Porter Bancorp, Inc. (NASDAQ: PBIB), parent company of PBI Bank, with 18 full-service banking offices in Kentucky, today reported unaudited results for the second quarter of 2013.
The Company reported a net loss available to common shareholders of $1.7 million, or ($0.14) per diluted share, for the second quarter of 2013 compared with a net loss of $319,000, or ($0.03) per diluted share, for the second quarter of 2012. Net loss available to common shareholders for the six months ended June 30, 2013, was $2.2 million, or ($0.19) per diluted common share, compared with net income available to common shareholders of $661,000, or $0.06 per diluted share, for the six months ended June 30, 2012.
The second quarter 2013 loss of $1.7 million represents a decline of $1.4 million compared with the $319,000 loss reported in the second quarter of 2012. This was primarily due to decreased non-interest income and increased non-interest expense, compared with the second quarter of 2012, countered by a $4.0 million reduction in the provision for loan losses. Additionally, our net interest margin improved to 3.24% for the second quarter of 2013 compared to 3.07% in the first quarter of 2013 and declined from 3.35% for the second quarter of 2012.
The $2.2 million loss for the six months ended June 30, 2013 represents a decline of $2.9 million compared to the six months ended June 30, 2012. This was primarily due to decreased net interest income driven by the reduction of the size of our loan portfolio, a decline in our net interest margin, a reduction of $2.8 million in gains on sales of investment securities, and increased non-interest expense. This was offset by a decrease in the provision for loan losses expense from $7.8 million for the six months ended June 30, 2012, to $450,000 for the six months ended June 30, 2013.
No provision for loan losses was recorded in the second quarter of 2013, which is a significant decrease compared to $4.0 million in the second quarter of 2012. The decrease was attributable to the $52.3 million reduction in loan portfolio size, lower net loan charge-offs during the quarter, and a reduction in loans migrating downward in risk grade classification.
We have successfully reduced the size of our balance sheet in accordance with our capital plan. Average assets were $1.1 billion in the second quarter of 2013 compared to $1.4 billion in the second quarter of 2012. This 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. The reduction of our balance sheet was the primary driver for net interest income declining by $2.4 million to $8.4 million in the second quarter of 2013 compared to $10.8 million in the second quarter of 2012. Additionally, our net interest margin declined to 3.24% in the second quarter of 2013 compared to 3.35% in the second quarter of 2012, but improved from 3.07% in the first quarter of 2013.
Financial performance continues to be negatively impacted by the Bank’s high level of non-performing loans and other real estate owned. Non-performing assets, which include loans past due 90 days and still accruing, loans on nonaccrual, and other real estate owned, decreased in dollars to $159.3 million, or 14.86% of total assets at June 30, 2013, compared with $165.1 million, or 14.58% of total assets, at March 31, 2013.
Non-performing loans decreased to $112.3 million, or 14.49% of total loans, at June 30, 2013, compared with $120.9 million, or 14.62% of total loans, at March 31, 2013. In addition, net charge-offs decreased from $17.3 million in the first quarter of 2013 to $2.3 million in the second quarter of 2013.
Total past due and nonaccrual loans decreased approximately $8.1 million to $123.8 million at June 30, 2013 from $132.0 million at March 31, 2013.
| June 30, 2013 | March 31, 2013 | Increase/ (Decrease) | ||||||||||
| (in thousands) | ||||||||||||
| Past Due Loans: | ||||||||||||
| 30 – 59 Days | $ | 8,600 | $ | 8,052 | $ | 548 | ||||||
| 60 – 89 Days | 2,979 | 2,960 | 19 | |||||||||
| 90 Days and Over | 71 | — | 71 | |||||||||
| Nonaccrual Loans | 112,185 | 120,943 | (8,758 | ) | ||||||||
| Total Past Due and Nonaccrual Loans | $ | 123,835 | $ | 131,955 | $ | (8,120 | ) | |||||
Foreclosed properties at June 30, 2013 increased to $47.0 million compared with $44.2 million at March 31, 2013, but decreased from $54.4 million at June 30, 2012. The Company acquired $11.9 million in other real estate owned and sold $8.1 million in other real estate owned during the second quarter of 2013. Fair value write-downs arising from new appraisals or lower marketing prices totaled $977,000 in the second quarter of 2013 compared to $350,000 in the second quarter of 2012 and $307,000 in the first quarter of 2013.
