PBIB Porter Bancorp, Inc. (delisted)

Reports 28% NPA Reduction in 3rd Quarter

Porter Bancorp, Inc. (NASDAQ: PBIB), parent company of PBI Bank, today reported unaudited results for the third quarter of 2016.

The Company reported that net income available to common shareholders for the third quarter of 2016 was $1.3 million, or $0.04 per basic and diluted common share, compared with net loss attributable to common shareholders of $1.0 million, or ($0.04) per basic and diluted share, for the third quarter of 2015. Net income available to common shareholders for the nine months ended September 30, 2016, was $3.8 million, or $0.13 per diluted common share, compared with net loss attributable to common shareholders of $2.3 million, or ($0.10) per diluted share, for the nine months ended September 30, 2015.

John T. Taylor, President and CEO of the Company noted, “More progress was made in the third quarter in reducing the overall levels of non-performing assets. Non-performing assets were reduced by $6.7 million from the previous quarter end and $16.1 million or 48% from the previous year end. We are also pleased to see a third consecutive profitable quarter supported by increasing net interest income versus the previous quarter.”

Net Interest Income – Net interest income increased to $7.5 million for the third quarter of 2016 compared to $7.2 million in the second quarter of 2016 and $7.5 million in the third quarter of 2015. Average loans increased to $626.1 million for the third quarter of 2016 compared with $619.3 million in the second quarter of 2016, and declined compared to $640.0 million in the third quarter of 2015. Net interest margin increased to 3.47% in the third quarter of 2016 compared to 3.34% in the second quarter of 2016 and 3.33% in the third quarter of 2015.

Our yield on earning assets increased to 4.15% in the third quarter of 2016 compared to 4.03% in the second quarter of 2016 and 4.07% in the third quarter of 2015. Our cost of funds was 0.78% in the third quarter of 2016 compared to 0.79% in the second quarter of 2016 and improved from 0.83% in the third quarter of 2015.

Allowance for Loan Losses and Recovery of Provision – The allowance for loan losses to total loans was 1.53% at September 30, 2016, compared to 1.62% at June 30, 2016, and 2.27% at September 30, 2015. The declining level of the allowance is primarily driven by declining charge-off levels and improving trends in credit quality. Net loan recoveries were $135,000 for the third quarter of 2016, compared to net charge-offs of $636,000 for the second quarter of 2016 and net charge-offs of $411,000 for the third quarter of 2015. The allowance for loan losses for loans evaluated collectively for impairment was 1.51% at September 30, 2016, compared with 1.66% at June 30, 2016, and 2.33% at September 30, 2015.

Because of ongoing improvements in asset quality and management’s assessment of risk in the loan portfolio, a negative provision of $750,000 was recorded for the third quarter of 2016, compared to a negative provision of $600,000 for the second quarter of 2016 and negative provision of $2.2 million in the third quarter of 2015.

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 $17.2 million, or 1.88% of total assets at September 30, 2016, compared with $23.9 million, or 2.61% of total assets at June 30, 2016, and $46.2 million, or 4.85% of total assets at September 30, 2015.

Non-performing loans decreased to $10.1 million, or 1.62% of total loans, at September 30, 2016, compared with $11.6 million, or 1.86% of total loans at June 30, 2016, and $17.0 million, or 2.72% of total loans at September 30, 2015. The decrease from the previous quarter was primarily driven by $592,000 in principal payments received on nonaccrual loans, $667,000 of nonaccrual loans migrating to OREO, and $303,000 of charge-offs.

OREO at September 30, 2016, decreased to $7.1 million, compared with $12.3 million at June 30, 2016, and $29.2 million at September 30, 2015. The Company acquired $667,000 in OREO and sold $5.6 million in OREO during the third quarter of 2016. Fair value write-downs arising from lower marketing prices or new appraisals totaled $320,000 in the third quarter of 2016 compared with $150,000 in the second quarter of 2016 and $4.5 million in the third quarter of 2015.

         

The following table details past due loans and non-performing assets as of:

     

September 30,2016

   

June 30,2016

   

March 31,2016

   

December 31,2015

   

September 30,2015

(in thousands) Past due loans: 30 – 59 days $ 2,335 $ 2,401 $ 1,829 $ 3,133 $ 1,972 60 – 89 days 273 336 62 241 578 90 days or more — — — — — Nonaccrual loans   10,099   11,599   11,119   14,087   16,987

Total past due and nonaccrual loans

$

12,707

$

14,336

$ 13,010 $ 17,461 $ 19,537  

Loans past due 90 days or more

$

—

$

—

$ — $ — $ — Nonaccrual loans 10,099 11,599 11,119 14,087 16,987 OREO 7,098 12,322 17,861 19,214 29,177 Other repossessed assets   —   —   —   —   —

Total non-performing assets

$

17,197

$

23,921

$ 28,980 $ 33,301 $ 46,164  

In addition to nonaccrual loans and OREO, loans classified as Troubled Debt Restructures (TDRs) and on accrual totaled $6.1 million at September 30, 2016, compared to $13.9 million at June 30, 2016, and $17.7 million at September 30, 2015.

