PBIB Porter Bancorp, Inc. (delisted)

Porter Bancorp, Inc. (NASDAQ: PBIB), parent company of PBI Bank, with 18 full-service banking offices in Kentucky, today reported results for the fourth quarter and year ended December 31, 2009. The Company reported net income of $226,000 for the fourth quarter of 2009 and $11.1 million for the year ended December 31, 2009. Including the preferred stock dividend and related accretion, the net loss to common shareholders was $256,000, or ($0.03) per fully diluted common share, for the fourth quarter of 2009 and net income of $9.1 million available to common shareholders, or $1.05 per fully diluted common share, for the full year. Porter Bancorp also reported a 4.7% increase in loans to $1.4 billion and a 18.7% increase in deposits to $1.5 billion compared with year-end 2008.

“Porter Bancorp reported higher net interest income in the fourth quarter of 2009 due to continued growth in earning assets,” stated Maria L. Bouvette, President and CEO of Porter Bancorp. “The growth in our net interest income was more than offset by a substantial increase in our provision for loan losses in the fourth quarter to account for higher charge-offs and building our allowance for loan losses. We took a more aggressive stance in reviewing our loan portfolio at year-end in light of the heightened regulatory scrutiny in the current environment and the prolonged weakness in the economy coupled with our concentration of real estate loans and the economy’s impact on real estate values.

“Our higher provision expense in the fourth quarter was the major factor in Porter reporting lower earnings in 2009 compared with 2008,” continued Ms. Bouvette. “Our core operations remain solid as evidenced by our growth in net interest income and non-interest income since the fourth quarter of last year. In addition, we continued to leverage our infrastructure as evidenced by the decrease in our non-interest expenses since the third quarter and improvement in our efficiency ratio. Our fourth quarter efficiency ratio of 44.43% was our best performance in nine quarters and remains one of the best in our industry.

“We remained focused on our asset quality due to the continuing soft economy and strengthened our allowance for loan losses to 1.87% at the end of the fourth quarter. Porter Bancorp continues to maintain its ‘well-capitalized’ position, the highest regulatory rating. Our total risk-based capital ratio of 13.83% for the holding company remains significantly above the 10.0% requirement for a well-capitalized institution.”

Fourth Quarter Results

• Net interest income increased 29.8% to $14.9 million for the three months ended December 31, 2009, compared with the same quarter of 2008. The growth in net interest income benefited from a 7.2% increase in earning assets to $1.7 billion and growth in net interest margin to 3.57% compared with 2.96% for the fourth quarter of 2008.
• Net interest margin increased 61 basis points to 3.57% in the fourth quarter of 2009 compared with 2.96% in the fourth quarter of 2008. Net interest margin was down 2 basis points from 3.59% in the third quarter of 2009 due to approximately $580,000 in interest reversals related to loans moved to non-performing status in the latest three months.
• Net income was $226,000 for the three months ended December 31, 2009, compared with $2.3 million for the fourth quarter of 2008. Net income was reduced by a $6.3 million increase in the provision for losses in the fourth quarter of 2009 compared with the same period in 2008.

• Net loss available to common stockholders was $256,000 for the fourth quarter of 2009, compared with net income of $2.1 million for the fourth quarter of 2008. The results included preferred stock dividend and accretion costs of $482,000 for the 2009 period and $214,000 in the 2008 period. Loss per diluted common share was ($0.03) in the fourth quarter of 2009 compared with earnings of $0.24 per share in the fourth quarter of 2008.
• Efficiency ratio improved to 44.43% for the three months ended December 31, 2009, compared with 47.14% for the third quarter of 2009.
• Loans grew 4.7% to $1.41 billion, compared with $1.35 billion at December 31, 2008.
• Deposits increased 18.7% to $1.5 billion compared with $1.3 billion at December 31, 2008.
• Total assets increased 11.4% to $1.8 billion compared with $1.6 billion at December 31, 2008.
• Nonperforming loans increased $58.6 million to $84.9 million in the 2009 fourth quarter compared with $26.3 million in the third quarter of 2009. Non-performing assets increased $60.2 million to $99.5 million compared with the third quarter of 2009.

