Non-Performing Assets Reduced by $23.7
Million or 33.9% in Third Quarter
Porter Bancorp, Inc. (NASDAQ: PBIB), parent company of
PBI Bank, today reported unaudited results for the third
quarter of 2015.
The Company reported net loss attributable to common
shareholders for the third quarter of 2015 of $1.0 million, or
($0.04) per basic and diluted common share, compared with net loss
attributable to common shareholders of $1.5 million, or ($0.12) per
basic and diluted share, for the third quarter of 2014. Net loss
attributable to common shareholders for the nine months ended
September 30, 2015, was $2.3 million, or ($0.10) per diluted common
share, compared with net loss attributable to common shareholders
of $8.8 million, or ($0.73) per diluted share, for the nine months
ended September 30, 2014.
“We are pleased to report that during the third quarter we were
able to buy back and retire $4.0 million of junior subordinated
debt and $330,000 of accrued unpaid interest at a $2.6 million
discount by issuing a total of 1.2 million common shares,” said
John T. Taylor, Chief Executive Officer of the Company. In the
transaction, $2.67 million of the debt was exchanged for equity
with related parties and transferred directly to common equity and
$1.33 million of the debt was exchanged for equity with an
unrelated third party resulting in a gain on extinguishment of the
debt totaling $883,000.
“Additionally, we have continued to make significant progress in
reducing our non-performing assets. In this quarter alone, we
reduced non-performing assets by $23.7 million or 33.9% from $69.9
million at June 30, 2015 to $46.2 million at September 30, 2015,”
said Taylor.
Net Interest Income – Net interest income before
provision increased to $7.48 million for the third quarter of 2015
compared to $7.34 million in the second quarter of 2015 and $7.34
million in the third quarter of 2014. While average loans decreased
slightly to $640.0 million for the third quarter of 2015 compared
with $641.6 million in the second quarter of 2015, and were
consistent with the third quarter of 2014, net interest margin
increased to 3.33% in the third quarter of 2015 compared to 3.21%
in the second quarter of 2015 and 3.10% in the third quarter of
2014. The increase in net interest margin was primarily driven by
the continued reduction in cost of funds, which declined to 0.83%
in the third quarter of 2015 compared with 0.87% in the second
quarter of 2015 and 1.13% in the third quarter of 2014.
Allowance for Loan Losses and Recovery of Provision
– The allowance for loan losses to total loans was 2.27% at
September 30, 2015, compared to 2.59% at June 30, 2015, and 3.79%
at September 30, 2014. The allowance for loan losses for loans
evaluated collectively for impairment was 2.33% at September 30,
2015, compared with 2.66% at June 30, 2015 and 4.00% at September
30, 2014.
The reduced level of the allowance and the $2.2 million recovery
of provision in the third quarter were primarily driven by
declining historical loss rates, improving trends in loan category
risk ratings, and management’s assessment of lower risk in the
portfolio. Substandard loans decreased by $21.5 million or 31.2%
over the past quarter and $44.0 million or 48.1% over the first
nine months of 2015, net charge-offs were $3.0 million for the
first nine months of 2015 compared to $10.2 million for the first
nine months of 2014, and non-accrual loans decreased by $13.2
million or 43.8% over the past quarter and $30.2 million or 64.0%
over the first nine months of 2015.
Net loan charge-offs decreased to $411,000 for the third quarter
of 2015 compared to $1.8 million for the second quarter of 2015 and
$935,000 for the third 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
considerably to $46.2 million, or 4.85% of total assets at
September 30, 2015, compared with $69.9 million, or 7.13% of
total assets at June 30, 2015, and $99.2 million, or 9.62% of total
assets at September 30, 2014.
Non-performing loans decreased to $17.0 million, or 2.72% of
total loans, at September 30, 2015, compared with
$30.3 million, or 4.67% of total loans at June 30, 2015, and
$44.7 million, or 7.00% of total loans at September 30, 2014. The
decrease from the previous quarter was primarily driven by $9.0
million in principal payments received on nonaccrual loans, $3.5
million of nonaccrual loans migrating to OREO, and $1.3 million of
charge-offs.
