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 first quarter of 2010.

The Company reported a 6.4% increase in net income to $3.3 million, or $0.32 per fully diluted common share, for the first quarter of 2010, compared with $3.1 million, or $0.30 per fully diluted common share, for the first quarter of 2009. Including the preferred stock dividend and related accretion, net income available to common shareholders rose to $2.8 million, or $0.32 per fully diluted common share, for the first quarter of 2010 compared with 2.6 million, or $0.30 per fully diluted common share, for the first quarter of 2009.

“Porter Bancorp reported higher net income in the first quarter of 2010 compared with the first quarter of 2009 and the linked fourth quarter of 2009,” stated Maria L. Bouvette, President and CEO of Porter Bancorp. “Our first quarter net income showed improvement from both the fourth and first quarters of 2009 due to continued growth in our net interest income and non-interest income. Our net interest income benefited from a 7.5% increase in average earning assets to $1.7 billion and lower cost of funds compared with the first quarter of last year. Our non-interest income was up 13.9% to $1.7 million due to growth in service charges, fiduciary income and an increase in gains on sales of loans and securities compared with the first quarter of last year.

“Our provision for loan losses was $3.0 million in the first quarter of 2010 which is down significantly from $9.0 million in the 2009 fourth quarter; however, the provision expense is up from the first quarter of last year due to an increase in charge-offs,” continued Ms. Bouvette. “We will continue to aggressively review our loan portfolio. We believe the increase in our allowance for loan losses to 1.95% of total loans provides Porter Bancorp with adequate support for the continued weakness in the economy and our concentration of real estate construction and development loans that have been impacted adversely by the economic downturn.”

First Quarter Results

• Net income rose to $3.3 million for the three months ended March 31, 2010, compared with $3.1 million for the first quarter of 2009. Earnings per diluted common share increased 6.7% to $0.32 compared with the first quarter of 2009.
• Net interest margin increased 30 basis points to 3.32% in the first quarter of 2010 compared with 3.02% in the first quarter of 2009. The increase in margin since last year benefited from a lower average cost of funds. Net interest margin was down from the fourth quarter of 2009 by 25 basis points primarily due to the higher level of non-performing assets.
• Net interest income increased 18.5% to $14.2 million for the three months ended March 31, 2010, compared with the same quarter of 2009 and benefited from a 7.5% increase in average earning assets to $1.7 billion and lower cost of funds.
• Average loans rose 3.3% to $1.40 billion in the first quarter of 2010 compared with $1.36 billion in the first quarter of 2009. Net loans decreased 1.0% to $1.33 billion in the first quarter of 2010, compared with $1.35 billion at March 31, 2009.
• Deposits increased 6.8% to $1.49 billion compared with $1.39 billion at March 31, 2009.
• Total assets increased 1.1% to $1.76 billion compared with $1.74 billion at March 31, 2009.
• Efficiency ratio improved to 50.9% for the first three months of 2010, compared with 54.1% for the first quarter of 2009.
• Non-performing loans decreased $24.4 million during the first quarter to $60.5 million at March 31, 2010 compared with $84.9 million at December 31, 2009. The decrease was primarily attributable to obtaining a deed in lieu of foreclosure on a residential construction and development loan that totaled approximately $24.1 million. This loan was on non-accrual at December 31, 2009.
• Non-performing assets increased $20.7 million during the first quarter to $120.2 million at March 31, 2010. The increase was primarily due to the addition of a residential construction and development credit relationship totaling approximately $17.6 million in the first quarter of 2010.

Net Interest Income

Net interest income increased 18.5% to $14.2 million for the three months ended March 31, 2010, an increase of $2.2 million, compared with $12.0 million for the same period in 2009. This increase was primarily attributable to an increase in average earning assets and decreased cost of funds compared with 2009.

Net interest margin increased 30 basis points to 3.32% in the first quarter of 2010 from our margin of 3.02% in the prior year first quarter due primarily to increased average interest earning assets coupled with lower cost of funds. The yield on earning assets declined 62 basis points from the 2009 first quarter, compared with a 109 basis point decline in rates paid on interest-bearing liabilities. Net interest margin decreased 25 basis points to 3.32% from our margin of 3.57% in the fourth quarter of 2009 due primarily to a lower yield on earning assets. The yield on earning assets declined 33 basis points from the fourth quarter of 2009 compared with a 13 basis point decline in rates paid on interest-bearing liabilities.

Average earning assets rose 7.5% to $1.7 billion for the three months ended March 31, 2010, compared with the $1.6 billion for the three months ended March 31, 2009. Average deposits increased 15.7% to $1.5 billion, up from $1.3 billion for the three months ended March 31, 2009.

