PBIB Porter Bancorp, Inc. (delisted)

First Quarter 2014 Net Loss Attributable to Common Shareholders of $976,000

Porter Bancorp, Inc. (NASDAQ: PBIB), parent company of PBI Bank, with 18 full-service banking centers in Kentucky, today reported unaudited results for the first quarter of 2014.

The Company reported that the net loss attributable to common shareholders decreased to $976,000, or ($0.08) per diluted share, for the first quarter of 2014 compared to a net loss of $1,028,000, or ($0.09) per diluted share for the fourth quarter of 2013 and increased compared to the net loss of $524,000, or ($0.04) per diluted share, for the first quarter of 2013.

Our primary initiatives for 2014 are to continue reducing non-performing assets, restore capital, and return to sustainable profitability while continuing to serve our customers and developing new quality financial relationships.

First Quarter 2014 Financial Performance Highlights

• Net Interest Income – Net interest income declined to $7.3 million for the first quarter of 2014 compared with $7.6 million in the fourth quarter of 2013 and $8.3 million in the first quarter of 2013 as average loans declined to $698.2 million for the first quarter of 2014 compared with $719.2 million in the fourth quarter of 2013 and $872.5 million in the first quarter of 2013. Net interest margin remained consistent at 2.96% in the first quarter of 2014, compared with 2.96% in the fourth quarter of 2013, and declined from 3.07% in the first quarter of 2013.

• Provision for Loan Losses – No provision for loan losses expense was recorded for the first quarter of 2014 or the fourth quarter of 2013, compared to $450,000 in the first quarter of 2013. The reduction in provision for loan losses benefited from the downsizing of the loan portfolio, declining historical loss rates, and a reduction in loans migrating downward in risk grade classification. The allowance for loan losses for loans evaluated collectively for impairment was 4.10% at March 31, 2014, compared with 4.41% at December 31, 2013, and 4.88% at March 31, 2013.
• Non-performing Assets - Non-performing assets, which include loans past due 90 days and still accruing, loans on nonaccrual, and other real estate owned (OREO), decreased to $123.3 million, or 11.59% of total assets at March 31, 2014, compared with $132.9 million, or 12.35% of total assets, at December 31, 2013.

Non-performing loans decreased to $77.3 million, or 11.33% of total loans, at March 31, 2014, compared with $102.0 million, or 14.38% of total loans, at December 31, 2013. The decline was primarily driven by $16.9 million of nonaccrual loans migrating to OREO, $10.2 million in principal payments received on nonaccrual loans, and $2.7 million of net charge-offs.

Non-performing loans and OREO remain at elevated levels and continue to negatively impact financial performance.

  March 31,

2014

  December 31,

2013

    September 30,

2013

    June 30,

2013

    March 31,

2013

(in thousands) Past due loans:       30 – 59 days $ 5,667 $ 10,696 $ 10,018 $ 8,600 $ 8,052 60 – 89 days 1,232 775 7,582 2,979 2,960 90 days or more — 232 — 71 — Nonaccrual loans   77,344   101,767   106,922   112,185   120,943

Total past due and nonaccrual loans

$

84,243

$

113,470 $ 124,522 $ 123,835 $ 131,955  

Loans past due 90 days or more

$

—

$

232 $ — $ 71 $ — Nonaccrual loans 77,344 101,767 106,922 112,185 120,943 OREO   45,918   30,892   41,857   47,030   44,192

Total non-performing assets

$

123,262

$

132,891   $ 148,779   $ 159,286   $ 165,135  

In addition to nonaccrual loans and OREO, loans classified as Troubled Debt Restructures (TDRs) and on accrual totaled $41.8 million at March 31, 2014, compared to $44.3 million at December 31, 2013 and $55.2 million at March 31, 2013.

OREO at March 31, 2014 increased to $45.9 million, compared with $30.9 million at December 31, 2013, and $44.2 million at March 31, 2013. The Company acquired $17.4 million in OREO and sold $2.1 million in OREO during the first quarter of 2014. Fair value write-downs arising from new appraisals or lower marketing prices totaled $250,000 in the first quarter of 2014, compared with $882,000 in the fourth quarter of 2013 and $307,000 in the first quarter of 2013.

• Non-interest Expense – Non-interest expense decreased $547,000 to $8.5 million for the first quarter of 2014, compared with $9.0 million for the fourth quarter of 2013, and decreased $1.1 million compared with $9.6 million for the first quarter of 2013. The reduction in non-interest expense was attributable primarily to lower loan collection expenses and lower OREO expenses.
• Capital – At March 31, 2014, PBI Bank’s Tier 1 leverage ratio was 6.36% compared with 6.28% at December 31, 2013, and its Total risk-based capital ratio was 11.50% at March 31, 2014 compared with 11.44% at December 31, 2013, which are below the minimums of 9.0% and 12.0% required by the Bank’s Consent Order. At March 31, 2014, Porter Bancorp’s leverage ratio was 4.87% compared with 4.95% at December 31, 2013, and its Total risk-based capital ratio was 10.93%, compared with 11.03% at December 31, 2013.

