Porter Bancorp, Inc. (NASDAQ: PBIB), parent company of PBI Bank, today reported unaudited results for the second quarter of 2016.

The Company reported that net income available to common shareholders for the second quarter of 2016 was $979,000, or $0.03 per basic and diluted common share, compared with net loss attributable to common shareholders of $2.0 million, or ($0.08) per basic and diluted share, for the second quarter of 2015. Net income available to common shareholders for the six months ended June 30, 2016, was $2.4 million, or $0.09 per diluted common share, compared with net loss attributable to common shareholders of $1.3 million, or ($0.06) per diluted share, for the six months ended June 30, 2015.

John T. Taylor, President and CEO of the Company noted, "PBI Bank has continued to make significant progress in reducing its non-performing assets. In the second quarter of 2016, non-performing assets were reduced by $5.1 million after achieving reductions of $4.3 million in the first quarter of 2016. In addition to lowering the risk profile of the Company, we are pleased to see a second consecutive profitable quarter, as the cost to remediate non-performing assets continues to decline, and we continue the all-important work of attracting new customers and providing high quality service to our existing customer base."

Net Interest Income - Net interest income before provision expense decreased to $7.2 million for the second quarter of 2016 compared with $7.7 million in the first quarter of 2016, and $7.3 million in the second quarter of 2015. Net interest income was positively impacted in the first quarter of 2016 by the collection of previously charged-off accrued uncollected interest of approximately $285,000. Average loans declined slightly to $619.3 million for the second quarter of 2016 compared with $620.1 million in the first quarter of 2016 and declined compared to $641.6 million in the second quarter of 2015. Net interest margin decreased to 3.34% in the second quarter of 2016, compared with 3.53% in the first quarter of 2016 and increased compared to 3.21% in the second quarter of 2015.

Our yield on earning assets declined to 4.03% in the second quarter of 2016 compared to 4.23% in the first quarter of 2016 and improved slightly compared to 4.00% in the second quarter of 2015. As mentioned above, the yield on earning assets was positively impacted in the first quarter of 2016 by the collection of previously charged-off accrued uncollected interest of approximately $285,000 along with the full unpaid balance on three nonaccrual loans. Our cost of funds was 0.79% in the second quarter of 2016 and the first quarter of 2016 and improved from 0.87% in the second quarter of 2015.

Allowance for Loan Losses - The allowance for loan losses to total loans was 1.62% at June 30, 2016, compared to 1.83% at March 31, 2016, and 2.59% at June 30, 2015. The declining level of the allowance is primarily driven by declining historical charge-off levels and improving trends in credit quality. Net loan charge-offs were $636,000 for the second quarter of 2016, compared to net charge-offs of $151,000 for the first quarter of 2016 and net charge-offs of $1.8 million for the second quarter of 2015. The allowance for loan losses for loans evaluated collectively for impairment was 1.66% at June 30, 2016, compared with 1.83% at March 31, 2016, and 2.66% at June 30, 2015.

Because of ongoing improvements in asset quality and management's assessment of risk in the loan portfolio, a negative provision of $600,000 was recorded for the second quarter of 2016, compared to a negative provision of $550,000 for the first quarter of 2016 and no provision for loan losses in the second quarter of 2015.

Non-performing Assets - Non-performing assets, which include loans past due 90 days and still accruing, loans on nonaccrual, and other real estate owned ("OREO"), decreased to $23.9 million, or 2.61% of total assets at June 30, 2016, compared with $29.0 million, or 3.09% of total assets at March 31, 2016, and $69.9 million, or 7.13% of total assets at June 30, 2015.

Non-performing loans increased slightly to $11.6 million, or 1.86% of total loans at June 30, 2016, compared with $11.1 million, or 1.79% of total loans at March 31, 2016, and decreased from $30.3 million, or 4.67% of total loans at June 30, 2015. The increase from the previous quarter was primarily driven by $2.0 million in loans being placed on nonaccrual during the second quarter. The impact of loans placed on nonaccrual was offset by $731,000 in principal payments received on nonaccrual loans, $135,000 of nonaccrual loans migrating to OREO, and $344,000 in charge-offs.

