PBIB Porter Bancorp, Inc. (delisted)

Porter Bancorp, Inc. (NASDAQ: PBIB), parent company of PBI Bank, today reported unaudited results for the fourth quarter of 2014.

The Company reported that net income attributable to common shareholders for the year ended December 31, 2014, was $19.4 million, or $1.59 per diluted common share, compared with a net loss attributable to common shareholders of $3.4 million, or ($0.29) per diluted share, for the year ended December 31, 2013.

In December 2014, the Company completed a non-cash equity exchange transaction with investors. The exchange transaction consisted of the cancellation of all of the Company’s issued and outstanding Series A Preferred Stock, accrued dividends thereon, and Series C Preferred Stock having an aggregate book value of approximately $45.7 million in exchange for newly issued common and preferred securities having a fair value of approximately $9.6 million. The effect of the preferred stock exchange to common shareholders totaled approximately $36.1 million. The transaction is fully described in 8-Ks filed on November 24, 2014 and December 10, 2014 as well as in the definitive proxy statement filed January 30, 2015.

The Company reported a net loss of $3.8 million and $11.2 million for the three months and year ended December 31, 2014, compared with a net loss of $506,000 and $1.6 million for the three months and year ended December 31, 2013. After additions for the effect of the non-cash equity exchange and deductions for dividends on preferred stock and earnings allocated to participating securities, the Company reported net income attributable to common shareholders of $24.3 million and $19.4 million for the three months and year ended December 31, 2014, compared with a net loss attributable to common shareholders of $1.0 million and $3.4 million for the three months and year ended December 31, 2013.

Net Interest Income – Net interest income before provision expense increased to $7.5 million for the fourth quarter of 2014 compared with $7.3 million in the third quarter of 2014, and decreased from $7.6 million in the fourth quarter of 2013. Average loans declined to $634.9 million for the fourth quarter of 2014 compared with $640.0 million in the third quarter of 2014 and $719.2 million in the fourth quarter of 2013. Net interest margin increased to 3.16% in the fourth quarter of 2014, compared with 3.10% in the third quarter of 2014 and 2.96% in the fourth quarter of 2013 primarily driven over the past quarter by improving cost of funds which declined to 0.99% in the fourth quarter of 2014, compared with 1.13% in the third quarter of 2014 and 1.15% in the fourth quarter of 2013.

Allowance for Loan Losses – The allowance for loan losses to total loans was 3.10% at December 31, 2014 compared to 3.79% at September 30, 2014, and 3.96% at December 31, 2013. The declining level of the allowance is primarily driven by declining historical charge-off levels and improving trends in loan category risk ratings. Net loan charge-offs declined to $15.9 million in 2014 from $29.3 million in 2013 and $36.1 million in 2012. The allowance for loan losses for loans evaluated collectively for impairment was 3.37% at December 31, 2014, compared with 4.00% at September 30, 2014, and 4.41% at December 31, 2013. Provision for loan losses expense of $800,000 was recorded for the fourth quarter of 2014, while no provision was recorded for the third quarter of 2014 or the fourth quarter of 2013. Provision expense of $7.1 million was recorded for 2014, compared to $700,000 for the year ended December 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 $94.0 million, or 9.2% of total assets at December 31, 2014, compared with $99.2 million, or 9.6% of total assets at September 30, 2014, and $132.9 million, or 12.4% of total assets at December 31, 2013.

Non-performing loans increased to $47.3 million, or 7.57% of total loans, at December 31, 2014, compared with $44.7 million, or 7.00% of total loans at September 30, 2014 and decreased from $102.0 million, or 14.4% of total loans at December 31, 2013. The increase from the previous quarter was primarily driven by $7.4 million in loans placed on nonaccrual during the period, offset by $675,000 of nonaccrual loans migrating to OREO, $1.8 million in principal payments received on nonaccrual loans, and $2.3 million of charge-offs.

OREO at December 31, 2014 decreased to $46.2 million, compared with $54.5 million at September 30, 2014 and increased from $30.9 million at December 31, 2013. The Company acquired $675,000 in OREO and sold $5.8 million in OREO during the fourth quarter of 2014. Fair value write-downs arising from new appraisals or lower marketing prices totaled $3.0 million in the fourth quarter of 2014, compared with $600,000 in the third quarter of 2014 and $882,000 in the fourth quarter of 2013.

