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 third quarter and nine months ended September 30, 2010.

The Company reported net income of $2.4 million for the third quarter of 2010 compared with net income of $4.5 million for the third quarter of 2009. Net income available to common shareholders was $1.8 million, or $0.16 per fully diluted common share, for the third quarter of 2010, compared with net income of $4.1 million, or $0.46 per fully diluted common share, for the third quarter of 2009. Net income for the nine months ended September 30, 2010 was $4.5 million compared with $10.8 million for the first nine months of 2009. Net income available to common shareholders for the nine months ended September 30, 2010 was $3.0 million, or $0.31 per fully diluted common share, compared with $9.4 million, or $1.08 per fully diluted common share, for comparable period of 2009.

“Porter Bancorp reported growth in net interest income, net interest margin and non-interest income compared with the third quarter of last year,” stated Maria L. Bouvette, President and CEO of Porter Bancorp. “The growth in our core business remains below our historical returns due to the continued weakness in the economy and the associated higher costs of non-performing loans, foreclosed properties and provision for loan losses.

“Our focus remains on strengthening our balance sheet by reducing problem loans and building our capital base,” noted Ms. Bouvette. “Total non-performing loans are down 46% since December 31, 2009, to $45.8 million, the lowest level in the past year and our third consecutive quarterly decline in non-performing loans. We continue to move non-performing loans through the system of collection or foreclosure to minimize our potential losses, which is reflected in the higher balance of OREO since last year. We strengthened our allowance for loan losses to $29.4 million or 2.21% of total loans.

“We also strengthened our capital position this year with capital raises totaling $32 million. At the end of the third quarter, our total risk-based capital ratio rose to 16.35%, well above the 10.0% requirement for a well-capitalized institution, the highest regulatory rating. We believe the new capital will provide a solid base to support our continued growth as the economy recovers,” continued Ms. Bouvette.

Third Quarter Results

• Net income was $2.4 million for the three months ended September 30, 2010, compared with $4.5 million for the third quarter of 2009. Earnings per fully diluted common share were $0.16 in the third quarter of 2010 compared with $0.46 per share in the third quarter of 2009.
• Net interest margin increased 14 basis points to 3.73% in the third quarter of 2010 compared with 3.59% in the third quarter of 2009. The increase in margin since last year benefited from a lower average cost of funds.
• We recorded a gain on sale of securities totaling $2.2 million during the third quarter. We made a strategic decision to liquidate our portfolio of private label mortgage backed securities during the quarter which totaled approximately $23 million.
• Average loans decreased 2.5% to $1.34 billion in the third quarter of 2010 compared with $1.37 billion in the third quarter of 2009. Net loans decreased 4.8% to $1.30 billion in the third quarter of 2010, compared with $1.37 billion at September 30, 2009.
• Deposits increased 0.8% to $1.39 billion compared with $1.38 billion at September 30, 2009.
• Total assets increased 3.0% to $1.78 billion compared with $1.73 billion at September 30, 2009.
• Efficiency ratio was 60.9% in the third quarter of 2010, compared with 47.1% in the prior year third quarter. Our efficiency ratio increased due to an increase in non-interest expense.
• Non-performing loans decreased $2.9 million, or 5.9%, during the third quarter to $45.8 million at September 30, 2010, compared with $48.7 million at June 30, 2010. The decrease was primarily attributable to non-performing loans moving through the collection, foreclosure and disposition process.
• Non-performing assets increased $2.3 million, or 2.0%, during the third quarter to $119.5 million at September 30, 2010. The increase was primarily attributable to non-performing loans moving through the collection, foreclosure and disposition process.
• Shareholders’ equity rose to $202.6 million at the end of the third quarter. The increase was primarily attributable to an additional $5 million capital raise that closed during the third quarter. The proceeds from the offering and third quarter net income resulted in improved capital ratios, including 11.71% tier 1 leverage ratio and 14.44% tier 1 risk-based capital ratio as of September 30, 2010.

