PBIB Porter Bancorp, Inc. (delisted)

Second Quarter 2014 Net Loss Attributable to Common Shareholders of $672,000

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

The Company reported a net loss attributable to common shareholders of $672,000, or ($0.06) per diluted share, for the second quarter of 2014 compared with a net loss of $1.7 million, or ($0.14) per diluted share, for the second quarter of 2013. Net loss attributable to common shareholders for the six months ended June 30, 2014, was $1.6 million, or ($0.14) per diluted common share, compared with net loss attributable to common shareholders of $2.2 million, or ($0.19) per diluted share, for the six months ended June 30, 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 develop new quality financial relationships.

Second Quarter 2014 Financial Performance Highlights

• Net Interest Income – Net interest income increased to $7.6 million for the second quarter of 2014 compared with $7.3 million in the first quarter of 2014 and decreased from $8.4 million in the second quarter of 2013 as average loans declined to $677.6 million for the second quarter of 2014 compared with $698.2 million in the first quarter of 2014 and $806.9 million in the second quarter of 2013. Net interest margin increased to 3.13% in the second quarter of 2014, compared with 2.96% in the first quarter of 2014, and declined from 3.24% in the second quarter of 2013. While earning assets have decreased and interest expense has remained relatively flat, net interest margin was positively impacted in the second quarter by the collection of previously charged-off accrued uncollected interest and late charges of approximately $240,000 along with the full unpaid principal balance on three nonaccrual loans.
• Provision for Loan Losses – No provision for loan losses expense was recorded for the second or first quarters of 2014, or in the second quarter of 2013 due to 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 3.95% at June 30, 2014, compared with 4.10% at March 31, 2014, and 4.56% at June 30, 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 $107.3 million, or 10.20% of total assets at June 30, 2014, compared with $123.3 million, or 11.59% of total assets, at March 31, 2014, and $159.3 million, or 14.86% of total assets, at June 30, 2013.

Non-performing loans decreased to $44.4 million, or 6.90% of total loans, at June 30, 2014, compared with $77.3 million, or 11.33% of total loans, at March 31, 2014. The decline was primarily driven by $18.5 million of nonaccrual loans migrating to OREO, $12.2 million in principal payments received on nonaccrual loans, and $2.9 million of charge-offs.

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

  June 30,

2014

  March 31,

2014

  December 31,

2013

  September 30,

2013

June 30,

2013

(in thousands) Past due loans:             30 – 59 days $ 3,057 $ 5,667 $ 10,696 $ 10,018 $ 8,600 60 – 89 days 991 1,232 775 7,582 2,979 90 days or more — — 232 — 71 Nonaccrual loans   44,375   77,344   101,767   106,922   112,185

Total past due and nonaccrual loans

$

48,423

$

84,243 $ 113,470 $ 124,522 $ 123,835  

Loans past due 90 days or more

$

—

$

— $ 232 $ — $ 71 Nonaccrual loans 44,375 77,344 101,767 106,922 112,185 OREO   62,935   45,918   30,892   41,857   47,030

Total non-performing assets

$

107,310

$

123,262   $ 132,891   $ 148,779   $ 159,286  

In addition to nonaccrual loans and OREO, loans classified as Troubled Debt Restructures (TDRs) and on accrual totaled $32.4 million at June 30, 2014, compared to $41.8 million at March 31, 2014 and $54.9 million at June 30, 2013.

OREO at June 30, 2014 increased to $62.9 million, compared with $45.9 million at March 31, 2014, and $47.0 million at June 30, 2013. The Company acquired $19.6 million in OREO and sold $2.2 million in OREO during the second quarter of 2014. Fair value write-downs arising from new appraisals or lower marketing prices totaled $400,000 in the second quarter of 2014, compared with $250,000 in the first quarter of 2014 and $977,000 in the second quarter of 2013.