At June 30, 2013, PBI Bank’s Tier 1 leverage ratio was 6.08% compared to 5.95% at March 31, 2013 and its Total risk-based capital ratio was 10.60% at June 30, 2013 compared to 10.29% at March 31, 2013, which are below the minimums of 9.0% and 12.0% required by the Bank’s Consent Order. At June 30, 2013, Porter Bancorp’s leverage ratio was 4.91%, compared with 4.91% at March 31, 2013 and 4.50% at December 31, 2012, and its Total risk-based capital ratio was 10.46% compared with 10.16% at March 31, 2013, and 9.81% at December 31, 2012.
On July 16, 2013, a jury in Louisville, Kentucky returned a verdict against PBI Bank awarding the plaintiffs compensatory damages of $1.5 million and punitive damages of $5.5 million. The verdict is subject to post-trial motions and has not yet been entered as a judgment. After conferring with our legal advisors, we believe the findings and damages are excessive and contrary to the law, and that we have meritorious grounds to seek reconsideration of the verdict and to appeal. The Bank intends to file motions to reduce or overturn the award and otherwise for reconsideration of the case. In accordance with U.S. generally accepted accounting principles (GAAP), we record contingent liabilities resulting from claims against us when a loss is assessed to be probable and the amount of the loss is reasonably estimable. As such, we accrued $1.5 million related to this matter during the quarter ended 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, Sandler O’Neill & Partners, LP is acting as our financial advisor and assisting our Board in this evaluation. Asset quality remediation, capital restoration, and lowering the risk profile of the Company continue to be major objectives during 2013 as well as delivering quality financial products and services to our customers throughout the Commonwealth of Kentucky.
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 second quarter ending June 30, 2013 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 | ||||||||||||
| 6/30/13 | 3/31/13 | 6/30/12 | 6/30/13 | 6/30/12 | ||||||||||||
| Income Statement Data | ||||||||||||||||
| Interest income | $ | 11,168 | $ | 11,258 | $ | 14,812 | $ | 22,426 | $ | 30,567 | ||||||
| Interest expense | 2,816 | 2,960 | 4,017 | 5,776 | 8,318 | |||||||||||
| Net interest income | 8,352 | 8,298 | 10,795 | 16,650 | 22,249 | |||||||||||
| Provision for loan losses | — | 450 | 4,000 | 450 | 7,750 | |||||||||||
| Net interest income after provision | 8,352 | 7,848 | 6,795 | 16,200 | 14,499 | |||||||||||
| Service charges on deposit accounts | 506 | 493 | 556 | 999 | 1,110 | |||||||||||
| Income from fiduciary activities | — | 517 | 291 | 517 | 542 | |||||||||||
| Bank card interchange fees | 196 | 172 | 199 | 368 | 376 | |||||||||||
| Other real estate owned income | 230 | 112 | 24 | 342 | 62 | |||||||||||
| Gains (losses) on sales of securities, net | 703 | — | 1,511 | 703 | 3,530 | |||||||||||
| Income from bank owned life insurance | 305 | 79 | 79 | 384 | 158 | |||||||||||
| Other | 208 | 274 | 358 | 482 | 685 | |||||||||||