The following table details non-performing assets as of:

               

December 31,2014

September 30,2014

June 30,2014

March 31,2014

December 31,2013

(in thousands) Past due loans: 30 – 59 days $ 3,960 $ 3,507 $ 3,057 $ 5,667 $ 10,696 60 – 89 days 980 3,333 991 1,232 775 90 days or more 151 — — — 232 Nonaccrual loans   47,175   44,670   44,375   77,344   101,767

Total past due and

nonaccrual loans

$

52,266

$

51,510 $ 48,423 $ 84,243 $ 113,470   Loans past due 90 days

or more

$

151

$

— $ — $ — $ 232 Nonaccrual loans 47,175 44,670 44,375 77,344 101,767 OREO 46,197 54,507 56,882 45,918 30,892 Other repossessed assets   —   —   —   —   — Total non-performing

assets

$

93,523

$

99,177 $ 101,257   $ 123,262 $ 132,891  

In addition to nonaccrual loans and OREO, loans classified as Troubled Debt Restructures (TDRs) and on accrual totaled $22.0 million at December 31, 2014, compared to $28.1 million at September 30, 2014 and $44.3 million at December 31, 2013.

Loans Held for Sale – During the fourth quarter of 2014, we identified and transferred to loans held for sale certain substandard accruing commercial loans. The loans were transferred to held for sale at the lower of cost or fair value. In accordance with generally accepted accounting principles, the credit component of any writedown upon transfer to held for sale is reflected in charge-offs to the allowance for loan losses. Loans held for sale total $8.9 million at December 31, 2014.

Non-interest Expense – Non-interest expense increased $2.6 million to $11.8 million for the fourth quarter of 2014, compared with $9.3 million for the third quarter of 2014, and increased $2.8 million compared with $9.0 million for the fourth quarter of 2013. While loan collection expenses decreased approximately $510,000 in the fourth quarter of 2014 compared to the third quarter of 2014, OREO expenses increased approximately $3.3 million primarily as a result of fair value writedowns resulting from declines in the fair value of the real estate based upon updated appraisals and reduced marketing prices.

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 there is 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 December 31, 2014 tax benefit is entirely due to unrealized gains in other comprehensive income that are presented in current operations in accordance with applicable accounting standards.

Capital – At December 31, 2014, PBI Bank’s Tier 1 leverage ratio was 5.78% compared with 6.09% at September 30, 2014, and its Total risk-based capital ratio was 10.57% at December 31, 2014 compared with 11.01% at September 30, 2014, which are below the minimums of 9.0% and 12.0% required by the Bank’s Consent Order. At December 31, 2014, Porter Bancorp’s leverage ratio was 4.51% compared with 4.02% at September 30, 2014, and its Total risk-based capital ratio was 10.61%, compared with 10.05% at September 30, 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.

Shares Issued and Outstanding – At December 31, 2014, we had 14,890,514 shares of common stock issued and outstanding. We also had 40,536 shares of Series B preferred stock and 64,580 shares of Series D preferred stock issued and outstanding. The Series B preferred shares will automatically convert to 4,053,600 common shares and the Series D preferred shares will automatically convert to 6,458,000 non-voting common shares on the third business day following shareholder approval. A special meeting of shareholders to vote on this matter is expected to be held on February 25, 2015.

The following table presents our unaudited book value and tangible book value per common and non-voting common share as of December 31, 2014 reflecting the proforma impact of the automatic conversion of Series B and Series D preferred shares into common and non-voting common shares following shareholder approval as fully described in the definitive proxy statement filed January 30, 2015:

     

As ofDecember 31, 2014Unaudited

ConversionAdjustmentsResulting fromShareholderApproval (1)

December 31,2014 ProformaUnaudited

(dollars in thousands, except share and per share amounts)   Common shareholders’ equity $ 24,913 $ 5,781 $ 30,694 Preferred shareholders’ equity   8,552   (5,781 )   2,771 Total shareholders’ equity $ 33,465 $ — $ 33,465   Common shares issued and outstanding 14,890,514 4,053,600 18,944,114 Non-voting common shares issued and outstanding   —   6,458,000   6,458,000 Total common and non-voting common shares   14,890,514   10,511,600   25,402,114   Book value per common and non-voting common share $ 1.67 $ 1.21 Tangible book value per common and non-voting common share (2) 1.61 1.17  

(1) The Series B and D preferred stock were recorded at issuance at fair value based on the 30-day post-announcement daily average closing price of $0.55 per common share.  Upon shareholder approval, the Series B and D preferred shares convert to common and non-voting common shares.

