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Porter Bancorp, Inc. Announces Third Quarter 2012 Results

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LOUISVILLE, Ky.--(BUSINESS WIRE)--

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 2012.

The Company reported net loss to common shareholders of $26.9 million, or ($2.29) per diluted share, for the third quarter of 2012 compared with net loss to common shareholders of $12.2 million, or ($1.04) per diluted share, for the third quarter of 2011. Net loss to common shareholders for the nine months ended September 30, 2012, was $26.4 million, or ($2.25) per diluted common share, compared with net loss to common shareholders of $50.8 million, or ($4.34) per diluted share, for the nine months ended September 30, 2011. The loss for the nine months ended September 30, 2011 includes a non-recurring 100% goodwill impairment charge of $23.8 million recorded in the second quarter of 2011.

Financial performance continues to be negatively impacted by the Bank's high level of nonperforming loans and other real estate owned. Non-performing loans increased to $90.1 million, or 9.47% of total loans, at September 30, 2012, compared with $81.7 million, or 7.85% of total loans, at June 30, 2012. Non-performing assets increased to $139.0 million, or 10.8% of total assets, compared with $136.1 million, or 10.2% of total assets, at June 30, 2012.

Foreclosed properties at September 30, 2012, decreased to $48.8 million compared with $54.4 million at June 30, 2012, and increased compared with $44.9 million at September 30, 2011. During the third quarter of 2012, the Company acquired $3.4 million of OREO, sold $4.7 million of OREO, and recorded OREO fair value write-downs totaling $4.3 million to reflect new appraisals or marketing prices during the third quarter of 2012.

Provision for loan losses totaled $25.5 million for the third quarter of 2012 compared to $4.0 million in the second quarter of 2012, and $8.0 million in the third quarter of 2011. Provision for loan losses totaled $33.3 million for the nine months ended September 30, 2012, compared to $26.8 million for the nine months ended September 30, 2011.

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.

At September 30, 2012, PBI Bank's Tier 1 leverage ratio was 5.53% and its Total risk-based capital ratio was 9.85%, which are below the minimums of 9.0% and 12.0% required by the Bank's Consent Order with its primary regulators. At September 30, 2012, Porter Bancorp's Tier 1 leverage ratio was 5.00%, compared with 7.56% at June 30, 2012, and 6.53% at December 31, 2011, and its Total risk-based capital ratio was 10.01% compared with 11.94% at June 30, 2012, and 11.22% at December 31, 2011.

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. A key component of that evaluation is reviewing the opportunity to sell common stock through either a public offering or private placement to new and existing shareholders. At Porter Bancorp's 2012 annual shareholders' meeting, shareholders approved an increase in our common shares authorized for issuance from 19 million shares to 86 million shares.

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,” “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 currently expected due to various risks and uncertainties, including those discussed 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, 2012 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
9/30/12 6/30/12 9/30/11 9/30/12 9/30/11

 

 

 

Income Statement Data
Interest income $ 13,987 $ 14,812 $ 18,103 $44,554 $ 56,917
Interest expense   3,855     4,017     5,448   12,173     17,053  

 

 

 

Net interest income 10,132 10,795 12,655 32,381 39,864
Provision for loan losses   25,500     4,000     8,000   33,250     26,800  

 

 

 

 

Net interest income after provision (15,368 ) 6,795 4,655 (869 ) 13,064
 
Service charges on deposit accounts 563 556 690 1,673 1,979
Income from fiduciary activities 261 291 237 803 738
Bank card interchange fees 180 196 168 553 500
Other real estate owned rental income 180 25 93 242 147
Gains on sales of loans originated for sale 138 77 123 260 664
Gains on sales of securities, net 1,511 3,530 1,108
Other   399     362     389   1,123     1,216  

 

 

 

Non-interest income 1,721 3,018 1,700 8,184 6,352
 
Salaries & employee benefits 4,264 3,982 3,780 12,558 12,084
Occupancy and equipment 971 969 957 2,826 2,910
Goodwill impairment 23,794
Other real estate owned expense 5,204 1,205 17,029 7,666 40,505
FDIC insurance 559 832 930 2,264 2,640
Loan collection expense 792 586 802 1,738 1,989
Professional fees 776 567 329 1,699 963
Franchise tax 496 592 582 1,680 1,746
Communications expense 175 168 176 523 509
Postage and delivery 108 109 117 339 368
Advertising 44 28 93 105 282
Other   761     624     628   2,061     1,787  