• Non-interest Expense – Non-interest expense increased $442,000 to $8.9 million for the second quarter of 2014, compared with $8.5 million for the first quarter of 2014, and decreased $2.9 million compared with $11.8 million for the second quarter of 2013. The increase from the first quarter of 2014 was due to increases in salary and employee benefit expenses, OREO expenses, and professional fees. The reduction in non-interest expense from the second quarter of 2013 was attributable primarily to lower loan collection expenses and lower OREO expenses.
• Income Tax Benefit – The calculation for the income tax provision or benefit generally does not consider the tax effects of changes in other comprehensive income, or OCI, which is a component of stockholders’ equity on the balance sheet. However, an exception is provided in certain circumstances, such as when there is a full valuation allowance against net deferred tax assets, there is a loss from continuing operations and income in other components of the financial statements. In such a case, pre-tax income from other categories, such as changes in OCI, must be considered in determining a tax benefit to be allocated to the loss from continuing operations. Our June 30, 2014 tax benefit is entirely due to gains in other comprehensive income that are presented in current operations in accordance with applicable accounting standards.
• Capital – At June 30, 2014, PBI Bank’s Tier 1 leverage ratio was 6.51% compared with 6.36% at March 31, 2014, and its Total risk-based capital ratio was 11.79% at June 30, 2014 compared with 11.50% at March 31, 2014, which are below the minimums of 9.0% and 12.0% required by the Bank’s Consent Order. At June 30, 2014, Porter Bancorp’s leverage ratio was 4.89% compared with 4.87% at March 31, 2014, and its Total risk-based capital ratio was 11.07%, compared with 10.93% at March 31, 2014.

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, and increase net interest income in a low interest rate environment, 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 second quarter ending June 30, 2014 follows.

     

PORTER BANCORP, INC.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 6/30/14 3/31/14 6/30/13 6/30/14 6/30/13

 

 

 

Income Statement Data Interest income $ 10,166 $ 9,897 $ 11,168 $ 20,063 $ 22,426 Interest expense   2,552     2,597     2,816     5,149     5,776  

 

 

 

Net interest income 7,614 7,300 8,352 14,914 16,650 Provision for loan losses   —     —     —     —     450  

 

 

 

 

Net interest income after provision 7,614 7,300 8,352 14,914 16,200   Service charges on deposit accounts 487 468 506 955 999 Income from fiduciary activities — — — — 517 Bank card interchange fees 205 161 196 366 368 Other real estate owned income 18 7 230 25 342 Gains (losses) on sales of securities, net 2 44 703 46 703 Income from bank owned life insurance 62 76 305 138 384 Other   175     159     208     334     482  

 

 

 

Non-interest income 949 915 2,148 1,864 3,795   Salaries & employee benefits 3,949 3,741 3,999 7,690 8,138 Occupancy and equipment 896 892 913 1,788 1,844 Other real estate owned expense 774 662 1,657 1,436 2,448 FDIC insurance 571 540 650 1,111 1,289 Franchise tax 405 425 537 830 1,074 Loan collection expense 389 539 2,407 928 3,442 Professional fees 764 558 499 1,322 905 Communications expense 165 235 179 400 354 Postage and delivery 94 110 102 204 215 Insurance expense 153 149 160 302 311 Other   784     651     706     1,435     1,353  

 

 

 

 

Non-interest expense 8,944 8,502 11,809 17,446 21,373   Income (loss) before income taxes (381 ) (287 ) (1,309 ) (668 ) (1,378 ) Income tax expense (benefit)   (424 )   —     —     (424 )   —  

 

 

 

 

Net income (loss) 43 (287 ) (1,309 ) (244 ) (1,378 ) Less: Dividends on preferred stock 789 786 437 1,574 875 Accretion on preferred stock — — 45 — 90 Earnings allocated to participating securities   (74 )   (97 )   (110 )   (173 )   (131 )   Net income (loss) attributable to common $ (672 ) $ (976 ) $ (1,681 ) $ (1,645 ) $ (2,212 )

