Porter Bancorp, Inc. (NASDAQ: PBIB), parent company of PBI Bank, with 18 full-service banking offices in Kentucky, today reported unaudited results for the third quarter of 2013.

The Company reported that the net loss attributable to common shareholders declined substantially to $168,000, or ($0.01) per diluted share, for the third quarter of 2013 compared with a net loss of $26.9 million, or ($2.29) per diluted share, for the third quarter of 2012. Net loss attributable to common shareholders for the nine months ended September 30, 2013 was $2.4 million, or ($0.20) per diluted common share, compared with net loss attributable to common shareholders of $26.4 million, or ($2.25) per diluted share, for the nine months ended September 30, 2012. The significant reduction in net loss since last year reflected our focus on asset quality remediation, regulatory capital restoration, and lowering the risk profile of the Company.

Third Quarter 2013 Financial Performance Highlights
  • Balance Sheet Reduction - We have successfully reduced the size of our balance sheet in accordance with our capital plan. Average assets were $1.056 billion in the third quarter of 2013 compared with $1.105 billion in the second quarter of 2013 and $1.326 billion in the third quarter of 2012. This reduction was accomplished primarily by reducing our commercial real estate and construction and development loans within our loan portfolio and through the redemption of higher cost certificates of deposit accounts.
  • Net Interest Income – Net interest income declined to $7.8 million for the third quarter of 2013 compared with $8.4 million in the second quarter of 2013 and $10.1 million in the third quarter of 2012 as our average loans declined to $756.1 million for the third quarter of 2013 compared with $806.9 million in the second quarter of 2013 and $1.008 billion in the third quarter of 2012. Our net interest margin declined to 3.14% in the third quarter of 2013 compared with 3.24% in the second quarter of 2013 and 3.23% in the third quarter of 2012.
  • Non-interest Income – Non-interest income decreased $981,000 to $1.2 million in the third quarter of 2013 compared with $2.1 million in the second quarter of 2013 and decreased $554,000 compared with $1.7 million in the third quarter of 2012. The quarter over quarter decline from June 2013 to September 2013 is attributable primarily to a $679,000 reduction in the gain on sales of securities, a $230,000 reduction in income from bank owned life insurance and a $176,000 decline in other real estate owned income.
  • Provision for Loan Losses - Provision for loan losses expense declined to $250,000 for the third quarter of 2013 and $700,000 for the first nine months of 2013 compared with $25.5 million for the third quarter of 2012 and $33.3 million for the first nine months of 2012. The significant reduction in provision for loan losses is being driven by the substantial shrinkage of the loan portfolio, declining historical loss rates, and a reduction in loans migrating downward in risk grade classification. Our reserve for loans evaluated collectively for impairment was 4.66% at September 30, 2013, compared with 4.56% at June 30, 2013 and 5.06% at September 30, 2012.
  • Non-performing Assets - Non-performing assets, which include loans past due 90 days and still accruing, loans on nonaccrual, and other real estate owned, decreased on a dollar level basis to $148.8 million, or 14.33% of total assets at September 30, 2013, compared with $159.3 million, or 14.86% of total assets, at June 30, 2013. Non-performing loans and other real estate owned still remain at higher than normal levels and continue to impact negatively the Bank’s earnings performance.

Non-performing loans decreased to $106.9 million, or 14.56% of total loans, at September 30, 2013, compared with $112.3 million, or 14.49% of total loans, at June 30, 2013. However, net charge-offs increased from $2.3 million in the second quarter of 2013 to $6.1 million in the third quarter of 2013. Net charge-offs for the nine months ended September 30, 2013 decreased to $25.6 million from $31.8 million for the same period in 2012.

Total past due and nonaccrual loans increased approximately $687,000 to $124.5 million at September 30, 2013 from $123.8 million at June 30, 2013.

