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 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