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Porter Bancorp, Inc. Reports Third Quarter 2013 Results

  Porter Bancorp, Inc. Reports Third Quarter 2013 Results

   Third Quarter 2013 Net Loss Available to Common Shareholders of $168,000

Business Wire

LOUISVILLE, Ky. -- October 30, 2013

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 2013.

The Company reported that the net loss attributable to common shareholders
declined substantially to $168,000, or ($0.01) per diluted share, for the
third quarter of 2013 compared with a net loss of $26.9 million, or ($2.29)
per diluted share, for the third quarter of 2012. Net loss attributable to
common shareholders for the nine months ended September 30, 2013 was $2.4
million, or ($0.20) per diluted common share, compared with net loss
attributable to common shareholders of $26.4 million, or ($2.25) per diluted
share, for the nine months ended September 30, 2012. The significant reduction
in net loss since last year reflected our focus on asset quality remediation,
regulatory capital restoration, and lowering the risk profile of the Company.

Third Quarter 2013 Financial Performance Highlights

  *Balance Sheet Reduction - We have successfully reduced the size of our
    balance sheet in accordance with our capital plan. Average assets were
    $1.056 billion in the third quarter of 2013 compared with $1.105billion
    in the second quarter of 2013 and $1.326 billion in the third quarter of
    2012. This reduction 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.
  *Net Interest Income – Net interest income declined to $7.8 million for the
    third quarter of 2013 compared with $8.4 million in the second quarter of
    2013 and $10.1 million in the third quarter of 2012 as our average loans
    declined to $756.1 million for the third quarter of 2013 compared with
    $806.9 million in the second quarter of 2013 and $1.008 billion in the
    third quarter of 2012. Our net interest margin declined to 3.14% in the
    third quarter of 2013 compared with 3.24% in the second quarter of 2013
    and 3.23% in the third quarter of 2012.
  *Non-interest Income – Non-interest income decreased $981,000 to $1.2
    million in the third quarter of 2013 compared with $2.1 million in the
    second quarter of 2013 and decreased $554,000 compared with $1.7million
    in the third quarter of 2012. The quarter over quarter decline from June
    2013 to September2013 is attributable primarily to a $679,000 reduction
    in the gain on sales of securities, a $230,000 reduction in income from
    bank owned life insurance and a $176,000 decline in other real estate
    owned income.
  *Provision for Loan Losses - Provision for loan losses expense declined to
    $250,000 for the third quarter of 2013 and $700,000 for the first nine
    months of 2013 compared with $25.5 million for the third quarter of 2012
    and $33.3 million for the first nine months of 2012. The significant
    reduction in provision for loan losses is being driven by the substantial
    shrinkage of the loan portfolio, declining historical loss rates, and a
    reduction in loans migrating downward in risk grade classification. Our
    reserve for loans evaluated collectively for impairment was 4.66% at
    September 30, 2013, compared with 4.56% at June 30, 2013 and 5.06% at
    September 30, 2012.
  *Non-performing Assets - Non-performing assets, which include loans past
    due 90 days and still accruing, loans on nonaccrual, and other real estate
    owned, decreased on a dollar level basis to $148.8 million, or 14.33% of
    total assets at September 30, 2013, compared with $159.3million, or
    14.86% of total assets, at June 30, 2013. Non-performing loans and other
    real estate owned still remain at higher than normal levels and continue
    to impact negatively the Bank’s earnings performance.

Non-performing loans decreased to $106.9 million, or 14.56% of total loans, at
September 30, 2013, compared with $112.3million, or 14.49% of total loans, at
June 30, 2013. However, net charge-offs increased from $2.3 million in the
second quarter of 2013 to $6.1 million in the third quarter of 2013. Net
charge-offs for the nine months ended September 30, 2013 decreased to $25.6
million from $31.8 million for the same period in 2012.

Total past due and nonaccrual loans increased approximately $687,000 to $124.5
million at September30,2013 from $123.8 million at June 30, 2013.