(2) Common equity is reduced by intangible assets totaling $929,000 in computing tangible book value per common and non-voting common shares.

 

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 fourth quarter ending December 31, 2014 follows.

   

PORTER BANCORP, INC.

Unaudited Financial Information

(in thousands, except share and per share data)

  Three Months Ended Years Ended 12/31/14   9/30/14   12/31/13 12/31/14   12/31/13

 

 

 

Income Statement Data Interest income $ 9,636 $ 9,814 $ 10,259 $ 39,513 $ 43,228 Interest expense 2,169 2,477 2,673 9,795   11,143

 

 

 

 

Net interest income 7,467 7,337 7,586 29,718 32,085 Provision for loan losses 800 — — 7,100   700

 

 

 

 

 

Net interest income after provision 6,667 7,337 7,586 22,618 31,385   Service charges on deposits 498 535 523 1,988 2,058 Bank card interchange fees 190 209 176 765 718 Income from bank owned life insurance 69 69 75 276 534 Other real estate owned income 226 5 3 256 399 Gains (losses) on sales of securities, net — 46 (4 ) 92 723 Income from fiduciary activities — — — — 517 Other 175 193 184 702   970

 

 

 

 

Non-interest income 1,158 1,057 957 4,079 5,919   Salaries & employee benefits 3,927 4,041 3,526 15,658 15,501 Occupancy and equipment 852 857 855 3,497 3,583 Loan collection expense 348 858 734 2,994 4,707 Other real estate owned expense 3,843 560 1,399 5,839 4,516 FDIC insurance 590 571 511 2,272 2,378 Franchise and deposit tax 210 405 333 1,445 1,944 Professional fees 819 630 484 2,771 1,892 Communications expense 171 181 180 752 711 Insurance expense 116 157 166 575 648 Postage and delivery 106 97 109 407 423 Data processing expense 288 270 107 1,106 184 Advertising 268 164 118 563 308 Other 310 490 527 1,556   2,095

 

 

 

 

Non-interest expense 11,848 9,281 9,049 39,435 38,890   Income (loss) before income taxes (4,023 ) (887 ) (506 ) (12,738 ) (1,586 ) Income tax expense (benefit) (238 ) (38 ) — (1,583 ) —

 

 

 

 

Net income (loss) (3,785 ) (849 ) (506 ) (11,155 ) (1,586 ) Less: Dividends and accretion on preferred stock — 786 632 2,362 2,079 Effect of exchange of preferred stock to common stock (36,104 ) — — (36,104 ) — Earnings allocated to participating securities 7,977 (162 ) (110 ) 3,159   (267 )   Net income (loss) attributable to common $ 24,342 $ (1,473 ) $ (1,028 ) $ 19,428   $ (3,398 )

 

 

 

 

  Weighted average shares – Basic 12,767,430 12,086,843 11,907,766 12,240,889 11,794,738 Weighted average shares – Diluted 12,767,430 12,086,843 11,907,766 12,240,889 11,794,738   Basic earnings (loss) per common share $ 1.91 $ (0.12 ) $ (0.09 ) $ 1.59 $ (0.29 ) Diluted earnings (loss) per common share $ 1.91 $ (0.12 ) $ (0.09 ) $ 1.59 $ (0.29 ) 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 Months Ended Years Ended 12/31/14 9/30/14 12/31/13 12/31/14 12/31/13

 

 

 

