PBIB Porter Bancorp, Inc. (delisted)

Continued Improvement in Asset Quality

Porter Bancorp, Inc. (NASDAQ: PBIB), parent company of PBI Bank, today reported unaudited results for the first quarter of 2015.

The Company reported that net income attributable to common shareholders for the first quarter of 2015 was $409,000, or $0.02 per basic and diluted common share, compared with a net loss attributable to common shareholders of $976,000, or $(0.08) per basic and diluted share, for the first quarter of 2014.

Net Interest Income – Net interest income before provision expense decreased to $7.3 million for the first quarter of 2015 compared with $7.5 million in the fourth quarter of 2014, and remained consistent compared to $7.3 million in the first quarter of 2014. Average loans increased to $643.0 million for the first quarter of 2015 compared with $634.9 million in the fourth quarter of 2014 and declined compared to $698.2 million in the first quarter of 2014. Net interest margin increased to 3.21% in the first quarter of 2015, compared with 3.16% in the fourth quarter of 2014 and 2.96% in the first quarter of 2014 primarily driven by improving cost of funds which declined to 0.91% in the first quarter of 2015, compared with 0.99% in the fourth quarter of 2014 and 1.16% in the first quarter of 2014.

Allowance for Loan Losses – The allowance for loan losses to total loans was 2.94% at March 31, 2015 compared to 3.10% at December 31, 2014, and 3.72% at March 31, 2014. 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 $767,000 for the first quarter of 2015, compared to $5.6 million for the fourth quarter of 2014 and $2.7 million for the first quarter of 2014. The allowance for loan losses for loans evaluated collectively for impairment was 3.18% at March 31, 2015, compared with 3.37% at December 31, 2014, and 4.10% at March 31, 2014. Because of ongoing improvements in asset quality and management’s assessment of risk in the loan portfolio, no provision expense was recorded for the first quarter of 2015, compared to $800,000 for the fourth quarter of 2014.

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 $80.1 million, or 7.94% of total assets at March 31, 2014, compared with $93.5 million, or 9.19% of total assets at December 31, 2014, and $123.3 million, or 11.59% of total assets at March 31, 2014.

Non-performing loans decreased to $36.5 million, or 5.77% of total loans, at March 31, 2015, compared with $47.3 million, or 7.57% of total loans at December 31, 2014 and decreased from $77.3 million, or 11.33% of total loans at March 31, 2014. The decrease from the previous quarter was primarily driven by $10.8 million in principal payments received on nonaccrual loans, $337,000 of nonaccrual loans migrating to OREO, and $955,000 of net charge-offs.

OREO at March 31, 2015 decreased to $43.6 million, compared with $46.2 million at December 31, 2014 and $45.9 million at March 31, 2014. The Company acquired $347,000 in OREO and sold $2.6 million in OREO during the first quarter of 2015. Fair value write-downs arising from new appraisals or lower marketing prices totaled $300,000 in the first quarter of 2015, compared with $3.0 million in the fourth quarter of 2014 and $250,000 in the first quarter of 2014.

The following table details past due loans and non-performing assets as of:

                     

March 31,2015

 

December 31,2014

September 30,2014

 

June 30,2014

 

March 31,2014

(in thousands) Past due loans: 30 – 59 days $ 4,370 $ 3,960 $ 3,507 $ 3,057 $ 5,667 60 – 89 days 1,769 980 3,333 991 1,232 90 days or more 18 151 — — — Nonaccrual loans     36,500   47,175   44,670   44,375   77,344

Total past due and nonaccrual loans

 

$

42,657

$

52,266 $ 51,510 $ 48,423 $ 84,243  

Loans past due 90 days or more

$

18

$

151 $ — $ — $ — Nonaccrual loans 36,500 47,175 44,670 44,375 77,344 OREO 43,618 46,197 54,507 56,882 45,918 Other repossessed assets     —   —   —   —   —

Total non-performing assets

 

$

80,136

$

93,523   $ 99,177 $ 101,257   $ 123,262  

In addition to nonaccrual loans and OREO, loans classified as Troubled Debt Restructures (TDRs) and on accrual totaled $18.8 million at March 31, 2015, compared to $22.0 million at December 31, 2014 and $41.8 million at March 31, 2014.

