Porter Bancorp, Inc. (NASDAQ: PBIB) (“the Company”), parent
company of PBI Bank, today reported unaudited results for the
first quarter of 2017. Per share amounts in this release have been
adjusted to reflect the 1-for-5 reverse stock split of the
Company’s common shares that was effective on December 16,
2016.
The Company reported that net income attributable to common
shareholders for the first quarter of 2017 was $1.6 million, or
$0.27 per basic and diluted common share, compared with $1.4
million, or $0.27 per basic and diluted share, for the first
quarter of 2016.
“We are pleased with the favorable financial results for the
first quarter of 2017 which were largely driven by quality loan
production and deposit growth,” said John T. Taylor, President and
CEO. “Non-interest expenses also continued to decline and normalize
commensurate with improving asset quality trends. The $1.6 million
in net income for the first quarter of 2017 compares favorably to
net income of $1.4 million in the first quarter of 2016. Core
earnings for the first quarter of 2017 outperformed the first
quarter of 2016 as the first quarter of 2016 benefitted from
$550,000 in negative loan loss provisioning and $203,000 in gains
on security sales and calls.”
Net Interest Income – Net interest income before
provision expense increased to $7.7 million for the first quarter
of 2017, compared with $7.3 million in the fourth quarter of 2016,
and $7.7 million in the first quarter of 2016. Average loans
increased to $649.3 million for the first quarter of 2017, compared
with $619.6 million in the fourth quarter of 2016 and $620.1
million in the first quarter of 2016. Net interest margin increased
to 3.55% in the first quarter of 2017, compared with 3.35% in the
fourth quarter of 2016 and 3.53% in the first quarter of 2016.
Our yield on earning assets improved to 4.23% in the first
quarter of 2017, compared to 4.01% in the fourth quarter of 2016
and remained consistent with 4.23% in the first quarter of 2016.
Our cost of funds was 0.78% in the first quarter of 2017, as well
as the fourth quarter of 2016, compared to 0.79% in the first
quarter of 2016.
Loan Loss Provision and Allowance for Loan Losses – There
was no provision for loan losses in the first quarter of 2017.
Ongoing improvements in asset quality and management’s assessment
of risk in the loan portfolio led to negative provisions for loan
losses of $550,000 for both the fourth quarter and first quarter of
2016.
The allowance for loan losses to total loans was 1.35% at March
31, 2017, compared to 1.40% at December 31, 2016, and 1.83% at
March 31, 2016. The declining level of the allowance is primarily
driven by declining historical charge-off levels, growth in the
portfolio, and improving trends in credit quality. Net loan
charge-offs were $1,000 for the first quarter of 2017, compared to
net recoveries of $28,000 for the fourth quarter of 2016, and net
charge-offs of $151,000 for the first quarter of 2016. The
allowance for loan losses for loans evaluated collectively for
impairment was 1.32% at March 31, 2017, compared with 1.37% at
December 31, 2016, and 1.83% at March 31, 2016.
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
$14.7 million, or 1.56% of total assets at March 31, 2017, compared
with $16.0 million, or 1.70% of total assets at December 31,
2016, and $29.0 million, or 3.09% of total assets at March 31,
2016.
Non-performing loans decreased to $8.1 million, or 1.22% of
total loans at March 31, 2017, compared with $9.2 million, or
1.44% of total loans at December 31, 2016, and decreased from $11.1
million, or 1.79% of total loans at March 31, 2016. The decrease
from the previous quarter was primarily driven by $1.5 million in
principal payments received on nonaccrual loans. OREO at March 31,
2017, decreased to $6.6 million, compared with $6.8 million at
December 31, 2016, and $17.9 million at March 31, 2016. The Company
acquired $100,000 in OREO and sold $388,000 in OREO during the
first quarter of 2017. There were no fair value write-downs arising
from lower marketing prices or new appraisals in the first quarter
of 2017, compared with $210,000 in the fourth quarter of 2016, and
$500,000 in the first quarter of 2016.
The following table details past due loans and non-performing
assets as of:
March 31,
2017
December 31,
2016
September 30,
2016
June 30,
2016
March 31,
2016
(in thousands) Past due loans:
30 – 59 days $ 972 $ 2,302 $ 2,335 $ 2,401 $ 1,829 60 – 89 days 289
315 273 336 62 90 days or more — — — — — Nonaccrual loans
8,102 9,216 10,099 11,599 11,119
Total past due and nonaccrual loans
$
9,363
$
11,833
$ 12,707 $ 14,336 $ 13,010 Loans past due 90 days
or more
$
—
$
—
$ — $ — $ — Nonaccrual loans 8,102 9,216 10,099 11,599 11,119 OREO
6,571 6,821 7,098 12,322 17,861 Other repossessed assets —
— — — —
Total non-performing assets
$
14,673
$
16,037
$ 17,197 $ 23,921 $ 28,980
In addition to nonaccrual loans and OREO, loans classified as
Troubled Debt Restructures (TDRs) and on accrual totaled $1.2
million at March 31, 2017, compared to $5.4 million at December 31,
2016 and $14.9 million at March 31, 2016.
