Porter Bancorp, Inc. Reports First Quarter 2014 Results

  Porter Bancorp, Inc. Reports First Quarter 2014 Results

 First Quarter 2014 Net Loss Attributable to Common Shareholders of $976,000

Business Wire

LOUISVILLE, Ky. -- April 30, 2014

Porter Bancorp, Inc. (NASDAQ: PBIB), parent company of PBIBank, with
18full-service banking centers in Kentucky, today reported unaudited results
for the first quarter of 2014.

The Company reported that the net loss attributable to common shareholders
decreased to $976,000, or ($0.08) per diluted share, for the first quarter of
2014 compared to a net loss of $1,028,000, or ($0.09) per diluted share for
the fourth quarter of 2013 and increased compared to the net loss of $524,000,
or ($0.04) per diluted share, for the first quarter of 2013.

Our primary initiatives for 2014 are to continue reducing non-performing
assets, restore capital, and return to sustainable profitability while
continuing to serve our customers and developing new quality financial
relationships.

First Quarter 2014 Financial Performance Highlights

  *Net Interest Income – Net interest income declined to $7.3 million for the
    first quarter of 2014 compared with $7.6 million in the fourth quarter of
    2013 and $8.3 million in the first quarter of 2013 as average loans
    declined to $698.2 million for the first quarter of 2014 compared with
    $719.2 million in the fourth quarter of 2013 and $872.5 million in the
    first quarter of 2013. Net interest margin remained consistent at 2.96% in
    the first quarter of 2014, compared with 2.96% in the fourth quarter of
    2013, and declined from 3.07% in the first quarter of 2013.

  *Provision for Loan Losses – No provision for loan losses expense was
    recorded for the first quarter of 2014 or the fourth quarter of 2013,
    compared to $450,000 in the first quarter of 2013. The reduction in
    provision for loan losses benefited from the downsizing of the loan
    portfolio, declining historical loss rates, and a reduction in loans
    migrating downward in risk grade classification. The allowance for loan
    losses for loans evaluated collectively for impairment was 4.10% at March
    31, 2014, compared with 4.41% at December 31, 2013, and 4.88% at March 31,
    2013.
  *Non-performing Assets - Non-performing assets, which include loans past
    due 90 days and still accruing, loans on nonaccrual, and other real estate
    owned (OREO), decreased to $123.3 million, or 11.59% of total assets at
    March 31, 2014, compared with $132.9million, or 12.35% of total assets,
    at December 31, 2013.

Non-performing loans decreased to $77.3 million, or 11.33% of total loans, at
March 31, 2014, compared with $102.0million, or 14.38% of total loans, at
December 31, 2013. The decline was primarily driven by $16.9 million of
nonaccrual loans migrating to OREO, $10.2 million in principal payments
received on nonaccrual loans, and $2.7 million of net charge-offs.

Non-performing loans and OREO remain at elevated levels and continue to
negatively impact financial performance.

                   March       December     September      June 30,      March 31,
                  31,        31,        30,                     
                                                           2013          2013
                   2014        2013         2013
                   (in thousands)
Past due                                                           
loans:
30 – 59 days     $ 5,667     $ 10,696       $ 10,018       $ 8,600       $ 8,052
60 – 89 days       1,232       775            7,582          2,979         2,960
90 days or         —           232            —              71            —
more
Nonaccrual        77,344     101,767       106,922       112,185      120,943
loans
Total past due
and nonaccrual   $ 84,243    $ 113,470      $ 124,522      $ 123,835     $ 131,955
loans
                                                                           
Loans past due
90 days or       $ —         $ 232          $ —            $ 71          $ —
more
Nonaccrual         77,344      101,767        106,922        112,185       120,943
loans
OREO              45,918     30,892        41,857        47,030       44,192
Total
non-performing   $ 123,262   $ 132,891     $ 148,779     $ 159,286    $ 165,135
assets


In addition to nonaccrual loans and OREO, loans classified as Troubled Debt
Restructures (TDRs) and on accrual totaled $41.8 million at March 31, 2014,
compared to $44.3 million at December 31, 2013 and $55.2 million at March 31,
2013.

OREO at March 31, 2014 increased to $45.9 million, compared with $30.9 million
at December 31, 2013, and $44.2 million at March 31, 2013. The Company
acquired $17.4 million in OREO and sold $2.1 million in OREO during the first
quarter of 2014. Fair value write-downs arising from new appraisals or lower
marketing prices totaled $250,000 in the first quarter of 2014, compared with
$882,000 in the fourth quarter of 2013 and $307,000 in the first quarter of
2013.