Average Balance Sheet Data Assets $ 1,033,327 $ 1,033,818 $ 1,081,908 $ 1,049,232 $ 1,098,400 Loans 634,872 640,011 719,163 662,442 788,176 Earning assets 952,946 954,217 1,033,083 979,187 1,050,142 Deposits 948,899 947,989 989,847 961,671 1,004,052 Long-term debt and advances 34,127 35,202 35,652 34,981 36,394 Interest bearing liabilities 865,042 873,520 922,519 885,757 937,406 Stockholders’ equity 29,928 31,101 38,035 33,881 42,631     Performance Ratios Return on average assets (1.45) % (0.33) % (0.19) % (1.06) % (0.14) % Return on average equity (50.18) (10.83) (5.28) (33.42) (3.72) Yield on average earning assets (tax equivalent) 4.06 4.13 3.99 4.09 4.16 Cost of interest bearing liabilities 0.99 1.13 1.15 1.11 1.19 Net interest margin (tax equivalent) 3.16 3.10 2.96 3.09 3.10 Efficiency ratio 137.37 111.18 105.87 117.00 104.32     Loan Charge-off Data Loans charged-off $ (6,197 ) $ (1,824 ) $ (4,171 ) $ (19,426 ) $ (32,608 ) Recoveries   563   889   541   3,566   3,352 Net charge-offs $ (5,634 ) $ (935 ) $ (3,630 ) $ (15,860 ) $ (29,256 )     Nonaccrual Loan Activity Nonaccrual loans at beginning of period $ 44,670 $ 44,375 $ 106,922 $ 101,767 $ 94,517 Net principal pay-downs (1,825 ) (3,229 ) (5,151 ) (27,494 ) (24,750 ) Charge-offs (2,291 ) (1,217 ) (3,232 ) (14,105 ) (29,348 ) Loans foreclosed and transferred to OREO (675 ) (797 ) (2,064 ) (31,698 ) (20,606 ) Loans returned to accrual status (116 ) (57 ) (2,459 ) (3,405 ) (3,558 ) Loans placed on nonaccrual during the period   7,412   5,595   7,751   22,110   85,512 Nonaccrual loans at end of period $ 47,175 $ 44,670 $ 101,767 $ 47,175 $ 101,767     Troubled Debt Restructurings (TDRs) Accruing $ 21,985 $ 28,114 $ 44,346 $ 21,985 $ 44,346 Nonaccrual   20,507   21,415   46,916   20,507   46,916 Total $ 42,492 $ 49,529 $ 91,262 $ 42,492 $ 91,262   Other Real Estate Owned (OREO) Activity OREO at beginning of period $ 54,507 $ 56,882 $ 41,857 $ 30,892 $ 43,671 Real estate acquired 675 797 2,064 32,338 20,606 Valuation adjustment write-downs (3,005 ) (600 ) (882 ) (4,255 ) (2,466 ) Proceeds from sales of properties (5,831 ) (2,973 ) (12,205 ) (13,084 ) (30,787 ) Gain (loss) on sales, net   (149 )   401   58   306   (132 ) OREO at end of period $ 46,197 $ 54,507 $ 30,892 $ 46,197 $ 30,892    

PORTER BANCORP, INC.

Unaudited Financial Information

(in thousands, except share and per share data)

  As of   12/31/14   9/30/14   6/30/14     3/31/14     12/31/13     12/31/12   Assets Loans $ 624,999 $ 638,360 $ 643,030 $ 682,591 $ 709,326 $ 899,092 Allowance for loan losses   (19,364 )   (24,198 )   (25,133 )   (25,415 )   (28,124 )   (56,680 ) Net loans 605,635 614,162 617,897 657,176 681,202 842,412 Loans held for sale 8,926 — 280 — 149 507 Securities held to maturity 42,325 42,386 43,488 43,550 43,612 — Securities available for sale 190,791 192,146 180,723 166,442 163,344 178,476 Federal funds sold & interest bearing deposits 66,011 73,494 95,353 99,286 103,669 41,161 Cash and due from financial institutions 14,169 11,336 6,913 7,449 7,465 8,411 Premises and equipment 19,507 19,649 19,788 19,821 19,983 20,805 Bank owned life insurance 9,167 9,103 9,039 8,981 8,911 8,398 FHLB Stock 7,323 7,323 7,323 7,323 10,072 10,072 Other real estate owned 46,197 54,507 56,882 45,918 30,892 43,671 Accrued interest receivable and other assets   7,938   6,608   7,181   7,584   6,822   8,718 Total Assets $ 1,017,989 $ 1,030,714 $ 1,044,867 $ 1,063,530 $ 1,076,121 $ 1,162,631   Liabilities and Equity Certificates of deposit $ 574,681 $ 609,682 $ 631,110 $ 656,475 $ 679,952 $ 760,573 Interest checking 91,086 76,431 76,625 79,689 84,626 87,234 Money market 109,734 100,890 95,946 89,678 79,349 63,715 Savings   36,430   36,364   37,178   38,524   36,292   39,227 Total interest bearing deposits 811,931 823,367 840,859 864,366 880,219 950,749 Demand deposits   114,910   110,165   109,956   110,507   107,486   114,310 Total deposits 926,841 933,532 950,815 974,873 987,705 1,065,059 Federal funds purchased & repurchase agreements 1,341 1,817 2,451 2,240 2,470 2,634 FHLB advances 15,752 16,940 14,134 4,345 4,492 5,604 Junior subordinated debentures 29,950 30,175 30,400 30,625 30,850 31,975 Accrued interest payable and other liabilities   10,640   18,922   16,453   15,110   14,673   10,169 Total liabilities 984,524 1,001,386 1,014,253 1,027,193 1,040,190 1,115,441   Preferred stockholders’ equity 8,552 38,283 38,283 38,283 38,283 38,123 Common stockholders’ equity (deficit)   24,913   (8,955 )   (7,669 )   (1,946 )   (2,352 )   9,067 Total stockholders’ equity   33,465   29,328   30,614   36,337   35,931   47,190 Total Liabilities and Stockholders’ Equity $ 1,017,989 $ 1,030,714 $ 1,044,867 $ 1,063,530 $ 1,076,121 $ 1,162,631   Ending shares outstanding 14,890,514 13,099,400 13,104,853 12,894,741 12,840,999 12,002,421 Book value per common share $ 1.67 $ (0.68 ) $ (0.59 ) $ (0.15 ) $ (0.18 ) $ 0.74 Tangible book value per common share 1.61 (0.76 ) (0.67 ) (0.25 ) (0.29 ) 0.58    