| Non-interest income | 2,148 | 1,647 | 3,018 | 3,795 | 6,463 | |||||||||||
| Salaries & employee benefits | 3,999 | 4,139 | 3,982 | 8,138 | 8,294 | |||||||||||
| Occupancy and equipment | 913 | 931 | 969 | 1,844 | 1,855 | |||||||||||
| Other real estate owned expense | 1,657 | 791 | 1,205 | 2,448 | 2,462 | |||||||||||
| FDIC insurance | 650 | 639 | 832 | 1,289 | 1,705 | |||||||||||
| Franchise tax | 537 | 537 | 592 | 1,074 | 1,184 | |||||||||||
| Loan collection expense | 2,407 | 1,035 | 586 | 3,442 | 946 | |||||||||||
| Professional fees | 499 | 406 | 567 | 905 | 923 | |||||||||||
| Communications expense | 179 | 175 | 168 | 354 | 348 | |||||||||||
| Postage and delivery | 102 | 113 | 109 | 215 | 231 | |||||||||||
| Insurance expense | 160 | 151 | 104 | 311 | 200 | |||||||||||
| Other | 706 | 647 | 548 | 1,353 | 1,161 | |||||||||||
| Non-interest expense | 11,809 | 9,564 | 9,662 | 21,373 | 19,309 | |||||||||||
| Income (loss) before income taxes | (1,309 | ) | (69 | ) | 151 | (1,378 | ) | 1,653 | ||||||||
| Income tax expense (benefit) | — | — | — | — | — | |||||||||||
| Net income (loss) | (1,309 | ) | (69 | ) | 151 | (1,378 | ) | 1,653 | ||||||||
| Less: | ||||||||||||||||
| Dividends on preferred stock | 437 | 438 | 438 | 875 | 875 | |||||||||||
| Accretion on preferred stock | 45 | 45 | 45 | 90 | 90 | |||||||||||
| Earnings (loss) allocated to participating securities | (110 | ) | (28 | ) | (13 | ) | (131 | ) | 27 | |||||||
| Net income (loss) available to common | $ | (1,681 | ) | $ | (524 | ) | $ | (319 | ) | $ | (2,212 | ) | $ | 661 | ||
| Weighted average shares – Basic | 11,761,788 | 11,847,907 | 11,733,156 | 11,801,663 | 11,701,655 | |||||||||||
| Weighted average shares – Diluted | 11,761,788 | 11,847,907 | 11,733,156 | 11,801,663 | 11,701,655 | |||||||||||
| Basic earnings (loss) per common share | $ | (0.14 | ) | $ | (0.04 | ) | $ | (0.03 | ) | $ | (0.19 | ) | $ | 0.06 | ||
| Diluted earnings (loss) per common share | $ | (0.14 | ) | $ | (0.04 | ) | $ | (0.03 | ) | $ | (0.19 | ) | $ | 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 | ||||||||||||
| 6/30/13 | 3/31/13 | 6/30/12 | 6/30/13 | 6/30/12 | ||||||||||||
| Average Balance Sheet Data | ||||||||||||||||
| Assets | $ | 1,104,807 | $ | 1,151,816 | $ | 1,363,340 | $ | 1,128,182 | $ | 1,387,973 | ||||||
| Loans | 806,941 | 872,505 | 1,078,497 | 839,542 | 1,098,839 | |||||||||||
| Earning assets | 1,050,515 | 1,111,469 | 1,307,520 | 1,080,824 | 1,329,199 | |||||||||||
| Deposits | 1,008,102 | 1,053,884 | 1,231,281 | 1,030,867 | 1,255,284 | |||||||||||
| Long-term debt and advances | 36,652 | 37,169 | 38,959 | 36,909 | 39,255 | |||||||||||
| Interest bearing liabilities | 941,059 | 983,481 | 1,159,447 | 962,153 | 1,183,651 | |||||||||||
| Stockholders’ equity | 46,904 | 47,749 | 83,987 | 47,324 | 84,323 | |||||||||||
| Performance Ratios | ||||||||||||||||
| Return on average assets | (0.48) | % | (0.02) | % | 0.04 | % | (0.25) | % | 0.24 | % | ||||||
| Return on average equity | (11.19) | (0.59) | 0.72 | (5.87) | 3.94 | |||||||||||