 

 

 

Non-interest expense 14,150 9,662 25,423 33,459 89,577
 
Income (loss) before income taxes (27,797 ) 151 (19,068 ) (26,144 ) (70,161 )
Income tax expense (benefit)   (65 )       (6,906 ) (65 )   (18,809 )

 

 

 

Net income (loss) (27,732 ) 151 (12,162 ) (26,079 ) (51,352 )
Less:
Dividends on preferred stock 437 438 437 1,312 1,312
Accretion on preferred stock 44 45 45 134 133
Earnings (loss) allocated to participating securities   (1,264 )   (13 )   (463 ) (1,095 )   (1,995 )
 
Net income (loss) available to common $ (26,949 ) $ (319 ) $ (12,181 ) $(26,430 ) $ (50,802 )

 

 

 

 
Weighted average shares – Basic 11,751,818 11,733,156 11,721,591 11,732,835 11,713,040
Weighted average shares – Diluted 11,751,818 11,733,156 11,721,591 11,732,835 11,713,040
 
Basic earnings (loss) per common share $ (2.29 ) $ (0.03 ) $ (1.04 ) $ (2.25 ) $ (4.34 )
Diluted earnings (loss) per common share $ (2.29 ) $ (0.03 ) $ (1.04 ) $ (2.25 ) $ (4.34 )
Cash dividends declared per common share $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.02

 
 
 

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
9/30/12 6/30/12 9/30/11 9/30/12 9/30/11

 

 

 

Average Balance Sheet Data
Assets $ 1,326,457 $ 1,363,340 $ 1,625,590 $ 1,367,318 $ 1,690,386
Loans 1,008,053 1,078,497 1,227,024 1,068,356 1,261,790
Earning assets 1,261,864 1,307,520 1,506,384 1,306,590 1,559,065
Deposits 1,196,580 1,231,281 1,405,543 1,235,573 1,453,121
Long-term debt and advances 38,328 38,959 50,463 38,944 50,034
Interest bearing liabilities 1,126,045 1,159,447 1,361,537 1,164,309 1,409,069
Stockholders' equity 81,029 83,987 151,055 83,217 169,269
 
 
Performance Ratios
Return on average assets (8.32 )% 0.04 % (2.97 )% (2.55 )% (4.06 )%
Return on average equity (136.16 ) 0.72 (31.94 ) (41.86 ) (40.56 )
Yield on average earning assets (tax equivalent) 4.45 4.59 4.81 4.59 4.92
Cost of interest bearing liabilities 1.36 1.39 1.59 1.40 1.62
Net interest margin (tax equivalent) 3.23 3.35 3.38 3.35 3.46
Efficiency ratio 119.38 78.54 177.10 90.34 145.83
 
 
Loan Charge-off Data
Loans charged-off $ (23,487 ) $ (6,438 ) $ (7,367 ) $ (32,507 ) $ (21,830 )
Recoveries   412     79     142     697     237  

 

 

 

 

Net charge-offs $ (23,075 ) $ (6,359 ) $ (7,225 ) $ (31,810 ) $ (21,593 )
 
 
Non-Accrual Loan Activity
Non-accrual loans at beginning of period $ 81,653 $ 97,230 $ 60,331 $ 92,020 $ 59,799
Loans returned to accrual status (929 )
Net principal pay-downs (5,768 ) (4,084 ) (3,059 ) (15,092 ) (9,920 )
Charge-offs (13,442 ) (4,902 ) (4,804 ) (20,656 ) (15,538 )
Loans foreclosed and transferred to OREO (3,339 ) (15,243 ) (3,613 ) (22,411 ) (17,043 )
Loan collateral repossessed (10 )
Loans placed on non-accrual during the period   29,528     8,652     11,216     54,771     41,834  
 
Non-accrual loans at end of period $ 88,632   $ 81,653   $ 59,132   $ 88,632   $ 59,132  
 
 
 
Other Real Estate Owned (OREO) Activity (Net of Allowance)
OREO at beginning of period $ 54,365 $ 35,574 $ 49,913 $ 41,449 $ 67,635
Real estate acquired 3,405 23,910 15,971 31,531 31,232
Valuation adjustment write-downs (4,260 ) (350 ) (15,265 ) (5,090 ) (30,702 )
Proceeds from sales of properties (4,140 ) (4,223 ) (5,189 ) (17,573 ) (17,279 )
Gain (loss) on sales, net (533 ) (546 ) (673 ) (1,481 ) (7,549 )
Capital improvements           176     1     1,596  
 
OREO at end of period $ 48,837   $ 54,365   $ 44,933   $ 48,837   $ 44,933  

 
 
 

PORTER BANCORP, INC.