OREO at June 30, 2016, decreased to $12.3 million, compared with $17.9 million at March 31, 2016, and $39.5 million at June 30, 2015. The Company acquired $135,000 in OREO and sold $5.6 million in OREO during the second quarter of 2016. Fair value write-downs arising from lower marketing prices or new appraisals totaled $150,000 in the second quarter of 2016, compared with $500,000 in the first quarter of 2016 and $2.3 million in the second quarter of 2015.

The following table details past due loans and non-performing assets as of:
                 
June 30, March 31, December 31, September 30, June 30,
2016 2016 2015 2015 2015
(in thousands)
Past due loans:
30 - 59 days $ 2,401 $ 1,829 $ 3,133 $ 1,972 $ 1,941
60 - 89 days 336 62 241 578 650
90 days or more 92
Nonaccrual loans     11,599   11,119   14,087   16,987   30,215

Total past due and nonaccrual loans

 
 

$
14,336

$
13,010 $ 17,461 $ 19,537 $ 32,898
 
Loans past due 90 days

or more

$

$
$ $ $ 92
Nonaccrual loans 11,599 11,119 14,087 16,987 30,215
OREO 12,322 17,861 19,214 29,177 39,545
Other repossessed assets            

Total non-performing Assets

 
 

$
23,921

$
28,980   $ 33,301 $ 46,164   $ 69,852
 

In addition to nonaccrual loans and OREO, loans classified as Troubled Debt Restructures (TDRs) and on accrual totaled $13.9 million at June 30, 2016, compared to $14.9 million at March 31, 2016, and $18.5 million at June 30, 2015.

Non-interest Income - Non-interest income decreased $239,000 to $1.2 million for the second quarter of 2016, compared with $1.4 million for the first quarter of 2016, and decreased $413,000 compared with $1.6 million for the second quarter of 2015. There was no gain on sales of securities in the second quarter of 2016, compared to $203,000 in the first quarter of 2016 and $199,000 in the second quarter of 2015. Additionally, OREO income has continued to decline as income producing properties have been sold.

Non-interest Expense - Non-interest expense decreased $155,000 to $7.9 million for the second quarter of 2016, compared with $8.1 million for the first quarter of 2016, and decreased $3.1 million compared with $11.0 million for the second quarter of 2015. The decrease from the first quarter of 2016 was primarily due to a reduction in OREO expenses of approximately $374,000 as fair value write downs based upon listing prices as well as new appraisals declined from $500,000 in the first quarter of 2016 to $150,000 in the second quarter. The decrease in OREO expense was offset by increases in professional fees of approximately $107,000 and loan collection expense of approximately $189,000. Loan collection expense was positively impacted in the first quarter of 2016 by recoveries of approximately $70,000 in previously incurred expenses.

Capital - On April 15, 2016, we completed a $5.03 million stock offering to accredited investors in a private placement transaction in which we sold 2,300,000 Common Shares and 1,100,000 Non-Voting Common Shares to non-affiliate investors at $1.25 per share. Three directors of the Company, including President and CEO John T. Taylor, also purchased a total of 600,000 Common Shares for $1.30 per share, but otherwise on the same terms and conditions as the other investors. Approximately $2.8 million of the proceeds were directed by the investors to make interest payments on the outstanding capital securities of the Company's subsidiary trusts, bringing interest payments current through the second quarter of 2016. Also from the proceeds, the Company made a $500,000 capital contribution to PBI Bank and the balance of the proceeds will be used for general corporate purposes.

At June 30, 2016, PBI Bank's Tier 1 leverage ratio was 6.65% compared with 6.39% at March 31, 2016, and its Total risk-based capital ratio was 10.87% at June 30, 2016, compared with 10.64% at March 31, 2016, which are below the minimums of 9.0% and 12.0% required by the Bank's Consent Order. At June 30, 2016, Porter Bancorp's leverage ratio was 5.87% compared with 5.03% at March 31, 2016, and its Total risk-based capital ratio was 11.31%, compared with 10.46% at March 31, 2016. At June 30, 2016, PBI Bank's Common equity Tier I risk-based capital ratio was 9.22%, and Porter Bancorp's Common equity Tier I risk-based capital ratio was 6.11%.