Net Interest Income

Net interest income increased 1.4% to $14.6 million for the three months ended September 30, 2010, an increase of $202,000, compared with $14.4 million for the same period in 2009. Net interest income rose 11.0% to $43.5 million for the nine months ended September 30, 2010, an increase of $4.3 million, compared with $39.2 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 14 basis points to 3.73% in the third quarter of 2010 from our margin of 3.59% in the prior year third quarter due primarily to lower cost of funds. The yield on earning assets declined 49 basis points from the 2009 third quarter while rates paid on interest-bearing liabilities declined 74 basis points. Net interest margin increased 2 basis points to 3.73% from our margin of 3.71% in the second quarter of 2010 due primarily to a lower average cost of funds. Both yield on earning assets and cost of interest-bearing liabilities decreased 12 basis points from the second quarter of 2010.

“Our net interest margin rose to its highest level since the first quarter of 2007, highlighting our focus on improving our core earnings,” continued Ms. Bouvette.

Average earning assets declined 2.3% to $1.56 billion for the three months ended September 30, 2010, compared with $1.60 billion for the three months ended September 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 2.1% to $1.40 billion, up from $1.37 billion for the three months ended September 30, 2009.

Non-Interest Income

Non-interest income for the third quarter of 2010 increased 93.1%, or $1.9 million, to $3.9 million compared with $2.0 million in the third quarter of 2009. The increase in non-interest income was due primarily to $2.2 million in net gains on sales of securities.

Non-Interest Expense

Non-interest expense for the third quarter of 2010 increased from the prior year’s third quarter due primarily to increased OREO expense. FDIC insurance expense increased 36.6% to $855,000 in the third quarter of 2010 compared to $626,000 in the third quarter of 2009. State franchise tax expense increased 20.7% to $543,000 in the third quarter of 2010 compared with $450,000 in the third quarter of 2009. OREO expense increased to $2.2 million in the third quarter of 2010 compared with $353,000 in the third quarter of 2009, due primarily to increased losses on sales of OREO, OREO write-downs, and OREO maintenance costs.

Balance Sheet Review

Total assets rose 3.0%, or $51.4 million, to $1.78 billion at September 30, 2010, from $1.73 billion at September 30, 2009. The Company’s loan portfolio decreased 4.2%, or $58.7 million, to $1.33 billion from $1.39 billion at September 30, 2009, due primarily to efforts to move troubled loans through the collection, foreclosure, and disposition process. Deposits at September 30, 2010 increased 0.8% to $1.39 billion from $1.38 billion at September 30, 2009, due primarily to growth in interest checking and demand deposits.

Asset Quality

Non-performing loans decreased to $45.8 million, or 3.45% of total loans, at September 30, 2010, compared with $48.7 million, or 3.64% of total loans, at June 30, 2010. Non-performing loans were up $19.6 million from $26.3 million, or 1.89% of total loans, at September 30, 2009, due primarily to troubled loans working their way through the collection, foreclosure and disposition process. As a result, foreclosed properties at September 30, 2010, rose to $73.6 million compared with $68.5 million at June 30, 2010, and $12.9 million at September 30, 2009. Our ratio of non-performing assets to total assets increased slightly during the quarter to 6.71% at September 30, 2010, compared with 6.66% at June 30, 2010.

Our loan loss reserve as a percentage of total loans increased to 2.21% at September 30, 2010, compared with 1.58% at September 30, 2009. Net loan charge-offs for the third quarter of 2010 were $2.4 million, or 0.18% of average loans for the quarter.

Our provision for loan losses was $5.0 million in the third quarter of 2010, compared with $6.6 million in the second quarter of 2010, and $2.0 million in the prior year third quarter.

“We believe Porter Bancorp is positioned well to grow our earnings as the economy improves,” continued Ms. Bouvette. “We have strengthened our capital position, improved our margins and been proactive in aligning our loan portfolio values with the current economic conditions in our markets. We have also increased our reserve for loan losses to the highest level in years and believe these steps will be an important part in restoring our earnings momentum in the future.”

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 third quarter ending September 30, 2010 follows.