                                                          
                         September     June 30,      March 31,     December
                         30,                                    31,
                                       2013          2013
                         2013                                      2012
                         (in thousands)
Past Due Loans:
30 – 59 Days           $ 10,018        $ 8,600       $ 8,052       $  38,219
60 – 89 Days             7,582           2,979         2,960          20,303
90 Days and Over         —               71            —              86
                                                                      
Nonaccrual Loans        106,922        112,185      120,943       94,517
Total Past Due and     $ 124,522      $ 123,835    $ 131,955    $  153,125
Nonaccrual Loans
                                                                      

Foreclosed properties at September 30, 2013 decreased to $41.9 million
compared with $47.0 million at June 30, 2013, and $48.8 million at September
30, 2012. The Company acquired $3.0 million in other real estate owned and
sold $8.0 million in other real estate owned during the third quarter of 2013.
Fair value write-downs arising from new appraisals or lower marketing prices
totaled $300,000 in the third quarter of 2013 compared with $4.3 million in
the third quarter of 2012 and $977,000 in the second quarter of 2013.

  *Non-interest Expense – Non-interest expense decreased $3.3 million to $8.5
    million for the third quarter of 2013 compared with $11.8 million for the
    second quarter of 2013 and decreased $5.7 million compared with $14.2
    million for the third quarter of 2012. The significant reduction in
    non-interest expense was attributable primarily to lower loan collection
    expenses and lower other real estate owned expenses.
  *Capital – Our net loss available to common shareholders of $168,000 for
    the third quarter of 2013 was much improved compared to our net loss
    available to common shareholders of $1.7 million in the second quarter of
    2013. In connection with the recent rise in long-term interest rates, our
    stockholders’ equity was negatively impacted from June 30, 2013 to
    September 30, 2013 by an increase in the net unrealized loss in our
    available for sale securities portfolio from $1.1 million at June 30,
    2013, to $2.8 million at September 30, 2013.

At September 30, 2013, PBI Bank’s Tier 1 leverage ratio was 6.40% compared
with 6.08% at June 30, 2013, and its Total risk-based capital ratio was 11.04%
at September 30, 2013 compared with 10.60% at June30,2013, which are below
the minimums of 9.0% and 12.0% required by the Bank’s Consent Order. At
September 30, 2013, Porter Bancorp’s leverage ratio was 5.15% compared with
4.91% at June 30, 2013, and its Total risk-based capital ratio was 10.78%
compared with 10.46% at 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, we have engaged a
financial advisor to assist our Board in this evaluation.

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,” “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 third quarter ending
September 30, 2013 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
                   9/30/13          6/30/13          9/30/12          9/30/13          9/30/12      
                                                   
Income
Statement Data
Interest           $ 10,543         $ 11,168         $ 13,987         $    32,969      $ 44,554
income
Interest            2,694           2,816           3,855              8,470        12,173
expense
                                                   
Net interest         7,849            8,352            10,132              24,499        32,381
income
Provision for       250             —               25,500             700          33,250
loan losses
                                                                                    
Net interest
income after         7,599            8,352            (15,368    )        23,799        (869       )
provision
                                                                                                    
Service
charges on           536              506              563                 1,535         1,673
deposit
accounts
Income from
fiduciary            —                —                261                 517           803
activities
Bank card
interchange          174              196              180                 542           553
fees
Other real
estate owned         54               230              180                 396           242
income
Gains on sales
of securities,       24               703              —                   727           3,530
net
Income from
bank owned           75               305              79                  459           238
life insurance
Other               304             208             458                786          1,145
                                                   
Non-interest         1,167            2,148            1,721               4,962         8,184
income
                                                                                                    
Salaries &
employee             3,837            3,999            4,264               11,975        12,558
benefits
Occupancy and        884              913              971                 2,728         2,826
equipment
Other real
estate owned         669              1,657            5,204               3,117         7,666
expense
FDIC insurance       578              650              559                 1,867         2,264
Franchise tax        537              537              496                 1,611         1,680
Loan
collection           531              2,407            792                 3,973         1,738
expense
Professional         503              499              776                 1,408         1,699
fees
Communications       177              179              175                 531           523
expense
Postage and          99               102              108                 314           339
delivery
Insurance            171              160              96                  482           296
expense
Other               482             706             709                1,835        1,870
                                                   
Non-interest         8,468            11,809           14,150              29,841        33,459
expense
                                                                                                    
Income (loss)
before income        298              (1,309     )     (27,797    )        (1,080  )     (26,144    )
taxes
Income tax
expense             —               —               (65        )       —            (65        )
(benefit)
                                                                                                
Net income           298              (1,309     )     (27,732    )        (1,080  )     (26,079    )
(loss)
Less:
Dividends on
preferred            437              437              437                 1,311         1,312
stock
Accretion on
preferred            45               45               44                  135           134
stock
Earnings
(loss)
allocated to        (16        )    (110       )    (1,264     )       (174    )    (1,095     )
participating
securities
                                                                                                    