Unaudited Financial Information

(in thousands, except share and per share data)

 
  As of   As of   As of   As of
9/30/12 6/30/12 12/31/11 9/30/11

 

 

 

Assets
Loans $ 952,021 $ 1,041,292 $ 1,136,717 $ 1,206,341
Loan loss reserve   (54,019 )   (51,594 )   (52,579 )   (39,492 )

 

 

 

1
Net loans 898,002 989,698 1,084,138 1,166,849
Securities available for sale 198,148 194,091 158,833 158,813
Federal funds sold & interest bearing deposits 69,928 30,762 92,034 93,062
Cash and due from financial institutions 11,854 5,599 13,928 27,319
Premises and equipment 20,955 21,223 21,541 21,791
Other real estate owned 48,837 54,365 41,449 44,933
Deferred tax assets 24,005
Accrued interest receivable and other assets   38,317     39,114     43,501     41,251  

 

 

 

 

Total Assets $ 1,286,041   $ 1,334,852   $ 1,455,424   $ 1,578,023  

 

 

 

 

 
Liabilities and Equity
Certificates of deposit $ 882,303 $ 909,504 $ 1,024,333 $ 1,075,226
Interest checking 80,524 82,208 87,653 77,229
Money market 63,594 60,704 64,302 79,790
Savings   39,703     39,509     36,357     36,508  

 

 

 

 

Total interest bearing deposits 1,066,124 1,091,925 1,212,645 1,268,753
Demand deposits   111,403     112,797     111,118     104,694  

 

 

 

 

Total deposits 1,177,527 1,204,722 1,323,763 1,373,447
Federal funds purchased & repurchase agreements 2,403 2,501 1,738 11,328
FHLB advances 5,960 6,398 7,116 13,155
Junior subordinated debentures 32,200 32,200 32,650 32,875
Accrued interest payable and other liabilities   12,967     7,526     7,628     8,000  

 

 

 

 

Total liabilities 1,231,057 1,253,347 1,372,895 1,438,805
Stockholders' equity   54,984     81,505     82,529     139,218  

 

 

 

 

Total Liabilities and Stockholders' Equity $ 1,286,041   $ 1,334,852   $ 1,455,424   $ 1,578,023  

 

 

 

 

 
Ending shares outstanding 12,007,127 11,934,872 11,824,472 11,830,581
Book value per common share $ 1.39 $ 3.62 $ 3.74 $ 8.53
Tangible book value per common share 1.22 3.44 3.54 8.32
 
Asset Quality Data
Loan 90 days or more past due still on accrual $ 1,486 $ 88 $ 1,350 $ 655
Non-accrual loans   88,632     81,653     92,020     59,132  

 

 

 

 

Total non-performing loans 90,118 81,741 93,370 59,787
Real estate acquired through foreclosures 48,837 54,365 41,449 44,933
Other repossessed assets   5     5     5     19  

 

 

 

 

Total non-performing assets $ 138,960   $ 136,111   $ 134,824   $ 104,739  

 

 

 

 

Non-performing loans to total loans 9.47 % 7.85 % 8.22 % 4.96 %
Non-performing assets to total assets 10.81 10.20 9.26 6.64
Allowance for loan losses to non-performing loans 59.94 63.12 56.31 66.05
Allowance for loan losses to total loans 5.68 4.96 4.63 3.27
 
Risk-based Capital Ratios
Tier 1 leverage ratio 5.00 % 7.56 % 6.53 % 9.72 %
Tier 1 risk-based capital ratio 7.03 9.95 9.23 13.13
Total risk-based capital ratio 10.01 11.94 11.22 15.07
 
FTE employees 291 300 291 298

Porter Bancorp, Inc.
Maria L. Bouvette, Chairman and CEO, 502-499-4800
or
John T. Taylor, President, 502-499-4800


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