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 2014.
The Company reported a net loss attributable to common shareholders of $672,000, or ($0.06) per diluted share, for the second quarter of 2014 compared with a net loss of $1.7 million, or ($0.14) per diluted share, for the second quarter of 2013. Net loss attributable to common shareholders for the six months ended June 30, 2014, was $1.6 million, or ($0.14) per diluted common share, compared with net loss attributable to common shareholders of $2.2 million, or ($0.19) per diluted share, for the six months ended June 30, 2013.
Our primary initiatives for 2014 are to continue reducing non-performing assets, restore capital, and return to sustainable profitability while continuing to serve our customers and develop new quality financial relationships.
Second Quarter 2014 Financial Performance Highlights
- Net Interest Income – Net interest income increased to $7.6 million for the second quarter of 2014 compared with $7.3 million in the first quarter of 2014 and decreased from $8.4 million in the second quarter of 2013 as average loans declined to $677.6 million for the second quarter of 2014 compared with $698.2 million in the first quarter of 2014 and $806.9 million in the second quarter of 2013. Net interest margin increased to 3.13% in the second quarter of 2014, compared with 2.96% in the first quarter of 2014, and declined from 3.24% in the second quarter of 2013. While earning assets have decreased and interest expense has remained relatively flat, net interest margin was positively impacted in the second quarter by the collection of previously charged-off accrued uncollected interest and late charges of approximately $240,000 along with the full unpaid principal balance on three nonaccrual loans.
- Provision for Loan Losses – No provision for loan losses expense was recorded for the second or first quarters of 2014, or in the second quarter of 2013 due to the downsizing of the loan portfolio, declining historical loss rates, and a reduction in loans migrating downward in risk grade classification. The allowance for loan losses for loans evaluated collectively for impairment was 3.95% at June 30, 2014, compared with 4.10% at March 31, 2014, and 4.56% at June 30, 2013.
- 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 $107.3 million, or 10.20% of total assets at June 30, 2014, compared with $123.3 million, or 11.59% of total assets, at March 31, 2014, and $159.3 million, or 14.86% of total assets, at June 30, 2013.
Non-performing loans decreased to $44.4 million, or 6.90% of total loans, at June 30, 2014, compared with $77.3 million, or 11.33% of total loans, at March 31, 2014. The decline was primarily driven by $18.5 million of nonaccrual loans migrating to OREO, $12.2 million in principal payments received on nonaccrual loans, and $2.9 million of charge-offs.
Non-performing loans and OREO remain at elevated levels and continue to negatively impact financial performance.
| June 30, 2014 | March 31, 2014 | December 31, 2013 | September 30, 2013 | June 30, 2013 | ||||||||||||||
| (in thousands) | ||||||||||||||||||
| Past due loans: | ||||||||||||||||||
| 30 – 59 days | $ | 3,057 | $ | 5,667 | $ | 10,696 | $ | 10,018 | $ | 8,600 | ||||||||
| 60 – 89 days | 991 | 1,232 | 775 | 7,582 | 2,979 | |||||||||||||
| 90 days or more | — | — | 232 | — | 71 | |||||||||||||
| Nonaccrual loans | 44,375 | 77,344 | 101,767 | 106,922 | 112,185 | |||||||||||||
Total past due and nonaccrual loans | $ | 48,423 | $ | 84,243 | $ | 113,470 | $ | 124,522 | $ | 123,835 | ||||||||
Loans past due 90 days or more | $ | — | $ | — | $ | 232 | $ | — | $ | 71 | ||||||||
| Nonaccrual loans | 44,375 | 77,344 | 101,767 | 106,922 | 112,185 | |||||||||||||
| OREO | 62,935 | 45,918 | 30,892 | 41,857 | 47,030 | |||||||||||||
Total non-performing assets | $ | 107,310 | $ | 123,262 | $ | 132,891 | $ | 148,779 | $ | 159,286 | ||||||||
In addition to nonaccrual loans and OREO, loans classified as Troubled Debt Restructures (TDRs) and on accrual totaled $32.4 million at June 30, 2014, compared to $41.8 million at March 31, 2014 and $54.9 million at June 30, 2013.
OREO at June 30, 2014 increased to $62.9 million, compared with $45.9 million at March 31, 2014, and $47.0 million at June 30, 2013. The Company acquired $19.6 million in OREO and sold $2.2 million in OREO during the second quarter of 2014. Fair value write-downs arising from new appraisals or lower marketing prices totaled $400,000 in the second quarter of 2014, compared with $250,000 in the first quarter of 2014 and $977,000 in the second quarter of 2013.