  *Non-interest Expense – Non-interest expense decreased $547,000 to $8.5
    million for the first quarter of 2014, compared with $9.0 million for the
    fourth quarter of 2013, and decreased $1.1 million compared with $9.6
    million for the first quarter of 2013. The reduction in non-interest
    expense was attributable primarily to lower loan collection expenses and
    lower OREO expenses.
  *Capital – At March 31, 2014, PBI Bank’s Tier 1 leverage ratio was 6.36%
    compared with 6.28% at December 31, 2013, and its Total risk-based capital
    ratio was 11.50% at March 31, 2014 compared with 11.44% at December
    31,2013, which are below the minimums of 9.0% and 12.0% required by the
    Bank’s Consent Order. At March 31, 2014, Porter Bancorp’s leverage ratio
    was 4.87% compared with 4.95% at December 31, 2013, and its Total
    risk-based capital ratio was 10.93%, compared with 11.03% at December 31,
    2013.

Management and the Board of Directors continue to evaluate appropriate
strategies for increasing the Company’s capital in order to meet the capital
requirements of the 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, the Company has engaged a
financial advisor to assist the Board of Directors in this evaluation.

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, increase net
interest income in a low interest rate environment, cybersecurity risks that
may result in increased costs for us to protect against the risks, as well as
liability or reputational damage to the Company in the event of a breach of
our security, 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 first quarter ending
March 31, 2014 follows.




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

                             Three           Three           Three
                              Months           Months           Months
                              Ended            Ended            Ended
                              3/31/14          12/31/13         3/31/13
                              
Income Statement Data
Interest income               $ 9,897          $10,259          $ 11,258
Interest expense               2,597         2,673            2,960      
                              
Net interest income             7,300          7,586              8,298
Provision for loan losses      —             —                450        
                                                               
Net interest income after       7,300          7,586              7,848
provision
                                                                
Service charges on deposit      468            523                493
accounts
Income from fiduciary           —              —                  517
activities
Bank card interchange fees      161            176                172
Other real estate owned         7              3                  112
income
Gain (loss) on sales of         44             (4           )     —
securities, net
Income from bank owned life     76             75                 79
insurance
Other                          159           184              274        
                              
Non-interest income             915            957                1,647
                                                                
Salaries & employee             3,741          3,526              4,139
benefits
Occupancy and equipment         892            855                931
Other real estate owned         662            1,399              791
expense
FDIC insurance                  540            511                639
Franchise tax                   425            333                537
Loan collection expense         539            734                1,035
Professional fees               558            484                406
Communications expense          235            180                175
Postage and delivery            110            109                113
Insurance expense               149            166                151
Other                          651           752              647        
                              
Non-interest expense            8,502          9,049              9,564
                                                                
Income (loss) before income     (287       )   (506         )     (69        )
taxes
Income tax expense             —             —                —          
(benefit)
                                                              
Net income (loss)               (287       )   (506         )     (69        )
Less:
Dividends on preferred          786            607                438
stock
Accretion on preferred          —              25                 45
stock
Earnings (loss) allocated      (97        )   (110         )    (28        )
to participating securities
                                                                
Net income (loss) available   $ (976       )   $(1,028      )   $ (524       )
to common
                              
                                                                
Weighted average shares –       12,021,313       11,907,766       11,847,907
Basic
Weighted average shares –       12,021,313       11,907,766       11,847,907
Diluted
                                                                
Basic earnings (loss) per     $ (0.08      )   $ (0.09      )   $ (0.04      )
common share
Diluted earnings (loss) per   $ (0.08      )   $ (0.09      )   $ (0.04      )
common share
Cash dividends declared per   $ 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
                              Months           Months           Months
                              Ended            Ended            Ended
                              3/31/14          12/31/13         3/31/13
                              
Average Balance Sheet Data
Assets                        $ 1,073,586      $ 1,081,908      $ 1,151,816
Loans                           698,184          719,163          872,505
Earning assets                  1,019,173        1,033,083        1,111,469
Deposits                        984,169          989,847          1,053,884
Long-term debt and advances     35,233           35,652           37,169
Interest bearing                911,186          922,519          983,481
liabilities
Stockholders’ equity            36,992           38,035           47,749
                                                                
                                                                
Performance Ratios
Return on average assets        (0.11     )%     (0.19     )%     (0.02     )%
Return on average equity        (3.15     )      (5.28     )      (0.59     )
Yield on average earning        3.99             3.99             4.15
assets (tax equivalent)
Cost of interest bearing        1.16             1.15             1.22
liabilities
Net interest margin (tax        2.96             2.96             3.07
equivalent)
Efficiency ratio                104.05           105.87           96.17
                                                                
                                                                
Loan Charge-off Data
Loans charged-off             $ (3,082    )    $ (4,171    )    $ (17,962   )
Recoveries                     373            541            671       
                                                               
Net charge-offs               $ (2,709    )    $ (3,630    )    $ (17,291   )
                                                                
