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 2011.
The Company reported net income available to common shareholders
of $305,000, or $0.03 per diluted share, for the first quarter of
2011, compared with $2.7 million, or $0.30 per diluted share, for
the first quarter of 2010.
“Porter Bancorp reported growth in net interest margin and
non-interest income compared with the first quarter of last year,”
stated Maria L. Bouvette, President and CEO of Porter Bancorp. “Our
first quarter earnings were below historical levels due to higher
costs related to non-performing loans, foreclosed properties and
provision for loan losses. These factors continue to be a drag on
our near-term earnings due to the continued weakness in our
construction and land development portfolio.
“We remain focused on improving loan quality and reducing
non-performing assets. We made solid progress in reducing our
exposure to higher risk construction and land development loans
since last year. Our construction and land development loans are
down 29.1% since the first quarter of 2010 and represented only
13.8% of our loan portfolio at March 31, 2011. We also continue to
be diligent in moving non-performing loans through the system of
collection or foreclosure to minimize our potential losses. We
believe these efforts will be key drivers in improving Porter
Bancorp’s future profitability,” continued Ms. Bouvette.
First Quarter Results
- Net income declined to $799,000 for the
three months ended March 31, 2011, compared with $3.3 million for
the first quarter of 2010. Earnings per diluted common share were
$0.03 compared with $0.30 in the first quarter of 2010.
- Net interest margin increased 22 basis
points to 3.54% in the first quarter of 2011 compared with 3.32% in
the first quarter of 2010. The increase in margin since last year
benefited from a lower average cost of funds.
- Average loans decreased 8.1% to $1.29
billion in the first quarter of 2011 compared with $1.40 billion in
the first quarter of 2010. Net loans decreased 6.8% to $1.24
billion in the first quarter of 2011, compared with $1.33 billion
at March 31, 2010.
- Deposits decreased 0.2% to $1.48
billion compared with $1.49 billion at March 31, 2010, and
increased 1.0% from $1.47 billion at December 31, 2010. Demand and
savings account deposits increased by 8.5% and 10.3%, respectively
during the first quarter of 2011 compared with the fourth quarter
of 2010.
- Total assets decreased 1.2% to $1.74
billion compared with $1.76 billion at March 31, 2010.
- Efficiency ratio was 60.7% for the
first three months of 2011, compared with 50.9% for the first
quarter of 2010. Our efficiency ratio increased primarily due to
higher credit related costs and increases in other real estate
owned (OREO) expense.
- Non-performing loans increased $9.5
million during the first quarter to $69.9 million at March 31,
2011, compared with $60.4 million at December 31, 2010. The
increase was primarily in the commercial and residential real
estate segments of our portfolio.
- Non-performing assets increased $15.8
million during the first quarter to $143.9 million at March 31,
2011. The increase was primarily due to a higher level of
non-performing loans described above and non-performing loans
moving through the collection and foreclosure process.
- On April 19, 2011, an Oldham County,
Kentucky jury rendered a judgment against PBI Bank for $529,000 in
compensatory damages and from $529,000 to $882,000 in punitive
damages. The case concerns a dispute with a prior landowner in
connection with a project for which PBI Bank provided development
financing to a third party. The final amount of the judgment is
subject to additional proceedings. We intend to file motions to set
aside the judgment, and if denied, to file an appeal. Based on
advice of legal counsel, we believe that we have several
meritorious grounds for appeal and no amounts have been accrued for
this matter as we expect a favorable outcome to the bank.
Net Interest Income
Net interest income decreased 2.9% to $13.8 million for the
three months ended March 31, 2011, a decrease of $409,000, compared
with $14.2 million for the same period in 2010. This decrease was
primarily attributable to a decrease in average earning assets,
partially offset by decreased cost of funds, compared with
2010.
