Reports 17% NPA Reduction in 2nd
Quarter
Porter Bancorp, Inc. (NASDAQ: PBIB), parent company of
PBI Bank, today reported unaudited results for the second
quarter of 2016.
The Company reported that net income available to common
shareholders for the second quarter of 2016 was $979,000, or $0.03
per basic and diluted common share, compared with net loss
attributable to common shareholders of $2.0 million, or ($0.08) per
basic and diluted share, for the second quarter of 2015. Net income
available to common shareholders for the six months ended June 30,
2016, was $2.4 million, or $0.09 per diluted common share, compared
with net loss attributable to common shareholders of $1.3 million,
or ($0.06) per diluted share, for the six months ended June 30,
2015.
John T. Taylor, President and CEO of the Company noted, “PBI
Bank has continued to make significant progress in reducing its
non-performing assets. In the second quarter of 2016,
non-performing assets were reduced by $5.1 million after achieving
reductions of $4.3 million in the first quarter of 2016. In
addition to lowering the risk profile of the Company, we are
pleased to see a second consecutive profitable quarter, as the cost
to remediate non-performing assets continues to decline, and we
continue the all-important work of attracting new customers and
providing high quality service to our existing customer base.”
Net Interest Income – Net interest income before
provision expense decreased to $7.2 million for the second quarter
of 2016 compared with $7.7 million in the first quarter of 2016,
and $7.3 million in the second quarter of 2015. Net interest income
was positively impacted in the first quarter of 2016 by the
collection of previously charged-off accrued uncollected interest
of approximately $285,000. Average loans declined slightly to
$619.3 million for the second quarter of 2016 compared with $620.1
million in the first quarter of 2016 and declined compared to
$641.6 million in the second quarter of 2015. Net interest margin
decreased to 3.34% in the second quarter of 2016, compared with
3.53% in the first quarter of 2016 and increased compared to 3.21%
in the second quarter of 2015.
Our yield on earning assets declined to 4.03% in the second
quarter of 2016 compared to 4.23% in the first quarter of 2016 and
improved slightly compared to 4.00% in the second quarter of 2015.
As mentioned above, the yield on earning assets was positively
impacted in the first quarter of 2016 by the collection of
previously charged-off accrued uncollected interest of
approximately $285,000 along with the full unpaid balance on three
nonaccrual loans. Our cost of funds was 0.79% in the second quarter
of 2016 and the first quarter of 2016 and improved from 0.87% in
the second quarter of 2015.
Allowance for Loan Losses – The allowance for loan losses
to total loans was 1.62% at June 30, 2016, compared to 1.83% at
March 31, 2016, and 2.59% at June 30, 2015. The declining level of
the allowance is primarily driven by declining historical
charge-off levels and improving trends in credit quality. Net loan
charge-offs were $636,000 for the second quarter of 2016, compared
to net charge-offs of $151,000 for the first quarter of 2016 and
net charge-offs of $1.8 million for the second quarter of 2015. The
allowance for loan losses for loans evaluated collectively for
impairment was 1.66% at June 30, 2016, compared with 1.83% at March
31, 2016, and 2.66% at June 30, 2015.
Because of ongoing improvements in asset quality and
management’s assessment of risk in the loan portfolio, a negative
provision of $600,000 was recorded for the second quarter of 2016,
compared to a negative provision of $550,000 for the first quarter
of 2016 and no provision for loan losses in the second quarter of
2015.
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
$23.9 million, or 2.61% of total assets at June 30, 2016, compared
with $29.0 million, or 3.09% of total assets at March 31,
2016, and $69.9 million, or 7.13% of total assets at June 30,
2015.
Non-performing loans increased slightly to $11.6 million, or
1.86% of total loans at June 30, 2016, compared with
$11.1 million, or 1.79% of total loans at March 31, 2016, and
decreased from $30.3 million, or 4.67% of total loans at June 30,
2015. The increase from the previous quarter was primarily driven
by $2.0 million in loans being placed on nonaccrual during the
second quarter. The impact of loans placed on nonaccrual was offset
by $731,000 in principal payments received on nonaccrual loans,
$135,000 of nonaccrual loans migrating to OREO, and $344,000 in
charge-offs.