| Yield on average earning assets (tax equivalent) | 4.31 | 4.15 | 4.59 | 4.23 | 4.66 | |||||||||||
| Cost of interest bearing liabilities | 1.20 | 1.22 | 1.39 | 1.21 | 1.41 | |||||||||||
| Net interest margin (tax equivalent) | 3.24 | 3.07 | 3.35 | 3.15 | 3.40 | |||||||||||
| Efficiency ratio | 120.54 | 96.17 | 78.54 | 108.26 | 76.68 | |||||||||||
| Loan Charge-off Data | ||||||||||||||||
| Loans charged-off | $ | (3,404 | ) | $ | (17,962 | ) | $ | (6,438 | ) | $ | (21,366 | ) | $ | (9,020 | ) | |
| Recoveries | 1,124 | 671 | 79 | 1,795 | 285 | |||||||||||
| Net charge-offs | $ | (2,280 | ) | $ | (17,291 | ) | $ | (6,359 | ) | $ | (19,571 | ) | $ | (8,735 | ) | |
| Nonaccrual Loan Activity | ||||||||||||||||
| Nonaccrual loans at beginning of period | $ | 120,943 | $ | 94,517 | $ | 97,230 | $ | 94,517 | $ | 92,020 | ||||||
| Net principal pay-downs | (8,118 | ) | (4,105 | ) | (4,084 | ) | (12,223 | ) | (9,324 | ) | ||||||
| Charge-offs | (3,256 | ) | (17,472 | ) | (4,902 | ) | (20,728 | ) | (7,214 | ) | ||||||
| Loans foreclosed and transferred to OREO | (11,875 | ) | (3,648 | ) | (15,243 | ) | (15,523 | ) | (19,072 | ) | ||||||
| Loans returned to accrual status | (421 | ) | — | — | (421 | ) | — | |||||||||
| Loans placed on nonaccrual during the period | 14,912 | 51,651 | 8,652 | 66,563 | 25,243 | |||||||||||
| Nonaccrual loans at end of period | $ | 112,185 | $ | 120,943 | $ | 81,653 | $ | 112,185 | $ | 81,653 | ||||||
| Troubled Debt Restructurings (TDRs) | ||||||||||||||||
| Accruing | $ | 54,927 | $ | 55,171 | $ | 85,068 | $ | 54,927 | $ | 85,068 | ||||||
| Nonaccrual | 46,510 | 52,592 | 37,748 | 46,510 | 37,748 | |||||||||||
| Total | $ | 101,437 | $ | 107,763 | $ | 122,816 | $ | 101,437 | $ | 122,816 | ||||||
| Other Real Estate Owned (OREO) Activity (Net of Allowance) | ||||||||||||||||
| OREO at beginning of period | $ | 44,192 | $ | 43,671 | $ | 35,574 | $ | 43,671 | $ | 41,449 | ||||||
| Real estate acquired | 11,875 | 3,680 | 23,910 | 15,555 | 28,126 | |||||||||||
| Valuation adjustment write-downs | (977 | ) | (307 | ) | (350 | ) | (1,284 | ) | (830 | ) | ||||||
| Proceeds from sales of properties | (7,898 | ) | (2,655 | ) | (4,223 | ) | (10,553 | ) | (13,433 | ) | ||||||
| Loss on sales, net | (162 | ) | (197 | ) | (546 | ) | (359 | ) | (948 | ) | ||||||
| Capital improvements | — | — | — | — | 1 | |||||||||||
| OREO at end of period | $ | 47,030 | $ | 44,192 | $ | 54,365 | $ | 47,030 | $ | 54,365 | ||||||
PORTER BANCORP, INC. Unaudited Financial Information (in thousands, except share and per share data) | ||||||||||||
| As of | As of | As of | As of | |||||||||
| 6/30/13 | 3/31/13 | 12/31/12 | 6/30/12 | |||||||||
| Assets | ||||||||||||
| Loans | $ | 774,785 | $ | 827,076 | $ | 899,092 | $ | 1,040,909 | ||||
| Loan loss reserve | (37,559 | ) | (39,839 | ) | (56,680 | ) | (51,594 | ) | ||||
| Net loans | 737,226 | 787,237 | 842,412 | 989,315 | ||||||||
| Mortgage loans held for sale | 133 | — | 507 | 383 | ||||||||
| Securities available for sale | 176,942 | 183,247 | 178,476 | 194,091 | ||||||||