Net interest margin increased 22 basis points to 3.54% in the
first quarter of 2011 from our margin of 3.32% in the prior year
first quarter due primarily to lower cost of funds. The yield on
earning assets declined 26 basis points from the 2010 first
quarter, compared with a 55 basis point decline in rates paid on
interest-bearing liabilities. Net interest margin decreased 6 basis
points to 3.54% from our margin of 3.60% in the fourth quarter of
2010 due primarily to a lower yield on earning assets. The yield on
earning assets declined 15 basis points from the fourth quarter of
2010 compared with an 11 basis point decline in rates paid on
interest-bearing liabilities.
Average earning assets declined 8.7% to $1.6 billion for the
three months ended March 31, 2011, compared with $1.7 billion
for the three months ended March 31, 2010. The decline in average
earnings assets was primarily due to an 8.1% decrease in average
loans to $1.3 billion at March 31, 2011.
Average deposits decreased 4.2% to $1.48 billion, down from
$1.55 billion for the three months ended March 31, 2010.
Average deposits increased 3.3% to $1.48 billion, up from $1.43
billion for the three months ended December 31, 2010.
Non-Interest Income
Non-interest income for the first quarter of 2011 increased
5.6%, or $95,000, to $1.79 million compared with $1.69 million
in the first quarter of 2010. The increase in non-interest income
was due to increased gains on sales of loans originated for sale,
partially offset by lower service charges on deposit accounts.
Non-Interest Expense
Non-interest expense for the first quarter of 2011 increased
16.7% from the prior year’s first quarter due primarily to
increased OREO expense, FDIC insurance premiums, and salaries and
employee benefits expense. OREO expense increased to $1.4 million
in the first quarter of 2011 compared with $378,000 in the first
quarter of 2010, due primarily to increased losses on sales of
OREO, OREO write-downs to reflect current market values and OREO
maintenance expense. FDIC insurance premiums rose 21.3% to $855,000
in the first quarter of 2011 compared with $705,000 in the first
quarter of 2010. Salaries and employee benefits expense increased
to $4.1 million in the first quarter of 2011 compared with $3.9
million in the prior year’s first quarter due to merit raises and
increases in staff.
Balance Sheet Review
Total assets decreased 1.2% to $1.74 billion at March 31, 2011,
from $1.76 billion at March 31, 2010, and increased 0.8% from $1.72
billion at December 31, 2010. Since December 31, 2010, total loans
are down 2.0%, or $25.5 million, to $1.28 billion from $1.30
billion at December 31, 2010, primarily due to efforts to move
troubled loans through the collection, foreclosure, and disposition
process. Deposits at March 31, 2011, increased 1.0% to $1.48
billion from $1.47 billion at December 31, 2010, primarily due to
increased demand and savings account deposits. Demand and savings
account deposits increased by 8.5% and 10.3%, respectively, during
the first quarter of 2011.
Asset Quality
Nonperforming loans increased to $69.9 million, or 5.5% of total
loans, at March 31, 2011, compared with $60.4 million, or 4.6%
of total loans at December 31, 2010, and $60.5 million, or 4.4% of
total loans at March 31, 2010. The increase in
nonperforming loans was due primarily to the continued weakness in
housing unit sales and loss of tenants or inability to lease vacant
space by our customers. We continue to resolve troubled loans by
working them through the collection, foreclosure, and disposition
process. As a result, foreclosed properties at March 31, 2011,
rose to $73.9 million compared with $67.6 million at December 31,
2010, and $59.7 million at March 31, 2010. Our ratio of
non-performing assets to total assets increased during the quarter
to 8.28% at March 31, 2011, compared with 7.43% at
December 31, 2010.
Non-Accrual Loan Activity (in thousands)
Non-accrual loans at December 31, 2010 $ 59,799 Loans returned to
accrual status (2,500 ) Net principal pay-downs (448 ) Charge-offs
(4,279 ) Loans foreclosed and transferred to OREO (7,987 ) Loans
placed on non-accrual during the period 21,379
Non-accrual loans at March 31, 2011 $ 65,964
Other Real Estate Owned (OREO) Activity (in
thousands) OREO at December 31, 2010 $ 67,635 Real estate acquired
8,812 Valuation adjustment write downs (486 ) Properties sold
(2,665 ) Gain (loss) on sales, net (391 ) Capital improvements
1,037 OREO at March 31, 2011 $ 73,942
Our loan loss reserve as a percentage of total loans was 2.63%
at March 31, 2011, and at December 31, 2010, compared with 1.95% at
March 31, 2010. Net loan charge-offs for the first quarter of 2011
were $5.8 million, or 0.4% of average loans for the quarter.