           

PORTER BANCORP, INC. AND SUBSIDIARY

Unaudited Financial Information

(in thousands, except share and per share data)

      Three     Three     Three     Nine     Nine Months Months Months Months Months Ended Ended Ended Ended Ended 9/30/10 6/30/10 9/30/09 9/30/10 9/30/09

 

 

 

Income Statement Data Interest income $ 21,340 $ 22,126 $ 23,802 $ 66,092 $ 70,949 Interest expense 6,764 7,399 9,428 22,612 31,795

 

 

 

Net interest income 14,576 14,727 14,374 43,480 39,154 Provision for loan losses 5,000 6,600 2,000 14,600   5,200

 

 

 

 

Net interest income after provision 9,576 8,127 12,374 28,880 33,954   Service charges on deposit accounts 757 793 843 2,270 2,319 Income from fiduciary activities 226 273 227 751 645 Net gain on sales of loans originated for sale 135 184 82 410 323 Net gain on sales of securities 2,175 24 321 2,256 322 Other than temporary impairment on securities – (465 ) – (465 ) – Other 638 688 563 1,898 1,808

 

 

 

Non-interest income 3,931 1,497 2,036 7,120 5,417   Salaries & employee benefits 3,849 3,931 3,799 11,727 11,490 Occupancy and equipment 1,070 1,015 993 3,107 2,972 FDIC insurance 855 706 626 2,266 1,588 FDIC special insurance assessment – – – – 781 Franchise tax 543 543 450 1,629 1,350 Other real estate owned expense 2,163 3,854 353 6,395 706 Professional fees 239 292 175 797 606 Postage and delivery 183 198 193 569 561 Communications expense 179 173 183 538 568 Advertising 104 77 121 277 404 Other 764 724 691 2,206 2,062

 

 

 

Non-interest expense 9,949 11,513 7,584 29,511 23,088   Income (loss) before income taxes 3,558 (1,889 ) 6,826 6,489 16,283 Income tax expense (benefit) 1,137 (758 ) 2,290 1,943 5,441

 

 

 

Net income (loss) 2,421 (1,131 ) 4,536 4,546 10,842 Less: Dividends on preferred stock 498 437 437 1,373 1,312 Accretion on preferred stock 44 44 44 132 132 Earnings allocated to participating securities 88 2 –   81   –   Net income (loss) available to common $ 1,791 $ (1,614 ) $ 4,055 $ 2,960 $ 9,398

 

 

 

  Weighted average shares – Basic 10,496,817 8,661,917 8,756,289 9,297,353 8,740,314 Weighted average shares – Diluted 11,028,925 8,664,412 8,756,289 9,506,286 8,740,314   Basic earnings (loss) per common share $ 0.17 $

(0.19

) $ 0.46 $ 0.32 $ 1.08 Diluted earnings (loss) per common share $ 0.16 $

(0.19

) $ 0.46 $ 0.31 $ 1.08 Cash dividends declared per common share $ 0.10 $ 0.20 $ 0.20 $ 0.50 $ 0.60            

PORTER BANCORP, INC. AND SUBSIDIARY

Unaudited Financial Information

(in thousands, except share and per share data)

      Three     Three     Three     Nine     Nine Months Months Months Months Months Ended Ended Ended Ended Ended 9/30/10 6/30/10 9/30/09 9/30/10 9/30/09

 

 

 

Average Balance Sheet Data Assets $ 1,704,043 $ 1,737,685 $ 1,674,703 $ 1,758,168 $ 1,701,967 Loans 1,335,357 1,356,883 1,368,970 1,365,322 1,363,150 Earning assets 1,563,599 1,605,387 1,599,943 1,636,839 1,626,887 Deposits 1,402,842 1,455,775 1,373,626 1,467,506 1,367,224 Long-term debt and advances 81,441 84,809 112,425 88,783 148,393 Interest bearing liabilities 1,393,425 1,448,795 1,401,791 1,466,336 1,426,975 Stockholders’ equity 201,126 179,205 168,561 183,478 167,172     Performance Ratios Return on average assets 0.56 % (0.26 ) % 1.07 % 0.35 % 0.85 % Return on average equity 4.78 (2.53 ) 10.68 3.31 8.67 Yield on average earning assets (tax equivalent) 5.44 5.56 5.93 5.43 5.86 Cost of interest bearing liabilities 1.93 2.05 2.67 2.06 2.98 Net interest margin (tax equivalent) 3.73 3.71 3.59 3.58 3.25 Efficiency ratio 60.92 69.08 47.14 60.46 52.18   Loan Charge-off Data Loans charged-off $ (2,514 ) $ (6,403

