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

The Company reported that the net loss attributable to common shareholders declined substantially to $1.0 million, or ($0.09) per diluted share, for the fourth quarter of 2013 compared with a net loss of $7.0 million, or ($0.59) per diluted share, for the fourth quarter of 2012. Net loss attributable to common shareholders for the year ended December 31, 2013 was $3.4 million, or ($0.29) per diluted common share, compared with net loss attributable to common shareholders of $33.4 million, or ($2.85) per diluted share, for the year ended December 31, 2012. The significant reduction in net loss in 2013 compared to 2012 is primarily attributable to the sizeable reduction in provision for loan losses and lower costs related to our other real estate owned portfolio.

Significant progress was made over the past year, reducing losses from $33.4 million in 2012 to $3.4 million in 2013. Our primary initiatives for 2014 are to continue reducing non-performing assets, restore capital, return to sustainable profitability, continue serving our existing customers, and develop new quality financial relationships.

Fourth Quarter 2013 Financial Performance Highlights
  • Balance Sheet Reduction – Average assets were $1.082 billion in the fourth quarter of 2013 compared with $1.265 billion in the fourth 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 $7.6 million for the fourth quarter of 2013 compared with $7.8 million in the third quarter of 2013 and $9.6 million in the fourth quarter of 2012 as our average loans declined to $719.2 million for the fourth quarter of 2013 compared with $756.1 million in the third quarter of 2013 and $929.0 million in the fourth quarter of 2012. Our net interest margin declined to 2.96% in the fourth quarter of 2013 compared with 3.14% in the third quarter of 2013 and 3.19% in the fourth quarter of 2012.
  • Provision for Loan Losses – No provision for loan losses expense was recorded for the fourth quarter of 2013 compared with $7.0 million in the fourth quarter of 2012. Total provision for loan losses expense of $700,000 was recorded for the twelve months ended December 31, 2013, compared with $40.3 million for the twelve months ended December 31, 2012. The significant reduction in provision for loan losses benefited from the downsizing 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 4.41% at December 31, 2013, compared with 4.66% at September 30, 2013 and 5.02% at December 31, 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 to $132.9 million, or 12.35% of total assets at December 31, 2013, compared with $148.8 million, or 14.33% of total assets, at September 30, 2013. Non-performing loans and other real estate owned remain at elevated levels and continue to impact negatively the Bank’s earnings performance.

Non-performing loans decreased to $102.0 million, or 14.38% of total loans, at December 31, 2013, compared with $106.9 million, or 14.56% of total loans, at September 30, 2013. Net charge-offs also decreased from $6.1 million in the third quarter of 2013 to $3.6 million in the fourth quarter of 2013. Net charge-offs for the twelve months ended December 31, 2013 decreased to $29.3 million from $36.1 million for the same period in 2012 and were largely related to relieving specific reserves previously established for loans deemed collateral dependent during the period.

Total past due and nonaccrual loans decreased approximately $11.1 million to $113.5 million at December 31, 2013 from $124.5 million at September 30, 2013. Our quarterly past due and nonaccrual loan trend since the prior year is as follows:

  December 31,

2013
    September 30,

2013
    June 30,

2013
    March 31,

2013
  December 31,

2012
(in thousands)
Past Due Loans:            
30 – 59 Days $ 10,696 $ 10,018 $ 8,600 $ 8,052 $ 38,219
60 – 89 Days 775 7,582 2,979 2,960 20,303
90 Days and Over 232 71 86
 
Nonaccrual Loans   101,767   106,922   112,185   120,943   94,517

Total Past Due and Nonaccrual Loans

$
113,470

$
124,522   $ 123,835   $ 131,955   $ 153,125
 

Additionally, TDRs on accrual totaled $44.3 million at December 31, 2013 compared to $44.0 million at September 30, 2013 and $77.3 million at December 31, 2012. Foreclosed properties at December 31, 2013 decreased to $30.9 million compared with $41.9 million at September 30, 2013, and $43.7 million at December 31, 2012. The Company acquired $2.1 million in other real estate owned and sold $12.2 million in other real estate owned during the fourth quarter of 2013. Fair value write-downs arising from new appraisals or lower marketing prices totaled $882,000 in the fourth quarter of 2013 compared with $2.1 million in the fourth quarter of 2012 and $300,000 in the third quarter of 2013.
  • Non-interest Expense – Non-interest expense increased $581,000 to $9.0 million for the fourth quarter of 2013 compared with $8.5 million for the third quarter of 2013 and decreased $1.8 million compared with $10.8 million for the fourth quarter of 2012. The increase in non-interest expense for the quarter was attributable primarily to higher loan collection expenses and other real estate owned expenses noted above.
  • Capital – At December 31, 2013, PBI Bank’s Tier 1 leverage ratio was 6.28% compared with 6.40% at September 30, 2013, and its Total risk-based capital ratio was 11.44% at December 31, 2013 compared with 11.04% at September 30, 2013, which are below the minimums of 9.0% and 12.0% required by the Bank’s Consent Order. At December 31, 2013, Porter Bancorp’s leverage ratio was 4.95% compared with 5.15% at September 30, 2013, and its Total risk-based capital ratio was 11.03% compared with 10.78% at September 30, 2013.