| Federal funds sold & interest bearing deposits | 56,512 | 62,505 | 41,161 | 30,762 | ||||||||
| Cash and due from financial institutions | 7,754 | 8,683 | 8,411 | 5,599 | ||||||||
| Premises and equipment | 20,368 | 20,667 | 20,805 | 21,223 | ||||||||
| Other real estate owned | 47,030 | 44,192 | 43,671 | 54,365 | ||||||||
| Accrued interest receivable and other assets | 26,166 | 26,338 | 27,188 | 39,114 | ||||||||
| Total Assets | $ | 1,072,131 | $ | 1,132,869 | $ | 1,162,631 | $ | 1,334,852 | ||||
| Liabilities and Equity | ||||||||||||
| Certificates of deposit | $ | 690,557 | $ | 739,934 | $ | 760,573 | $ | 909,504 | ||||
| Interest checking | 78,218 | 83,522 | 87,234 | 82,208 | ||||||||
| Money market | 65,620 | 62,111 | 63,715 | 60,704 | ||||||||
| Savings | 40,121 | 41,952 | 39,227 | 39,509 | ||||||||
| Total interest bearing deposits | 874,516 | 927,519 | 950,749 | 1,091,925 | ||||||||
| Demand deposits | 106,320 | 108,841 | 114,310 | 112,797 | ||||||||
| Total deposits | 980,836 | 1,036,360 | 1,065,059 | 1,204,722 | ||||||||
| Federal funds purchased & repurchase agreements | 3,292 | 2,853 | 2,634 | 2,501 | ||||||||
| FHLB advances | 5,016 | 5,324 | 5,604 | 6,398 | ||||||||
| Junior subordinated debentures | 31,525 | 31,525 | 31,975 | 32,200 | ||||||||
| Accrued interest payable and other liabilities | 12,710 | 10,069 | 10,169 | 7,526 | ||||||||
| Total liabilities | 1,033,379 | 1,086,131 | 1,115,441 | 1,253,347 | ||||||||
| Stockholders’ equity | 38,752 | 46,738 | 47,190 | 81,505 | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | 1,072,131 | $ | 1,132,869 | $ | 1,162,631 | $ | 1,334,852 | ||||
| Ending shares outstanding | 12,322,207 | 12,139,975 | 12,002,421 | 11,934,872 | ||||||||
| Book value per common share | $ | 0.04 | $ | 0.70 | $ | 0.74 | $ | 3.62 | ||||
| Tangible book value per common share | (0.10 | ) | 0.55 | 0.58 | 3.44 | |||||||
| Asset Quality Data | ||||||||||||
| Loan 90 days or more past due still on accrual | $ | 71 | $ | — | $ | 86 | $ | 88 | ||||
| Nonaccrual loans | 112,185 | 120,943 | 94,517 | 81,653 | ||||||||
| Total non-performing loans | 112,256 | 120,943 | 94,603 | 81,741 | ||||||||
| Real estate acquired through foreclosures | 47,030 | 44,192 | 43,671 | 54,365 | ||||||||
| Other repossessed assets | — | — | — | 5 | ||||||||
| Total non-performing assets | $ | 159,286 | $ | 165,135 | $ | 138,274 | $ | 136,111 | ||||
| Non-performing loans to total loans | 14.49 | % | 14.62 | % | 10.52 | % | 7.85 | % | ||||
| Non-performing assets to total assets | 14.86 | 14.58 | 11.89 | 10.20 | ||||||||
| Allowance for loan losses to non-performing loans | 33.46 | 32.94 | 59.91 | 63.12 | ||||||||
| Allowance for loan losses to total loans | 4.85 | 4.82 | 6.30 | 4.96 | ||||||||
| Risk-based Capital Ratios | ||||||||||||
| Tier I leverage ratio | 4.91 | % | 4.91 | % | 4.50 | % | 7.56 | % | ||||
| Tier I risk-based capital ratio | 6.88 | 6.77 | 6.46 | 9.95 | ||||||||
| Total risk-based capital ratio | 10.46 | 10.16 | 9.81 | 11.94 | ||||||||
| FTE employees | 264 | 264 | 278 | 300 | ||||||||
Contacts:
John T. Taylor, 502-499-4800
President
