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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