                                                                
Nonaccrual Loan Activity
Nonaccrual loans at           $ 101,767        $ 106,922        $ 94,517
beginning of period
Net principal pay-downs         (10,245   )      (5,151    )      (4,105    )
Charge-offs                     (2,472    )      (3,232    )      (17,472   )
Loans foreclosed and            (16,895   )      (2,064    )      (3,648    )
transferred to OREO
Loans returned to accrual       (870      )      (2,459    )      —
status
Loans placed on nonaccrual     6,059          7,751          51,651    
during the period
                                                                
Nonaccrual loans at end of    $ 77,344        $ 101,767       $ 120,943   
period
                                                                
                                                                
Troubled Debt
Restructurings (TDRs)
Accruing                      $ 41,813         $ 44,346         $ 55,171
Nonaccrual                     30,640         46,916         52,592    
Total                         $ 72,453         $ 91,262         $ 107,763
                                                                
                 
OREO at beginning of period   $ 30,892         $ 41,857         $ 43,671
Real estate acquired            17,351           2,064            3,680
Valuation adjustment            (250      )      (882      )      (307      )
write-downs
Proceeds from sales of          (2,075    )      (12,205   )      (2,655    )
properties
Gain (loss) on sales, net      —              58             (197      )
                                                                
OREO at end of period         $ 45,918        $ 30,892        $ 44,192    




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

                             As of           As of           As of
                              3/31/14          12/31/13         3/31/13
                                                              
Assets
Loans                         $ 682,591        $ 709,326        $ 827,076
Loan loss reserve              (25,415    )    (28,124    )    (39,839    )
                                                              
Net loans                       657,176          681,202          787,237
Mortgage loans held for         —                149              —
sale
Securities held to maturity     43,550           43,612           —
Securities available for        166,442          163,344          183,247
sale
Federal funds sold &            99,286           103,669          62,505
interest bearing deposits
Cash and due from financial     7,449            7,465            8,683
institutions
FHLB stock                      7,323            10,072           10,072
Premises and equipment          19,821           19,983           20,667
Other real estate owned         45,918           30,892           44,192
Accrued interest receivable    16,565         15,733         16,266     
and other assets
                                                              
Total Assets                  $ 1,063,530     $ 1,076,121     $ 1,132,869  
                                                              
                                                                
Liabilities and Equity
Certificates of deposit       $ 656,475        $ 679,952        $ 739,934
Interest checking               79,689           84,626           83,522
Money market                    89,678           79,349           62,111
Savings                        38,524         36,292         41,952     
                                                              
Total interest bearing          864,366          880,219          927,519
deposits
Demand deposits                110,507        107,486        108,841    
                                                              
Total deposits                  974,873          987,705          1,036,360
Federal funds purchased &       2,240            2,470            2,853
repurchase agreements
FHLB advances                   4,345            4,492            5,324
Junior subordinated             30,625           30,850           31,525
debentures
Accrued interest payable       15,110         14,673         10,069     
and other liabilities
                                                              
Total liabilities               1,027,193        1,040,190        1,086,131
Stockholders’ equity           36,337         35,931         46,738     
                                                              
Total Liabilities and         $ 1,063,530     $ 1,076,121     $ 1,132,869  
Stockholders’ Equity
                                                              
                                                                
Ending shares outstanding       12,894,741       12,840,999       12,139,975
Book value per common share   $ (0.15      )   $ (0.18      )   $ 0.70
Tangible book value per         (0.25      )     (0.29      )     0.55
common share
                                                                
Asset Quality Data
Loan 90 days or more past     $ —              $ 232            $ —
due still on accrual
Nonaccrual loans               77,344         101,767        120,943    
                                                              
Total non-performing loans      77,344           101,999          120,943
Real estate acquired            45,918           30,892           44,192
through foreclosures
Other repossessed assets       —              —              —          
                                                              
Total non-performing assets   $ 123,262       $ 132,891       $ 165,135    
                                                              
Non-performing loans to         11.33      %     14.38      %     14.62      %
total loans
Non-performing assets to        11.59            12.35            14.58
total assets
Allowance for loan losses       32.86            27.57            32.94
to non-performing loans
Allowance as % of loans         2.01             2.32             4.60
evaluated individually
Allowance as % of loans         4.10             4.41             4.88
evaluated collectively
Allowance for loan losses       3.72             3.96             4.82
to total loans
                                                                
Risk-based Capital Ratios
Tier I leverage ratio           4.87       %     4.95       %     4.91       %
Tier I risk-based capital       7.22             7.34             6.77
ratio
Total risk-based capital        10.93            11.03            10.16
ratio
                                                                
FTE employees                   263              260              264

Contact:

Porter Bancorp, Inc.
John T. Taylor, 502-499-4800
Chief Executive Officer
 
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