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Porter Bancorp, Inc. Announces First Quarter 2011 Results

Porter Bancorp, Inc. (NASDAQ: PBIB), parent company of PBI Bank, with 18 full-service banking offices in Kentucky, today reported results for the first quarter of 2011.

The Company reported net income available to common shareholders of $305,000, or $0.03 per diluted share, for the first quarter of 2011, compared with $2.7 million, or $0.30 per diluted share, for the first quarter of 2010.

“Porter Bancorp reported growth in net interest margin and non-interest income compared with the first quarter of last year,” stated Maria L. Bouvette, President and CEO of Porter Bancorp. “Our first quarter earnings were below historical levels due to higher costs related to non-performing loans, foreclosed properties and provision for loan losses. These factors continue to be a drag on our near-term earnings due to the continued weakness in our construction and land development portfolio.

“We remain focused on improving loan quality and reducing non-performing assets. We made solid progress in reducing our exposure to higher risk construction and land development loans since last year. Our construction and land development loans are down 29.1% since the first quarter of 2010 and represented only 13.8% of our loan portfolio at March 31, 2011. We also continue to be diligent in moving non-performing loans through the system of collection or foreclosure to minimize our potential losses. We believe these efforts will be key drivers in improving Porter Bancorp’s future profitability,” continued Ms. Bouvette.

First Quarter Results

  • Net income declined to $799,000 for the three months ended March 31, 2011, compared with $3.3 million for the first quarter of 2010. Earnings per diluted common share were $0.03 compared with $0.30 in the first quarter of 2010.
  • Net interest margin increased 22 basis points to 3.54% in the first quarter of 2011 compared with 3.32% in the first quarter of 2010. The increase in margin since last year benefited from a lower average cost of funds.
  • Average loans decreased 8.1% to $1.29 billion in the first quarter of 2011 compared with $1.40 billion in the first quarter of 2010. Net loans decreased 6.8% to $1.24 billion in the first quarter of 2011, compared with $1.33 billion at March 31, 2010.
  • Deposits decreased 0.2% to $1.48 billion compared with $1.49 billion at March 31, 2010, and increased 1.0% from $1.47 billion at December 31, 2010. Demand and savings account deposits increased by 8.5% and 10.3%, respectively during the first quarter of 2011 compared with the fourth quarter of 2010.
  • Total assets decreased 1.2% to $1.74 billion compared with $1.76 billion at March 31, 2010.
  • Efficiency ratio was 60.7% for the first three months of 2011, compared with 50.9% for the first quarter of 2010. Our efficiency ratio increased primarily due to higher credit related costs and increases in other real estate owned (OREO) expense.
  • Non-performing loans increased $9.5 million during the first quarter to $69.9 million at March 31, 2011, compared with $60.4 million at December 31, 2010. The increase was primarily in the commercial and residential real estate segments of our portfolio.
  • Non-performing assets increased $15.8 million during the first quarter to $143.9 million at March 31, 2011. The increase was primarily due to a higher level of non-performing loans described above and non-performing loans moving through the collection and foreclosure process.
  • On April 19, 2011, an Oldham County, Kentucky jury rendered a judgment against PBI Bank for $529,000 in compensatory damages and from $529,000 to $882,000 in punitive damages. The case concerns a dispute with a prior landowner in connection with a project for which PBI Bank provided development financing to a third party. The final amount of the judgment is subject to additional proceedings. We intend to file motions to set aside the judgment, and if denied, to file an appeal. Based on advice of legal counsel, we believe that we have several meritorious grounds for appeal and no amounts have been accrued for this matter as we expect a favorable outcome to the bank.

Net Interest Income

Net interest income decreased 2.9% to $13.8 million for the three months ended March 31, 2011, a decrease of $409,000, compared with $14.2 million for the same period in 2010. This decrease was primarily attributable to a decrease in average earning assets, partially offset by decreased cost of funds, compared with 2010.

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