OREO at June 30, 2016, decreased to $12.3 million, compared with
$17.9 million at March 31, 2016, and $39.5 million at June 30,
2015. The Company acquired $135,000 in OREO and sold $5.6 million
in OREO during the second quarter of 2016. Fair value write-downs
arising from lower marketing prices or new appraisals totaled
$150,000 in the second quarter of 2016, compared with $500,000 in
the first quarter of 2016 and $2.3 million in the second quarter of
2015.
The following table details past due loans and non-performing
assets as of:
June 30, March 31, December 31, September
30, June 30, 2016 2016 2015
2015 2015 (in thousands) Past due loans: 30 – 59 days
$ 2,401 $ 1,829 $ 3,133 $ 1,972 $ 1,941 60 – 89 days 336 62 241 578
650 90 days or more — — — — 92 Nonaccrual loans
11,599 11,119 14,087 16,987 30,215
Total past due and nonaccrual loans
$
14,336
$
13,010 $ 17,461 $ 19,537 $ 32,898 Loans past due 90 days
or more
$
—
$
— $ — $ — $ 92 Nonaccrual loans 11,599 11,119 14,087 16,987 30,215
OREO 12,322 17,861 19,214 29,177 39,545 Other repossessed assets
— — — — —
Total non-performing Assets
$
23,921
$
28,980 $ 33,301 $ 46,164 $ 69,852
In addition to nonaccrual loans and OREO, loans classified as
Troubled Debt Restructures (TDRs) and on accrual totaled $13.9
million at June 30, 2016, compared to $14.9 million at March 31,
2016, and $18.5 million at June 30, 2015.
Non-interest Income – Non-interest income decreased
$239,000 to $1.2 million for the second quarter of 2016, compared
with $1.4 million for the first quarter of 2016, and decreased
$413,000 compared with $1.6 million for the second quarter of 2015.
There was no gain on sales of securities in the second quarter of
2016, compared to $203,000 in the first quarter of 2016 and
$199,000 in the second quarter of 2015. Additionally, OREO income
has continued to decline as income producing properties have been
sold.
Non-interest Expense – Non-interest expense decreased
$155,000 to $7.9 million for the second quarter of 2016, compared
with $8.1 million for the first quarter of 2016, and decreased $3.1
million compared with $11.0 million for the second quarter of 2015.
The decrease from the first quarter of 2016 was primarily due to a
reduction in OREO expenses of approximately $374,000 as fair value
write downs based upon listing prices as well as new appraisals
declined from $500,000 in the first quarter of 2016 to $150,000 in
the second quarter. The decrease in OREO expense was offset by
increases in professional fees of approximately $107,000 and loan
collection expense of approximately $189,000. Loan collection
expense was positively impacted in the first quarter of 2016 by
recoveries of approximately $70,000 in previously incurred
expenses.
Capital – On April 15, 2016, we completed a $5.03 million
stock offering to accredited investors in a private placement
transaction in which we sold 2,300,000 Common Shares and 1,100,000
Non-Voting Common Shares to non-affiliate investors at $1.25 per
share. Three directors of the Company, including President and CEO
John T. Taylor, also purchased a total of 600,000 Common Shares for
$1.30 per share, but otherwise on the same terms and conditions as
the other investors. Approximately $2.8 million of the proceeds
were directed by the investors to make interest payments on the
outstanding capital securities of the Company’s subsidiary trusts,
bringing interest payments current through the second quarter of
2016. Also from the proceeds, the Company made a $500,000 capital
contribution to PBI Bank and the balance of the proceeds will be
used for general corporate purposes.
At June 30, 2016, PBI Bank’s Tier 1 leverage ratio was 6.65%
compared with 6.39% at March 31, 2016, and its Total risk-based
capital ratio was 10.87% at June 30, 2016, compared with 10.64% at
March 31, 2016, which are below the minimums of 9.0% and 12.0%
required by the Bank’s Consent Order. At June 30, 2016, Porter
Bancorp’s leverage ratio was 5.87% compared with 5.03% at March 31,
2016, and its Total risk-based capital ratio was 11.31%, compared
with 10.46% at March 31, 2016. At June 30, 2016, PBI Bank’s Common
equity Tier I risk-based capital ratio was 9.22%, and Porter
Bancorp’s Common equity Tier I risk-based capital ratio was
6.11%.