               
September 30,

2013
  June 30,

2013
  March 31,

2013
  December 31,

2012
(in thousands)
Past Due Loans:
30 – 59 Days $ 10,018 $ 8,600 $ 8,052 $ 38,219
60 – 89 Days 7,582 2,979 2,960 20,303
90 Days and Over 71 86
 
Nonaccrual Loans   106,922   112,185   120,943   94,517
Total Past Due and Nonaccrual Loans $ 124,522   $ 123,835   $ 131,955   $ 153,125
 

Foreclosed properties at September 30, 2013 decreased to $41.9 million compared with $47.0 million at June 30, 2013, and $48.8 million at September 30, 2012. The Company acquired $3.0 million in other real estate owned and sold $8.0 million in other real estate owned during the third quarter of 2013. Fair value write-downs arising from new appraisals or lower marketing prices totaled $300,000 in the third quarter of 2013 compared with $4.3 million in the third quarter of 2012 and $977,000 in the second quarter of 2013.
  • Non-interest Expense – Non-interest expense decreased $3.3 million to $8.5 million for the third quarter of 2013 compared with $11.8 million for the second quarter of 2013 and decreased $5.7 million compared with $14.2 million for the third quarter of 2012. The significant reduction in non-interest expense was attributable primarily to lower loan collection expenses and lower other real estate owned expenses.
  • Capital – Our net loss available to common shareholders of $168,000 for the third quarter of 2013 was much improved compared to our net loss available to common shareholders of $1.7 million in the second quarter of 2013. In connection with the recent rise in long-term interest rates, our stockholders’ equity was negatively impacted from June 30, 2013 to September 30, 2013 by an increase in the net unrealized loss in our available for sale securities portfolio from $1.1 million at June 30, 2013, to $2.8 million at September 30, 2013.

At September 30, 2013, PBI Bank’s Tier 1 leverage ratio was 6.40% compared with 6.08% at June 30, 2013, and its Total risk-based capital ratio was 11.04% at September 30, 2013 compared with 10.60% at June 30, 2013, which are below the minimums of 9.0% and 12.0% required by the Bank’s Consent Order. At September 30, 2013, Porter Bancorp’s leverage ratio was 5.15% compared with 4.91% at June 30, 2013, and its Total risk-based capital ratio was 10.78% compared with 10.46% at June 30, 2013.

We are continuing our efforts to strengthen our capital levels and comply with the Consent Order. Management and the Board of Directors are evaluating appropriate strategies for increasing the Company’s capital in order to meet the capital requirements of our Consent Order. These include, among other things, a possible public offering or private placement of common stock to new and existing shareholders. As previously announced, we have engaged a financial advisor to assist our Board in this evaluation.

PBIB-G PBIB-F

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 third quarter ending September 30, 2013 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
9/30/13 6/30/13 9/30/12 9/30/13 9/30/12  

 

 

 
Income Statement Data
Interest income $ 10,543 $ 11,168 $ 13,987 $ 32,969 $ 44,554
Interest expense   2,694   2,816   3,855   8,470   12,173

 

 

 
Net interest income 7,849 8,352 10,132 24,499 32,381
Provision for loan losses   250     25,500   700   33,250

 

 

 

 
Net interest income after provision 7,599 8,352 (15,368 ) 23,799 (869 )
 
Service charges on deposit accounts 536 506 563 1,535 1,673
Income from fiduciary activities 261 517 803
Bank card interchange fees 174 196 180 542 553
Other real estate owned income 54 230 180 396 242
Gains on sales of securities, net 24 703 727 3,530
Income from bank owned life insurance 75 305 79 459 238
Other   304   208   458   786   1,145

 

 

 
Non-interest income 1,167 2,148 1,721 4,962 8,184
 
Salaries & employee benefits 3,837 3,999 4,264 11,975 12,558
Occupancy and equipment 884 913 971 2,728 2,826
Other real estate owned expense 669 1,657 5,204 3,117 7,666
FDIC insurance 578 650 559 1,867 2,264
Franchise tax 537 537 496 1,611 1,680
Loan collection expense 531 2,407 792 3,973 1,738
Professional fees 503 499 776 1,408 1,699
Communications expense 177 179 175 531 523
Postage and delivery 99 102 108 314 339
Insurance expense 171 160 96 482 296
Other   482   706   709   1,835   1,870

 

 

 
Non-interest expense 8,468 11,809 14,150 29,841 33,459
 
Income (loss) before income taxes 298 (1,309 ) (27,797 ) (1,080 ) (26,144 )
Income tax expense (benefit)       (65 )     (65 )

 