About Porter Bancorp, Inc.

Porter Bancorp, Inc. (NASDAQ: PBIB) is a Louisville, Kentucky-based bank holding company which operates banking centers in 12 counties through its wholly-owned subsidiary PBI Bank. Our markets include metropolitan Louisville in Jefferson County and the surrounding counties of Henry and Bullitt, and extend south along the Interstate 65 corridor. We serve southern and south central Kentucky from banking centers in Butler, Green, Hart, Edmonson, Barren, Warren, Ohio and Daviess counties. We also have a banking center in Lexington, Kentucky, the second largest city in the state. PBI Bank is a traditional community bank with a wide range of personal and business banking products and services.

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 second quarter ending June 30, 2016 follows.
     

PORTER BANCORP, INC.

Unaudited Financial Information

(in thousands, except share and per share data)
 
Three Three Three Six Six
Months Months Months Months Months
Ended Ended Ended Ended Ended
6/30/16 3/31/16 6/30/15 6/30/16 6/30/15

 

 

 
Income Statement Data
Interest income $ 8,705 $ 9,185 $ 9,167 $ 17,890 $ 18,370
Interest expense   1,509   1,534   1,828   3,043   3,741
Net interest income 7,196 7,651 7,339 14,847 14,629
Provision (negative provision) for loan losses   (600)   (550 )     (1,150)  
Net interest income after provision 7,796 8,201 7,339 15,997 14,629
 
Service charges on deposit accounts 473 429 475 902 884
Bank card interchange fees 221 202 229 423 432
Other real estate owned income 149 256 372 405 729
Gains (losses) on sales of securities, net 203 199 203 1,696
Other   309   301   290   610   520
Non-interest income 1,152 1,391 1,565 2,543 4,261
 
Salaries & employee benefits 3,857 3,822 4,028 7,679 7,875
Occupancy and equipment 808 854 828 1,662 1,698
Professional fees 492 385 714 877 1,693
FDIC insurance 493 523 564 1,016 1,134
Data processing expense 295 297 278 592 582
State franchise and deposit tax 255 255 285 510 570
Other real estate owned expense 294 668 2,932 962 3,665
Loan collection expense 271 82 291 353 574
Other   1,171   1,205   1,114   2,376   2,635
Non-interest expense 7,936 8,091 11,034 16,027 20,426
 
Income (loss) before income taxes 1,012 1,501 (2,130 ) 2,513 (1,536 )
Income tax expense     21     21  
Net income (loss) 1,012 1,480 (2,130 ) 2,492 (1,536 )
Less:
Earnings (loss) allocated to participating securities   33   51   (91 )   84   (269 )
Net income (loss) available to common $ 979 $ 1,429 $ (2,039 ) $ 2,408 $ (1,267 )
 
Weighted average shares - Basic 29,389,804 26,025,327 24,589,507 27,694,075 21,079,238
Weighted average shares - Diluted 29,389,804 26,025,327 24,589,507 27,694,075 21,079,238
 
Basic earnings (loss) per common share $ 0.03 $ 0.05 $ (0.08 ) $ 0.09 $ (0.06 )
Diluted earnings (loss) per common share $ 0.03 $ 0.05 $ (0.08 ) $ 0.09 $ (0.06 )
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 Six Six
Months Months Months Months Months
Ended Ended Ended Ended Ended
6/30/16 3/31/16 6/30/15 6/30/16 6/30/15

 

 

 

Average Balance Sheet Data
Assets $ 936,000 $ 937,378 $ 1,003,507 $ 936,689 $ 1,007,512
Loans 619,253 620,077 641,587 619,665 642,269
Earning assets 876,721 881,635 930,415 879,178 933,210
Deposits 858,849 865,125 924,840 861,987 928,250
Long-term debt and advances 27,649 28,033 33,208 27,841 33,553
Interest bearing liabilities 766,712 779,438 846,892 773,075 850,637
Stockholders' equity 39,214 33,546 33,770 36,380 33,870
 