Non-interest Income – Non-interest income increased $1.5 million to $2.7 million for the first quarter of 2015, compared with $1.2 million for the fourth quarter of 2014, and increased $1.8 million compared with $915,000 for the first quarter of 2014 driven primarily by gains on the sales of securities totaling $1.5 million in the first quarter of 2015. There were no securities sales gains in the fourth quarter of 2014, and gains of $44,000 in the first quarter of 2014.

Non-interest Expense – Non-interest expense decreased $2.5 million to $9.4 million for the first quarter of 2015, compared with $11.8 million for the fourth quarter of 2014, and increased $890,000 compared with $8.5 million for the first quarter of 2014. This decrease from the fourth quarter of 2014 was primarily due to a reduction in OREO expenses of approximately $3.1 million, partially offset by an increase in professional fees of $448,000 driven primarily by legal fees and litigation expenses. OREO expenses decreased primarily due to a reduction in fair value write-downs from $3.0 million in the fourth quarter of 2014 to $300,000 in the first quarter of 2015. These write-downs result from declines in the fair value of the real estate based upon updated appraisals as well as reductions in listing prices.

Capital – At March 31, 2015, PBI Bank’s Tier 1 leverage ratio was 5.84% compared with 5.78% at December 31, 2014, and its Total risk-based capital ratio was 10.25% at March 31, 2015 compared with 10.57% at December 31, 2014, which are below the minimums of 9.0% and 12.0% required by the Bank’s Consent Order. At March 31, 2015, Porter Bancorp’s leverage ratio was 4.13% compared with 4.51% at December 31, 2014, and its Total risk-based capital ratio was 10.05%, compared with 10.61% at December 31, 2014. At March 31, 2015, PBI Bank’s Common equity Tier I risk-based capital ratio was 8.32%, and Porter Bancorp’s Common equity Tier I risk-based capital ratio was 4.71%.

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 including, among other things, a possible private placement of common stock to new and existing shareholders.

Shares Issued and Outstanding – On February 25, 2015, shareholders approved the conversion of all mandatorily convertible Series B Preferred Shares into 4,053,600 common shares and the conversion of all mandatorily convertible Series D Preferred Shares into 6,458,000 non-voting common shares. The conversion reduced preferred stockholders’ equity by $5.8 million and increased common stockholders’ equity by the same amount. Total issued and outstanding common shares and non-voting common shares were 25,663,495 at March 31, 2015.

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 first quarter ending March 31, 2015 follows.

   

PORTER BANCORP, INC.

Unaudited Financial Information

(in thousands, except share and per share data)

  Three Months Ended 3/31/15     12/31/14   3/31/14

 

 

 

Income Statement Data Interest income $ 9,203 $ 9,636 $ 9,897 Interest expense 1,913 2,169 2,597

 

 

Net interest income 7,290 7,467 7,300 Provision for loan losses   —   800   —   Net interest income after provision 7,290 6,667 7,300   Service charges on deposits 409 498 468 Bank card interchange fees 203 190 161 Other real estate owned income 357 226 7 Gains (losses) on sales of securities, net 1,497 — 44 Other 230 244 235

 

 

Non-interest income 2,696 1,158 915   Salaries & employee benefits 3,847 3,927 3,741 Occupancy and equipment 870 852 892 Professional fees 979 531 289 FDIC insurance 570 590 540 Data processing expense 304 288 269 State Franchise and deposit tax 285 210 425 Other real estate owned expense 733 3,843 662 Loan collection expense 283 348 539 Other 1,521 1,259 1,145

 

 

Non-interest expense 9,392 11,848 8,502   Income (loss) before income taxes 594 (4,023 ) (287 ) Income tax expense (benefit) — (238 ) —

 

 

 

Net income (loss) 594 (3,785 ) (287 ) Less: Dividends and accretion on preferred stock — — 786 Effect of exchange of preferred stock to common stock — (36,104 ) — Earnings allocated to participating securities 185 7,977 (97 )   Net income (loss) attributable to common $ 409 $ 24,342 $ (976 )

 

 

 

  Weighted average shares – Basic 17,493,397 12,767,430 12,021,313 Weighted average shares – Diluted 17,493,397 12,767,430 12,021,313   Basic earnings (loss) per common share $ 0.02 $ 1.91 $ (0.08 ) Diluted earnings (loss) per common share $ 0.02 $ 1.91 $ (0.08 ) 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 Months Ended 3/31/15     12/31/14     3/31/14

 

 

 