Our provision for loan losses was $5.1 million in the first
quarter of 2011, compared with $15.5 million in the fourth quarter
of 2010, and $3.0 million in the prior year first quarter.
“Our earnings outlook for 2011 remains challenged by the
continued softness in real estate markets, including lower market
values and soft demand for residential and commercial real estate,”
continued Ms. Bouvette. “Our primary focus is to improve Porter
Bancorp’s profitability, preserve our strong capital base and
reduce the credit risks in our loan portfolio. Our core business
remains solid with continued growth in our net interest margin and
non-interest income since the fourth quarter of last year.
“We remain confident about Porter Bancorp’s future based on our
strong capital base and our solid market position in Kentucky’s
major markets. Our entire team remains focused on reducing the
level of nonperforming assets, improving our operating efficiency
and maintaining our high level of customer service. We have made
significant additions to our underwriting and workout division
teams to address these concerns. We believe these will be key
factors in building long-term shareholder value,” 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. The words “believe,”
“may,” “should,” “anticipate,” “estimate,” “expect,” “intend,”
“objective,” “seek,” “plan,” “strive” or similar words, or
negatives of these words, identify forward-looking statements.
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, 2011 follows.
PORTER BANCORP, INC.
Unaudited Financial Information
(in thousands, except share and per share
data)
Three Three
Three Months Months Months Ended Ended Ended 3/31/11 12/31/10
3/31/10
Income Statement Data Interest income $ 19,616 $ 20,315 $
22,626 Interest expense 5,848 6,229
8,449
Net interest income 13,768 14,086 14,177 Provision for loan losses
5,100 15,500 3,000
Net interest income after provision 8,668 (1,414 ) 11,177
Service charges on deposit accounts 630 714 720 Income from
fiduciary activities 255 236 252 Gains on sales of loans originated
for sale 221 144 91 Gains (losses) on sales of securities, net 83
2,896 57 Other than temporary impairment on securities — (132 ) —
Other 598 604 572
Non-interest income 1,787 4,462 1,692 Salaries &
employee benefits 4,124 3,176 3,947 Occupancy and equipment 972 988
1,022 Other real estate owned expense 1,367 9,859 378 FDIC
insurance 855 705 705 Franchise tax 582 543 543 Professional fees
280 270 266 Loan collection fees 262 360 175 Communications expense
168 199 186 Postage and delivery 123 153 188 Advertising 102 131 96
Other 560 583 543
Non-interest expense 9,395 16,967 8,049 Income (loss) before
income taxes 1,060 (13,919 ) 4,820 Income tax expense (benefit)
261 (4,989 ) 1,564
Net income (loss) 799 (8,930 ) 3,256 Less: Dividends on preferred
stock 438 437 438 Accretion on preferred stock 44 45 44 Earnings
(loss) allocated to participating securities 12 (365
) 42 Net income (loss) available to common $ 305 $
(9,047 ) $ 2,732
Weighted average shares – Basic 11,704,651 11,707,334
9,072,052 Weighted average shares – Diluted 11,704,651 11,707,334
9,072,052 Basic earnings (loss) per common share $ 0.03 $
(0.77 ) $ 0.30 Diluted earnings (loss) per common share $ 0.03 $
(0.77 ) $ 0.30 Cash dividends declared per common share $ 0.01 $
0.01 $ 0.19
PORTER BANCORP, INC.