Non-interest Income – Non-interest income for the first
quarter of 2017 decreased $323,000 to $1.1 million compared with
$1.4 million for the first quarter of 2016. The decrease from the
first quarter of 2016 was primarily due to reductions in OREO
income of $256,000 and reductions in the gains on sales and calls
of securities of $203,000. As income producing OREO has been sold,
no income was collected in the first quarter of 2017. Additionally,
there were no investment security sales or calls in the first
quarter of 2017. These reductions were partially offset by a
$72,000 increase in service charges on deposit accounts in the
first quarter of 2017 compared to the first quarter of 2016.
Non-interest Expense – Non-interest expense decreased
$962,000 to $7.1 million for the first quarter of 2017, compared
with $8.1 million for the first quarter of 2016. The decrease from
the first quarter of 2016 was primarily due to a reduction in OREO
expenses of approximately $684,000, a reduction of FDIC insurance
expense of $181,000, a reduction of professional fees of $82,000,
and a reduction of litigation and loan collection expenses of
$79,000.
Capital – At March 31, 2017, PBI Bank’s Tier 1 leverage
ratio was 6.37% compared with 6.24% at December 31, 2016, and its
Total risk-based capital ratio was 9.89% at March 31, 2017,
compared with 9.88% at December 31, 2016, which are below the
minimums of 9.0% and 12.0% required by the Bank’s Consent
Order.
At March 31, 2017, Porter Bancorp’s leverage ratio was 5.43%,
compared with 5.27% at December 31, 2016, and its Total risk-based
capital ratio was 10.15%, compared with 10.21% at December 31,
2016. At March 31, 2017, PBI Bank’s Common equity Tier I risk-based
capital ratio was 8.33%, and Porter Bancorp’s Common equity Tier I
risk-based capital ratio was 5.29%.
Deferred Tax Assets and Liabilities – The Company
has a net deferred tax asset of $53.3 million at March 31, 2017,
which is currently subject to a 100% valuation allowance. Deferred
tax assets and liabilities were due to the following as of:
March 31, December 31,
2017 2016 (in thousands) Deferred tax assets:
Net operating loss carry-forward $ 44,630 $ 42,094 Allowance for
loan losses 3,138 3,139 Other real estate owned write-down 3,366
3,366 Other 3,560 7,607 54,694
56,206 Deferred tax liabilities: FHLB
stock dividends 928 928 Other 500 1,229
1,428 2,157 Net deferred tax assets
before valuation allowance 53,266 54,049
Valuation allowance (53,266 ) (54,049 ) Net
deferred tax asset $ — $ —
Our ability to utilize deferred tax assets depends upon
generating sufficient future levels of taxable income. The
determination to restore a deferred tax asset and eliminate a
valuation allowance depends upon the evaluation of both positive
and negative evidence regarding the likelihood of achieving
sufficient future taxable income levels. We established a valuation
allowance for all deferred tax assets as of December 31, 2011, and
the valuation allowance remains in effect as of March 31, 2017.
Under Section 382 of the Internal Revenue Code, as amended
(“Section 382”), the Company’s net operating loss carryforwards
(“NOLs”) and other deferred tax assets can generally be used to
offset future taxable income and therefore reduce federal income
tax obligations. However, the Company’s ability to use its NOLs
would be limited if there was an “ownership change” as defined by
Section 382. This would occur if shareholders owning (or deemed to
own under the tax rules) 5% or more of the Company’s voting and
non-voting common shares increase their aggregate ownership of the
Company by more than 50 percentage points over a defined period of
time.
In 2015, the Company took two measures to preserve the value of
its NOLs. First, we adopted a tax benefits preservation plan
designed to reduce the likelihood of an “ownership change”
occurring as a result of purchases and sales of the Company’s
common shares. Any shareholder or group that acquires beneficial
ownership of 5% or more of the Company (an “acquiring person”)
could be subject to significant dilution in its holdings if the
Company’s Board of Directors does not approve such acquisition.
