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Porter Bancorp, Inc. Reports Second Quarter Results

  Porter Bancorp, Inc. Reports Second Quarter Results   Second Quarter 2014 Net Loss Attributable to Common Shareholders of $672,000  Business Wire  LOUISVILLE, Ky. -- July 30, 2014  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 2014.  The Company reported a net loss attributable to common shareholders of $672,000, or ($0.06) per diluted share, for the second quarter of 2014 compared with a net loss of $1.7 million, or ($0.14) per diluted share, for the second quarter of 2013. Net loss attributable to common shareholders for the six months ended June 30, 2014, was $1.6 million, or ($0.14) per diluted common share, compared with net loss attributable to common shareholders of $2.2 million, or ($0.19) per diluted share, for the six months ended June 30, 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 develop new quality financial relationships.  Second Quarter 2014 Financial Performance Highlights    *Net Interest Income – Net interest income increased to $7.6 million for     the second quarter of 2014 compared with $7.3 million in the first quarter     of 2014 and decreased from $8.4 million in the second quarter of 2013 as     average loans declined to $677.6 million for the second quarter of 2014     compared with $698.2 million in the first quarter of 2014 and $806.9     million in the second quarter of 2013. Net interest margin increased to     3.13% in the second quarter of 2014, compared with 2.96% in the first     quarter of 2014, and declined from 3.24% in the second quarter of 2013.     While earning assets have decreased and interest expense has remained     relatively flat, net interest margin was positively impacted in the second     quarter by the collection of previously charged-off accrued uncollected     interest and late charges of approximately $240,000 along with the full     unpaid principal balance on three nonaccrual loans.   *Provision for Loan Losses – No provision for loan losses expense was     recorded for the second or first quarters of 2014, or in the second     quarter of 2013 due to 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 3.95% at June 30, 2014, compared with     4.10% at March 31, 2014, and 4.56% at June 30, 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 $107.3 million, or 10.20% of total assets at     June 30, 2014, compared with $123.3million, or 11.59% of total assets, at     March 31, 2014, and $159.3 million, or 14.86% of total assets, at June 30,     2013.  Non-performing loans decreased to $44.4 million, or 6.90% of total loans, at June 30, 2014, compared with $77.3million, or 11.33% of total loans, at March 31, 2014. The decline was primarily driven by $18.5 million of nonaccrual loans migrating to OREO, $12.2 million in principal payments received on nonaccrual loans, and $2.9 million of charge-offs.  Non-performing loans and OREO remain at elevated levels and continue to negatively impact financial performance.                   June 30,    March 31,   December        September   June 30,                                       31,            30,                  2014        2014                                    2013                                          2013            2013                    (in thousands) Past due                                                         loans: 30 – 59 days     $ 3,057     $ 5,667       $ 10,696      $ 10,018      $ 8,600 60 – 89 days       991         1,232         775           7,582         2,979 90 days or         —           —             232           —             71 more Nonaccrual        44,375     77,344       101,767      106,922      112,185 loans Total past due and nonaccrual   $ 48,423    $ 84,243      $ 113,470     $ 124,522     $ 123,835 loans                                                                           Loans past due 90 days or       $ —         $ —           $ 232         $ —           $ 71 more Nonaccrual         44,375      77,344        101,767       106,922       112,185 loans OREO              62,935     45,918       30,892       41,857       47,030 Total non-performing   $ 107,310   $ 123,262    $ 132,891    $ 148,779    $ 159,286 assets   In addition to nonaccrual loans and OREO, loans classified as Troubled Debt Restructures (TDRs) and on accrual totaled $32.4 million at June 30, 2014, compared to $41.8 million at March 31, 2014 and $54.9 million at June 30, 2013.  OREO at June 30, 2014 increased to $62.9 million, compared with $45.9 million at March 31, 2014, and $47.0 million at June 30, 2013. The Company acquired $19.6 million in OREO and sold $2.2 million in OREO during the second quarter of 2014. Fair value write-downs arising from new appraisals or lower marketing prices totaled $400,000 in the second quarter of 2014, compared with $250,000 in the first quarter of 2014 and $977,000 in the second quarter of 2013.    *Non-interest Expense – Non-interest expense increased $442,000 to $8.9     million for the second quarter of 2014, compared with $8.5 million for the     first quarter of 2014, and decreased $2.9 million compared with $11.8     million for the second quarter of 2013. The increase from the first     quarter of 2014 was due to increases in salary and employee benefit     expenses, OREO expenses, and professional fees. The reduction in     non-interest expense from the second quarter of 2013 was attributable     primarily to lower loan collection expenses and lower OREO expenses.   *Income Tax Benefit – The calculation for the income tax provision or     benefit generally does not consider the tax effects of changes in other     comprehensive income, or OCI, which is a component of stockholders’ equity     on the balance sheet. However, an exception is provided in certain     circumstances, such as when there is a full valuation allowance against     net deferred tax assets, there is a loss from continuing operations and     income in other components of the financial statements. In such a case,     pre-tax income from other categories, such as changes in OCI, must be     considered in determining a tax benefit to be allocated to the loss from     continuing operations. Our June 30, 2014 tax benefit is entirely due to     gains in other comprehensive income that are presented in current     operations in accordance with applicable accounting standards.   *Capital – At June 30, 2014, PBI Bank’s Tier 1 leverage ratio was 6.51%     compared with 6.36% at March 31, 2014, and its Total risk-based capital     ratio was 11.79% at June 30, 2014 compared with 11.50% at March 31, 2014,     which are below the minimums of 9.0% and 12.0% required by the Bank’s     Consent Order. At June 30, 2014, Porter Bancorp’s leverage ratio was 4.89%     compared with 4.87% at March 31, 2014, and its Total risk-based capital     ratio was 11.07%, compared with 10.93% at March 31, 2014.  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, 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, 2014 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                  6/30/14          3/31/14          6/30/13          6/30/14          6/30/13                                                   Income Statement Data Interest         $ 10,166         $ 9,897          $ 11,168         $ 20,063         $ 22,426 income Interest          2,552          2,597          2,816          5,149          5,776       expense                                                   Net interest       7,614            7,300            8,352            14,914           16,650 income Provision for     —              —              —              —              450         loan losses                                                                                    Net interest income after       7,614            7,300            8,352            14,914           16,200 provision                                                                                       Service charges on         487              468              506              955              999 deposit accounts Income from fiduciary          —                —                —                —                517 activities Bank card interchange        205              161              196              366              368 fees Other real estate owned       18               7                230              25               342 income Gains (losses) on sales of        2                44               703              46               703 securities, net Income from bank owned         62               76               305              138              384 life insurance Other             175            159            208            334            482                                                           Non-interest       949              915              2,148            1,864            3,795 income                                                                                       Salaries & employee           3,949            3,741            3,999            7,690            8,138 benefits Occupancy and      896              892              913              1,788            1,844 equipment Other real estate owned       774              662              1,657            1,436            2,448 expense FDIC insurance     571              540              650              1,111            1,289 Franchise tax      405              425              537              830              1,074 Loan collection         389              539              2,407            928              3,442 expense Professional       764              558              499              1,322            905 fees Communications     165              235              179              400              354 expense Postage and        94               110              102              204              215 delivery Insurance          153              149              160              302              311 expense Other             784            651            706            1,435          1,353                                                                         Non-interest       8,944            8,502            11,809           17,446           21,373 expense                                                                                       Income (loss) before income      (381       )     (287       )     (1,309     )     (668       )     (1,378     ) taxes Income tax expense           (424       )    —              —              (424       )    —           (benefit)                                                                   Net income         43               (287       )     (1,309     )     (244       )     (1,378     ) (loss) Less: Dividends on preferred          789              786              437              1,574            875 stock Accretion on preferred          —                —                45               —                90 stock Earnings allocated to      (74        )    (97        )    (110       )    (173       )    (131       ) participating