 

 

 

 
Net income (loss) 298 (1,309 ) (27,732 ) (1,080 ) (26,079 )
Less:
Dividends on preferred stock 437 437 437 1,311 1,312
Accretion on preferred stock 45 45 44 135 134
Earnings (loss) allocated to participating securities   (16 )   (110 )   (1,264 )   (174 )   (1,095 )
 
Net income (loss) available to common $ (168 ) $ (1,681 ) $ (26,949 ) $ (2,352 ) $ (26,430 )

 

 

 
 
Weighted average shares – Basic 11,592,959 11,761,788 11,751,818 11,701,396 11,732,835
Weighted average shares – Diluted 11,592,959 11,761,788 11,751,818 11,701,396 11,732,835
 
Basic earnings (loss) per common share $ (0.01 ) $ (0.14 ) $ (2.29 ) $ (0.20 ) $ (2.25 )
Diluted earnings (loss) per common share $ (0.01 ) $ (0.14 ) $ (2.29 ) $ (0.20 ) $ (2.25 )
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
9/30/13 6/30/13 9/30/12 9/30/13 9/30/12

 

 

 
Average Balance Sheet Data
Assets $ 1,056,300 $ 1,104,807 $ 1,326,457 $ 1,103,958 $ 1,367,318
Loans 756,132 806,941 1,008,053 811,433 1,068,356
Earning assets 1,006,838 1,050,515 1,261,864 1,055,891 1,306,590
Deposits 965,501 1,008,102 1,196,580 1,008,839 1,235,573
Long-term debt and advances 36,123 36,652 38,328 36,644 38,944
Interest bearing liabilities 903,607 941,059 1,126,045 942,423 1,164,309
Stockholders’ equity 37,995 46,904 81,029 44,180 83,217
 
 
Performance Ratios
Return on average assets 0.11 % (0.48) % (8.32) % (0.13) % (2.55) %
Return on average equity 3.11 (11.19) (136.16) (3.27) (41.86)
Yield on average earning assets (tax equivalent) 4.21 4.31 4.45 4.22 4.59
Cost of interest bearing liabilities 1.18 1.20 1.36 1.20 1.40
Net interest margin (tax equivalent) 3.14 3.24 3.23 3.15 3.35
Efficiency ratio 94.17 120.54 119.38 103.85 90.34
 
 
Loan Charge-off Data
Loans charged-off $ (7,071 ) $ (3,404 ) $ (23,487 ) $ (28,437 ) $ (32,507 )
Recoveries   1,016   1,124   412   2,811   697

 

 

 
Net charge-offs $ (6,055 ) $ (2,280 ) $ (23,075 ) $ (25,626 ) $ (31,810 )
 
 
Nonaccrual Loan Activity
Nonaccrual loans at beginning of period $ 112,185 $ 120,943 $ 81,653 $ 94,517 $ 92,020
Net principal pay-downs (7,408 ) (8,118 ) (5,768 ) (19,599 ) (15,092 )
Charge-offs (5,388 ) (3,256 ) (13,442 ) (26,116 ) (20,656 )
Loans foreclosed and transferred to OREO (2,987 ) (11,875 ) (3,339 ) (18,542 ) (22,411 )
Loans returned to accrual status (678 ) (421 ) (1,099 )
Loans placed on nonaccrual during the period   11,198   14,912   29,528   77,761   54,771
 
Nonaccrual loans at end of period $ 106,922 $ 112,185 $ 88,632 $ 106,922 $ 88,632
 
 
Troubled Debt Restructurings (TDRs)
Accruing $ 43,968 $ 54,927 $ 81,930 $ 43,968 $ 81,930
Nonaccrual   49,255   46,510   35,552   49,255   35,552
Total $ 93,223 $ 101,437 $ 117,482 $ 93,223 $ 117,482
 
Other Real Estate Owned (OREO) Activity (Net of Allowance)
OREO at beginning of period $ 47,030 $ 44,192 $ 54,365 $ 43,671 $ 41,449
Real estate acquired 2,987 11,875 3,405 18,542 31,531
Valuation adjustment write-downs (300 ) (977 ) (4,260 ) (1,584 ) (5,090 )
Proceeds from sales of properties (8,029 ) (7,898 ) (4,140 ) (18,582 ) (17,573 )
Gain (loss) on sales, net 169 (162 ) (533 ) (190 ) (1,481 )
Capital improvements           1
 
OREO at end of period $ 41,857 $ 47,030 $ 48,837 $ 41,857 $ 48,837

         

PORTER BANCORP, INC.