Non-interest Income – Non-interest income decreased $47,000 to $1.1 million for the third quarter of 2016 compared with $1.2 million for the second quarter of 2016, and decreased $1.1 million compared with $2.2 million for the third quarter of 2015. The decrease in non-interest income from the third quarter of 2015 is due to the gain on extinguishment of junior subordinated debt of $883,000 recognized in 2015. Additionally, OREO income has continued to decline as income producing properties have been sold.

Non-interest Expense – Non-interest expense was unchanged at $7.9 million for the third quarter of 2016 compared to the second quarter of 2016, and decreased $5.0 million compared with $13.0 million for the third quarter of 2015. The decrease from the third quarter of 2015 was due to a decrease in OREO expense as a result of fewer write-downs during the third quarter of 2016.

Capital – On April 15, 2016, we completed a $5.03 million stock offering to accredited investors in a private placement transaction in which we issued 2,300,000 Common Shares and 1,100,000 Non-Voting Common Shares. Approximately $2.8 million of the proceeds were directed by the investors to make interest payments on the outstanding capital securities of the Company’s subsidiary trusts, which brought interest payments current through the second quarter of 2016. Also from the proceeds, the Company made a $500,000 capital contribution to PBI Bank and the balance of the proceeds will be used for general corporate purposes.

At September 30, 2016, PBI Bank’s Tier 1 leverage ratio was 6.97% compared with 6.65% at June 30, 2016, and its Total risk-based capital ratio was 11.18% at September 30, 2016, compared with 10.87% at June 30, 2016, which are below the minimums of 9.0% and 12.0% required by the Bank’s Consent Order. At September 30, 2016, Porter Bancorp’s leverage ratio was 6.21% compared with 5.87% at June 30, 2016, and its Total risk-based capital ratio was 11.57%, compared with 11.31% at June 30, 2016. At September 30, 2016, PBI Bank’s Common Equity Tier I risk-based capital ratio was 9.53% and Porter Bancorp’s Common Equity Tier I risk-based capital ratio was 6.37%.

Forward-Looking StatementsStatements 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 InformationUnaudited supplemental financial information for the quarter ending September 30, 2016 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 9/30/16 6/30/16 9/30/15 9/30/16 9/30/15

 

 

 

Income Statement Data Interest income $ 8,931 $ 8,705 $ 9,179 $ 26,821 $ 27,549 Interest expense   1,473     1,509     1,697     4,516     5,438   Net interest income 7,458 7,196 7,482 22,305 22,111 Provision (negative provision) for loan losses   (750 )   (600 )   (2,200 )   (1,900 )   (2,200 ) Net interest income after provision 8,208 7,796 9,682 24,205 24,311   Service charges on deposit accounts 520 473 492 1,422 1,376 Bank card interchange fees 214 221 212 637 644 Other real estate owned income 46 149 380 451 1,109 Bank owned life insurance income 101 119 65 316 229 Gains (losses) on sales of securities, net (16 ) — — 187 1,696 Gain on extinguishment of debt — — 883 — 883 Other   240     190     178     635     534   Non-interest income 1,105 1,152 2,210 3,648 6,471   Salaries & employee benefits 3,945 3,857 3,920 11,624 11,795 Occupancy and equipment 842 808 815 2,504 2,513 Professional fees 374 492 620 1,251 2,313 FDIC insurance 442 493 539 1,458 1,673 Data processing expense 295 295 278 887 860 State franchise and deposit tax 255 255 285 765 855 Other real estate owned expense 322 294 5,131 1,284 8,796 Loan collection expense 222 271 321 575 895 Other   1,223     1,171     1,059     3,599     3,694   Non-interest expense 7,920 7,936 12,968 23,947 33,394   Income (loss) before income taxes 1,393 1,012 (1,076 ) 3,906 (2,612 ) Income tax expense (benefit)   —     —     —     21     —   Net income (loss) 1,393 1,012 (1,076 ) 3,885 (2,612 ) Less: Earnings (loss) allocated to participating securities   46     33     (45 )   129     (338 ) Net income (loss) attributable to common $ 1,347   $ 979   $ (1,031 ) $ 3,756   $ (2,274 )   Weighted average shares – Basic 30,081,080 29,389,804 24,681,547 28,511,025 22,313,501 Weighted average shares – Diluted 30,081,080 29,389,804 24,681,547 28,511,025 22,313,501   Basic earnings (loss) per common share $ 0.04 $ 0.03 $ (0.04 ) $ 0.13 $ (0.10 ) Diluted earnings (loss) per common share $ 0.04 $ 0.03 $ (0.04 ) $ 0.13 $ (0.10 ) Cash dividends declared per common share $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00    