PORTER BANCORP, INC.

Unaudited Financial Information

(in thousands, except share and per share data)

As of   12/31/14     9/30/14     6/30/14     3/31/14     12/31/13     12/31/12 Asset Quality Data Loan 90 days or more past due still on accrual $ 151 $ — $ — $ — $ 232 $ 86 Nonaccrual loans   47,175   44,670   44,375   77,344   101,767   94,517 Total non-performing loans 47,326 44,670 44,375 77,344 101,999 94,603 Real estate acquired through foreclosures 46,197 54,507 56,882 45,918 30,892 43,671 Other repossessed assets   —   —   —   —   —   — Total non-performing assets $ 93,523 $ 99,177 $ 101,257 $ 123,262 $ 132,891 $ 138,274   Non-performing loans to total loans 7.57 % 7.00 % 6.90 % 11.33 % 14.38 % 10.52 % Non-performing assets to total assets 9.19 9.62 9.69 11.59 12.35 11.89 Allowance for loan losses to non-performing loans 40.92 54.17 56.64 32.86 27.57 59.91   Allowance for loans evaluated individually $ 752 $ 1,788 $ 1,753 $ 2,453 $ 3,471 $ 21,034 Loans evaluated individually for impairment 71,993 78,695 79,742 122,158 149,883 188,808 Allowance as % of loans evaluated individually 1.04 % 2.27 % 2.20 % 2.01 % 2.32 % 11.14 %   Allowance for loans evaluated collectively $ 18,612 $ 22,410 $ 23,380 $ 22,962 $ 24,653 $ 35,646 Loans evaluated collectively for impairment 553,006 559,665 563,288 560,433 559,443 710,284 Allowance as % of loans evaluated collectively 3.37 % 4.00 % 4.15 % 4.10 % 4.41 % 5.02 %   Allowance for loan losses to total loans 3.10 % 3.79 % 3.91 % 3.72 % 3.96 % 6.30 %   Loans by Risk Category Pass $ 461,126 $ 446,166 $ 434,853 $ 415,144 $ 369,529 $ 437,886 Watch 68,200 83,711 91,208 104,171 144,316 177,419 Special Mention 4,189 4,431 3,223 4,069 5,865 34,700 Substandard 91,484 104,052 113,746 159,207 189,616 248,691 Doubtful   —   —   —   —   —   396 Total $ 624,999 $ 638,360 $ 643,030 $ 682,591 $ 709,326 $ 899,092   Risk-based Capital Ratios - Company Tier I leverage ratio 4.51 % 4.02 % 4.10 % 4.87 % 4.95 % 4.50 % Tier I risk-based capital ratio 6.70 5.93 6.19 7.22 7.34 6.46 Total risk-based capital ratio 10.61 10.05 10.27 10.93 11.03 9.81   Risk-based Capital Ratios – PBI Bank Tier I leverage ratio 5.78 % 6.09 % 5.96 % 6.36 % 6.28 % 5.37 % Tier I risk-based capital ratio 8.59 8.99 9.00 9.44 9.35 7.71 Total risk-based capital ratio 10.57 11.01 11.06 11.50 11.44 9.82   FTE employees 264 268 275 263 260 278

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