Net income
(loss)             $ (168       )   $ (1,681     )   $ (26,949    )   $    (2,352  )   $ (26,430    )
available to
common
                                                   
                                                                                                    
Weighted
average shares       11,592,959       11,761,788       11,751,818       11,701,396       11,732,835
– Basic
Weighted
average shares       11,592,959       11,761,788       11,751,818       11,701,396       11,732,835
– Diluted
                                                                                                    
Basic earnings
(loss) per         $ (0.01      )   $ (0.14      )   $ (2.29      )   $ (0.20      )   $ (2.25      )
common share
Diluted
earnings           $ (0.01      )   $ (0.14      )   $ (2.29      )   $ (0.20      )   $ (2.25      )
(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           Nine            Nine
                   Months          Months          Months          Months          Months
                   Ended           Ended           Ended           Ended           Ended
                   9/30/13         6/30/13         9/30/12         9/30/13         9/30/12
                                                 
Average
Balance Sheet
Data
Assets             $ 1,056,300     $ 1,104,807     $ 1,326,457     $ 1,103,958     $ 1,367,318
Loans                756,132         806,941         1,008,053       811,433         1,068,356
Earning assets       1,006,838       1,050,515       1,261,864       1,055,891       1,306,590
Deposits             965,501         1,008,102       1,196,580       1,008,839       1,235,573
Long-term debt       36,123          36,652          38,328          36,644          38,944
and advances
Interest
bearing              903,607         941,059         1,126,045       942,423         1,164,309
liabilities
Stockholders’        37,995          46,904          81,029          44,180          83,217
equity
                                                                                               
                                                                                               
Performance
Ratios
Return on            0.11      %     (0.48)    %     (8.32)    %     (0.13)    %     (2.55)    %
average assets
Return on            3.11            (11.19)         (136.16)        (3.27)          (41.86)
average equity
Yield on
average
earning assets       4.21            4.31            4.45            4.22            4.59
(tax
equivalent)
Cost of
interest             1.18            1.20            1.36            1.20            1.40
bearing
liabilities
Net interest
margin (tax          3.14            3.24            3.23            3.15            3.35
equivalent)
Efficiency           94.17           120.54          119.38          103.85          90.34
ratio
                                                                                               
                                                                                               
Loan
Charge-off
Data
Loans              $ (7,071    )   $ (3,404    )   $ (23,487   )   $ (28,437   )   $ (32,507   )
charged-off
Recoveries          1,016          1,124          412            2,811          697
                                                 
Net                $ (6,055    )   $ (2,280    )   $ (23,075   )   $ (25,626   )   $ (31,810   )
charge-offs
                                                                                               
                                                                                               
Nonaccrual
Loan Activity
Nonaccrual
loans at           $ 112,185       $ 120,943       $ 81,653        $ 94,517        $ 92,020
beginning of
period
Net principal        (7,408    )     (8,118    )     (5,768    )     (19,599   )     (15,092   )
pay-downs
Charge-offs          (5,388    )     (3,256    )     (13,442   )     (26,116   )     (20,656   )
Loans
foreclosed and       (2,987    )     (11,875   )     (3,339    )     (18,542   )     (22,411   )
transferred to
OREO
Loans returned
to accrual           (678      )     (421      )     —               (1,099    )     —
status
Loans placed
on nonaccrual       11,198         14,912         29,528         77,761         54,771
during the
period
                                                                                               
Nonaccrual
loans at end       $ 106,922       $ 112,185       $ 88,632        $ 106,922       $ 88,632
of period
                                                                                               
                                                                                               
Troubled Debt
Restructurings
(TDRs)
Accruing           $ 43,968        $ 54,927        $ 81,930        $ 43,968        $ 81,930
Nonaccrual          49,255         46,510         35,552         49,255         35,552
Total              $ 93,223        $ 101,437       $ 117,482       $ 93,223        $ 117,482
                                                                                               
Other Real Estate Owned (OREO) Activity (Net
of Allowance)
OREO at
beginning of       $ 47,030        $ 44,192        $ 54,365        $ 43,671        $ 41,449
period
Real estate          2,987           11,875          3,405           18,542          31,531
acquired
Valuation
adjustment           (300      )     (977      )     (4,260    )     (1,584    )     (5,090    )
write-downs
Proceeds from
sales of             (8,029    )     (7,898    )     (4,140    )     (18,582   )     (17,573   )
properties
Gain (loss) on       169             (162      )     (533      )     (190      )     (1,481    )
sales, net
Capital             —              —              —              —              1
improvements
                                                                                               
OREO at end of     $ 41,857        $ 47,030        $ 48,837        $ 41,857        $ 48,837
period

                                                                
PORTER BANCORP, INC.