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 9/30/16 6/30/16 9/30/15 9/30/16 9/30/15

 

 

 

Average Balance Sheet Data Assets $ 917,625 $ 936,000 $ 968,471 $ 930,288 $ 994,355 Loans 626,095 619,253 639,954 621,824 641,489 Earning assets 864,307 876,721 903,857 874,185 923,318 Deposits 839,926 858,849 893,262 854,580 916,459 Long-term debt and advances 27,270 27,649 32,769 27,649 33,289 Interest bearing liabilities 748,585 766,712 813,753 764,852 838,207 Stockholders’ equity 42,170 39,214 30,920 38,324 32,876     Performance Ratios Return on average assets 0.60 % 0.43 % (0.44 )% 0.56 % (0.35 )% Return on average equity 13.14 10.38 (13.81 ) 13.54 (10.62 ) Yield on average earning assets (tax equivalent) 4.15 4.03 4.07 4.14 4.03 Cost of interest bearing liabilities 0.78 0.79 0.83 0.79 0.87 Net interest margin (tax equivalent) 3.47 3.34 3.33 3.45 3.25 Efficiency ratio 92.32 95.06 133.80 92.94 124.21     Loan Charge-off Data Loans charged-off $ (405 ) $ (928 ) $ (1,580 ) $ (2,082 ) $ (5,171 ) Recoveries   540     292     1,169     1,430     2,205   Net charge-offs $ 135 $ (636 ) $ (411 ) $ (652 ) $ (2,966 )     Nonaccrual Loan Activity Nonaccrual loans at beginning of period $ 11,599 $ 11,119 $ 30,215 $ 14,087 $ 47,175 Net principal pay-downs (592 ) (731 ) (9,028 ) (4,035 ) (25,118 ) Charge-offs (303 ) (344 ) (1,333 ) (1,291 ) (4,370 ) Loans foreclosed and transferred to OREO (667 ) (135 ) (3,495 ) (1,243 ) (4,440 ) Loans returned to accrual status (402 ) (265 ) (902 ) (751 ) (1,600 ) Loans placed on nonaccrual during the period   464     1,955     1,530     3,332     5,340   Nonaccrual loans at end of period $ 10,099   $ 11,599   $ 16,987   $ 10,099   $ 16,987     Troubled Debt Restructurings (TDRs) Accruing $ 6,114 $ 13,936 $ 17,656 $ 6,114 $ 17,656 Nonaccrual   3,379     3,453     3,788     3,379     3,788   Total $ 9,493 $ 17,389 $ 21,444 $ 9,493 $ 21,444   Other Real Estate Owned (OREO) Activity OREO at beginning of period $ 12,322 $ 17,861 $ 39,545 $ 19,214 $ 46,197 Real estate acquired 667 135 3,495 1,243 4,450 Valuation adjustment write-downs (320 ) (150 ) (4,450 ) (970 ) (7,080 ) Proceeds from sales of properties (5,623 ) (5,638 ) (9,397 ) (12,610 ) (14,417 ) Gain (loss) on sales, net   52     114     (16 )   221     27   OREO at end of period $ 7,098   $ 12,322   $ 29,177   $ 7,098   $ 29,177      

PORTER BANCORP, INC.

Unaudited Financial Information

(in thousands, except share and per share data)