Existing shareholders holding 5% or more of the Company will not be
considered acquiring persons unless they acquire additional shares,
subject to certain exceptions described in the plan. In addition,
the Board of Directors has the discretion to exempt certain
transactions and certain persons whose acquisition of securities is
determined by the Board not to jeopardize the Company’s deferred
tax assets. The rights will expire upon the earlier of (i) June 29,
2018, (ii) the beginning of a taxable year with respect to which
the Board of Directors determines that no tax benefits may be
carried forward, (iii) the repeal or amendment of Section 382 or
any successor statute, if the Board of Directors determines that
the plan is no longer needed to preserve the tax benefits, and (iv)
certain other events as described in the plan.
On September 23, 2015, our shareholders approved an amendment to
the Company’s articles of incorporation to further help protect the
long-term value of the Company’s NOLs. The amendment provides a
means to block transfers of our common shares that could result in
an ownership change under Section 382. The transfer restrictions
will expire on the earlier of (i) September 23, 2018, (ii) the
beginning of a taxable year with respect to which the Board of
Directors determines that no tax benefit may be carried forward,
(iii) the repeal of Section 382 or any successor statute if our
Board determines that the transfer restrictions are no longer
needed to preserve the tax benefits of our NOLs, or (iv) such date
as the Board otherwise determines that the transfer restrictions
are no longer necessary.
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 first quarter ending March 31, 2017,
follows.
PORTER BANCORP, INC.
Unaudited Financial Information
(in thousands, except share and per share
data)
Three Months Ended 3/31/17
12/31/16 3/31/16
Income Statement Data Interest income $ 9,225 $ 8,781 $
9,185 Interest expense 1,484 1,465
1,534
Net interest income 7,741 7,316 7,651 Provision (negative
provision) for loan losses — (550 )
(550 )
Net interest income after provision 7,741 7,866 8,201
Service charges on deposit accounts 501 536 429 Bank card
interchange fees 213 212 202 Other real estate owned income — 5 256
Bank owned life insurance income 102 101 96 Gains on sales and
calls of securities, net — 29 203 Other 252
233 205
Non-interest income 1,068 1,116 1,391 Salaries &
employee benefits 3,947 3,884 3,822 Occupancy and equipment 821
1,013 854 Professional fees 303 317 385 FDIC insurance 342 202 523
Data processing expense 292 298 297 State franchise and deposit tax
225 200 255 Other real estate owned expense (16 ) 257 668
Litigation and loan collection expense 3 8,230 82 Other
1,212 1,219 1,205
Non-interest expense 7,129 15,620 8,091 Income (loss) before
income taxes 1,680 (6,638 ) 1,501 Income tax expense (benefit)
— — 21
Net income (loss) 1,680 (6,638 ) 1,480 Less: Earnings (losses)
allocated to participating securities 44 (202
) 51 Net income (loss) attributable to common
$ 1,636 $ (6,436 ) $ 1,429
Weighted average shares – Basic 6,063,026 6,035,403
5,205,066 Weighted average shares – Diluted 6,063,026 6,035,403
5,205,066 Basic earnings (loss) per common share $ 0.27 $
(1.07 ) $ 0.27 Diluted earnings (loss) per common share $ 0.27 $
(1.07 ) $ 0.27 Cash dividends declared per common share $ 0.00 $
0.00 $ 0.00
PORTER BANCORP, INC.
Unaudited Financial Information
(in thousands, except share and per share
data)
Three Months Ended 3/31/17
12/31/16 3/31/16
Average Balance Sheet Data Assets $ 937,616 $ 925,721 $
937,378 Loans 649,325 619,640 620,077 Earning assets 892,292
878,470 881,635 Deposits 853,556 847,168 865,125 Long-term debt and
advances 35,956 27,753 28,033 Interest bearing liabilities 767,461
748,159 779,438 Stockholders’ equity 33,732 42,696 33,546
Performance Ratios Return on average assets 0.73 %
(2.85 )% 0.64 % Return on average equity 20.20 (61.85 ) 17.74 Yield
on average earning assets (tax equivalent) 4.23 4.01 4.23 Cost of
interest bearing liabilities 0.78 0.78 0.79 Net interest margin
(tax equivalent) 3.55 3.35 3.53 Efficiency ratio 80.93 185.89 91.54
Loan Charge-off Data Loans charged-off $ (326
) $ (547 ) $ (749 ) Recoveries 325 575
598 Net recoveries (charge-offs) $ (1 ) $ 28 $ (151 )
Nonaccrual Loan Activity Nonaccrual loans at
beginning of period $ 9,216 $ 10,099 $ 14,087 Net principal
pay-downs (1,452 ) (1,251 ) (2,712 ) Charge-offs (229 ) (434 ) (644
) Loans foreclosed and transferred to OREO (100 ) (30 ) (441 )
Loans returned to accrual status (136 ) (283 ) (84 ) Loans placed
on nonaccrual during the period 803 1,115
913 Nonaccrual loans at end of period $ 8,102
$ 9,216 $ 11,119
Troubled
Debt Restructurings (TDRs) Accruing $ 1,244 $ 5,350 $ 14,867
Nonaccrual 3,374 3,374 3,479
Total $ 4,618 $ 8,724 $ 18,346
Other Real
Estate Owned (OREO) Activity OREO at beginning of period $
6,821 $ 7,098 $ 19,214 Real estate acquired 100 30 441 Valuation
adjustment write-downs — (210 ) (500 ) Proceeds from sales of
properties (388 ) (98 ) (1,349 ) Gain (loss) on sales, net
38 1 55 OREO at end of period $
6,571 $ 6,821 $ 17,861
PORTER BANCORP, INC.