Unaudited Financial Information

(in thousands, except share and per share data)
                                                                                   
                     As of          As of            As of            As of
                     9/30/13        6/30/13          12/31/12         9/30/12
                                                                   
Assets
Loans              $ 734,240        $ 774,785        $ 899,092        $ 951,811
Loan loss           (31,754    )    (37,559    )    (56,680    )    (54,019    )
reserve
                                                                  
Net loans            702,486          737,226          842,412          897,792
Mortgage loans       123              133              507              210
held for sale
Securities
available for        193,981          176,942          178,476          198,148
sale
Federal funds
sold &
interest             42,071           56,512           41,161           69,928
bearing
deposits
Cash and due
from financial       11,362           7,754            8,411            11,854
institutions
Premises and         20,167           20,368           20,805           20,955
equipment
Other real           41,857           47,030           43,671           48,837
estate owned
Accrued
interest            26,080          26,166          27,188          38,317
receivable and
other assets
                                                                 
Total Assets       $ 1,038,127      $ 1,072,131      $ 1,162,631      $ 1,286,041
                                                                 
                                                                                   
Liabilities
and Equity
Certificates       $ 658,940        $ 690,557        $ 760,573        $ 882,303
of deposit
Interest             71,851           78,218           87,234           80,524
checking
Money market         77,292           65,620           63,715           63,594
Savings             37,622          40,121          39,227          39,703
                                                                 
Total interest
bearing              845,705          874,516          950,749          1,066,124
deposits
Demand              101,191         106,320         114,310         111,403
deposits
                                                                 
Total deposits       946,896          980,836          1,065,059        1,177,527
Federal funds
purchased &          3,722            3,292            2,634            2,403
repurchase
agreements
FHLB advances        4,741            5,016            5,604            5,960
Junior
subordinated         31,075           31,525           31,975           32,200
debentures
Accrued
interest
payable and         14,578          12,710          10,169          12,967
other
liabilities
                                                                 
Total                1,001,012        1,033,379        1,115,441        1,231,057
liabilities
Stockholders’       37,115          38,752          47,190          54,984
equity
                                                                 
Total
Liabilities
and                $ 1,038,127      $ 1,072,131      $ 1,162,631      $ 1,286,041
Stockholders’
Equity
                                                                 
                                                                                   
Ending shares        12,846,668       12,322,207       12,002,421       12,007,127
outstanding
Book value per     $ (0.09      )   $ 0.04           $ 0.74           $ 1.39
common share
Tangible book
value per            (0.21      )     (0.10      )     0.58             1.22
common share
                                                                                   
Asset Quality
Data
Loan 90 days
or more past       $ —              $ 71             $ 86             $ 1,486
due still on
accrual
Nonaccrual          106,922         112,185         94,517          88,632
loans
                                                                 
Total
non-performing       106,922          112,256          94,603           90,118
loans
Real estate
acquired             41,857           47,030           43,671           48,837
through
foreclosures
Other
repossessed         11              —               —               5
assets
                                                                 
Total
non-performing     $ 148,790        $ 159,286        $ 138,274        $ 138,960
assets
                                                                 
Non-performing
loans to total       14.56      %     14.49      %     10.52      %     9.47       %
loans
Non-performing
assets to            14.33            14.86            11.89            10.81
total assets
Allowance for
loan losses to       29.70            33.46            59.91            59.94
non-performing
loans
Allowance as %
of loans             3.06             5.82             11.14            8.48
evaluated
individually
Allowance as %
of loans             4.66             4.56             5.02             5.06
evaluated
collectively
Allowance for
loan losses to       4.32             4.85             6.30             5.68
total loans
                                                                                   
Risk-based
Capital Ratios
Tier I               5.15       %     4.91       %     4.50       %     5.00       %
leverage ratio
Tier I
risk-based           7.19             6.88             6.46             7.03
capital ratio
Total
risk-based           10.78            10.46            9.81             10.01
capital ratio
                                                                                   
FTE employees        260              264              278              291

Contact:

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