- Non-interest Expense – Non-interest expense increased $442,000 to $8.9 million for the second quarter of 2014, compared with $8.5 million for the first quarter of 2014, and decreased $2.9 million compared with $11.8 million for the second quarter of 2013. The increase from the first quarter of 2014 was due to increases in salary and employee benefit expenses, OREO expenses, and professional fees. The reduction in non-interest expense from the second quarter of 2013 was attributable primarily to lower loan collection expenses and lower OREO expenses.
- Income Tax Benefit – The calculation for the income tax provision or benefit generally does not consider the tax effects of changes in other comprehensive income, or OCI, which is a component of stockholders’ equity on the balance sheet. However, an exception is provided in certain circumstances, such as when there is a full valuation allowance against net deferred tax assets, there is a loss from continuing operations and income in other components of the financial statements. In such a case, pre-tax income from other categories, such as changes in OCI, must be considered in determining a tax benefit to be allocated to the loss from continuing operations. Our June 30, 2014 tax benefit is entirely due to gains in other comprehensive income that are presented in current operations in accordance with applicable accounting standards.
- Capital – At June 30, 2014, PBI Bank’s Tier 1 leverage ratio was 6.51% compared with 6.36% at March 31, 2014, and its Total risk-based capital ratio was 11.79% at June 30, 2014 compared with 11.50% at March 31, 2014, which are below the minimums of 9.0% and 12.0% required by the Bank’s Consent Order. At June 30, 2014, Porter Bancorp’s leverage ratio was 4.89% compared with 4.87% at March 31, 2014, and its Total risk-based capital ratio was 11.07%, compared with 10.93% at March 31, 2014.
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 the 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 second quarter ending June 30, 2014 follows.
PORTER BANCORP, INC. | ||||||||||||||||||||
| Three | Three | Three | Six | Six | ||||||||||||||||
| Months | Months | Months | Months | Months | ||||||||||||||||
| Ended | Ended | Ended | Ended | Ended | ||||||||||||||||
| 6/30/14 | 3/31/14 | 6/30/13 | 6/30/14 | 6/30/13 | ||||||||||||||||
| Income Statement Data | ||||||||||||||||||||
| Interest income | $ | 10,166 | $ | 9,897 | $ | 11,168 | $ | 20,063 | $ | 22,426 | ||||||||||
| Interest expense | 2,552 | 2,597 | 2,816 | 5,149 | 5,776 | |||||||||||||||
| Net interest income | 7,614 | 7,300 | 8,352 | 14,914 | 16,650 | |||||||||||||||
| Provision for loan losses | — | — | — | — | 450 | |||||||||||||||
| Net interest income after provision | 7,614 | 7,300 | 8,352 | 14,914 | 16,200 | |||||||||||||||
| Service charges on deposit accounts | 487 | 468 | 506 | 955 | 999 | |||||||||||||||
| Income from fiduciary activities | — | — | — | — | 517 | |||||||||||||||
| Bank card interchange fees | 205 | 161 | 196 | 366 | 368 | |||||||||||||||
| Other real estate owned income | 18 | 7 | 230 | 25 | 342 | |||||||||||||||
| Gains (losses) on sales of securities, net | 2 | 44 | 703 | 46 | 703 | |||||||||||||||
| Income from bank owned life insurance | 62 | 76 | 305 | 138 | 384 | |||||||||||||||
| Other | 175 | 159 | 208 | 334 | 482 | |||||||||||||||