Net Interest Income

Net interest income increased 29.8% to $14.9 million for the three months ended December 31, 2009, an increase of $3.4 million, compared with $11.5 million for the same period in 2008. Net interest income rose 14.5% to $54.1 million for the year ended December 31, 2009, an increase of $6.8 million, compared with $47.2 million for the same period in 2008. The increase in net interest income was primarily attributable to an increase in average earning assets and decreased cost of funds compared with 2008.

Net interest margin increased 61 basis points to 3.57% from 2.96% in the fourth quarter of 2008. The yield on earning assets declined 62 basis points from the 2008 fourth quarter and the rates paid on interest-bearing liabilities declined by 136 basis points from the fourth quarter of 2008. Net interest margin declined 2 basis points from the linked third quarter of 2009 due primarily to lower yield on earning assets, but was partially offset by lower cost of funds. The yield on earning assets decreased 31 basis points from the third quarter of 2009 and rates paid on interest-bearing liabilities decreased 34 basis points. The decline in yield on earning assets compared with the third quarter of 2009 was due to approximately $580,000 in interest reversals arising from loans moving to non-performing status during the fourth quarter.

Average earning assets rose 7.2% to $1.7 billion for the three months ended December 31, 2009, compared with $1.6 billion for the three months ended December 31, 2008. Average deposits increased 12.2% to $1.4 billion, up from $1.3 billion for the three months ended December 31, 2008.

Non-Interest Income

Non-interest income increased 9.1%, or $140,000, to $1.7 million for the fourth quarter of 2009, compared with the fourth quarter of 2008. The increase in non-interest income was due to gains on sales of loans originated for sale, but was partially offset by lower service charges on deposit accounts. PBI Bank began originating residential real estate loans for sale in the secondary market late in the first quarter of 2009. Loans sold generated $88,000 in income in the fourth quarter of 2009 and $411,000 for the year ended December 31, 2009. The Bank retained servicing rights for the sold loans. Fourth quarter 2008 non-interest income included a one-time gain of $410,000 on the sale of a branch and a one-time other-than-temporary impairment charge of $471,000 related to equity securities in the securities portfolio.

Non-Interest Expense

Non-interest expense for the fourth quarter increased 8.0% from the prior year fourth quarter. This was due primarily to increased FDIC insurance premiums. FDIC insurance premiums were $615,000 in the fourth quarter of 2009 compared with $304,000 in the fourth quarter of 2008.

Non-interest expense was down in every major category compared with the third quarter of 2009 except for other real estate owned expense and professional fees. Professional fees increased primarily due to costs associated with Porter’s abandoned tender offer to acquire Citizens First Corporation of Bowling Green, Kentucky, that was terminated in December 2009. Our efficiency ratio continues to outperform our peers at 44.43% for the fourth quarter of 2009 and improved from 50.64% in the fourth quarter of 2008.

Balance Sheet Review

Total assets increased 11.4%, or $187.2 million, to $1.8 billion at December 31, 2009, from $1.6 billion at December 31, 2008. The Company’s loan portfolio increased 4.7%, or $63 million, to $1.41 billion from $1.35 billion at December 31, 2008, due to in-house loan origination efforts. Deposits at December 31, 2009, increased 18.7% to $1.5 billion from $1.3 billion at December 31, 2008, primarily due to an increase in both time deposits and transactional accounts from promotional efforts throughout the year.

Asset Quality

Non-performing loans increased to $84.9 million, or 6.00% of total loans, at December 31, 2009, compared with $26.3 million, or 1.89% of total loans, at September 30, 2009, and $21.3 million, or 1.58% of total loans, at December 31, 2008. Foreclosed properties at December 31, 2009, were $14.5 million, compared with $12.9 million at September 30, 2009, and $7.8 million at December 31, 2008. Our ratio of non-performing assets to total assets increased during the quarter to 5.42% at December 31, 2009, compared with 2.27% at September 30, 2009.

Our loan loss reserve as a percentage of total loans increased to 1.87% at December 31, 2009, compared with 1.46% at December 31, 2008. Net loan charge-offs for the fourth quarter of 2009 were $4.6 million, or 0.33% of average loans for the quarter, and $7.5 million, or 0.54% of average loans for the year ended December 31, 2009.