OREO at September 30, 2015 decreased to $29.2 million, compared
with $39.5 million at June 30, 2015 and $54.5 million at September
30, 2014. The Company acquired $3.5 million in OREO and sold $9.4
million in OREO during the third quarter of 2015. Fair value
write-downs arising from reductions in listing prices for certain
properties, updated appraisals, and certain properties liquidated
through auctions near and after the end of the third quarter
totaled $4.5 million in the third quarter of 2015 compared with
$2.3 million in the second quarter of 2015 and $600,000 in the
third quarter of 2014. Progress continues in the disposition of
OREO. At quarter end, $6.5 million of OREO property was subject to
a contract for sale or letter of intent.
The following table details past due loans
and non-performing assets as of:
September 30,
2015
June 30,
2015
March 31,
2015
December 31,
2014
September 30,
2014
(in thousands)
Past due loans: 30 – 59 days $ 1,972 $
1,941 $ 4,370 $ 3,960 $ 3,507 60 – 89
days 578 650 1,769 980 3,333 90 days or more — 92 18 151 —
Nonaccrual loans 16,987
30,215 36,500 47,175
44,670
Total past due and nonaccrual loans
$
19,537
$
32,898
$ 42,657 $ 52,266 $ 51,510
Loans past due 90 days or more
$
—
$
92
$ 18 $ 151 $ — Nonaccrual loans 16,987 30,215 36,500 47,175 44,670
OREO 29,177 39,545 43,618 46,197 54,507 Other repossessed assets
— —
— — —
Total non-performing assets
$
46,164
$
69,852
$ 80,136 $ 93,523 $ 99,177
In addition to nonaccrual loans and OREO, loans classified as
Troubled Debt Restructures (TDRs) and on accrual totaled $17.7
million at September 30, 2015, compared to $18.5 million at June
30, 2015, and $28.1 million at September 30, 2014.
Non-interest Income – Non-interest income increased
$645,000 to $2.2 million for the third quarter of 2015 compared
with $1.6 million for the second quarter of 2015, and increased
$1.2 million compared with $1.1 million for the third quarter of
2014. The increase in non-interest income was driven primarily by a
gain of $883,000 recognized in relation to the extinguishment of
our junior subordinated debt, offset by a reduction in gains on the
sales of securities which totaled $199,000 in the second quarter of
2015, with no sales in the third quarter. The increase from the
third quarter of 2014 was primarily due to an increase in OREO
rental income of $375,000, as well as the gain on debt
extinguishment noted above.
Non-interest Expense – Non-interest expense increased
$1.9 million to $13.0 million for the third quarter of 2015
compared with $11.0 million for the second quarter of 2015, and
increased $3.7 million compared with $9.3 million for the third
quarter of 2014. The increase from the second quarter of 2015 was
primarily due to an increase in OREO expenses of approximately $2.2
million, partially offset by decreases in professional fees and
other non-interest expenses. OREO expenses increased quarter over
quarter primarily due to an increase in fair value write-downs of
$2.0 million resulting from declines in the fair value of the real
estate based upon reductions in listing prices for certain
properties, updated appraisals, and certain properties liquidated
through auctions near and after the end of the third quarter 2015.
The increase from the third quarter of 2014 was also due to an
increase in OREO expenses from $560,000 to $5.1 million, primarily
due to declines in fair value as noted above. For the third quarter
2015, the second quarter 2015, and the third quarter 2014,
non-interest expense before OREO expenses totaled $7.8 million,
$8.1 million, and $8.7 million, respectively and $13.0 million,
$11.0 million, and $9.3 million after OREO expenses,
respectively.
Capital – At September 30, 2015, PBI Bank’s Tier 1
leverage ratio improved slightly to 6.01% compared with 5.95% at
June 30, 2015, and its Total risk-based capital ratio was 10.50% at
September 30, 2015 compared with 10.34% at June 30, 2015. Both are
below the minimums of 9.0% and 12.0% required by the Bank’s Consent
Order. At September 30, 2015, Porter Bancorp’s leverage ratio was
4.73% compared with 4.25% at June 30, 2015, and its Total
risk-based capital ratio was 10.40%, compared with 10.25% at June
30, 2015. At September 30, 2015, PBI Bank’s Common equity Tier I
risk-based capital ratio was 8.73% compared with 8.43% at June 30,
2015. Porter Bancorp’s Common equity Tier I risk-based capital
ratio was 5.07% compared with 4.42% at June 30, 2015.
Management and the Board of Directors remain committed to
evaluating and implementing appropriate strategies for increasing
the Company’s capital in order to meet the requirements of the
Consent Order.
