Porter Bancorp, Inc. (NASDAQ: PBIB), parent company of
PBI Bank, with 18 full-service banking offices in
Kentucky, today reported results for the second quarter and six
months ended June 30, 2010.
The Company reported a net loss of $829,000 for the second
quarter of 2010 compared with net income of $3.2 million for
the second quarter of 2009. Earnings for the six months ended June
30, 2010, were $2.4 million compared with $6.3 million for the
first six months of 2009. Including the preferred stock dividend
and related accretion, the net loss to common shareholders was $1.3
million, or ($0.15) per fully diluted common share, for the second
quarter of 2010 compared with net income of $2.8 million, or $0.31
per fully diluted common share, for the second quarter of 2009. Net
income available to common shareholders for the six months ended
June 30, 2010, was $1.5 million, or $0.17 per fully diluted common
share, compared with $5.3 million, or $0.61 per fully diluted
common share, for comparable period of 2009.
“Porter Bancorp’s core operations remained solid in the second
quarter of 2010 with higher net interest income, net interest
margin and non-interest income, and strengthened capital base
compared with the second quarter of 2009 and the first quarter of
2010,” stated Maria L. Bouvette, President and CEO of Porter
Bancorp. “The growth in our core business was more than offset
by a substantial increase in our provision for loan losses that
resulted in our second quarter loss. We charged-off $6.3 million of
nonperforming loans and wrote down $3.4 million of other real
estate owned (OREO) in the second quarter to account for lower
valuations on the underlying real estate collateral. We took these
write-downs as part of our ongoing review of non-performing loans
and OREO to reflect the continued weakness in the market and
corresponding weakness in selling prices for residential lots,
single family homes and other real estate properties in our
markets.
“We remain focused on strengthening our balance sheet by
reducing problem loans and building our capital base,” noted Ms.
Bouvette. “We made solid progress on these key metrics in the
latest quarter. Our non-performing loans declined $11.8 million in
the latest three months and our total non-performing assets
declined $3.0 million. We strengthened our allowance for loan
losses to $26.8 million, or 2.01% of total loans. We also raised
$27 million in new capital during the quarter, increasing our total
risk-based capital ratio to 15.93% for the holding company, well
above the 10.0% requirement for a well-capitalized institution, the
highest regulatory rating.”
Second Quarter Results
- Net interest margin increased 58
basis points to 3.71% in the second quarter of 2010 compared with
3.13% in the second quarter of 2009. The increase in margin since
last year benefited from a lower average cost of funds. Net
interest margin was also up from the first quarter of 2010 by 39
basis points primarily due to lower average cost of funds.
- Net interest income increased
14.9% to $14.7 million for the three months ended June 30, 2010,
compared with the same quarter of 2009 benefiting from a lower
average cost of funds.
- The Company recorded a net loss
of $829,000 for the three months ended June 30, 2010, compared with
net income of $3.2 million for the second quarter of 2009. The loss
for the 2010 quarter was due primarily to a $5.0 million
increase in the provision for loan losses to $6.6 million in the
second quarter of 2010 compared with $1.6 million in the second
quarter of 2009 and write-downs of $3.4 million of OREO.
- Average loans decreased 0.2% to
$1.357 billion in the second quarter of 2010 compared with $1.360
billion in the second quarter of 2009. Net loans decreased 2.3% to
$1.31 billion in the second quarter of 2010, compared with $1.34
billion at June 30, 2009.
- Deposits increased 3.7% to $1.41
billion compared with $1.36 billion at June 30, 2009.
- Total assets increased 3.0% to
$1.76 billion compared with $1.71 billion at June 30, 2009.
- Efficiency ratio was 69.1% in
the second quarter of 2010, compared with 55.9% in the prior year
second quarter. Our efficiency ratio for the second quarter of 2010
increased from 48.7% to 69.1% as a result of $3.4 million in OREO
write-downs.
- Non-performing loans decreased
$11.8 million, or 19.5%, during the second quarter to $48.7 million
at June 30, 2010, compared with $60.5 million at March
31, 2010. The decrease was primarily attributable to non-performing
loans moving through the collection, foreclosure and disposition
process.
- Non-performing assets decreased
$3.0 million, or 2.5%, during the second quarter to $117.2 million
at June 30, 2010.