| Non-interest income | 949 | 915 | 2,148 | 1,864 | 3,795 | |||||||||||||||
| Salaries & employee benefits | 3,949 | 3,741 | 3,999 | 7,690 | 8,138 | |||||||||||||||
| Occupancy and equipment | 896 | 892 | 913 | 1,788 | 1,844 | |||||||||||||||
| Other real estate owned expense | 774 | 662 | 1,657 | 1,436 | 2,448 | |||||||||||||||
| FDIC insurance | 571 | 540 | 650 | 1,111 | 1,289 | |||||||||||||||
| Franchise tax | 405 | 425 | 537 | 830 | 1,074 | |||||||||||||||
| Loan collection expense | 389 | 539 | 2,407 | 928 | 3,442 | |||||||||||||||
| Professional fees | 764 | 558 | 499 | 1,322 | 905 | |||||||||||||||
| Communications expense | 165 | 235 | 179 | 400 | 354 | |||||||||||||||
| Postage and delivery | 94 | 110 | 102 | 204 | 215 | |||||||||||||||
| Insurance expense | 153 | 149 | 160 | 302 | 311 | |||||||||||||||
| Other | 784 | 651 | 706 | 1,435 | 1,353 | |||||||||||||||
| Non-interest expense | 8,944 | 8,502 | 11,809 | 17,446 | 21,373 | |||||||||||||||
| Income (loss) before income taxes | (381 | ) | (287 | ) | (1,309 | ) | (668 | ) | (1,378 | ) | ||||||||||
| Income tax expense (benefit) | (424 | ) | — | — | (424 | ) | — | |||||||||||||
| Net income (loss) | 43 | (287 | ) | (1,309 | ) | (244 | ) | (1,378 | ) | |||||||||||
| Less: | ||||||||||||||||||||
| Dividends on preferred stock | 789 | 786 | 437 | 1,574 | 875 | |||||||||||||||
| Accretion on preferred stock | — | — | 45 | — | 90 | |||||||||||||||
| Earnings allocated to participating securities | (74 | ) | (97 | ) | (110 | ) | (173 | ) | (131 | ) | ||||||||||
| Net income (loss) attributable to common | $ | (672 | ) | $ | (976 | ) | $ | (1,681 | ) | $ | (1,645 | ) | $ | (2,212 | ) | |||||
| Weighted average shares – Basic | 11,981,121 | 12,021,313 | 11,761,788 | 11,992,925 | 11,801,663 | |||||||||||||||
| Weighted average shares – Diluted | 11,981,121 | 12,021,313 | 11,761,788 | 11,992,925 | 11,801,663 | |||||||||||||||
| Basic earnings (loss) per common share | $ | (0.06 | ) | $ | (0.08 | ) | $ | (0.14 | ) | $ | (0.14 | ) | $ | (0.19 | ) | |||||
| Diluted earnings (loss) per common share | $ | (0.06 | ) | $ | (0.08 | ) | $ | (0.14 | ) | $ | (0.14 | ) | $ | (0.19 | ) | |||||
| Cash dividends declared per common share | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | ||||||||||
PORTER BANCORP, INC. | ||||||||||||||||||||
| Three | Three | Three | Six | Six | ||||||||||||||||
| Months | Months | Months | Months | Months | ||||||||||||||||
| Ended | Ended | Ended | Ended | Ended | ||||||||||||||||
| 6/30/14 | 3/31/14 | 6/30/13 | 6/30/14 | 6/30/13 | ||||||||||||||||
| Average Balance Sheet Data | ||||||||||||||||||||
| Assets | $ | 1,056,888 | $ | 1,073,586 | $ | 1,104,807 | $ | 1,065,191 | $ | 1,128,182 | ||||||||||
| Loans | 677,643 | 698,184 | 806,941 | 687,857 | 839,542 | |||||||||||||||
| Earning assets | 991,416 | 1,019,173 | 1,050,515 | 1,005,218 | 1,080,824 | |||||||||||||||
| Deposits | 966,164 | 984,169 | 1,008,102 | 975,117 | 1,030,867 | |||||||||||||||
| Long-term debt and advances | 35,372 | 35,233 | 36,652 | 35,303 | 36,909 | |||||||||||||||
| Interest bearing liabilities | 893,921 | 911,186 | 941,059 | 902,506 | 962,153 | |||||||||||||||
| Stockholders’ equity | 37,690 | 36,992 | 46,904 | 37,343 | 47,324 | |||||||||||||||
| Performance Ratios | ||||||||||||||||||||
| Return on average assets | 0.02 | % | (0.11 | )% | (0.48 | )% | (0.05 | )% | (0.25 | )% | ||||||||||