Unaudited Financial Information
(in thousands, except share and per share
data)
As of 3/31/17 12/31/16
9/30/16 6/30/16 3/31/16
Assets Loans $ 664,183 $ 639,236 $ 621,697 $ 624,136 $
619,827 Allowance for loan losses (8,966 ) (8,967 )
(9,489 ) (10,104 ) (11,340 ) Net loans 655,217
630,269 612,208 614,032 608,487 Loans held for sale — — 134 — 113
Securities held to maturity 41,752 41,818 41,883 41,948 42,011
Securities available for sale 156,001 152,790 142,433 143,145
141,525 Federal funds sold & interest bearing deposits 32,329
56,867 57,578 49,313 72,209 Cash and due from financial
institutions 5,456 9,449 6,266 8,289 8,097 Premises and equipment
17,687 17,848 18,481 18,618 18,751 Bank owned life insurance 14,935
14,838 14,741 14,646 14,531 FHLB Stock 7,323 7,323 7,323 7,323
7,323 Other real estate owned 6,571 6,821 7,098 12,322 17,861
Accrued interest receivable and other assets 5,083
7,154 7,135 6,916
7,251
Total Assets $ 942,354 $ 945,177
$ 915,280 $ 916,552 $ 938,159
Liabilities and Equity Certificates of deposit $ 470,029 $
444,639 $ 454,742 $ 461,183 $ 478,965 Interest checking 104,811
103,876 88,386 90,806 96,465 Money market 122,434 142,497 140,995
135,643 134,684 Savings 36,380 34,518
33,816 34,616 35,197
Total interest bearing deposits 733,654 725,530 717,939 722,248
745,311 Demand deposits 127,049 124,395
119,005 117,843 120,302
Total deposits 860,703 849,925 836,944 840,091 865,613 FHLB
advances 17,313 22,458 2,619 2,775 2,932 Junior subordinated
debentures 23,925 24,150 24,375 24,600 24,825 Accrued interest
payable and other liabilities 4,908 15,911
7,721 7,651 10,181
Total liabilities 906,849 912,444 871,659 875,117 903,551
Preferred stockholders’ equity 2,771 2,771 2,771 2,771 2,771 Common
stockholders’ equity 32,734 29,962
40,850 38,664 31,837
Total stockholders’ equity 35,505 32,733
43,621 41,435 34,608
Total Liabilities and Stockholders’ Equity $ 942,354
$ 945,177 $ 915,280 $ 916,552 $ 938,159
Ending shares outstanding 6,247,520 6,224,533
6,222,994 6,223,661 5,388,836
Book value per common share $
5.24 $ 4.81 $ 6.56 $ 6.21 $ 5.91
Tangible book value per common
share 5.23 4.79 6.53 6.16 5.83
PORTER BANCORP, INC.