Unaudited Financial Information

(in thousands, except share and per share data)
 
As of As of As of As of
9/30/13 6/30/13 12/31/12 9/30/12

 

 

 

 
Assets
Loans $ 734,240 $ 774,785 $ 899,092 $ 951,811
Loan loss reserve   (31,754 )   (37,559 )   (56,680 )   (54,019 )

 

 

 

 

 
Net loans 702,486 737,226 842,412 897,792
Mortgage loans held for sale 123 133 507 210
Securities available for sale 193,981 176,942 178,476 198,148
Federal funds sold & interest bearing deposits 42,071 56,512 41,161 69,928
Cash and due from financial institutions 11,362 7,754 8,411 11,854
Premises and equipment 20,167 20,368 20,805 20,955
Other real estate owned 41,857 47,030 43,671 48,837
Accrued interest receivable and other assets   26,080   26,166   27,188   38,317

 

 

 

 

 

 
Total Assets $ 1,038,127 $ 1,072,131 $ 1,162,631 $ 1,286,041

 

 

 

 

 

 
 
Liabilities and Equity
Certificates of deposit $ 658,940 $ 690,557 $ 760,573 $ 882,303
Interest checking 71,851 78,218 87,234 80,524
Money market 77,292 65,620 63,715 63,594
Savings   37,622   40,121   39,227   39,703

 

 

 

 

 

 
Total interest bearing deposits 845,705 874,516 950,749 1,066,124
Demand deposits   101,191   106,320   114,310   111,403

 

 

 

 

 

 
Total deposits 946,896 980,836 1,065,059 1,177,527
Federal funds purchased & repurchase agreements 3,722 3,292 2,634 2,403
FHLB advances 4,741 5,016 5,604 5,960
Junior subordinated debentures 31,075 31,525 31,975 32,200
Accrued interest payable and other liabilities   14,578

 
12,710   10,169   12,967

 

 

 

 

 

 
Total liabilities 1,001,012 1,033,379 1,115,441 1,231,057
Stockholders’ equity   37,115   38,752   47,190   54,984

 

 

 

 

 

 
Total Liabilities and Stockholders’ Equity $ 1,038,127 $ 1,072,131 $ 1,162,631 $ 1,286,041

 

 

 

 

 

 
 
Ending shares outstanding 12,846,668 12,322,207 12,002,421 12,007,127
Book value per common share $ (0.09 ) $ 0.04 $ 0.74 $ 1.39
Tangible book value per common share (0.21 ) (0.10 ) 0.58 1.22
 
Asset Quality Data
Loan 90 days or more past due still on accrual $ $ 71 $ 86 $ 1,486
Nonaccrual loans   106,922   112,185   94,517   88,632

 

 

 

 

 

 
Total non-performing loans 106,922 112,256 94,603 90,118
Real estate acquired through foreclosures 41,857 47,030 43,671 48,837
Other repossessed assets   11       5

 

 

 

 

 

 
Total non-performing assets $ 148,790 $ 159,286 $ 138,274 $ 138,960

 

 

 

 

 

 
Non-performing loans to total loans 14.56 % 14.49 % 10.52 % 9.47 %
Non-performing assets to total assets 14.33 14.86 11.89 10.81
Allowance for loan losses to non-performing loans 29.70 33.46 59.91 59.94
Allowance as % of loans evaluated individually 3.06 5.82 11.14 8.48
Allowance as % of loans evaluated collectively 4.66 4.56 5.02 5.06
Allowance for loan losses to total loans 4.32 4.85 6.30 5.68
 
Risk-based Capital Ratios
Tier I leverage ratio 5.15 % 4.91 % 4.50 % 5.00 %
Tier I risk-based capital ratio 7.19 6.88 6.46 7.03
Total risk-based capital ratio 10.78 10.46 9.81 10.01
 
FTE employees 260 264 278 291

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