About Porter Bancorp, Inc.
Porter Bancorp, Inc. (NASDAQ: PBIB) is a Louisville,
Kentucky-based bank holding company which operates banking centers
in 12 counties through its wholly-owned subsidiary PBI Bank. Our
markets include metropolitan Louisville in Jefferson County and the
surrounding counties of Henry and Bullitt, and extend south along
the Interstate 65 corridor. We serve southern and south central
Kentucky from banking centers in Butler, Green, Hart, Edmonson,
Barren, Warren, Ohio and Daviess counties. We also have a banking
center in Lexington, Kentucky, the second largest city in the
state. PBI Bank is a traditional community bank with a wide range
of personal and business banking products and services.
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, 2016 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 6/30/16 3/31/16 6/30/15 6/30/16
6/30/15
Income Statement Data Interest income $ 8,705 $ 9,185 $
9,167 $ 17,890 $ 18,370 Interest expense 1,509 1,534
1,828 3,043 3,741 Net interest income 7,196
7,651 7,339 14,847 14,629 Provision (negative provision) for loan
losses (600) (550 ) — (1,150) —
Net interest income after provision 7,796 8,201 7,339 15,997 14,629
Service charges on deposit accounts 473 429 475 902 884 Bank
card interchange fees 221 202 229 423 432 Other real estate owned
income 149 256 372 405 729 Gains (losses) on sales of securities,
net — 203 199 203 1,696 Other 309 301 290
610 520 Non-interest income 1,152 1,391 1,565 2,543
4,261 Salaries & employee benefits 3,857 3,822 4,028
7,679 7,875 Occupancy and equipment 808 854 828 1,662 1,698
Professional fees 492 385 714 877 1,693 FDIC insurance 493 523 564
1,016 1,134 Data processing expense 295 297 278 592 582 State
franchise and deposit tax 255 255 285 510 570 Other real estate
owned expense 294 668 2,932 962 3,665 Loan collection expense 271
82 291 353 574 Other 1,171 1,205 1,114
2,376 2,635 Non-interest expense 7,936 8,091 11,034 16,027
20,426 Income (loss) before income taxes 1,012 1,501 (2,130
) 2,513 (1,536 ) Income tax expense — 21 —
21 — Net income (loss) 1,012 1,480 (2,130 ) 2,492
(1,536 ) Less: Earnings (loss) allocated to participating
securities 33 51 (91 ) 84 (269 )
Net income (loss) available to common $ 979 $ 1,429 $ (2,039 ) $
2,408 $ (1,267 ) Weighted average shares – Basic 29,389,804
26,025,327 24,589,507 27,694,075 21,079,238 Weighted average shares
– Diluted 29,389,804 26,025,327 24,589,507 27,694,075 21,079,238
Basic earnings (loss) per common share $ 0.03 $ 0.05 $ (0.08
) $ 0.09 $ (0.06 ) Diluted earnings (loss) per common share $ 0.03
$ 0.05 $ (0.08 ) $ 0.09 $ (0.06 ) 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 6/30/16 3/31/16 6/30/15 6/30/16
6/30/15
Average Balance Sheet Data
Assets $ 936,000 $ 937,378 $ 1,003,507 $ 936,689 $ 1,007,512 Loans
619,253 620,077 641,587 619,665 642,269 Earning assets 876,721
881,635 930,415 879,178 933,210 Deposits 858,849 865,125 924,840
861,987 928,250 Long-term debt and advances 27,649 28,033 33,208
27,841 33,553 Interest bearing liabilities 766,712 779,438 846,892
773,075 850,637 Stockholders’ equity 39,214 33,546 33,770 36,380
33,870
Performance Ratios Return on average
assets 0.43 % 0.64 % (0.85) % 0.54 % (0.31) % Return on average
equity 10.38 17.74 (25.30) 13.78 (9.15) Yield on average earning
assets (tax equivalent) 4.03 4.23 4.00 4.13 4.02 Cost of interest
bearing liabilities 0.79 0.79 0.87 0.79 0.89 Net interest margin
(tax equivalent) 3.34 3.53 3.21 3.44 3.21 Efficiency ratio 95.06
91.54 126.75 93.25 118.80
Loan Charge-off Data