Unaudited Financial Information
(in thousands, except share and per share
data)
Three Three
Three Months Months Months Ended Ended Ended 3/31/11 12/31/10
3/31/10
Average Balance Sheet Data Assets $ 1,738,253 $ 1,716,430 $
1,834,208 Loans 1,290,851 1,317,606 1,404,486 Earning assets
1,591,561 1,564,243 1,743,509 Deposits 1,481,192 1,433,921
1,545,469 Long-term debt and advances 48,275 60,845 100,307
Interest bearing liabilities 1,434,718 1,402,052 1,558,604
Stockholders’ equity 190,585 201,478 169,759
Performance Ratios Return on average assets 0.19 % -2.06 %
0.72 % Return on average equity 1.70 -17.58 7.78 Yield on average
earning assets (tax equivalent) 5.03 5.18 5.29 Cost of interest
bearing liabilities 1.65 1.76 2.20 Net interest margin (tax
equivalent) 3.54 3.60 3.32 Efficiency ratio 60.72 107.49 50.90
Loan Charge-off Data Loans charged-off $ (5,867 ) $
(10,638 ) $ (2,906 ) Recoveries 81 31
57
Net charge-offs $ (5,786 ) $ (10,607 ) $ (2,849 )
PORTER BANCORP, INC.
Unaudited Financial Information
(in thousands, except share and per share
data)
As of As of
As of 3/31/11 12/31/10 3/31/10
Assets Loans $ 1,277,497 $ 1,303,013 $ 1,361,216 Loan loss
reserve (33,599 ) (34,285 ) (26,543 )
Net loans 1,243,898 1,268,728 1,334,673 Securities available for
sale 163,032 106,309 180,582 Federal funds sold & interest
bearing deposits 146,477 137,429 81,355 Cash and due from financial
institutions 15,626 48,006 11,127 Premises and equipment 22,175
22,468 23,251 Other real estate owned 73,942 67,635 59,688 Goodwill
23,794 23,794 23,794 Accrued interest receivable and other assets
48,163 49,583 42,857
Total Assets $ 1,737,107 $ 1,723,952 $
1,757,327
Liabilities and Equity Certificates of deposit $
1,168,841 $ 1,166,820 $ 1,204,022 Interest checking 85,343 87,690
76,305 Money market 83,133 80,082 69,618 Savings 38,234
34,678 35,577
Total interest bearing deposits 1,375,551 1,369,270 1,385,522
Demand deposits 106,772 98,398
99,518
Total deposits 1,482,323 1,467,668 1,485,040 Federal funds
purchased & repurchase agreements 11,429 11,616 11,595 FHLB
advances 14,564 15,022 47,285 Junior subordinated debentures 33,550
33,550 34,000 Accrued interest payable and other liabilities
5,507 6,681 6,670
Total liabilities 1,547,373 1,534,537 1,584,590 Stockholders’
equity 189,734 189,415 172,737
Total Liabilities and Stockholders’ Equity $ 1,737,107
$ 1,723,952 $ 1,757,327
Ending shares outstanding 11,840,176 11,846,107
9,263,986
Book value per common share $ 12.79 $ 12.76 $
14.87
Tangible book value per common share 10.37 10.33 11.49
Asset Quality Data Loan 90 days or more past due
still on accrual $ 3,907 $ 594 $ 5,913 Non-accrual loans
65,964 59,799 54,545
Total non-performing loans 69,871 60,393 60,458 Real estate
acquired through foreclosures 73,942 67,635 59,688 Other
repossessed assets 41 52 80
Total non-performing assets $ 143,854 $ 128,080 $
120,226
Non-performing loans to total loans 5.47 % 4.63 % 4.44 %
Non-performing assets to total assets 8.28 7.43 6.84 Allowance for
loan losses to non-performing loans 48.09 56.77 43.90 Allowance for
loan losses to total loans 2.63 2.63 1.95
Risk-based
Capital Ratios Tier I leverage ratio 10.93 % 11.08 % 9.24 %
Tier I risk-based capital ratio 14.59 14.39 12.20 Total risk-based
capital ratio 16.52 16.32 14.12
FTE employees 300 286
280
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