“The prolonged weakness in the economy has resulted in continued pressure on real estate values, reduced demand for real estate and lower business profits that provide a source of security for many loans,” stated Ms. Bouvette. “These factors were an important part in our thorough review of our loan portfolio and the subsequent downgrading of credits in the latest quarter, including an increase of $58.6 million in loans to non-performing status. We also made a significant addition to our reserve for loan losses as a result of our allowance methodology that is driven by risk ratings. We believe these measures align our loan portfolio with current economic factors and greater industry regulatory scrutiny while recognizing the potential risk of loss in our loan portfolio. We remain very proactive in working through problem loans to minimize future losses. We believe that our strengthened allowance for loan losses and strong capital base will be important buffers against possible continued weakness in the economy,” concluded Ms. Bouvette.

PBIB-G PBIB-F

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. These forward-looking statements are based on management’s current expectations. Porter Bancorp’s actual results in future periods may differ materially from those currently expected due to various risks and uncertainties, including those discussed 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 fourth quarter and year ending December 31, 2009, follows.

PORTER BANCORP, INC. AND SUBSIDIARY Unaudited Financial Information

(in thousands, except share and per share data)

  Three   Three   Three   Twelve   Twelve Months Months Months Months Months Ended Ended Ended Ended Ended 12/31/09 9/30/09 12/31/08 12/31/09 12/31/08 Income Statement Data Interest income $ 23,517 $ 23,802 $ 24,286 $ 94,466 $ 100,107 Interest expense 8,617 9,428 12,808 40,412 52,881   Net interest income 14,900 14,374 11,478 54,054 47,226 Provision for loan losses 9,000 2,000 2,750 14,200   5,400   Net interest income after provision 5,900 12,374 8,728 39,854 41,826   Service charges on deposit accounts 793 843 817 3,112 3,424 Income from fiduciary activities 230 227 234 875 1,079 Gains on sales of loans originated for sale 88 82 - 411 - Gains (losses) on sales of securities, net (7 ) 321 10 315 (136 ) Write-off of other than temporary impairment - - (471 ) - (471 ) Gain on sale of branch - - 410 - 410 Other 573 563 537 2,381 2,562   Non-interest income 1,677 2,036 1,537 7,094 6,868   Salaries & employee benefits 3,519 3,799 3,410 15,009 14,792 Occupancy and equipment 946 993 888 3,918 3,587 FDIC insurance 615 626 304 2,203 1,051 FDIC special insurance assessment - - - 781 - Franchise tax 450 450 435 1,800 1,740 Other real estate owned expense 449 353 425 1,155 881 Professional fees 295 175 192 901 787 Postage and delivery 191 193 180 752 748 Communications expense 161 183 181 729 711 Advertising 88 121 62 492 463 Other 654 691 747 2,716 2,997   Non-interest expense 7,368 7,584 6,824 30,456 27,757   Income before income taxes 209 6,826 3,441 16,492 20,937 Income tax expense (17 ) 2,290 1,101 5,424 6,927   Net income 226 4,536 2,340 11,068 14,010 Less: Dividends on preferred stock 438 437 194 1,750 194 Accretion on preferred stock 44 44 20   176   20   Net income (loss) available to common $ (256 ) $ 4,055 $ 2,126 $ 9,142 $ 13,796     Weighted average common shares - Basic & Diluted 8,756,440 8,756,289 8,702,161 8,745,226 8,697,792     Basic and diluted earnings per common share $ ( 0.03 ) $ 0.46 $ 0.24 $ 1.05 $ 1.59 Cash dividends declared per common share $ 0.20 $ 0.20 $ 0.20 $ 0.80 $ 0.77 PORTER BANCORP, INC. AND SUBSIDIARY Unaudited Financial Information

(in thousands, except share and per share data)