Non-Interest Income

Non-interest income for the first quarter of 2010 increased 13.9%, or $206,000, to $1.69 million compared with $1.49 million in the first quarter of 2009. The increase in non-interest income was due to increased service charges on deposit accounts and income from fiduciary activities, and gains on sales of loans originated for sale and securities. PBI Bank began originating residential real estate loans for sale in the secondary market late in the first quarter of 2009. The Bank retained servicing rights for the sold loans. The loan sales generated $91,000 in first quarter 2010 income. There were no comparable loan sales in the first quarter of 2009.

Non-Interest Expense

Non-interest expense for the first quarter increased 10.6% from the prior year’s first quarter. This was due primarily to increased FDIC insurance premiums, franchise tax, and other real estate owned expense. FDIC insurance premiums rose 53.6% to $705,000 in the first quarter of 2010 compared with $459,000 in the first quarter of 2009. Franchise tax expense increased 20.7% to $543,000 in the first quarter of 2010 compared with $450,000 in the first quarter of 2009. Other real estate owned expense increased to $378,000 in the first quarter of 2010 compared with $127,000 in the first quarter of 2009. Our efficiency ratio continues to outperform our peers at 50.9% for the first quarter of 2010 and improved from 54.1% in the first quarter of 2009.

Balance Sheet Review

Total assets rose 1.1% to $1.76 billion at March 31, 2010, from $1.74 billion at March 31, 2009. Since December 31, 2009, total loans are down 3.7%, or $52.0 million, to $1.36 billion from $1.41 billion at December 31, 2009, primarily due to efforts to move troubled loans through the collection, foreclosure, and disposition process. Deposits at March 31, 2010 decreased 2.9% to $1.49 billion from $1.53 billion at December 31, 2009, primarily due to reduction of brokered deposits. Demand and savings account deposits increased by 2.3% and 6.6%, respectively, during the first quarter of 2010.

Asset Quality

Nonperforming loans decreased to $60.5 million, or 4.4% of total loans, at March 31, 2010, compared with $84.9 million, or 6.0% of total loans at December 31, 2009, and $24.8 million, or 1.8% of total loans at March 31, 2009, primarily due to troubled loans working their way through the collection, foreclosure, and disposition process. As a result, foreclosed properties at March 31, 2010 rose to $59.7 million compared with $14.5 million at December 31, 2009, and $10.5 million at March 31, 2009. Additionally, our ratio of non-performing assets to total assets increased during the quarter to 6.84% at March 31, 2010, compared with 5.42% at December 31, 2009.

Our loan loss reserve as a percentage of total loans increased to 1.95% at March 31, 2010, from 1.87% at December 31, 2009, and 1.49% at March 31, 2009. Net loan charge-offs for the first quarter of 2010 were $2.8 million, or 0.2% of average loans for the quarter.

“The prolonged weakness in the economy continues to pressure the real estate markets in our area, resulting in reduced demand and lower real estate values,” stated Ms. Bouvette. “We have increased our reserve for loan losses over the past year to account for these factors and believe our reserves reflect these economic factors and their potential impact on our loan portfolio,” concluded Ms. Bouvette.

“We continue to take a proactive approach in working through problem loans to minimize potential losses. In the first quarter, we obtained deeds in lieu of foreclosure on two multi-unit residential condominium and patio home developments located in our primary market area. The loans had a carrying amount of approximately $41.7 million. We are committed to an orderly disposition of our borrowers’ properties. We have set up a real estate department with a dedicated real estate sales expert that has been successful in selling OREO properties and assisting in the sale of properties securing non-performing loans. In the first quarter of 2010, these transactions totaled approximately $17.6 million,” concluded Ms. Bouvette.

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. 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 first quarter ending March 31, 2010 follows.

     

PORTER BANCORP, INC.

Unaudited Financial Information

(in thousands, except share and per share data)

  Three Three Three Months Months Months Ended Ended Ended 3/31/10 12/31/09 3/31/09

 

 

 

Income Statement Data Interest income $ 22,626 $ 23,517 $ 23,502 Interest expense 8,449 8,617 11,535

 

 

 

Net interest income 14,177 14,900 11,967 Provision for loan losses 3,000 9,000 1,600

 

 

 

Net interest income after provision 11,177 5,900 10,367   Service charges on deposit accounts 720 793 688 Income from fiduciary activities 252 230 220 Gains on sales of loans originated for sale 91 88 - Gains (losses) on sales of securities, net 57 (7 ) 1 Other 572 573 577

 

 

 

Non-interest income 1,692 1,677 1,486   Salaries & employee benefits 3,947 3,519 3,878 Occupancy and equipment 1,022 946 998 FDIC insurance 705 615 459 Franchise tax 543 450 450 Other real estate owned expense 378 449 127 Professional fees 266 295 228 Communications expense 188 161 155 Postage and delivery 186 191 184 Advertising 96 88 158 Other 718 654 639

 

 

 

Non-interest expense 8,049 7,368 7,276   Income before income taxes 4,820 209 4,577 Income tax expense 1,564 (17 ) 1,516

 

 

 

Net income 3,256 226 3,061 Less: Dividends on preferred stock 438 438 438 Accretion on preferred stock 44 44 44   Net income available to common $ 2,774 $ (256 ) $ 2,579

 

 

 

  Weighted average shares – Basic & Diluted 8,773,398 8,756,440 8,709,229     Basic and diluted earnings per common share $ 0.32 $ (0.03 ) $ 0.30 Cash dividends declared per common share $ 0.20 $ 0.20 $ 0.20      

PORTER BANCORP, INC.