- Shareholders’ equity rose
to$196.2 million at the end of the second quarter and benefited
from a stock offering that raised $27.0 million in gross proceeds
that closed June 30, 2010. The proceeds resulted in improved
capital ratios, including 11.11% tier 1 leverage ratio and 14.00%
tier 1 risk-based capital ratio as of June 30, 2010.
Net Interest Income
Net interest income increased 14.9% to $14.7 million for the
three months ended June 30, 2010, an increase of $1.9 million,
compared with $12.8 million for the same period in 2009. Net
interest income rose 16.6% to $28.9 million for the six months
ended June 30, 2010, an increase of $4.1 million, compared with
$24.8 million for the same period in 2009. The increase in net
interest income was primarily attributable to an increase in net
interest margin compared with 2009.
Net interest margin increased 58 basis points to 3.71% in the
second quarter of 2010 from our margin of 3.13% in the prior year
second quarter due primarily to lower cost of funds. The yield on
earning assets declined 18 basis points from the 2009 second
quarter while rates paid on interest-bearing liabilities declined
93 basis points. Net interest margin increased 39 basis points
to 3.71% from our margin of 3.32% in the first quarter of 2010 due
primarily to a lower average cost of funds. The yield on earning
assets increased 27 basis points from the first quarter of 2010
compared with a 15 basis point decline in rates paid on
interest-bearing liabilities.
Average earning assets declined 3.2% to $1.61 billion for the
three months ended June 30, 2010, compared with $1.66 billion
for the three months ended June 30, 2009. The decline in average
earning assets was due primarily to lower average loans resulting
from a slowdown in new loan originations and loans moved to other
real estate owned (OREO).
Average deposits increased 4.6% to $1.46 billion, up from $1.39
billion for the three months ended June 30, 2009.
Non-Interest Income
Non-interest income for the second quarter of 2010 increased
3.5%, or $67,000, to $1.96 million compared with $1.90 million
in the second quarter of 2009. The increase in non-interest income
was due to increased income from service charges, fiduciary
activities, net gains on sales of securities, offset partially by
lower gains on sales of loans originated for sale.
Non-Interest Expense
Non-interest expense for the second quarter of 2010 increased
from the prior year’s second quarter due primarily to the
$3.4 million of write-downs of other real estate owned. This
was partially off-set by lower FDIC fees. Total FDIC fees were
$706,000 in the second quarter of 2010 compared with $1.3 million
in the second quarter of 2009. The 2009 FDIC fees included a
special assessment of $781,000. FDIC insurance premiums rose 40.4%
to $706,000 in the second quarter of 2010 compared with $503,000 in
the second quarter of 2009. Salary and employee benefits expense
rose 3.1% to $3.9 million in the second quarter of 2010
compared with $3.8 million in the prior year second quarter. State
franchise tax expense increased 20.7% to $543,000 in the second
quarter of 2010 compared with $450,000 in the second quarter of
2009. Other real estate owned expense increased to $3.85 million in
the second quarter of 2010 compared with $226,000 in the second
quarter of 2009 primarily due to the write-downs.
Balance Sheet Review
Total assets rose 3.0%, or $50.8 million, to $1.76 billion at
June 30, 2010, from $1.71 billion at June 30, 2009. The Company’s
loan portfolio decreased 1.8%, or $24.6 million, to $1.34 billion
from $1.36 billion at June 30, 2009, primarily due to efforts to
move troubled loans through the collection, foreclosure, and
disposition process. Deposits at June 30, 2010, increased
3.7% to $1.41 billion from $1.36 billion at June 30, 2009,
primarily due to growth in certificates of deposit and demand
deposits.
Asset Quality
Non-performing loans decreased to $48.7 million, or 3.64% of
total loans, at June 30, 2010, compared with $60.5 million, or
4.44% of total loans, at March 31, 2010. Non-performing loans were
up $19.3 million, or 1.42% of total loans, from the second quarter
of last year primarily due to troubled loans working their way
through the collection, foreclosure and disposition process. As a
result, foreclosed properties at June 30, 2010, rose to $68.5
million compared with $59.7 million at March 31, 2010, and $9.6
million at June 30, 2009. Our ratio of non-performing assets to
total assets slightly decreased during the quarter to 6.66% at June
30, 2010, compared with 6.84% at March 31, 2010. Approximately $9.0
million in OREO was sold during the second quarter of 2010.
Our loan loss reserve as a percentage of total loans increased
to 2.01% at June 30, 2010, compared with 1.52% at
June 30, 2009. Net loan charge-offs for the second
quarter of 2010 were $6.3 million, or 0.46% of average loans for
the quarter.