 
Performance Ratios
Return on average assets 0.43 % 0.64 % (0.85) % 0.54 % (0.31) %
Return on average equity 10.38 17.74 (25.30) 13.78 (9.15)
Yield on average earning assets (tax equivalent) 4.03 4.23 4.00 4.13 4.02
Cost of interest bearing liabilities 0.79 0.79 0.87 0.79 0.89
Net interest margin (tax equivalent) 3.34 3.53 3.21 3.44 3.21
Efficiency ratio 95.06 91.54 126.75 93.25 118.80
 
 
Loan Charge-off Data
Loans charged-off $ (928 ) $ (749 ) $ (2,264 ) $ (1,677 ) $ (3,591 )
Recoveries   292   598   476   890   1,036
Net charge-offs $ (636 ) $ (151 ) $ (1,788 ) $ (787 ) $ (2,555 )
 
 
Nonaccrual Loan Activity
Nonaccrual loans at beginning of period $ 11,119 $ 14,087 $ 36,500 $ 14,087 $ 47,175
Net principal pay-downs (731 ) (2,712 ) (5,336 ) (3,443 ) (16,090 )
Charge-offs (344 ) (644 ) (2,082 ) (988 ) (3,037 )
Loans foreclosed and transferred to OREO (135 ) (441 ) (608 ) (576 ) (945 )
Loans returned to accrual status (265 ) (84 ) (620 ) (349 ) (698 )
Loans placed on nonaccrual during the period   1,955   913   2,361   2,868   3,810
Nonaccrual loans at end of period $ 11,599 $ 11,119 $ 30,215 $ 11,599 $ 30,215
 
Troubled Debt Restructurings (TDRs)
Accruing $ 13,936 $ 14,867 $ 18,548 $ 13,936 $ 18,548
Nonaccrual   3,453   3,479   15,006   3,453   15,006
Total $ 17,389 $ 18,346 $ 33,554 $ 17,389 $ 33,554
 
Other Real Estate Owned (OREO) Activity (Net of Allowance)
OREO at beginning of period $ 17,861 $ 19,214 $ 43,618 $ 19,214 $ 46,197
Real estate acquired 135 441 608 576 955
Valuation adjustment write-downs (150 ) (500 ) (2,330 ) (650 ) (2,630 )
Proceeds from sales of properties (5,638 ) (1,349 ) (2,391 ) (6,987 ) (5,020 )
Gain (loss) on sales, net   114   55   40   169   43
OREO at end of period $ 12,322 $ 17,861 $ 39,545 $ 12,322 $ 39,545
 

 
PORTER BANCORP, INC.
Unaudited Financial Information

(in thousands, except share and per share data)
 
  As of
  6/30/16 3/31/16 12/31/15   9/30/15   6/30/15
 
Assets
Loans $ 624,136 $ 619,827 $ 618,666 $ 624,414 $ 648,321
Allowance for loan losses   (10,104 )   (11,340 )   (12,041 )   (14,198 )   (16,809 )
Net loans 614,032 608,487 606,625 610,216 631,512
Loans held for sale 113 186 71 125
Securities held to maturity 41,948 42,011 42,075 42,138 42,202
Securities available for sale 143,145 141,525 144,978 146,837 151,758
Federal funds sold & interest bearing deposits 49,313 72,209 85,329 73,940 63,987
Cash and due from financial institutions 8,289 8,097 8,006 6,540 7,403
Premises and equipment 18,618 18,751 18,812 19,109 19,167
Bank owned life insurance 14,646 14,531 9,441 9,381 9,320
FHLB Stock 7,323 7,323 7,323 7,323 7,323
Other real estate owned 12,322 17,861 19,214 29,177 39,545
Accrued interest receivable and other assets   6,916   7,251   6,733   6,748   6,998
Total Assets $ 916,552 $ 938,159 $ 948,722 $ 951,480 $ 979,340
 
