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Porter Bancorp, Inc. Announces Third Quarter 2012 Results

Stocks in this article: PBIB

The increase in the provision for loan losses in the third quarter of 2012 is primarily attributable to collateral value declines for certain larger commercial real estate loans as evidenced by new appraisals received during the third quarter, higher net charge-offs, and a continued decline in credit trends in our loan portfolio. In addition, the third quarter 2012 provision for loan losses was negatively impacted by a strategy change during the quarter related to impaired loans whereby we expect to accelerate the remediation process through litigation or foreclosure. For impaired loans subject to such an expectation, we applied an additional fair value discount to the underlying collateral in our impairment analysis estimates for the third quarter of 2012, due to our experience that resolution of this nature generally results in receiving lower values for real estate collateral in a more aggressive sales environment.

Net loan charge-offs totaled $23.1 million for the third quarter of 2012 compared to $6.4 million in the second quarter of 2012, and $7.2 million in the third quarter of 2011. Net loan charge-offs totaled $31.8 for the nine months ended September 30, 2012, compared to $21.6 million for the nine months ended September 30, 2011.

Our net interest income also continued to decline in the three months and nine months ended September 30 2012, compared with the same periods in 2011, as average earning assets, primarily loans, declined $252.5 million and net interest margin declined 11 basis points between the nine months ended September 30, 2012, and the nine months ended September 30, 2011.

The Bank remains focused on executing its strategic plans to address the challenges related to a higher-than-normal level of non-performing loans and OREO, and the continuation of soft market conditions affecting the value and marketability of real estate. As part of the plan, John T. Taylor was hired in July as President and CEO of PBI Bank and President of Porter Bancorp, and John R. Davis joined the credit administration team in August and was subsequently approved by our primary regulators as Chief Credit Officer. Additionally, management remains diligently focused on assessing risk and determining the appropriate strategies to accelerate the reduction of the risk profile of the bank while formulating strategies and executing upon opportunities to increase revenue through improved net interest margin and non-interest income growth. We are also diligently focused on credit cost reduction and non-interest expense reductions as part of our plan to increase the long-term profitability of the bank.

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