securities                                                                                       Net income (loss)           $ (672       )   $ (976       )   $ (1,681     )   $ (1,645     )   $ (2,212     ) attributable to common                                                                                                                                                         Weighted average shares     11,981,121       12,021,313       11,761,788       11,992,925       11,801,663 – Basic Weighted average shares     11,981,121       12,021,313       11,761,788       11,992,925       11,801,663 – Diluted                                                                                       Basic earnings (loss) per       $ (0.06      )   $ (0.08      )   $ (0.14      )   $ (0.14      )   $ (0.19      ) common share Diluted earnings         $ (0.06      )   $ (0.08      )   $ (0.14      )   $ (0.14      )   $ (0.19      ) (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                  6/30/14         3/31/14          6/30/13          6/30/14          6/30/13                                                  Average Balance Sheet Data Assets           $ 1,056,888     $ 1,073,586      $ 1,104,807      $ 1,065,191      $ 1,128,182 Loans              677,643         698,184          806,941          687,857          839,542 Earning assets     991,416         1,019,173        1,050,515        1,005,218        1,080,824 Deposits           966,164         984,169          1,008,102        975,117          1,030,867 Long-term debt     35,372          35,233           36,652           35,303           36,909 and advances Interest bearing            893,921         911,186          941,059          902,506          962,153 liabilities Stockholders’      37,690          36,992           46,904           37,343           47,324 equity                                                                                                                                                                           Performance Ratios Return on          0.02      %     (0.11     )%     (0.48     )%     (0.05     )%     (0.25     )% average assets Return on          0.46            (3.15     )      (11.19    )      (1.32     )      (5.87     ) average equity Yield on average earning assets     4.16            3.99             4.31             4.08             4.23 (tax equivalent) Cost of interest           1.15            1.16             1.20             1.15             1.21 bearing liabilities Net interest margin (tax        3.13            2.96             3.24             3.04             3.15 equivalent) Efficiency         104.47          104.05           120.54           104.27           108.26 ratio                                                                                                                                                                           Loan Charge-off Data Loans            $ (3,130    )   $ (3,082    )    $ (3,404    )    $ (6,212    )    $ (21,366   ) charged-off Recoveries        1,741         373            1,124          2,114          1,795      Net              $ (1,389    )   $ (2,709    )    $ (2,280    )    $ (4,098    )    $ (19,571   ) charge-offs                                                                                                                                                                           Nonaccrual Loan Activity Nonaccrual loans at         $ 77,344        $ 101,767        $ 120,943        $ 101,767        $ 94,517 beginning of period Net principal      (12,195   )     (10,245   )      (8,118    )      (22,440   )      (12,223   ) pay-downs Charge-offs        (2,932    )     (2,472    )      (3,256    )      (5,404    )      (20,728   ) Loans foreclosed and     (18,524   )     (16,895   )      (11,875   )      (35,419   )      (15,523   ) transferred to OREO Loans returned to accrual         (2,362    )     (870      )      (421      )      (3,232    )      (421      ) status Loans placed on nonaccrual     3,044         6,059          14,912         9,103          66,563     during the period Nonaccrual loans at end     $ 44,375       $ 77,344        $ 112,185       $ 44,375        $ 112,185    of period                                                                                                                                                                           Troubled Debt Restructurings (TDRs) Accruing         $ 32,389        $ 41,813         $ 54,927         $ 32,389         $ 54,927 Nonaccrual        18,500        30,640         46,510         18,500         46,510     Total            $ 50,889        $ 72,453         $ 101,437        $ 50,889         $ 101,437                                                                                      Other Real Estate Owned (OREO) Activity (Net of Allowance) OREO at beginning of     $ 45,918        $ 30,892         $ 44,192         $ 30,892         $ 43,671 period Real estate        19,569          17,351           11,875           36,920           15,555 acquired Valuation adjustment         (400      )     (250      )      (977      )      (650      )      (1,284    ) write-downs Proceeds from sales of           (2,206    )     (2,075    )      (7,898    )      (4,281    )      (10,553   ) properties Gain (loss) on    54            —              (162      )     54             (359      ) sales, net OREO at end of   $ 62,935       $ 45,918        $ 47,030        $ 62,935        $ 47,030     period     PORTER BANCORP, INC. Unaudited Financial Information (in