| Return on average equity | 0.46 | (3.15 | ) | (11.19 | ) | (1.32 | ) | (5.87 | ) | |||||||||||
| Yield on average earning assets (tax equivalent) | 4.16 | 3.99 | 4.31 | 4.08 | 4.23 | |||||||||||||||
| Cost of interest bearing liabilities | 1.15 | 1.16 | 1.20 | 1.15 | 1.21 | |||||||||||||||
| Net interest margin (tax equivalent) | 3.13 | 2.96 | 3.24 | 3.04 | 3.15 | |||||||||||||||
| Efficiency ratio | 104.47 | 104.05 | 120.54 | 104.27 | 108.26 | |||||||||||||||
| Loan Charge-off Data | ||||||||||||||||||||
| Loans charged-off | $ | (3,130 | ) | $ | (3,082 | ) | $ | (3,404 | ) | $ | (6,212 | ) | $ | (21,366 | ) | |||||
| Recoveries | 1,741 | 373 | 1,124 | 2,114 | 1,795 | |||||||||||||||
| Net charge-offs | $ | (1,389 | ) | $ | (2,709 | ) | $ | (2,280 | ) | $ | (4,098 | ) | $ | (19,571 | ) | |||||
| Nonaccrual Loan Activity | ||||||||||||||||||||
| Nonaccrual loans at beginning of period | $ | 77,344 | $ | 101,767 | $ | 120,943 | $ | 101,767 | $ | 94,517 | ||||||||||
| Net principal pay-downs | (12,195 | ) | (10,245 | ) | (8,118 | ) | (22,440 | ) | (12,223 | ) | ||||||||||
| Charge-offs | (2,932 | ) | (2,472 | ) | (3,256 | ) | (5,404 | ) | (20,728 | ) | ||||||||||
| Loans foreclosed and transferred to OREO | (18,524 | ) | (16,895 | ) | (11,875 | ) | (35,419 | ) | (15,523 | ) | ||||||||||
| Loans returned to accrual status | (2,362 | ) | (870 | ) | (421 | ) | (3,232 | ) | (421 | ) | ||||||||||
| Loans placed on nonaccrual during the period | 3,044 | 6,059 | 14,912 | 9,103 | 66,563 | |||||||||||||||
| Nonaccrual loans at end of period | $ | 44,375 | $ | 77,344 | $ | 112,185 | $ | 44,375 | $ | 112,185 | ||||||||||
| Troubled Debt Restructurings (TDRs) | ||||||||||||||||||||
| Accruing | $ | 32,389 | $ | 41,813 | $ | 54,927 | $ | 32,389 | $ | 54,927 | ||||||||||
| Nonaccrual | 18,500 | 30,640 | 46,510 | 18,500 | 46,510 | |||||||||||||||
| Total | $ | 50,889 | $ | 72,453 | $ | 101,437 | $ | 50,889 | $ | 101,437 | ||||||||||
| Other Real Estate Owned (OREO) Activity (Net of Allowance) | ||||||||||||||||||||
| OREO at beginning of period | $ | 45,918 | $ | 30,892 | $ | 44,192 | $ | 30,892 | $ | 43,671 | ||||||||||
| Real estate acquired | 19,569 | 17,351 | 11,875 | 36,920 | 15,555 | |||||||||||||||
| Valuation adjustment write-downs | (400 | ) | (250 | ) | (977 | ) | (650 | ) | (1,284 | ) | ||||||||||
| Proceeds from sales of properties | (2,206 | ) | (2,075 | ) | (7,898 | ) | (4,281 | ) | (10,553 | ) | ||||||||||
| Gain (loss) on sales, net | 54 | — | (162 | ) | 54 | (359 | ) | |||||||||||||
| OREO at end of period | $ | 62,935 | $ | 45,918 | $ | 47,030 | $ | 62,935 | $ | 47,030 | ||||||||||
PORTER BANCORP, INC. | ||||||||||||||||
| As of | As of | As of | As of | |||||||||||||
| 6/30/14 | 3/31/14 | 12/31/13 | 6/30/13 | |||||||||||||
| Assets | ||||||||||||||||
| Loans | $ | 643,030 | $ | 682,591 | $ | 709,326 | $ | 774,785 | ||||||||
| Loan loss reserve | (24,026 | ) | (25,415 | ) | (28,124 | ) | (37,559 | ) | ||||||||
| Net loans | 619,004 | 657,176 | 681,202 | 737,226 | ||||||||||||
| Mortgage loans held for sale | 280 | — | 149 | 133 | ||||||||||||
| Securities held to maturity | 43,488 | 43,550 | 43,612 | — | ||||||||||||
| Securities available for sale | 180,723 | 166,442 | 163,344 | 176,942 | ||||||||||||
| Federal funds sold & interest bearing deposits | 95,353 | 99,286 | 103,669 | 56,512 | ||||||||||||
| Cash and due from financial institutions | 6,913 | 7,449 | 7,465 | 7,754 | ||||||||||||