          Three Three Three Twelve Twelve Months Months Months Months Months Ended Ended Ended Ended Ended 12/31/09 9/30/09 12/31/08 12/31/09 12/31/08 Average Balance Sheet Data Assets $ 1,750,225 $ 1,674,703 $ 1,630,074 $ 1,714,131 $ 1,572,599 Loans 1,394,429 1,368,970 1,349,351 1,371,034 1,324,658 Earning assets 1,667,417 1,599,943 1,555,621 1,637,103 1,491,156 Deposits 1,440,017 1,373,626 1,282,955 1,385,572 1,250,614 Long-term debt and advances 116,122 112,425 178,231 140,259 168,479 Interest bearing liabilities 1,469,548 1,401,791 1,382,241 1,437,706 1,339,782 Stockholders’ equity 173,440 168,561 148,366 168,752 131,706     Performance Ratios Return on average assets 0.05 % 1.07 % 0.57 % 0.65 % 0.89 % Return on average equity 0.52 10.68 6.27 6.56 10.64 Yield on average earning assets (tax equivalent) 5.62 5.93 6.24 5.80 6.74 Cost of interest bearing liabilities 2.33 2.67 3.69 2.81 3.95 Net interest margin (tax equivalent) 3.57 3.59 2.96 3.33 3.20 Efficiency ratio 44.43 47.14 50.64 50.06 50.74   Loan Charge-off Data Loans charged-off $ (4,619 ) $ (829 ) $ (1,835 ) $ (7,731 ) $ (3,834 ) Recoveries 53 47 98 271 323 Net charge-offs $ (4,566 ) $ (782 ) $ (1,737 ) $ (7,460 ) $ (3,511 ) PORTER BANCORP, INC. AND SUBSIDIARY Unaudited Financial Information

(in thousands, except share and per share data)

      As of As of As of 12/31/09 9/30/09 12/31/08 Assets Loans $ 1,413,252 $ 1,387,359 $ 1,350,106 Loan loss reserve   (26,392 ) (21,958 ) (19,652 ) Net loans 1,386,860 1,365,401 1,330,454 Securities available for sale 168,721 175,160 173,077 Federal funds sold & interest bearing deposits 157,091 74,232 38,189 Cash and due from financial institutions 15,082 17,610 14,957 Premises and equipment 23,610 23,756 22,543 Goodwill 23,794 23,794 23,794 Accrued interest receivable and other assets   59,932 48,809 44,843 Total Assets $ 1,835,090 $ 1,728,762 $ 1,647,857   Liabilities and Equity Certificates of deposit $ 1,238,189 $ 1,099,402 $ 1,012,851 Interest checking 77,108 72,472 76,962 Money market 84,160 80,471 72,543 Savings   33,376 33,450 33,253 Total interest bearing deposits 1,432,833 1,285,795 1,195,609 Demand deposits   97,263 92,861   92,940 Total deposits 1,530,096 1,378,656 1,288,549 Federal funds purchased & repurchase agreements 11,517 11,296 10,084 FHLB advances 82,980 125,284 142,776 Junior subordinated debentures 34,000 34,000 34,000 Accrued interest payable and other liabilities   7,163 8,411 8,235 Total liabilities 1,665,756 1,557,647 1,483,644 Stockholders’ equity   169,334 171,115 164,213 Total Liabilities and Stockholders’ Equity $ 1,835,090 $ 1,728,762 $ 1,647,857   Ending common shares outstanding 8,756,440 8,756,057 8,702,330 Book value per common share $ 15.34 $ 15.54 $ 14.85 Tangible book value per common share 12.01 12.21 11.74   Asset Quality Data Loan 90 days or more past due still on accrual $ 5,968 $ 9,896 $ 11,598 Non-accrual loans   78,888 16,369 9,725 Total non-performing loans 84,856 26,265 21,323 Real estate acquired through foreclosures 14,548 12,934 7,839 Other repossessed assets   80 77 96 Total non-performing assets $ 99,484 $ 39,276 $ 29,258 Non-performing loans to total loans 6.00 % 1.89 % 1.58 % Non-performing assets to total assets 5.42 2.27 1.78 Allowance for loan losses to non-performing loans 31.10 83.60 92.16 Allowance for loan losses to total loans 1.87 1.58 1.46   Risk-based Capital Ratios Tier I leverage ratio 9.59 % 10.13 % 10.10 % Tier I risk-based capital ratio 11.93 11.90 12.13 Total risk-based capital ratio 13.83 13.80 14.05   FTE employees 278 281 276