Our provision for loan losses was $6.6 million in the second
quarter of 2010 which is up significantly from $3.0 million in the
first quarter of 2010, and $1.6 million in the prior year second
quarter due to an increase in charge-offs. The increase in
charge-offs was primarily related to lower valuations on the
collateral underlying certain construction and development loans,
including loans for lots and residential construction units, where
underlying property values remain under pressure due to the soft
market conditions and the extension of the estimated sell out
times.
“We continue to aggressively review our loan portfolio and OREO
to assure that collateral and other economic measures support the
value on our books,” continued Ms. Bouvette. “We believe the
charge-offs and write-downs of OREO in the second quarter reflect
our approach in this process and aligns our loan portfolio values
with the current economic conditions in our markets.
“We have increased our reserve for loan losses over the past
year to reflect the changes in market conditions and will continue
to take proactive measures to reduce problem loans on our books. We
believe these steps will be an important part in minimizing
potential losses and restoring our earnings power in the future. In
addition, we believe that our strengthened capital base and reserve
for loan losses will be important buffers against any prolonged
weakness in the economy,” concluded Ms. Bouvette.
PBIB-F 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 second
quarter ending June 30, 2010 follows.
PORTER BANCORP, INC. AND
SUBSIDIARY
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
6/30/10 3/31/10 6/30/09 6/30/10 6/30/09
Income Statement Data
Interest income $ 22,126 $ 22,626 $ 23,645 $ 44,752 $ 47,147
Interest expense 7,399 8,449
10,832 15,848 22,367
Net interest income 14,727 14,177 12,813 28,904 24,780 Provision
for loan losses 6,600 3,000
1,600 9,600 3,200
Net interest income after provision 8,127 11,177 11,213 19,304
21,580 Service charges on deposit accounts 793 720 788 1,513
1,476 Income from fiduciary activities 273 252 198 525 418 Net gain
on sales of loans originated for sale 184 91 241 275 241 Net gain
on sales of securities 24 57 – 81 1 Other 688
572 668 1,260 1,245
Non-interest income 1,962 1,692 1,895 3,654 3,381 Salaries
& employee benefits 3,931 3,947 3,813 7,878 7,691 Occupancy and
equipment 1,015 1,022 981 2,037 1,979 FDIC insurance 706 705 503
1,411 962 FDIC special insurance assessment – – 781 – 781 Franchise
tax 543 543 450 1,086 900 Other real estate owned expense 3,854 378
226 4,232 353 Professional fees 292 266 203 558 431 Postage and
delivery 198 188 184 386 368 Communications expense 173 186 230 359
385 Advertising 77 96 125 173 283 Other 724
718 732 1,442 1,371
Non-interest expense 11,513 8,049 8,228 19,562 15,504 Income
(loss) before income taxes (1,424 ) 4,820 4,880 3,396 9,457 Income
tax expense (benefit) (595 ) 1,564
1,635 969 3,151
Net income (loss) (829 ) 3,256 3,245 2,427 6,306 Less: Dividends on
preferred stock 437 438 437 875 875 Accretion on preferred stock
44 44 44 88
88 Net income (loss) available to common $ (1,310 ) $
2,774 $ 2,764 $ 1,464 $ 5,343
Weighted average shares – Basic 8,846,862 8,773,385
8,754,908 8,810,326 8,732,195 Weighted average shares – Diluted
8,850,015 8,773,385 8,754,908 8,811,701 8,732,195 Basic and
diluted earnings (loss) per common share $
(0.15
) $ 0.32 $ 0.31 $ 0.17 $ 0.61 Cash dividends declared per common
share $ 0.20 $ 0.20 $ 0.20 $ 0.40 $ 0.40
PORTER BANCORP, INC. AND
SUBSIDIARY
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 6/30/10 3/31/10 6/30/09 6/30/10 6/30/09
Average Balance Sheet Data Assets $ 1,737,684 $ 1,834,208 $
