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7 Cheapest Bank Takeout Target Stocks From KBW (Update 2)

2. Porter Bancorp

Shares of Porter Bancorp (PBIB - Get Report) of Louisville, Ky., closed at $1.66 Friday, down 43% year-to-date, after dropping 72% during 2011.

The shares trade for 44% of tangible book value, and for 13 times the consensus 2013 earnings estimate of 13 cents. The consensus 2012 earnings is a loss of 11 cents a share.

The company owes $35 million in TARP money.

Porter Bancorp had $1.4 billion in total assets as of March 31. The company reported first-quarter net income available to common shareholders of $985,000, or eight cents a share, compared to a net loss of $54.5 million, or $4.64 in the fourth quarter, and earnings to common shareholders of $305 thousand, or three cents a share, during the first quarter of 2011.

The fourth-quarter loss sprang from the establishment of a $28.5 million deferred tax asset, a $35.8 million provision for loan losses and related expenses, as the company took aggressive steps aimed at "reducing our nonperforming assets in light of the sluggish economic recovery, continued weakness in local real estate activities, and declining values of real estate in certain market sectors," according to CEO Maria Bouvette.

Porter Bancorp's ratio of nonperforming assets -- including nonaccrual loans and loans past due 90 days or more, less government-guaranteed balances, plus repossessed real estate -- was 15.75% as of March 31, and the Texas ratio was 97.65% as of March 31, according to Thomson Reuters Bank Insight.

A consent order from state regulators and the FDIC requires main subsidiary PBI Bank to maintain a total risk-based capital ratio of at least 12%. The bank's total risk-based capital ratio was 11.38% as of March 31.

Mealor rates Porter Bancorp "Market Perform," with a price target of $2.00, and said on April 30 that "the Bank still has a regulatory consent order outstanding and would need at least ~$25M of capital just to be compliant," and that she remained "cautious on the shares as PBIB needs a vastly improved level of NPAs and classified assets, sustainable core profitability and compliant regulatory capital."

Interested in more on Porter Bancorp? See TheStreet Ratings' report card for this stock.
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