Unaudited Financial Information

(in thousands, except share and per share data)

  Three Three Three Months Months Months Ended Ended Ended 3/31/10 12/31/09 3/31/09

 

 

 

Average Balance Sheet Data Assets $ 1,834,208 $ 1,750,225 $ 1,696,575 Loans 1,404,486 1,394,429 1,360,193 Earning assets 1,743,509 1,667,417 1,621,569 Deposits 1,545,469 1,440,017 1,335,761 Long-term debt and advances 100,307 116,122 176,065 Interest bearing liabilities 1,558,604 1,469,548 1,422,584 Stockholders’ equity 169,759 173,440 165,756     Performance Ratios Return on average assets 0.72 % 0.05 % 0.73 % Return on average equity 7.78 0.52 7.49 Yield on average earning assets (tax equivalent) 5.29 5.62 5.91 Cost of interest bearing liabilities 2.20 2.33 3.29 Net interest margin (tax equivalent) 3.32 3.57 3.02 Efficiency ratio 50.90 44.43 54.09   Loan Charge-off Data Loans charged-off $ (2,906 ) $ (4,619 ) $ (983 ) Recoveries 57 53 102

 

 

 

Net charge-offs $ (2,849 ) $ (4,566 ) $ (881 )      

PORTER BANCORP, INC.

Unaudited Financial Information

(in thousands, except share and per share data)

  As of As of As of 3/31/10 12/31/09 3/31/09

 

 

 

Assets Loans $ 1,361,216 $ 1,413,252 $ 1,369,087 Loan loss reserve   (26,543 ) (26,392 ) (20,371 )

 

 

 

 

Net loans 1,334,673 1,386,860 1,348,716 Securities available for sale 180,582 168,721 174,260 Federal funds sold & interest bearing deposits 81,355 157,091 72,766 Cash and due from financial institutions 11,127 15,082 49,873 Premises and equipment 23,251 23,610 22,396 Other real estate owned 59,688 14,548 10,470 Goodwill 23,794 23,794 23,794 Accrued interest receivable and other assets   42,857 45,384 36,118

 

 

 

 

Total Assets $ 1,757,327 $ 1,835,090 $ 1,738,393

 

 

 

 

  Liabilities and Equity Certificates of deposit $ 1,204,022 $ 1,238,189 $ 1,078,007 Interest checking 76,305 77,108 79,831 Money market 69,618 84,160 84,379 Savings   35,577 33,376 36,958

 

 

 

 

Total interest bearing deposits 1,385,522 1,432,833 1,279,175 Demand deposits   99,518 97,263 111,778

 

 

 

 

Total deposits 1,485,040 1,530,096 1,390,953 Federal funds purchased & repurchase agreements 11,595 11,517 12,534 FHLB advances 47,285 82,980 127,192 Junior subordinated debentures 34,000 34,000 34,000 Accrued interest payable and other liabilities   6,670 7,163 8,493

 

 

 

 

Total liabilities 1,584,590 1,665,756 1,573,172 Stockholders’ equity   172,737 169,334 165,221

 

 

 

 

Total Liabilities and Stockholders’ Equity $ 1,757,327 $ 1,835,090 $ 1,738,393

 

 

 

 

  Ending shares outstanding 8,822,844 8,756,440 8,754,078 Book value per common share $ 15.61 $ 15.34 $ 14.88 Tangible book value per common share 12.06 12.01 11.79   Asset Quality Data Loan 90 days or more past due still on accrual $ 5,913 $ 5,968 $ 10,002 Non-accrual loans   54,545 78,888 14,802

 

 

 

 

Total non-performing loans 60,458 84,856 24,804 Real estate acquired through foreclosures 59,688 14,548 10,470 Other repossessed assets   80 80 117

 

 

 

 

Total non-performing assets $ 120,226 $ 99,484 $ 35,391

 

 

 

 

Non-performing loans to total loans 4.44 % 6.00 % 1.81 % Non-performing assets to total assets 6.84 5.42 2.04 Allowance for loan losses to non-performing loans 43.90 31.10 82.13 Allowance for loan losses to total loans 1.95 1.87 1.49   Risk-based Capital Ratios Tier I leverage ratio 9.24 % 9.59 % 9.76 % Tier I risk-based capital ratio 12.20 11.93 12.00 Total risk-based capital ratio 14.12 13.83 13.91   FTE employees 280 278 275