Average Balance Sheet Data Assets $ 1,011,561 $ 1,033,327 $ 1,073,586 Loans 642,959 634,872 698,184 Earning assets 936,037 952,946 1,019,173 Deposits 931,698 948,899 984,169 Long-term debt and advances 33,902 34,127 35,233 Interest bearing liabilities 854,423 865,042 911,186 Stockholders’ equity 33,971 29,928 36,992     Performance Ratios Return on average assets 0.24 % (1.45) % (0.11) % Return on average equity 7.09 (50.18) (3.15) Yield on average earning assets (tax equivalent) 4.03 4.06 3.99 Cost of interest bearing liabilities 0.91 0.99 1.16 Net interest margin (tax equivalent) 3.21 3.16 2.96 Efficiency ratio 110.64 137.37 104.05     Loan Charge-off Data Loans charged-off $ (1,327 ) $ (6,197 ) $ (3,082 ) Recoveries   560   563   373 Net charge-offs $ (767 ) $ (5,634 ) $ (2,709 )     Nonaccrual Loan Activity Nonaccrual loans at beginning of period $ 47,175 $ 44,670 $ 101,767 Net principal pay-downs (10,754 ) (1,825 ) (10,245 ) Charge-offs (955 ) (2,291 ) (2,472 ) Loans foreclosed and transferred to OREO (337 ) (675 ) (16,895 ) Loans returned to accrual status (78 ) (116 ) (870 ) Loans placed on nonaccrual during the period   1,449   7,412   6,059 Nonaccrual loans at end of period $ 36,500 $ 47,175 $ 77,344     Troubled Debt Restructurings (TDRs) Accruing $ 18,798 $ 21,985 $ 41,813 Nonaccrual   19,002   20,507   30,640 Total $ 37,800 $ 42,492 $ 72,453   Other Real Estate Owned (OREO) Activity OREO at beginning of period $ 46,197 $ 54,507 $ 30,892 Real estate acquired 347 675 17,351 Valuation adjustment write-downs (300 ) (3,005 ) (250 ) Proceeds from sales of properties (2,629 ) (5,831 ) (2,075 ) Gain (loss) on sales, net   3   (149 )   — OREO at end of period $ 43,618 $ 46,197 $ 45,918      

PORTER BANCORP, INC.

Unaudited Financial Information

(in thousands, except share and per share data)

  As of 3/31/15     12/31/14     9/30/14     6/30/14     3/31/14       12/31/13   Assets Loans $ 632,428 $ 624,999 $ 638,360 $ 643,030 $ 682,591 $ 709,326 Allowance for loan losses   (18,597 )   (19,364 )   (24,198 )   (25,133 )   (25,415 )   (28,124 ) Net loans 613,831 605,635 614,162 617,897 657,176 681,202 Loans held for sale — 8,926 — 280 — 149 Securities held to maturity 42,263 42,325 42,386 43,488 43,550 43,612 Securities available for sale 157,290 190,791 192,146 180,723 166,442 163,344 Federal funds sold & interest bearing deposits 101,872 66,011 73,494 95,353 99,286 103,669 Cash and due from financial institutions 7,899 14,169 11,336 6,913 7,449 7,465 Premises and equipment 19,323 19,507 19,649 19,788 19,821 19,983 Bank owned life insurance 9,231 9,167 9,103 9,039 8,981 8,911 FHLB Stock 7,323 7,323 7,323 7,323 7,323 10,072 Other real estate owned 43,618 46,197 54,507 56,882 45,918 30,892 Accrued interest receivable and other assets   7,056   7,938   6,608   7,181   7,584   6,822 Total Assets $ 1,009,706 $ 1,017,989 $ 1,030,714 $ 1,044,867 $ 1,063,530 $ 1,076,121   Liabilities and Equity Certificates of deposit $ 597,117 $ 574,681 $ 609,682 $ 631,110 $ 656,475 $ 679,952 Interest checking 86,614 91,086 76,431 76,625 79,689 84,626 Money market 102,349 109,734 100,890 95,946 89,678 79,349 Savings   36,418   36,430   36,364   37,178   38,524   36,292 Total interest bearing deposits 822,498 811,931 823,367 840,859 864,366 880,219 Demand deposits   108,011   114,910   110,165   109,956   110,507   107,486 Total deposits 930,509 926,841 933,532 950,815 974,873 987,705 Federal funds purchased & repurchase agreements 1,145 1,341 1,817 2,451 2,240 2,470 FHLB advances 3,597 15,752 16,940 14,134 4,345 4,492 Junior subordinated debentures 29,725 29,950 30,175 30,400 30,625 30,850 Accrued interest payable and other liabilities   10,758   10,640   18,922   16,453   15,110   14,673 Total liabilities 975,734 984,524 1,001,386 1,014,253 1,027,193 1,040,190   Preferred stockholders’ equity 2,771 8,552 38,283 38,283 38,283 38,283 Common stockholders’ equity (deficit)   31,201   24,913   (8,955 )   (7,669 )   (1,946 )   (2,352 ) Total stockholders’ equity   33,972   33,465   29,328   30,614   36,337   35,931 Total Liabilities and Stockholders’ Equity $ 1,009,706 $ 1,017,989 $ 1,030,714 $ 1,044,867 $ 1,063,530 $ 1,076,121   Ending shares outstanding 25,663,495 14,890,514 13,099,400 13,104,853 12,894,741 12,840,999 Book value per common share $ 1.22 $ 1.67 $ (0.68 ) $ (0.59 ) $ (0.15 ) $ (0.18 ) Tangible book value per common share 1.18 1.61 (0.76 ) (0.67 ) (0.25 ) (0.29 )      