Unaudited Financial Information
(in thousands, except share and per share
data)
As of 3/31/17 12/31/16
9/30/16 6/30/16 3/31/16
Asset
Quality Data Loan 90 days or more past due still on accrual $ —
$ — $ — $ — $ — Nonaccrual loans 8,102 9,216
10,099 11,599 11,119
Total non-performing loans 8,102 9,216 10,099 11,599 11,119
Real estate acquired through foreclosures 6,571 6,821 7,098 12,322
17,861 Other repossessed assets — —
— — — Total
non-performing assets $ 14,673 $ 16,037 $ 17,197
$ 23,921 $ 28,980 Non-performing loans
to total loans 1.22 % 1.44 % 1.62 % 1.86 % 1.79 % Non-performing
assets to total assets 1.56 1.70 1.88 2.61 3.09 Allowance for loan
losses to non-performing loans 110.66 97.30 93.96 87.11 101.99
Allowance for loans evaluated individually $ 332 $ 399 $ 339
$ 146 $ 464 Loans evaluated individually for impairment 9,891
15,131 16,214 25,535 26,236 Allowance as % of loans evaluated
individually 3.36 % 2.64 % 2.09 % 0.57 % 1.77 % Allowance
for loans evaluated collectively $ 8,634 $ 8,568 $ 9,150 $ 9,958 $
10,876 Loans evaluated collectively for impairment 654,292 624,105
605,483 598,601 593,591 Allowance as % of loans evaluated
collectively 1.32 % 1.37 % 1.51 % 1.66 % 1.83 % Allowance
for loan losses to total loans 1.35 % 1.40 % 1.53 % 1.62 % 1.83 %
Loans by Risk Category Pass $ 617,361 $ 586,430 $
551,075 $ 547,853 $ 534,451 Watch 26,442 30,431 46,049 50,024
59,265 Special Mention 492 497 603 622 1,383 Substandard 19,888
21,878 23,970 25,637 24,728 Doubtful — —
— — —
Total
$ 664,183 $ 639,236 $ 621,697 $ 624,136 $ 619,827
Risk-based Capital Ratios - Company Tier I leverage ratio
5.43 % 5.27 % 6.21 % 5.87 % 5.03 % Common equity Tier I risk-based
capital ratio 5.29 5.20 6.37 6.11 5.21 Tier I risk-based capital
ratio 7.09 6.99 8.48 8.16 7.03 Total risk-based capital ratio 10.15
10.21 11.57 11.31 10.46
Risk-based Capital Ratios – PBI
Bank Tier I leverage ratio 6.37 % 6.24 % 6.97 % 6.65 % 6.39 %
Common equity Tier I risk-based capital ratio 8.33 8.28 9.53 9.22
8.94 Tier I risk-based capital ratio 8.33 8.28 9.53 9.22 8.94 Total
risk-based capital ratio 9.89 9.88 11.18 10.87 10.64
FTE
employees 230 238 233 239 246
Non-GAAP Financial Measures ReconciliationTangible book
value per common share is a non-GAAP financial measure derived from
GAAP-based amounts. We calculate tangible book value per common
share by excluding the balance of intangible assets from common
stockholders’ equity. We calculate tangible book value per common
share by dividing tangible common equity by common shares
outstanding, as compared to book value per common share, which we
calculate by dividing common stockholders’ equity by common shares
outstanding. We believe this is consistent with bank regulatory
agency treatment, which excludes tangible assets from the
calculation of risk-based capital.
The efficiency ratio is a non-GAAP measure of expense control
relative to revenue from net interest income and fee income. We
calculate the efficiency ratio by dividing total non-interest
expenses as determined under GAAP by net interest income and total
non-interest income, but excluding net gains on the sale of
securities from the calculation. We believe this provides a
reasonable measure of primary banking expenses relative to primary
banking revenue.
As of 3/31/17 12/31/16
9/30/16 6/30/16 3/31/16
Tangible
Book Value Per Share (in thousands, except share and per share
data) Common stockholder’s equity $ 32,734 $ 29,962 $ 40,850
$ 38,664 $ 31,837 Less: Intangible assets 42
140 239 337 435 Tangible common
equity 32,692 29,822 40,611 38,327 31,402 Shares Outstanding
6,247,520 6,224,533 6,222,994
6,223,661 5,388,836 Tangible book value per
common share $ 5.23 $ 4.79 $ 6.53 $ 6.16 $ 5.83 Book value per
common share 5.24 4.81 6.56 6.21 5.91 Three Months Ended
3/31/17 12/31/16 3/31/16
Efficiency Ratio (in thousands)
Net interest income $ 7,741 $ 7,316 $ 7,651 Non-interest
income 1,068 1,116 1,391 Less: Net gain on securities —
29 203 Revenue used for
efficiency ratio 8,809 8,403
8,839 Non-interest expense 7,129 15,620 8,091
Efficiency ratio 80.93 % 185.89 %
91.54
%
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version on businesswire.com: http://www.businesswire.com/news/home/20170419006173/en/
Porter Bancorp, Inc.John T. Taylor, 502-499-4800Chief Executive
Officer
Porter Bancorp, Inc. (delisted) (NASDAQ:PBIB)
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