Loans charged-off $ (928 ) $ (749 ) $ (2,264 ) $ (1,677 ) $ (3,591
) Recoveries 292 598 476 890
1,036 Net charge-offs $ (636 ) $ (151 ) $ (1,788 ) $ (787 ) $
(2,555 )
Nonaccrual Loan Activity Nonaccrual
loans at beginning of period $ 11,119 $ 14,087 $ 36,500 $ 14,087 $
47,175 Net principal pay-downs (731 ) (2,712 ) (5,336 ) (3,443 )
(16,090 ) Charge-offs (344 ) (644 ) (2,082 ) (988 ) (3,037 ) Loans
foreclosed and transferred to OREO (135 ) (441 ) (608 ) (576 ) (945
) Loans returned to accrual status (265 ) (84 ) (620 ) (349 ) (698
) Loans placed on nonaccrual during the period 1,955
913 2,361 2,868 3,810 Nonaccrual loans at end
of period $ 11,599 $ 11,119 $ 30,215 $ 11,599 $ 30,215
Troubled Debt Restructurings (TDRs) Accruing $ 13,936 $
14,867 $ 18,548 $ 13,936 $ 18,548 Nonaccrual 3,453
3,479 15,006 3,453 15,006 Total $ 17,389 $
18,346 $ 33,554 $ 17,389 $ 33,554
Other Real Estate Owned
(OREO) Activity (Net of Allowance) OREO at beginning of period
$ 17,861 $ 19,214 $ 43,618 $ 19,214 $ 46,197 Real estate acquired
135 441 608 576 955 Valuation adjustment write-downs (150 ) (500 )
(2,330 ) (650 ) (2,630 ) Proceeds from sales of properties (5,638 )
(1,349 ) (2,391 ) (6,987 ) (5,020 ) Gain (loss) on sales, net
114 55 40 169 43 OREO at end of
period $ 12,322 $ 17,861 $ 39,545 $ 12,322 $ 39,545
PORTER BANCORP, INC. Unaudited Financial Information
(in thousands, except share and per share
data)
As of 6/30/16 3/31/16 12/31/15 9/30/15
6/30/15
Assets Loans $ 624,136 $ 619,827 $
618,666 $ 624,414 $ 648,321 Allowance for loan losses
(10,104 ) (11,340 ) (12,041 ) (14,198 )
(16,809 ) Net loans 614,032 608,487 606,625 610,216 631,512 Loans
held for sale — 113 186 71 125 Securities held to maturity 41,948
42,011 42,075 42,138 42,202 Securities available for sale 143,145
141,525 144,978 146,837 151,758 Federal funds sold & interest
bearing deposits 49,313 72,209 85,329 73,940 63,987 Cash and due
from financial institutions 8,289 8,097 8,006 6,540 7,403 Premises
and equipment 18,618 18,751 18,812 19,109 19,167 Bank owned life
insurance 14,646 14,531 9,441 9,381 9,320 FHLB Stock 7,323 7,323
7,323 7,323 7,323 Other real estate owned 12,322 17,861 19,214
29,177 39,545 Accrued interest receivable and other assets
6,916 7,251 6,733 6,748 6,998
Total
Assets $ 916,552 $ 938,159 $ 948,722 $ 951,480 $ 979,340
Liabilities and Equity Certificates of deposit $ 461,183 $
478,965 $ 499,827 $ 534,031 $ 564,253 Interest checking 90,806
96,465 97,515 83,247 84,627 Money market 135,643 134,684 125,935
119,324 110,529 Savings 34,616 35,197 34,677
35,131 35,942 Total interest bearing deposits 722,248
745,311 757,954 771,733 795,351 Demand deposits 117,843
120,302 120,043 106,160 108,800 Total
deposits 840,091 865,613 877,997 877,893 904,151 Federal funds
purchased & repurchase agreements — — — — 1,265 FHLB advances
2,775 2,932 3,081 3,255 3,430 Junior subordinated debentures 24,600
24,825 25,050 25,275 29,500 Accrued interest payable and other
liabilities 7,651 10,181 10,577 11,249
10,949 Total liabilities 875,117 903,551 916,705 917,672
949,295 Preferred stockholders’ equity 2,771 2,771 2,771
2,771 2,771 Common stockholders’ equity 38,664 31,837
29,246 31,037 27,274 Total stockholders’
equity 41,435 34,608 32,017 33,808
30,045
Total Liabilities and Stockholders’ Equity $
916,552 $ 938,159 $ 948,722 $ 951,480 $ 979,340
Ending
shares outstanding 31,118,302 26,944,177 26,947,533 26,949,205
25,759,223
Book value per common share $ 1.24 $ 1.18 $ 1.09
$ 1.15 $ 1.06
Tangible book value per common share 1.23 1.17
1.07 1.13 1.03
PORTER BANCORP, INC.