PORTER BANCORP, INC.

Unaudited Financial Information

(in thousands, except share and per share data)

  As of 3/31/15     12/31/14     9/30/14     6/30/14     3/31/14     12/31/13 Asset Quality Data Loan 90 days or more past due still on accrual $ 18 $ 151 $ — $ — $ — $ 232 Nonaccrual loans   36,500   47,175   44,670   44,375   77,344   101,767 Total non-performing loans 36,518 47,326 44,670 44,375 77,344 101,999 Real estate acquired through foreclosures 43,618 46,197 54,507 56,882 45,918 30,892 Other repossessed assets   —   —   —   —   —   — Total non-performing assets $ 80,136 $ 93,523 $ 99,177 $ 101,257 $ 123,262 $ 132,891   Non-performing loans to total loans 5.77 % 7.57 % 7.00 % 6.90 % 11.33 % 14.38 % Non-performing assets to total assets 7.94 9.19 9.62 9.69 11.59 12.35 Allowance for loan losses to non-performing loans 50.93 40.92 54.17 56.64 32.86 27.57   Allowance for loans evaluated individually $ 254 $ 752 $ 1,788 $ 1,753 $ 2,453 $ 3,471 Loans evaluated individually for impairment 55,299 71,993 78,695 79,742 122,158 149,883 Allowance as % of loans evaluated individually 0.46 % 1.04 % 2.27 % 2.20 % 2.01 % 2.32 %   Allowance for loans evaluated collectively $ 18,343 $ 18,612 $ 22,410 $ 23,380 $ 22,962 $ 24,653 Loans evaluated collectively for impairment 577,129 553,006 559,665 563,288 560,433 559,443 Allowance as % of loans evaluated collectively 3.18 % 3.37 % 4.00 % 4.15 % 4.10 % 4.41 %   Allowance for loan losses to total loans 2.94 % 3.10 % 3.79 % 3.91 % 3.72 % 3.96 %   Loans by Risk Category Pass $ 480,545 $ 461,126 $ 446,166 $ 434,853 $ 415,144 $ 369,529 Watch 76,876 68,200 83,711 91,208 104,171 144,316 Special Mention 1,110 4,189 4,431 3,223 4,069 5,865 Substandard 73,897 91,484 104,052 113,746 159,207 189,616 Doubtful   —   —   —   —   —   — Total $ 632,428 $ 624,999 $ 638,360 $ 643,030 $ 682,591 $ 709,326   Risk-based Capital Ratios - Company Tier I leverage ratio 4.13 % 4.51 % 4.02 % 4.10 % 4.87 % 4.95 % Common equity Tier I risk-based capital ratio 4.71 N/A N/A N/A N/A N/A Tier I risk-based capital ratio 5.88 6.70 5.93 6.19 7.22 7.34 Total risk-based capital ratio 10.05 10.61 10.05 10.27 10.93 11.03   Risk-based Capital Ratios – PBI Bank Tier I leverage ratio 5.84 % 5.78 % 6.09 % 5.96 % 6.36 % 6.28 % Common equity Tier I risk-based capital ratio 8.32 N/A N/A N/A N/A N/A Tier I risk-based capital ratio 8.32 8.59 8.99 9.00 9.44 9.35 Total risk-based capital ratio 10.25 10.57 11.01 11.06 11.50 11.44   FTE employees 258 264 268 275 263 260  

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