)

 

$ (829 ) $ (11,823 ) $ (3,112 ) Recoveries 70 96   47 223   218

 

 

 

 

Net charge-offs $ (2,444 ) $ (6,307

)

 

$ (782 ) $ (11,600 ) $ (2,894 )            

PORTER BANCORP, INC. AND SUBSIDIARY

Unaudited Financial Information

(in thousands, except share and per share data)

      As of     As of     As of     As of 9/30/10 6/30/10 12/31/09 9/30/09

 

 

 

Assets Loans $ 1,328,695 $ 1,337,508 $ 1,413,252 $ 1,387,359 Loan loss reserve   (29,392 ) (26,836 ) (26,392 ) (21,958 )

 

 

 

 

Net loans 1,299,303 1,310,672 1,386,860 1,365,401 Securities available for sale 150,569 175,738 168,721 175,160 Federal funds sold & interest bearing deposits 120,591 103,139 157,091 74,232 Cash and due from financial institutions 46,279 12,263 15,082 17,610 Premises and equipment 22,708 22,954 23,610 23,756 Other real estate owned 73,645 68,450 14,548 12,934 Goodwill 23,794 23,794 23,794 23,794 Accrued interest receivable and other assets   43,290 43,647 45,384 35,875

 

 

 

 

Total Assets $ 1,780,179 $ 1,760,657 $ 1,835,090 $ 1,728,762

 

 

 

 

  Liabilities and Equity Certificates of deposit $ 1,093,032 $ 1,113,564 $ 1,238,189 $ 1,099,402 Interest checking 80,153 78,429 77,108 72,472 Money market 78,232 81,637 84,160 80,471 Savings   35,222 36,312 33,376 33,450

 

 

 

 

Total interest bearing deposits 1,286,639 1,309,942 1,432,833 1,285,795 Demand deposits   103,424 104,384 97,263 92,861

 

 

 

 

 

Total deposits 1,390,063 1,414,326 1,530,096 1,378,656 Federal funds purchased & repurchase agreements 34,083 11,810 11,517 11,296 FHLB advances 110,763 96,695 82,980 125,284 Junior subordinated debentures 33,775 34,000 34,000 34,000 Accrued interest payable and other liabilities   8,922 7,601 7,163 8,411

 

 

 

 

 

Total liabilities 1,577,606 1,564,432 1,665,756 1,557,647 Stockholders’ equity   202,573 196,225 169,334 171,115

 

 

 

 

 

Total Liabilities and Stockholders’ Equity $ 1,780,179 $ 1,760,657 $ 1,835,090 $ 1,728,762

 

 

 

 

 

  Ending shares outstanding 11,281,691 10,580,494 8,756,440 8,756,057 Book value per common share $ 14.56 $ 14.59 $ 15.34 $ 15.55 Tangible book value per common share 11.67 11.53 12.01 12.21   Asset Quality Data Loan 90 days or more past due still on accrual $ 7,048 $ 10,497 $ 5,968 $ 9,896 Non-accrual loans   38,784 38,199 78,888 16,369

 

 

 

 

 

Total non-performing loans 45,832 48,696 84,856 26,265 Real estate acquired through foreclosures 73,645 68,450 14,548 12,934 Other repossessed assets   53 51 80 77

 

 

 

 

 

Total non-performing assets $ 119,530 $ 117,197 $ 99,484 $ 39,276

 

 

 

 

 

Non-performing loans to total loans 3.45 % 3.64 % 6.00 % 1.89 % Non-performing assets to total assets 6.71 6.66 5.42 2.27 Allowance for loan losses to non-performing loans 64.13 55.11 31.10 83.60 Allowance for loan losses to total loans 2.21 2.01 1.87 1.58   Risk-based Capital Ratios Tier I leverage ratio 11.71 % 11.11 % 9.59 % 10.13 % Tier I risk-based capital ratio 14.44 14.00 11.93 11.90 Total risk-based capital ratio 16.35 15.93 13.83 13.80   FTE employees 288 281 278 281