Management and the Board of Directors continue to evaluate appropriate strategies for increasing the Company’s capital in order to meet the capital requirements of the Consent Order. These include, among other things, a possible public offering or private placement of common stock to new and existing shareholders. As previously announced, the Company has engaged a financial advisor to assist the Board of Directors in this evaluation.

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. The words “believe,” “may,” “should,” “anticipate,” “estimate,” “expect,” “intend,” “objective,” “possible,” “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 indicated by forward-looking statements due to various risks and uncertainties, including our ability to reduce our level of higher risk loans such as commercial real estate and real estate development loans, reduce our level of non-performing loans and other real estate owned, increase net interest income in a low interest rate environment, cybersecurity risks that may result in increased costs for us to protect against the risks, as well as liability or reputational damage to the Company in the event of a breach of our security, as well as our need to increase capital. These and other risks and uncertainties are described in greater detail 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, 2014 follows.

     

PORTER BANCORP, INC.Unaudited Financial Information(in thousands, except share and per share data)

    Three   Three   Three Months Months Months Ended Ended Ended 3/31/14 12/31/13 3/31/13

 

Income Statement Data Interest income $ 9,897 $10,259 $ 11,258 Interest expense   2,597   2,673     2,960  

 

Net interest income 7,300 7,586 8,298 Provision for loan losses   —   —     450  

 

 

Net interest income after provision 7,300 7,586 7,848   Service charges on deposit accounts 468 523 493 Income from fiduciary activities — — 517 Bank card interchange fees 161 176 172 Other real estate owned income 7 3 112 Gain (loss) on sales of securities, net 44 (4 ) — Income from bank owned life insurance 76 75 79 Other   159   184     274  

 

Non-interest income 915 957 1,647   Salaries & employee benefits 3,741 3,526 4,139 Occupancy and equipment 892 855 931 Other real estate owned expense 662 1,399 791 FDIC insurance 540 511 639 Franchise tax 425 333 537 Loan collection expense 539 734 1,035 Professional fees 558 484 406 Communications expense 235 180 175 Postage and delivery 110 109 113 Insurance expense 149 166 151 Other   651   752     647  

 

Non-interest expense 8,502 9,049 9,564   Income (loss) before income taxes (287 ) (506 ) (69 ) Income tax expense (benefit)   —   —     —  

 

 

 

Net income (loss) (287 ) (506 ) (69 ) Less: Dividends on preferred stock 786 607 438 Accretion on preferred stock — 25 45 Earnings (loss) allocated to participating securities   (97 ) (110 )   (28 )   Net income (loss) available to common $ (976 ) $(1,028 ) $ (524 )

 

  Weighted average shares – Basic 12,021,313 11,907,766 11,847,907 Weighted average shares – Diluted 12,021,313 11,907,766 11,847,907   Basic earnings (loss) per common share $ (0.08 ) $ (0.09 ) $ (0.04 ) Diluted earnings (loss) per common share $ (0.08 ) $ (0.09 ) $ (0.04 ) Cash dividends declared per common share $ 0.00 $ 0.00 $ 0.00      

PORTER BANCORP, INC.Unaudited Financial Information(in thousands, except share and per share data)

    Three   Three   Three Months Months Months Ended Ended Ended 3/31/14 12/31/13 3/31/13

 

Average Balance Sheet Data Assets $ 1,073,586 $ 1,081,908 $ 1,151,816 Loans 698,184 719,163 872,505 Earning assets 1,019,173 1,033,083 1,111,469 Deposits 984,169 989,847 1,053,884 Long-term debt and advances 35,233 35,652 37,169 Interest bearing liabilities 911,186 922,519 983,481 Stockholders’ equity 36,992 38,035 47,749     Performance Ratios Return on average assets (0.11 )% (0.19 )% (0.02 )% Return on average equity (3.15 ) (5.28 ) (0.59 ) Yield on average earning assets (tax equivalent) 3.99 3.99 4.15 Cost of interest bearing liabilities 1.16 1.15 1.22 Net interest margin (tax equivalent) 2.96 2.96 3.07 Efficiency ratio 104.05 105.87 96.17     Loan Charge-off Data Loans charged-off $ (3,082 ) $ (4,171 ) $ (17,962 ) Recoveries   373     541     671  