 

 

 

 

  Weighted average shares – Basic 11,981,121 12,021,313 11,761,788 11,992,925 11,801,663 Weighted average shares – Diluted 11,981,121 12,021,313 11,761,788 11,992,925 11,801,663   Basic earnings (loss) per common share $ (0.06 ) $ (0.08 ) $ (0.14 ) $ (0.14 ) $ (0.19 ) Diluted earnings (loss) per common share $ (0.06 ) $ (0.08 ) $ (0.14 ) $ (0.14 ) $ (0.19 ) Cash dividends declared per common share $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00      

PORTER BANCORP, INC.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 6/30/14 3/31/14 6/30/13 6/30/14 6/30/13

 

 

 

Average Balance Sheet Data Assets $ 1,056,888 $ 1,073,586 $ 1,104,807 $ 1,065,191 $ 1,128,182 Loans 677,643 698,184 806,941 687,857 839,542 Earning assets 991,416 1,019,173 1,050,515 1,005,218 1,080,824 Deposits 966,164 984,169 1,008,102 975,117 1,030,867 Long-term debt and advances 35,372 35,233 36,652 35,303 36,909 Interest bearing liabilities 893,921 911,186 941,059 902,506 962,153 Stockholders’ equity 37,690 36,992 46,904 37,343 47,324     Performance Ratios Return on average assets 0.02 % (0.11 )% (0.48 )% (0.05 )% (0.25 )% Return on average equity 0.46 (3.15 ) (11.19 ) (1.32 ) (5.87 ) Yield on average earning assets (tax equivalent) 4.16 3.99 4.31 4.08 4.23 Cost of interest bearing liabilities 1.15 1.16 1.20 1.15 1.21 Net interest margin (tax equivalent) 3.13 2.96 3.24 3.04 3.15 Efficiency ratio 104.47 104.05 120.54 104.27 108.26     Loan Charge-off Data Loans charged-off $ (3,130 ) $ (3,082 ) $ (3,404 ) $ (6,212 ) $ (21,366 ) Recoveries   1,741     373     1,124     2,114     1,795   Net charge-offs $ (1,389 ) $ (2,709 ) $ (2,280 ) $ (4,098 ) $ (19,571 )     Nonaccrual Loan Activity Nonaccrual loans at beginning of period $ 77,344 $ 101,767 $ 120,943 $ 101,767 $ 94,517 Net principal pay-downs (12,195 ) (10,245 ) (8,118 ) (22,440 ) (12,223 ) Charge-offs (2,932 ) (2,472 ) (3,256 ) (5,404 ) (20,728 ) Loans foreclosed and transferred to OREO (18,524 ) (16,895 ) (11,875 ) (35,419 ) (15,523 ) Loans returned to accrual status (2,362 ) (870 ) (421 ) (3,232 ) (421 ) Loans placed on nonaccrual during the period   3,044     6,059     14,912     9,103     66,563   Nonaccrual loans at end of period $ 44,375   $ 77,344   $ 112,185   $ 44,375   $ 112,185       Troubled Debt Restructurings (TDRs) Accruing $ 32,389 $ 41,813 $ 54,927 $ 32,389 $ 54,927 Nonaccrual   18,500     30,640     46,510     18,500     46,510   Total $ 50,889 $ 72,453 $ 101,437 $ 50,889 $ 101,437   Other Real Estate Owned (OREO) Activity (Net of Allowance) OREO at beginning of period $ 45,918 $ 30,892 $ 44,192 $ 30,892 $ 43,671 Real estate acquired 19,569 17,351 11,875 36,920 15,555 Valuation adjustment write-downs (400 ) (250 ) (977 ) (650 ) (1,284 ) Proceeds from sales of properties (2,206 ) (2,075 ) (7,898 ) (4,281 ) (10,553 ) Gain (loss) on sales, net   54     —     (162 )   54     (359 ) OREO at end of period $ 62,935   $ 45,918   $ 47,030   $ 62,935   $ 47,030        