Management and the Board of Directors continue to evaluate 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, the Company has engaged a financial advisor to assist the Board of Directors in this evaluation.

PBIB-G

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 fourth quarter ending December 31, 2013 follows.
         
PORTER BANCORP, INC.
Unaudited Financial Information

(in thousands, except share and per share data)
 
Three Three Three Twelve Twelve
Months Months Months Months Months
Ended Ended Ended Ended Ended
12/31/13 9/30/13 12/31/12 12/31/13 12/31/12

 

 

 
Income Statement Data
Interest income $ 10,259 $ 10,543 $ 13,175 $ 43,228 $ 57,729
Interest expense   2,673   2,694   3,601   11,143     15,774
Net interest income 7,586 7,849 9,574 32,085 41,955
Provision for loan losses     250   7,000   700     40,250
Net interest income after provision 7,586 7,599 2,574 31,385 1,705
 
Service charges on deposit accounts 523 536 566 2,058 2,239
Income from fiduciary activities 374 517 1,177
Bank card interchange fees 176 174 174 718 727
Other real estate owned income 3 54 178 399 420
Gain (loss) on sales of securities, net (4 ) 24 (294 ) 723 3,236
Income from bank owned life insurance 75 75 74 534 312
Other   184   304   334   970   1,479
Non-interest income 957 1,167 1,406 5,919 9,590
 
Salaries & employee benefits 3,526 3,837 4,090 15,501 16,648
Occupancy and equipment 855 884 816 3,583 3,642
Other real estate owned expense 1,399 669 2,883 4,516 10,549
FDIC insurance 511 578 571 2,378 2,835
Franchise tax 333 537 494 1,944 2,174
Loan collection expense 734 531 704 4,707 2,442
Professional fees 484 503 286 1,892 1,985
Communications expense 180 177 187 711 710
Postage and delivery 109 99 115 423 454
Insurance expense 166 171 77 648 373
Other   752   482   610   2,587   2,480
Non-interest expense 9,049 8,468 10,833 38,890 44,292
 
Income (loss) before income taxes (506 ) 298 (6,853 ) (1,586 ) (32,997 )
Income tax expense (benefit)           (65 )
Net income (loss) (506 ) 298 (6,853 ) (1,586 ) (32,932 )
Less:
Dividends on preferred stock 607 437 438 1,919 1,750
Accretion on preferred stock 25 45 45 160 179
Earnings (loss) allocated to participating securities   (110 )   (16 )   (343 )   (267 )   (1,429 )
Net loss attributable to common $ (1,028 ) $ (168 ) $ (6,993 ) $ (3,398 ) $ (33,432 )
 
Weighted average shares – Basic 11,907,766 11,592,959 11,762,330 11,794,738 11,746,719
Weighted average shares – Diluted 11,907,766 11,592,959 11,762,330 11,794,738 11,746,719
 
Basic earnings (loss) per common share $ (0.09 ) $ (0.01 ) $ (0.59 ) $ (0.29 ) $ (2.85 )
Diluted earnings (loss) per common share $ (0.09 ) $ (0.01 ) $ (0.59 ) $ (0.29 ) $ (2.85 )
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 Twelve Twelve
Months Months Months Months Months
Ended Ended Ended Ended Ended
12/31/13 9/30/13 12/31/12 12/31/13 12/31/12

 

 

 
Average Balance Sheet Data
Assets $ 1,081,908 $ 1,056,300 $ 1,264,867 $ 1,098,400 $ 1,341,565
Loans 719,163 756,132 928,974 788,176 1,033,320
Earning assets 1,033,083 1,006,838 1,207,711 1,050,142 1,281,735
Deposits 989,847 965,501 1,162,015 1,004,052 1,217,083
Long-term debt and advances 35,652 36,123 37,710 36,394 38,634
Interest bearing liabilities 922,519 903,607 1,085,424 937,406 1,144,480
Stockholders’ equity 38,035 37,995 53,229 42,631 75,679
 
 
Performance Ratios
Return on average assets (0.19) % 0.11 % (2.16) % (0.14) % (2.45) %
Return on average equity (5.28) 3.11 (51.22) (3.72) (43.52)
Yield on average earning assets (tax equivalent) 3.99 4.21 4.38 4.16 4.54
Cost of interest bearing liabilities 1.15 1.18 1.32 1.19 1.38
Net interest margin (tax equivalent) 2.96 3.14 3.19 3.10 3.31
Efficiency ratio 105.87 94.17 96.09 104.32 91.68
 
 
Loan Charge-off Data
Loans charged-off $ (4,171 ) $ (7,071 ) $ (5,008 ) $ (32,608 ) $ (37,515 )
Recoveries   541   1,016   669   3,352   1,366
Net charge-offs $ (3,630 ) $ (6,055 ) $ (4,339 ) $ (29,256 ) $ (36,149 )
 