 

 

Net charge-offs $ (2,709 ) $ (3,630 ) $ (17,291 )     Nonaccrual Loan Activity Nonaccrual loans at beginning of period $ 101,767 $ 106,922 $ 94,517 Net principal pay-downs (10,245 ) (5,151 ) (4,105 ) Charge-offs (2,472 ) (3,232 ) (17,472 ) Loans foreclosed and transferred to OREO (16,895 ) (2,064 ) (3,648 ) Loans returned to accrual status (870 ) (2,459 ) — Loans placed on nonaccrual during the period   6,059     7,751     51,651     Nonaccrual loans at end of period $ 77,344   $ 101,767   $ 120,943       Troubled Debt Restructurings (TDRs) Accruing $ 41,813 $ 44,346 $ 55,171 Nonaccrual   30,640     46,916     52,592   Total $ 72,453 $ 91,262 $ 107,763                   OREO at beginning of period $ 30,892 $ 41,857 $ 43,671 Real estate acquired 17,351 2,064 3,680 Valuation adjustment write-downs (250 ) (882 ) (307 ) Proceeds from sales of properties (2,075 ) (12,205 ) (2,655 ) Gain (loss) on sales, net   —     58     (197 )   OREO at end of period $ 45,918   $ 30,892   $ 44,192        

PORTER BANCORP, INC.Unaudited Financial Information(in thousands, except share and per share data)

    As of   As of   As of 3/31/14 12/31/13 3/31/13

 

 

 

Assets Loans $ 682,591 $ 709,326 $ 827,076 Loan loss reserve   (25,415 )   (28,124 )   (39,839 )

 

 

 

Net loans 657,176 681,202 787,237 Mortgage loans held for sale — 149 — Securities held to maturity 43,550 43,612 — Securities available for sale 166,442 163,344 183,247 Federal funds sold & interest bearing deposits 99,286 103,669 62,505 Cash and due from financial institutions 7,449 7,465 8,683 FHLB stock 7,323 10,072 10,072 Premises and equipment 19,821 19,983 20,667 Other real estate owned 45,918 30,892 44,192 Accrued interest receivable and other assets   16,565     15,733     16,266  

 

 

 

Total Assets $ 1,063,530   $ 1,076,121   $ 1,132,869  

 

 

 

  Liabilities and Equity Certificates of deposit $ 656,475 $ 679,952 $ 739,934 Interest checking 79,689 84,626 83,522 Money market 89,678 79,349 62,111 Savings   38,524     36,292     41,952  

 

 

 

Total interest bearing deposits 864,366 880,219 927,519 Demand deposits   110,507     107,486     108,841  

 

 

 

Total deposits 974,873 987,705 1,036,360 Federal funds purchased & repurchase agreements 2,240 2,470 2,853 FHLB advances 4,345 4,492 5,324 Junior subordinated debentures 30,625 30,850 31,525 Accrued interest payable and other liabilities   15,110     14,673     10,069  

 

 

 

Total liabilities 1,027,193 1,040,190 1,086,131 Stockholders’ equity   36,337     35,931     46,738  

 

 

 

Total Liabilities and Stockholders’ Equity $ 1,063,530   $ 1,076,121   $ 1,132,869  

 

 

 

  Ending shares outstanding 12,894,741 12,840,999 12,139,975 Book value per common share $ (0.15 ) $ (0.18 ) $ 0.70 Tangible book value per common share (0.25 ) (0.29 ) 0.55   Asset Quality Data Loan 90 days or more past due still on accrual $ — $ 232 $ — Nonaccrual loans   77,344     101,767     120,943  

 

 

 

Total non-performing loans 77,344 101,999 120,943 Real estate acquired through foreclosures 45,918 30,892 44,192 Other repossessed assets   —     —     —  

 

 

 

Total non-performing assets $ 123,262   $ 132,891   $ 165,135  

 

 

 

Non-performing loans to total loans 11.33 % 14.38 % 14.62 % Non-performing assets to total assets 11.59 12.35 14.58 Allowance for loan losses to non-performing loans 32.86 27.57 32.94 Allowance as % of loans evaluated individually 2.01 2.32 4.60 Allowance as % of loans evaluated collectively 4.10 4.41 4.88 Allowance for loan losses to total loans 3.72 3.96 4.82   Risk-based Capital Ratios Tier I leverage ratio 4.87 % 4.95 % 4.91 % Tier I risk-based capital ratio 7.22 7.34 6.77 Total risk-based capital ratio 10.93 11.03 10.16   FTE employees 263 260 264

Porter Bancorp, Inc.John T. Taylor, 502-499-4800Chief Executive Officer