| Premises and equipment | 19,788 | 19,821 | 19,983 | 20,368 | ||||||||||||
| FHLB Stock | 7,323 | 7,323 | 10,072 | 10,072 | ||||||||||||
| Other real estate owned | 62,935 | 45,918 | 30,892 | 47,030 | ||||||||||||
| Accrued interest receivable and other assets | 16,220 | 16,565 | 15,733 | 16,094 | ||||||||||||
| Total Assets | $ | 1,052,027 | $ | 1,063,530 | $ | 1,076,121 | $ | 1,072,131 | ||||||||
| Liabilities and Equity | ||||||||||||||||
| Certificates of deposit | $ | 631,110 | $ | 656,475 | $ | 679,952 | $ | 690,557 | ||||||||
| Interest checking | 76,625 | 79,689 | 84,626 | 78,218 | ||||||||||||
| Money market | 95,946 | 89,678 | 79,349 | 65,620 | ||||||||||||
| Savings | 37,178 | 38,524 | 36,292 | 40,121 | ||||||||||||
| Total interest bearing deposits | 840,859 | 864,366 | 880,219 | 874,516 | ||||||||||||
| Demand deposits | 109,956 | 110,507 | 107,486 | 106,320 | ||||||||||||
| Total deposits | 950,815 | 974,873 | 987,705 | 980,836 | ||||||||||||
| Federal funds purchased & repurchase agreements | 2,451 | 2,240 | 2,470 | 3,292 | ||||||||||||
| FHLB advances | 14,134 | 4,345 | 4,492 | 5,016 | ||||||||||||
| Junior subordinated debentures | 30,400 | 30,625 | 30,850 | 31,525 | ||||||||||||
| Accrued interest payable and other liabilities | 16,453 | 15,110 | 14,673 | 12,710 | ||||||||||||
| Total liabilities | 1,014,253 | 1,027,193 | 1,040,190 | 1,033,379 | ||||||||||||
| Stockholders’ equity | 37,774 | 36,337 | 35,931 | 38,752 | ||||||||||||
| Total Liabilities and Stockholders’ Equity | $ | 1,052,027 | $ | 1,063,530 | $ | 1,076,121 | $ | 1,072,131 | ||||||||
| Ending shares outstanding | 13,104,853 | 12,894,741 | 12,840,999 | 12,322,207 | ||||||||||||
| Book value per common share | $ | (0.04 | ) | $ | (0.15 | ) | $ | (0.18 | ) | $ | 0.04 | |||||
| Tangible book value per common share | (0.13 | ) | (0.25 | ) | (0.29 | ) | (0.10 | ) | ||||||||
| Asset Quality Data | ||||||||||||||||
| Loan 90 days or more past due still on accrual | $ | — | $ | — | $ | 232 | $ | 71 | ||||||||
| Nonaccrual loans | 44,375 | 77,344 | 101,767 | 112,185 | ||||||||||||
| Total non-performing loans | 44,375 | 77,344 | 101,999 | 112,256 | ||||||||||||
| Real estate acquired through foreclosures | 62,935 | 45,918 | 30,892 | 47,030 | ||||||||||||
| Other repossessed assets | — | — | — | — | ||||||||||||
| Total non-performing assets | $ | 107,310 | $ | 123,262 | $ | 132,891 | $ | 159,286 | ||||||||
| Non-performing loans to total loans | 6.90 | % | 11.33 | % | 14.38 | % | 14.49 | % | ||||||||
| Non-performing assets to total assets | 10.20 | 11.59 | 12.35 | 14.86 | ||||||||||||
| Allowance for loan losses to non-performing loans | 54.14 | 32.86 | 27.57 | 33.46 | ||||||||||||
| Allowance as % of loans evaluated individually | 2.20 | 2.01 | 2.32 | 5.82 | ||||||||||||
| Allowance as % of loans evaluated collectively | 3.95 | 4.10 | 4.41 | 4.56 | ||||||||||||
| Allowance for loan losses to total loans | 3.74 | 3.72 | 3.96 | 4.85 | ||||||||||||
| Risk-based Capital Ratios | ||||||||||||||||
| Tier I leverage ratio | 4.89 | % | 4.87 | % | 4.95 | % | 4.91 | % | ||||||||
| Tier I risk-based capital ratio | 7.31 | 7.22 | 7.34 | 6.88 | ||||||||||||
| Total risk-based capital ratio | 11.07 | 10.93 | 11.03 | 10.46 | ||||||||||||
| FTE employees | 275 | 263 | 260 | 264 | ||||||||||||
Contacts:
John T. Taylor, President, 502-499-4800