thousands, except share and per share data)                  As of           As of           As of           As of                  6/30/14          3/31/14          12/31/13         6/30/13 Assets Loans            $ 643,030        $ 682,591        $ 709,326        $ 774,785 Loan loss         (24,026    )    (25,415    )    (28,124    )    (37,559    ) reserve                                                                   Net loans          619,004          657,176          681,202          737,226 Mortgage loans     280              —                149              133 held for sale Securities held to            43,488           43,550           43,612           — maturity Securities available for      180,723          166,442          163,344          176,942 sale Federal funds sold & interest           95,353           99,286           103,669          56,512 bearing deposits Cash and due from financial     6,913            7,449            7,465            7,754 institutions Premises and       19,788           19,821           19,983           20,368 equipment FHLB Stock         7,323            7,323            10,072           10,072 Other real         62,935           45,918           30,892           47,030 estate owned Accrued interest          16,220         16,565         15,733         16,094      receivable and other assets                                                                   Total Assets     $ 1,052,027     $ 1,063,530     $ 1,076,121     $ 1,072,131                                                                     Liabilities and Equity Certificates     $ 631,110        $ 656,475        $ 679,952        $ 690,557 of deposit Interest           76,625           79,689           84,626           78,218 checking Money market       95,946           89,678           79,349           65,620 Savings           37,178         38,524         36,292         40,121                                                                        Total interest bearing            840,859          864,366          880,219          874,516 deposits Demand            109,956        110,507        107,486        106,320     deposits                                                                   Total deposits     950,815          974,873          987,705          980,836 Federal funds purchased &        2,451            2,240            2,470            3,292 repurchase agreements FHLB advances      14,134           4,345            4,492            5,016 Junior subordinated       30,400           30,625           30,850           31,525 debentures Accrued interest payable and       16,453         15,110         14,673         12,710      other liabilities                                                                   Total              1,014,253        1,027,193        1,040,190        1,033,379 liabilities Stockholders’     37,774         36,337         35,931         38,752      equity                                                                   Total Liabilities and              $ 1,052,027     $ 1,063,530     $ 1,076,121     $ 1,072,131   Stockholders’ Equity                                                                                                                                        Ending shares      13,104,853       12,894,741       12,840,999       12,322,207 outstanding Book value per   $ (0.04      )   $ (0.15      )   $ (0.18      )   $ 0.04 common share Tangible book value per          (0.13      )     (0.25      )     (0.29      )     (0.10      ) common share                                                                      Asset Quality Data Loan 90 days or more past     $ —              $ —              $ 232            $ 71 due still on accrual Nonaccrual        44,375         77,344         101,767        112,185     loans Total non-performing     44,375           77,344           101,999          112,256 loans Real estate acquired           62,935           45,918           30,892           47,030 through foreclosures Other repossessed       —              —              —              —           assets Total non-performing   $ 107,310       $ 123,262       $ 132,891       $ 159,286     assets                                                                   Non-performing loans to total     6.90       %     11.33      %     14.38      %     14.49      % loans Non-performing assets to          10.20            11.59            12.35            14.86 total assets Allowance for loan losses to     54.14            32.86            27.57            33.46 non-performing loans Allowance as % of loans           2.20             2.01             2.32             5.82 evaluated individually Allowance as % of loans           3.95             4.10             4.41             4.56 evaluated collectively Allowance for loan losses to     3.74             3.72             3.96             4.85 total loans                                                                      Risk-based Capital Ratios Tier I             4.89       %     4.87       %     4.95       %     4.91       % leverage ratio Tier I risk-based         7.31             7.22             7.34             6.88 capital ratio Total risk-based         11.07            10.93            11.03            10.46 capital ratio                                                                      FTE employees      275              263              260              264   Contact:  Porter Bancorp, Inc. John T. Taylor, President, 502-499-4800  
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