OREO
Loans returned
to accrual         (421      )   —             —             (421      )   —
status
Loans placed
on nonaccrual      14,912        51,651        8,652         66,563        25,243
during the
period
                                                                                     
Nonaccrual
loans at end     $ 112,185     $ 120,943     $ 81,653      $ 112,185     $ 81,653
of period
                                                                                     
                                                                                     
Troubled Debt
Restructurings
(TDRs)
Accruing         $ 54,927      $ 55,171      $ 85,068      $ 54,927      $ 85,068
Nonaccrual        46,510       52,592       37,748       46,510       37,748
Total            $ 101,437     $ 107,763     $ 122,816     $ 101,437     $ 122,816
                                                                                     
Other Real Estate Owned (OREO) Activity
(Net of Allowance)
OREO at
beginning of     $ 44,192      $ 43,671      $ 35,574      $ 43,671      $ 41,449
period
Real estate        11,875        3,680         23,910        15,555        28,126
acquired
Valuation
adjustment         (977      )   (307      )   (350      )   (1,284    )   (830      )
write-downs
Proceeds from
sales of           (7,898    )   (2,655    )   (4,223    )   (10,553   )   (13,433   )
properties
Loss on sales,     (162      )   (197      )   (546      )   (359      )   (948      )
net
Capital            —             —             —             —             1
improvements
                                                                                     
OREO at end of   $ 47,030      $ 44,192      $ 54,365      $ 47,030      $ 54,365
period

                                                                             
PORTER BANCORP, INC.

Unaudited Financial Information

(in thousands, except share and per share data)
                                                                             
                     As of        As of          As of          As of
                     6/30/13      3/31/13        12/31/12       6/30/12
                                                             
Assets
Loans              $ 774,785      $ 827,076      $ 899,092      $ 1,040,909
Loan loss reserve   (37,559    )   (39,839    )   (56,680    )   (51,594    )
                                                            
Net loans            737,226        787,237        842,412        989,315
Mortgage loans       133            —              507            383
held for sale
Securities           176,942        183,247        178,476        194,091
available for sale
Federal funds sold
& interest bearing   56,512         62,505         41,161         30,762
deposits
Cash and due from
financial            7,754          8,683          8,411          5,599
institutions
Premises and         20,368         20,667         20,805         21,223
equipment
Other real estate    47,030         44,192         43,671         54,365
owned
Accrued interest
receivable and      26,166         26,338         27,188         39,114
other assets
                                                           
Total Assets       $ 1,072,131    $ 1,132,869    $ 1,162,631    $ 1,334,852
                                                           
                                                                             
Liabilities and
Equity
Certificates of    $ 690,557      $ 739,934      $ 760,573      $ 909,504
deposit
Interest checking    78,218         83,522         87,234         82,208
Money market         65,620         62,111         63,715         60,704
Savings             40,121         41,952         39,227         39,509
                                                           
Total interest       874,516        927,519        950,749        1,091,925
bearing deposits
Demand deposits     106,320        108,841        114,310        112,797
                                                           
Total deposits       980,836        1,036,360      1,065,059      1,204,722
Federal funds
purchased &          3,292          2,853          2,634          2,501
repurchase
agreements
FHLB advances        5,016          5,324          5,604          6,398
Junior
subordinated         31,525         31,525         31,975         32,200
debentures
Accrued interest
payable and other   12,710         10,069         10,169         7,526
liabilities
                                                           
Total liabilities    1,033,379      1,086,131      1,115,441      1,253,347
Stockholders’       38,752         46,738         47,190         81,505
equity
                                                           
Total Liabilities
and Stockholders’  $ 1,072,131    $ 1,132,869    $ 1,162,631    $ 1,334,852
Equity
                                                           
                                                                             
Ending shares        12,322,207     12,139,975     12,002,421     11,934,872
outstanding
Book value per     $ 0.04         $ 0.70         $ 0.74         $ 3.62
common share
Tangible book
value per common     (0.10      )   0.55           0.58           3.44
share
                                                                             
Asset Quality Data
Loan 90 days or
more past due      $ 71           $ —            $ 86           $ 88
still on accrual
Nonaccrual loans    112,185        120,943        94,517         81,653
                                                           
Total
non-performing       112,256        120,943        94,603         81,741
loans
Real estate
acquired through     47,030         44,192         43,671         54,365
foreclosures
Other repossessed   —              —              —              5
assets
                                                           
Total
non-performing     $ 159,286      $ 165,135      $ 138,274      $ 136,111
assets
                                                           
Non-performing
loans to total       14.49      %   14.62      %   10.52      %   7.85       %
loans
Non-performing
assets to total      14.86          14.58          11.89          10.20
assets
Allowance for loan
losses to            33.46          32.94          59.91          63.12
non-performing
loans
Allowance for loan
losses to total      4.85           4.82           6.30           4.96
loans
                                                                             
Risk-based Capital
Ratios
Tier I leverage      4.91       %   4.91       %   4.50       %   7.56       %
ratio
Tier I risk-based    6.88           6.77           6.46           9.95
capital ratio
Total risk-based     10.46          10.16          9.81           11.94
capital ratio
                                                                             
FTE employees        264            264            278            300

Contact:

Porter Bancorp, Inc.
John T. Taylor, 502-499-4800
President
 
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