1,734,866 $ 1,785,679 $ 1,715,826 Loans 1,356,883 1,404,486
1,360,191 1,380,553 1,360,192 Earning assets 1,605,520 1,743,509
1,659,389 1,674,133 1,640,583 Deposits 1,455,775 1,545,469
1,391,868 1,500,374 1,363,970 Long-term debt and advances 84,809
100,307 157,388 92,515 166,675 Interest bearing liabilities
1,448,795 1,558,604 1,456,778 1,503,396 1,439,776 Stockholders’
equity 179,205 169,759 167,168 174,508 166,466
Performance Ratios Return on average assets (0.19
)%
0.72 % 0.75 % 0.27 % 0.74 % Return on average equity (1.86 ) 7.78
7.79 2.80 7.64 Yield on average earning assets (tax equivalent)
5.56 5.29 5.74 5.42 5.82 Cost of interest bearing liabilities 2.05
2.20 2.98 2.13 3.13 Net interest margin (tax equivalent) 3.71 3.32
3.13 3.51 3.08 Efficiency ratio 69.08 50.90 55.94 60.23 55.06
Loan Charge-off Data Loans charged-off $ (6,403
)
$ (2,906 ) $ (1,300 ) $ (9,309 ) $ (2,283 ) Recoveries 96
57 69 153
171
Net charge-offs $ (6,307
)
$ (2,849 ) $ (1,231 ) $ (9,156 ) $ (2,112 )
PORTER BANCORP, INC. AND
SUBSIDIARY
Unaudited Financial
Information
(in thousands, except share and
per share data)
As of As of As of
As of 6/30/10 3/31/10 12/31/09 6/30/09
Assets Loans $ 1,337,508 $ 1,361,216 $ 1,413,252 $ 1,362,059
Loan loss reserve (26,836 ) (26,543 ) (26,392
) (20,740 )
Net loans 1,310,672 1,334,673 1,386,860 1,341,319 Securities
available for sale 175,738 180,582 168,721 178,161 Federal funds
sold & interest bearing deposits 103,139 81,355 157,091 79,284
Cash and due from financial institutions 12,263 11,127 15,082
17,844 Premises and equipment 22,954 23,251 23,610 23,412 Other
real estate owned 68,450 59,688 14,548 9,551 Goodwill 23,794 23,794
23,794 23,794 Accrued interest receivable and other assets
43,647 42,857 45,384
36,443
Total Assets $ 1,760,657 $ 1,757,327 $
1,835,090 $ 1,709,808
Liabilities and Equity Certificates of deposit $
1,113,564 $ 1,204,022 $ 1,238,189 $ 1,074,819 Interest checking
78,429 76,305 77,108 71,864 Money market 81,637 69,618 84,160
90,962 Savings 36,312 35,577
33,376 34,917
Total interest bearing deposits 1,309,942 1,385,522 1,432,833
1,272,562 Demand deposits 104,384 99,518
97,263 91,630
Total deposits 1,414,326 1,485,040 1,530,096 1,364,192 Federal
funds purchased & repurchase agreements 11,810 11,595 11,517
11,232 FHLB advances 96,695 47,285 82,980 126,350 Junior
subordinated debentures 34,000 34,000 34,000 34,000 Accrued
interest payable and other liabilities 7,601
6,670 7,163 7,891
Total liabilities 1,564,432 1,584,590 1,665,756 1,543,665
Stockholders’ equity 196,225 172,737
169,334 166,143
Total Liabilities and Stockholders’ Equity $ 1,760,657
$ 1,757,327 $ 1,835,090 $ 1,709,808
Ending shares outstanding 10,580,494 8,822,844
8,756,440 8,756,598
Book value per common share $ 14.59 $
15.61 $ 15.34 $ 14.98
Tangible book value per common share
11.56 12.06 12.01 11.92
Asset Quality Data Loan 90
days or more past due still on accrual $ 10,497 $ 5,913 $ 5,968 $
8,405 Non-accrual loans 38,199 54,545
78,888 10,872
Total non-performing loans 48,696 60,458 84,856 19,277 Real estate
acquired through foreclosures 68,450 59,688 14,548 9,551 Other
repossessed assets 51 80 80
80
Total non-performing assets $ 117,197 $ 120,226 $
99,484 $ 28,908
Non-performing loans to total loans 3.64 % 4.44 % 6.00 % 1.42 %
Non-performing assets to total assets 6.66 6.84 5.42 1.69 Allowance
for loan losses to non-performing loans 55.11 43.90 31.10 107.59
Allowance for loan losses to total loans 2.01 1.95 1.87 1.52
Risk-based Capital Ratios Tier I leverage ratio 11.11 % 9.24
% 9.59 % 9.62 % Tier I risk-based capital ratio 14.00 12.20 11.93
11.98 Total risk-based capital ratio 15.93 14.12 13.83 13.89
FTE employees 281 280 278 278
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