Forward-Looking StatementsStatements 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 InformationUnaudited supplemental financial
information for the quarter ending September 30, 2015 follows.
PORTER BANCORP, INC.
Unaudited Financial Information
(in thousands, except share and per share
data)
Three Three Three
Nine Nine Months Months Months Months
Months Ended Ended Ended Ended Ended 9/30/15 6/30/15 9/30/14
9/30/15 9/30/14
Income Statement Data Interest income $ 9,179 $ 9,167 $
9,814 $ 27,549 $ 29,877 Interest expense 1,697
1,828 2,477 5,438 7,626
Net interest income 7,482 7,339 7,337 22,111 22,251
Provision for loan losses (2,200 ) — —
(2,200 ) 6,300 Net interest income
after provision 9,682 7,339 7,337 24,311 15,951 Service
charges on deposit accounts 492 475 535 1,376 1,490 Bank card
interchange fees 212 229 209 644 575 Other real estate owned income
380 372 5 1,109 30 Gains (losses) on sales of securities, net — 199
46 1,696 92 Gain on extinguishment of debt 883 — — 883 — Other
243 290 262 763
734 Non-interest income 2,210 1,565 1,057
6,471 2,921 Salaries & employee benefits 3,920 4,028
4,041 11,795 11,731 Occupancy and equipment 815 828 857 2,513 2,645
Professional fees 620 714 361 2,313 1,134 FDIC insurance 539 564
571 1,673 1,682 Data processing expense 278 278 269 860 818 State
franchise and deposit tax 285 285 405 855 1,235 Other real estate
owned expense 5,131 2,932 560 8,796 1,996 Loan collection expense
321 291 858 895 2,646 Other 1,059 1,114
1,359 3,694 3,700
Non-interest expense 12,968 11,034 9,281 33,394 27,587
Income (loss) before income taxes (1,076 ) (2,130 ) (887 ) (2,612 )
(8,715 ) Income tax expense (benefit) — —
(38 ) — (1,345 ) Net income
(loss) (1,076 ) (2,130 ) (849 ) (2,612 ) (7,370 ) Less: Dividends
on preferred stock — — 786 — 2,361 Earnings (loss) allocated to
participating securities (45 ) (91 ) (162 )
(338 ) (928 ) Net income (loss) attributable to
common $ (1,031 ) $ (2,039 ) $ (1,473 ) $ (2,274 ) $ (8,803 )
Weighted average shares – Basic 24,681,547 24,589,507
12,086,843 22,313,501 12,044,858 Weighted average shares – Diluted
24,681,547 24,589,507 12,086,843 22,313,501 12,044,858 Basic
earnings (loss) per common share $ (0.04 ) $ (0.08 ) $ (0.12 ) $
(0.10 ) $ (0.73 ) Diluted earnings (loss) per common share $ (0.04
) $ (0.08 ) $ (0.12 ) $ (0.10 ) $ (0.73 ) 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
Nine Nine Months Months Months Months
Months Ended Ended Ended Ended Ended 9/30/15 6/30/15 9/30/14
9/30/15 9/30/14
Average Balance Sheet Data Assets $ 968,471 $ 1,003,507 $
1,033,818 $ 994,355 $ 1,054,592 Loans 639,954 641,587 640,011
641,489 671,733 Earning assets 903,857 930,415 954,217 923,318
988,031 Deposits 893,262 924,840 947,989 916,459 965,975 Long-term
debt and advances 32,769 33,208 35,202 33,289 35,269 Interest
bearing liabilities 813,753 846,892 873,520 838,207 892,738
Stockholders’ equity 30,920 33,770 31,101 32,876 35,213
Performance Ratios Return on average assets (0.44 )%
(0.85 )% (0.33 )% (0.35 )% (0.93 )% Return on average equity (13.81
) (25.30 ) (10.83 ) (10.62 ) (27.98 ) Yield on average earning
assets (tax equivalent) 4.07 4.00 4.13 4.03 4.09 Cost of interest
bearing liabilities 0.83 0.87 1.13 0.87 1.14 Net interest margin
(tax equivalent) 3.33 3.21 3.10 3.25 3.06 Efficiency ratio 133.80
126.75 111.18 124.21 110.00
Loan Charge-off
Data Loans charged-off $ (1,580 ) $ (2,264 ) $ (1,824 ) $
(5,171 ) $ (13,229 ) Recoveries 1,169 476
889 2,205 3,003
Net charge-offs $ (411 ) $ (1,788 ) $ (935 ) $ (2,966 ) $ (10,226 )
Nonaccrual Loan Activity Nonaccrual loans at
beginning of period $ 30,215 $ 36,500 $ 44,375 $ 47,175 $ 101,767