      As of 9/30/16     6/30/16     3/31/16     12/31/15     9/30/15   Assets Loans $ 621,697 $ 624,136 $ 619,827 $ 618,666 $ 624,414 Allowance for loan losses   (9,489 )   (10,104 )   (11,340 )   (12,041 )   (14,198 ) Net loans 612,208 614,032 608,487 606,625 610,216 Loans held for sale 134 — 113 186 71 Securities held to maturity 41,883 41,948 42,011 42,075 42,138 Securities available for sale 142,433 143,145 141,525 144,978 146,837 Federal funds sold & interest bearing deposits 57,578 49,313 72,209 85,329 73,940 Cash and due from financial institutions 6,266 8,289 8,097 8,006 6,540 Premises and equipment 18,481 18,618 18,751 18,812 19,109 Bank owned life insurance 14,741 14,646 14,531 9,441 9,381 FHLB Stock 7,323 7,323 7,323 7,323 7,323 Other real estate owned 7,098 12,322 17,861 19,214 29,177 Accrued interest receivable and other assets   7,135     6,916     7,251     6,733     6,748   Total Assets $ 915,280   $ 916,552   $ 938,159   $ 948,722   $ 951,480     Liabilities and Equity Certificates of deposit $ 454,742 $ 461,183 $ 478,965 $ 499,827 $ 534,031 Interest checking 88,386 90,806 96,465 97,515 83,247 Money market 140,995 135,643 134,684 125,935 119,324 Savings   33,816     34,616     35,197     34,677     35,131   Total interest bearing deposits 717,939 722,248 745,311 757,954 771,733 Demand deposits   119,005     117,843     120,302     120,043     106,160   Total deposits 836,944 840,091 865,613 877,997 877,893 FHLB advances 2,619 2,775 2,932 3,081 3,255 Junior subordinated debentures 24,375 24,600 24,825 25,050 25,275 Accrued interest payable and other liabilities   7,721     7,651     10,181     10,577     11,249   Total liabilities 871,659 875,117 903,551 916,705 917,672   Preferred stockholders’ equity 2,771 2,771 2,771 2,771 2,771 Common stockholders’ equity   40,850     38,664     31,837     29,246     31,037   Total stockholders’ equity   43,621     41,435     34,608     32,017     33,808   Total Liabilities and Stockholders’ Equity $ 915,280   $ 916,552   $ 938,159   $ 948,722   $ 951,480     Ending shares outstanding 31,114,969 31,118,302 26,944,177 26,947,533 26,949,205 Book value per common share $ 1.31 $ 1.24 $ 1.18 $ 1.09 $ 1.15 Tangible book value per common share 1.31 1.23 1.17 1.07 1.13    

PORTER BANCORP, INC.

Unaudited Financial Information

(in thousands, except share and per share data)

      As of 9/30/16     6/30/16     3/31/16     12/31/15     9/30/15 Asset Quality Data Loan 90 days or more past due still on accrual $ — $ — $ — $ — $ — Nonaccrual loans   10,099     11,599     11,119     14,087     16,987   Total non-performing loans 10,099 11,599 11,119 14,087 16,987 Real estate acquired through foreclosures 7,098 12,322 17,861 19,214 29,177 Other repossessed assets   —     —     —     —     —   Total non-performing assets $ 17,197   $ 23,921   $ 28,980   $ 33,301   $ 46,164     Non-performing loans to total loans 1.62 % 1.86 % 1.79 % 2.28 % 2.72 % Non-performing assets to total assets 1.88 2.61 3.09 3.51 4.85 Allowance for loan losses to non-performing loans 93.96 87.11 101.99 85.48 83.58   Allowance for loans evaluated individually $ 339 $ 146 $ 464 $ 428 $ 469 Loans evaluated individually for impairment 16,214 25,535 26,236 31,776 34,895 Allowance as % of loans evaluated individually 2.09 % 0.57 % 1.77 % 1.35 % 1.34 %   Allowance for loans evaluated collectively $ 9,150 $ 9,958 $ 10,876 $ 11,613 $ 13,729 Loans evaluated collectively for impairment 605,483 598,601 593,591 586,890 589,519 Allowance as % of loans evaluated collectively 1.51 % 1.66 % 1.83 % 1.98 % 2.33 %   Allowance for loan losses to total loans 1.53 % 1.62 % 1.83 % 1.95 % 2.27 %   Loans by Risk Category Pass $ 551,075 $ 547,853 $ 534,451 $ 517,484 $ 508,470 Watch 46,049 50,024 59,265 63,363 66,726 Special Mention 603 622 1,383 1,395 1,700 Substandard 23,970 25,637 24,728 36,424 47,518 Doubtful   —     —     —     —     —   Total $ 621,697 $ 624,136 $ 619,827 $ 618,666 $ 624,414   Risk-based Capital Ratios - Company Tier I leverage ratio 6.21 % 5.87 % 5.03 % 4.74 % 4.73 % Common equity Tier I risk-based capital ratio 6.37 6.11 5.21 5.09 5.07 Tier I risk-based capital ratio 8.48 8.16 7.03 6.89 6.86 Total risk-based capital ratio 11.57 11.31 10.46 10.46 10.40   Risk-based Capital Ratios – PBI Bank Tier I leverage ratio 6.97 % 6.65 % 6.39 % 6.08 % 6.01 % Common equity Tier I risk-based capital ratio 9.53 9.22 8.94 8.84 8.73 Tier I risk-based capital ratio 9.53 9.22 8.94 8.84 8.73 Total risk-based capital ratio 11.18 10.87 10.64 10.58 10.50   FTE employees 233 239 246 244 246  

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