 
Nonaccrual Loan Activity
Nonaccrual loans at beginning of period $ 106,922 $ 112,185 $ 88,632 $ 94,517 $ 92,020
Net principal pay-downs (5,151 ) (7,408 ) (3,576 ) (24,750 ) (18,668 )
Charge-offs (3,232 ) (5,388 ) (3,856 ) (29,348 ) (24,512 )
Loans foreclosed and transferred to OREO (2,064 ) (2,987 ) (1,998 ) (20,606 ) (24,409 )
Loans returned to accrual status (2,459 ) (678 ) (3,558 )
Loans placed on nonaccrual during the period   7,751   11,198   15,315   85,512   70,086
Nonaccrual loans at end of period $ 101,767 $ 106,922 $ 94,517 $ 101,767 $ 94,517
 
 
Troubled Debt Restructurings (TDRs)
Accruing $ 44,346 $ 43,968 $ 77,344 $ 44,346 $ 77,344
Nonaccrual   46,916   49,255   40,464   46,916   40,464
Total $ 91,262 $ 93,223 $ 117,808 $ 91,262 $ 117,808
 
Other Real Estate Owned (OREO) Activity (Net of Allowance)
OREO at beginning of period $ 41,857 $ 47,030 $ 48,837 $ 43,671 $ 41,449
Real estate acquired 2,064 2,987 1,997 20,606 33,528
Valuation adjustment write-downs (882 ) (300 ) (2,064 ) (2,466 ) (7,154 )
Proceeds from sales of properties (12,205 ) (8,029 ) (4,908 ) (30,787 ) (22,481 )
Gain (loss) on sales, net 58 169 (191 ) (132 ) (1,672 )
Capital improvements           1
OREO at end of period $ 30,892 $ 41,857 $ 43,671 $ 30,892 $ 43,671
 

     
PORTER BANCORP, INC.
Unaudited Financial Information

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

 

 

 
Assets
Loans $ 709,326 $ 734,240 $ 899,092
Loan loss reserve   (28,124 )   (31,754 )   (56,680 )
Net loans 681,202   702,486 842,412
Mortgage loans held for sale 149 123 507
Securities held to maturity 43,612
Securities available for sale 163,344 193,981 178,476
Federal funds sold & interest bearing deposits 103,669 42,071 41,161
Cash and due from financial institutions 7,465 11,362 8,411
FHLB stock 10,072 10,072 10,072
Premises and equipment 19,983 20,167 20,805
Other real estate owned 30,892 41,857 43,671
Accrued interest receivable and other assets   15,733   16,008   17,116
Total Assets $ 1,076,121 $ 1,038,127 $ 1,162,631

 

 

 

 

 
 
Liabilities and Equity
Certificates of deposit $ 679,952 $ 658,940 $ 760,573
Interest checking 84,626 71,851 87,234
Money market 79,349 77,292 63,715
Savings   36,292   37,622   39,227
Total interest bearing deposits 880,219 845,705 950,749
Demand deposits   107,486   101,191   114,310
Total deposits 987,705 946,896 1,065,059
Federal funds purchased & repurchase agreements 2,470 3,722 2,634
FHLB advances 4,492 4,741 5,604
Junior subordinated debentures 30,850 31,075 31,975
Accrued interest payable and other liabilities   14,673   14,578   10,169
Total liabilities 1,040,190 1,001,012 1,115,441
Stockholders’ equity   35,931   37,115   47,190
Total Liabilities and Stockholders’ Equity $ 1,076,121 $ 1,038,127 $ 1,162,631

 

 

 

 

 
 
Ending shares outstanding 12,840,999 12,846,668 12,002,421
Book value per common share $ (0.18 ) $ (0.09 ) $ 0.74
Tangible book value per common share (0.29 ) (0.21 ) 0.58
 
Asset Quality Data
Loan 90 days or more past due still on accrual $ 232 $ $ 86
Nonaccrual loans   101,767   106,922   94,517
Total non-performing loans 101,999 106,922 94,603
Real estate acquired through foreclosures 30,892 41,857 43,671
Other repossessed assets     11  
Total non-performing assets $ 132,891 $ 148,790 $ 138,274
Non-performing loans to total loans 14.38 % 14.56 % 10.52 %
Non-performing assets to total assets 12.35 14.33 11.89
Allowance for loan losses to non-performing loans 27.57 29.70 59.91
Allowance as % of loans evaluated individually 2.32 3.06 11.14
Allowance as % of loans evaluated collectively 4.41 4.66 5.02
Allowance for loan losses to total loans 3.96 4.32 6.30
 
Risk-based Capital Ratios
Tier I leverage ratio 4.95 % 5.15 % 4.50 %
Tier I risk-based capital ratio 7.34 7.19 6.46
Total risk-based capital ratio 11.03 10.78 9.81
 
FTE employees 260 260 278

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