Net principal pay-downs (9,028 ) (5,336 ) (3,229 ) (25,118 )
(25,669 ) Charge-offs (1,333 ) (2,082 ) (1,217 ) (4,370 ) (11,814 )
Loans foreclosed and transferred to OREO (3,495 ) (608 ) (797 )
(4,440 ) (31,023 ) Loans returned to accrual status (902 ) (620 )
(57 ) (1,600 ) (3,289 ) Loans placed on nonaccrual during the
period 1,530 2,361 5,595
5,340 14,698 Nonaccrual loans at end of
period $ 16,987 $ 30,215 $ 44,670 $ 16,987
$ 44,670
Troubled Debt Restructurings
(TDRs) Accruing $ 17,656 $ 18,548 $ 28,114 $ 17,656 $ 28,114
Nonaccrual 3,788 15,006 21,415
3,788 21,415 Total $ 21,444 $
33,554 $ 49,529 $ 21,444 $ 49,529
Other Real Estate Owned
(OREO) Activity (Net of Allowance) OREO at beginning of period
$ 39,545 $ 43,618 $ 56,882 $ 46,197 $ 30,892 Real estate acquired
3,495 608 797 4,450 31,663 Valuation adjustment write-downs (4,450
) (2,330 ) (600 ) (7,080 ) (1,250 ) Proceeds from sales of
properties (9,397 ) (2,391 ) (2,973 ) (14,417 ) (7,253 ) Gain
(loss) on sales, net (16 ) 40 401
27 455 OREO at end of period $
29,177 $ 39,545 $ 54,507 $ 29,177 $
54,507
PORTER BANCORP, INC.
Unaudited Financial Information
(in thousands, except share and per share
data)
As of 9/30/15 6/30/15
3/31/15 12/31/14 9/30/14
6/30/14
Assets Loans $ 624,414 $ 648,321 $
632,428 $ 624,999 $ 638,360 $ 643,030 Allowance for loan losses
(14,198 ) (16,809 ) (18,597 ) (19,364 )
(24,198 ) (25,133 ) Net loans 610,216 631,512 613,831
605,635 614,162 617,897 Loans held for sale 71 125 — 8,926 — 280
Securities held to maturity 42,138 42,202 42,263 42,325 42,386
43,488 Securities available for sale 146,837 151,758 157,290
190,791 192,146 180,723 Federal funds sold & interest bearing
deposits 73,940 63,987 101,872 66,011 73,494 95,353 Cash and due
from financial institutions 6,540 7,403 7,899 14,169 11,336 6,913
Premises and equipment 19,109 19,167 19,323 19,507 19,649 19,788
Bank owned life insurance 9,381 9,320 9,231 9,167 9,103 9,039 FHLB
Stock 7,323 7,323 7,323 7,323 7,323 7,323 Other real estate owned
29,177 39,545 43,618 46,197 54,507 56,882 Accrued interest
receivable and other assets 6,748 6,998
7,056 7,938 6,608
7,181
Total Assets $ 951,480 $ 979,340
$ 1,009,706 $ 1,017,989 $ 1,030,714 $
1,044,867
Liabilities and Equity Certificates
of deposit $ 534,031 $ 564,253 $ 597,117 $ 574,681 $ 609,682 $
631,110 Interest checking 83,247 84,627 86,614 91,086 76,431 76,625
Money market 119,324 110,529 102,349 109,734 100,890 95,946 Savings
35,131 35,942 36,418
36,430 36,364 37,178
Total interest bearing deposits 771,733 795,351 822,498 811,931
823,367 840,859 Demand deposits 106,160
108,800 108,011 114,910
110,165 109,956 Total deposits 877,893 904,151
930,509 926,841 933,532 950,815 Federal funds purchased &
repurchase agreements — 1,265 1,145 1,341 1,817 2,451 FHLB advances
3,255 3,430 3,597 15,752 16,940 14,134 Junior subordinated
debentures 25,275 29,500 29,725 29,950 30,175 30,400 Accrued
interest payable and other liabilities 11,249
10,949 10,758 10,640
18,922 16,453 Total liabilities 917,672
949,295 975,734 984,524 1,001,386 1,014,253 Preferred
stockholders’ equity 2,771 2,771 2,771 8,552 38,283 38,283 Common
stockholders’ equity (deficit) 31,037 27,274
31,201 24,913 (8,955 )
(7,669 ) Total stockholders’ equity 33,808
30,045 33,972 33,465
29,328 30,614
Total Liabilities and
Stockholders’ Equity $ 951,480 $ 979,340 $
1,009,706 $ 1,017,989 $ 1,030,714 $ 1,044,867
Ending shares outstanding 26,949,205
25,759,223 25,663,495 14,890,514 13,099,400 13,104,853
Book
value per common share $ 1.15 $ 1.06 $ 1.22 $ 1.67 $ (0.68 ) $
(0.59 )
Tangible book value per common share 1.13 1.03 1.18
1.61 (0.76 ) (0.67 )
PORTER BANCORP, INC.