Unaudited Financial Information (in thousands, except
share and per share data) As of 6/30/16
3/31/16 12/31/15 9/30/15 6/30/15
Asset Quality Data Loan 90 days or more past due still on
accrual $ — $ — $ — $ — $
92
Nonaccrual loans 11,599 11,119 14,087
16,987 30,215 Total non-performing loans 11,599 11,119
14,087 16,987 30,307 Real estate acquired through foreclosures
12,322 17,861 19,214 29,177 39,545 Other repossessed assets
— — — — — Total non-performing assets $
23,921 $ 28,980 $ 33,301 $ 46,164 $ 69,852 Non-performing
loans to total loans 1.86 % 1.79 % 2.28 % 2.72 % 4.67 %
Non-performing assets to total assets 2.61 3.09 3.51 4.85 7.13
Allowance for loan losses to non-performing loans 87.11 101.99
85.48 83.58 55.46 Allowance for loans evaluated individually
$ 146 $ 464 $ 428 $ 469 $ 842 Loans evaluated individually for
impairment 25,535 26,236 31,776 34,895 49,011 Allowance as % of
loans evaluated individually 0.57 % 1.77 % 1.35 % 1.34 % 1.72 %
Allowance for loans evaluated collectively $ 9,958 $ 10,876
$ 11,613 $ 13,729 $ 15,967 Loans evaluated collectively for
impairment 598,601 593,591 586,890 589,519 599,310 Allowance as %
of loans evaluated collectively 1.66 % 1.83 % 1.98 % 2.33 % 2.66 %
Allowance for loan losses to total loans 1.62 % 1.83 % 1.95
% 2.27 % 2.59 %
Loans by Risk Category Pass $ 547,853
$ 534,451 $ 517,484 $ 508,470 $ 509,843 Watch 50,024 59,265 63,363
66,726 67,712 Special Mention 622 1,383 1,395 1,700 1,718
Substandard 25,637 24,728 36,424 47,518 69,048 Doubtful —
— — —
—
Total $ 624,136 $ 619,827 $ 618,666 $ 624,414 $ 648,321
Risk-based Capital Ratios - Company Tier I leverage
ratio 5.87 % 5.03 % 4.74 % 4.73 % 4.25 % Common equity Tier I
risk-based capital ratio 6.11 5.21 5.09 5.07 4.42 Tier I risk-based
capital ratio 8.16 7.03 6.89 6.86 6.02 Total risk-based capital
ratio 11.31 10.46 10.46 10.40 10.25
Risk-based Capital
Ratios – PBI Bank Tier I leverage ratio 6.65 % 6.39 % 6.08 %
6.01 % 5.95 % Common equity Tier I risk-based capital ratio 9.22
8.94 8.84 8.73 8.43 Tier I risk-based capital ratio 9.22 8.94 8.84
8.73 8.43 Total risk-based capital ratio 10.87 10.64 10.58 10.50
10.34
FTE employees 239 246 244 246 253
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Porter Bancorp, Inc.John T. Taylor, 502-499-4800Chief Executive
Officer
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