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

    As of   As of   As of   As of 6/30/14 3/31/14 12/31/13 6/30/13 Assets Loans $ 643,030 $ 682,591 $ 709,326 $ 774,785 Loan loss reserve   (24,026 )   (25,415 )   (28,124 )   (37,559 )

 

 

 

 

Net loans 619,004 657,176 681,202 737,226 Mortgage loans held for sale 280 — 149 133 Securities held to maturity 43,488 43,550 43,612 — Securities available for sale 180,723 166,442 163,344 176,942 Federal funds sold & interest bearing deposits 95,353 99,286 103,669 56,512 Cash and due from financial institutions 6,913 7,449 7,465 7,754 Premises and equipment 19,788 19,821 19,983 20,368 FHLB Stock 7,323 7,323 10,072 10,072 Other real estate owned 62,935 45,918 30,892 47,030 Accrued interest receivable and other assets   16,220     16,565     15,733     16,094  

 

 

 

 

Total Assets $ 1,052,027   $ 1,063,530   $ 1,076,121   $ 1,072,131  

 

 

 

 

Liabilities and Equity Certificates of deposit $ 631,110 $ 656,475 $ 679,952 $ 690,557 Interest checking 76,625 79,689 84,626 78,218 Money market 95,946 89,678 79,349 65,620 Savings   37,178     38,524     36,292     40,121  

 

 

 

 

Total interest bearing deposits 840,859 864,366 880,219 874,516 Demand deposits   109,956     110,507     107,486     106,320  

 

 

 

 

Total deposits 950,815 974,873 987,705 980,836 Federal funds purchased & repurchase agreements 2,451 2,240 2,470 3,292 FHLB advances 14,134 4,345 4,492 5,016 Junior subordinated debentures 30,400 30,625 30,850 31,525 Accrued interest payable and other liabilities   16,453     15,110     14,673     12,710  

 

 

 

 

Total liabilities 1,014,253 1,027,193 1,040,190 1,033,379 Stockholders’ equity   37,774     36,337     35,931     38,752  

 

 

 

 

Total Liabilities and Stockholders’ Equity $ 1,052,027   $ 1,063,530   $ 1,076,121   $ 1,072,131  

 

 

 

 

  Ending shares outstanding 13,104,853 12,894,741 12,840,999 12,322,207 Book value per common share $ (0.04 ) $ (0.15 ) $ (0.18 ) $ 0.04 Tangible book value per common share (0.13 ) (0.25 ) (0.29 ) (0.10 )   Asset Quality Data Loan 90 days or more past due still on accrual $ — $ — $ 232 $ 71 Nonaccrual loans   44,375     77,344     101,767     112,185   Total non-performing loans 44,375 77,344 101,999 112,256 Real estate acquired through foreclosures 62,935 45,918 30,892 47,030 Other repossessed assets   —     —     —     —   Total non-performing assets $ 107,310   $ 123,262   $ 132,891   $ 159,286  

 

 

 

 

Non-performing loans to total loans 6.90 % 11.33 % 14.38 % 14.49 % Non-performing assets to total assets 10.20 11.59 12.35 14.86 Allowance for loan losses to non-performing loans 54.14 32.86 27.57 33.46 Allowance as % of loans evaluated individually 2.20 2.01 2.32 5.82 Allowance as % of loans evaluated collectively 3.95 4.10 4.41 4.56 Allowance for loan losses to total loans 3.74 3.72 3.96 4.85   Risk-based Capital Ratios Tier I leverage ratio 4.89 % 4.87 % 4.95 % 4.91 % Tier I risk-based capital ratio 7.31 7.22 7.34 6.88 Total risk-based capital ratio 11.07 10.93 11.03 10.46   FTE employees 275 263 260 264  

Porter Bancorp, Inc.John T. Taylor, President, 502-499-4800