Unaudited Financial Information
(in thousands, except share and per share
data)
As of 9/30/15 6/30/15
3/31/15 12/31/14 9/30/14
6/30/14
Asset Quality Data Loan 90 days or more past
due still on accrual $ — $ 92 $ 18 $ 151 $ — $ — Nonaccrual loans
16,987 30,215 36,500
47,175 44,670 44,375
Total non-performing loans 16,987 30,307 36,518 47,326 44,670
44,375 Real estate acquired through foreclosures 29,177 39,545
43,618 46,197 54,507 56,882 Other repossessed assets —
— — — —
— Total non-performing assets $ 46,164
$ 69,852 $ 80,136 $ 93,523 $ 99,177 $
101,257 Non-performing loans to total loans 2.72 %
4.67 % 5.77 % 7.57 % 7.00 % 6.90 % Non-performing assets to total
assets 4.85 7.13 7.94 9.19 9.62 9.69 Allowance for loan losses to
non-performing loans 83.58 55.46 50.93 40.92 54.17 56.64
Allowance for loans evaluated individually $ 469 $ 842 $ 254 $ 752
$ 1,788 $ 1,753 Loans evaluated individually for impairment 34,895
49,011 55,299 71,993 78,695 79,742 Allowance as % of loans
evaluated individually 1.34 % 1.72 % 0.46 % 1.04 % 2.27 % 2.20 %
Allowance for loans evaluated collectively $ 13,729 $ 15,967
$ 18,343 $ 18,612 $ 22,410 $ 23,380 Loans evaluated collectively
for impairment 589,519 599,310 577,129 553,006 559,665 563,288
Allowance as % of loans evaluated collectively 2.33 % 2.66 % 3.18 %
3.37 % 4.00 % 4.15 % Allowance for loan losses to total
loans 2.27 % 2.59 % 2.94 % 3.10 % 3.79 % 3.91 %
Loans by
Risk Category Pass $ 508,470 $ 509,843 $ 480,545 $ 461,126 $
446,166 $ 434,853 Watch 66,726 67,712 76,876 68,200 83,711 91,208
Special Mention 1,700 1,718 1,110 4,189 4,431 3,223 Substandard
47,518 69,048 73,897 91,484 104,052 113,746 Doubtful —
— — — —
—
Total $ 624,414 $ 648,321 $ 632,428 $
624,999 $ 638,360 $ 643,030
Risk-based Capital Ratios -
Company Tier I leverage ratio 4.73 % 4.25 % 4.13 % 4.51 % 4.02
% 4.10 % Common equity Tier I risk-based capital ratio 5.07 4.42
4.68 N/A N/A N/A Tier I risk-based capital ratio 6.86 6.02 5.85
6.70 5.93 6.19 Total risk-based capital ratio 10.40 10.25 10.00
10.61 10.05 10.27
Risk-based Capital Ratios – PBI
Bank Tier I leverage ratio 6.01 % 5.95 % 5.84 % 5.78 % 6.09 %
5.96 % Common equity Tier I risk-based capital ratio 8.73 8.43 8.32
N/A N/A N/A Tier I risk-based capital ratio 8.73 8.43 8.32 8.59
8.99 9.00 Total risk-based capital ratio 10.50 10.34 10.26 10.57
11.01 11.06
FTE employees 246 253 258 264 268 275
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Porter Bancorp, Inc.John T. Taylor, 502-499-4800Chief Executive
Officer
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