Liabilities and Equity
Certificates of deposit $ 461,183 $ 478,965 $ 499,827 $ 534,031 $ 564,253
Interest checking 90,806 96,465 97,515 83,247 84,627
Money market 135,643 134,684 125,935 119,324 110,529
Savings   34,616   35,197   34,677   35,131   35,942
Total interest bearing deposits 722,248 745,311 757,954 771,733 795,351
Demand deposits   117,843   120,302   120,043   106,160   108,800
Total deposits 840,091 865,613 877,997 877,893 904,151
Federal funds purchased & repurchase agreements 1,265
FHLB advances 2,775 2,932 3,081 3,255 3,430
Junior subordinated debentures 24,600 24,825 25,050 25,275 29,500
Accrued interest payable and other liabilities   7,651   10,181   10,577   11,249   10,949
Total liabilities 875,117 903,551 916,705 917,672 949,295
 
Preferred stockholders' equity 2,771 2,771 2,771 2,771 2,771
Common stockholders' equity   38,664   31,837   29,246   31,037   27,274
Total stockholders' equity   41,435   34,608   32,017   33,808   30,045
Total Liabilities and Stockholders' Equity $ 916,552 $ 938,159 $ 948,722 $ 951,480 $ 979,340
 
Ending shares outstanding 31,118,302 26,944,177 26,947,533 26,949,205 25,759,223
Book value per common share $ 1.24 $ 1.18 $ 1.09 $ 1.15 $ 1.06
Tangible book value per common share 1.23 1.17 1.07 1.13 1.03
 

 
PORTER BANCORP, INC.
Unaudited Financial Information
(in thousands, except share and per share data)
 
  As of
  6/30/16   3/31/16   12/31/15   9/30/15   6/30/15
Asset Quality Data
Loan 90 days or more past due still on accrual $ $ $ $ $

92

 
Nonaccrual loans   11,599   11,119   14,087   16,987   30,215
Total non-performing loans 11,599 11,119 14,087 16,987 30,307
Real estate acquired through foreclosures 12,322 17,861 19,214 29,177 39,545
Other repossessed assets          
Total non-performing assets $ 23,921 $ 28,980 $ 33,301 $ 46,164 $ 69,852
 
Non-performing loans to total loans 1.86 % 1.79 % 2.28 % 2.72 % 4.67 %
Non-performing assets to total assets 2.61 3.09 3.51 4.85 7.13
Allowance for loan losses to non-performing loans 87.11 101.99 85.48 83.58 55.46
 
Allowance for loans evaluated individually $ 146 $ 464 $ 428 $ 469 $ 842
Loans evaluated individually for impairment 25,535 26,236 31,776 34,895 49,011
Allowance as % of loans evaluated individually 0.57 % 1.77 % 1.35 % 1.34 % 1.72 %
 
Allowance for loans evaluated collectively $ 9,958 $ 10,876 $ 11,613 $ 13,729 $ 15,967
Loans evaluated collectively for impairment 598,601 593,591 586,890 589,519 599,310
Allowance as % of loans evaluated collectively 1.66 % 1.83 % 1.98 % 2.33 % 2.66 %
 
Allowance for loan losses to total loans 1.62 % 1.83 % 1.95 % 2.27 % 2.59 %
 
Loans by Risk Category
Pass $ 547,853 $ 534,451 $ 517,484 $ 508,470 $ 509,843
Watch 50,024 59,265 63,363 66,726 67,712
Special Mention 622 1,383 1,395 1,700 1,718
Substandard 25,637 24,728 36,424 47,518 69,048
Doubtful          

 
Total $ 624,136 $ 619,827 $ 618,666 $ 624,414 $ 648,321
 
Risk-based Capital Ratios - Company
Tier I leverage ratio 5.87 % 5.03 % 4.74 % 4.73 % 4.25 %
Common equity Tier I risk-based capital ratio 6.11 5.21 5.09 5.07 4.42
Tier I risk-based capital ratio 8.16 7.03 6.89 6.86 6.02
Total risk-based capital ratio 11.31 10.46 10.46 10.40 10.25
 
Risk-based Capital Ratios - PBI Bank
Tier I leverage ratio 6.65 % 6.39 % 6.08 % 6.01 % 5.95 %
Common equity Tier I risk-based capital ratio 9.22 8.94 8.84 8.73 8.43
Tier I risk-based capital ratio 9.22 8.94 8.84 8.73 8.43
Total risk-based capital ratio 10.87 10.64 10.58 10.50 10.34
 
FTE employees 239 246 244 246 253
 

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