Porter Bancorp, Inc. (NASDAQ: PBIB), parent company of PBI Bank, today reported unaudited results for the fourth quarter of 2015.

The Company reported a net loss attributable to common shareholders for the quarter ended December 31, 2015 of $579,000, or ($0.02) per diluted common share, compared to a net loss attributable to common shareholders of $1.031 million, or ($0.04) per diluted common share, for the three months ended September 30, 2015.

The Company reported a net loss attributable to common shareholders for the year ended December 31, 2015 of $2.9 million, or ($0.12) per diluted common share, compared to net income attributable to common shareholders of $19.4 million, or $1.59 per diluted common share, for the year ended December 31, 2014. In December 2014, the Company completed a non-cash equity exchange transaction with investors in which two series of its outstanding preferred stock having an aggregate book value of approximately $45.7 million and all accrued dividends thereon were cancelled in exchange for newly issued common and preferred securities having a fair value of approximately $9.6 million. The effect of the 2014 preferred stock exchange to common shareholders totaled approximately $36.1 million.

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 fourth quarter of 2015, non-performing assets were reduced by $12.9 million after achieving reductions of $23.7 million in the third quarter of 2015. In total, non-performing assets were reduced $60.2 million, or 64% in 2015.”

Net Interest Income – Net interest income before provision was $7.44 million for the fourth quarter of 2015 compared to $7.48 million in the third quarter of 2015 and $7.47 million in the fourth quarter of 2014. Average loans decreased to $619.5 million for the fourth quarter of 2015 compared with $640.0 million in the third quarter of 2015, and $634.9 million for the fourth quarter of 2014. Yields on average assets decreased to 4.02% for the fourth quarter of 2015, compared to 4.07% for the third quarter of 2015 and 4.06% for the fourth quarter of 2014. Cost of interest bearing liabilities decreased to 0.79% for the fourth quarter of 2015, compared to 0.83% for the third quarter of 2015 and 0.99% for the fourth quarter of 2014. Net interest margin remained steady at 3.32% in the fourth quarter of 2015 compared to 3.33% in the third quarter of 2015 and improved from 3.16% in the fourth quarter of 2014.

Allowance for Loan Losses and Negative Provision for Loan Losses – The allowance for loan losses to total loans was 1.95% at December 31, 2015, compared to 2.27% at September 30, 2015, and 3.10% at December 31, 2014. The allowance for loan losses for loans evaluated collectively for impairment was 1.98% at December 31, 2015, compared with 2.33% at September 30, 2015, and 3.37% at December 31, 2014.

The reduced level of the allowance and the negative provision for loan losses of $2.3 million in the fourth quarter of 2015 and $4.5 million for the full year were primarily driven by declining historical loss rates, improving trends in loan category risk ratings, and management’s assessment of lower risk in the portfolio. Substandard loans decreased by $11.1 million, or 23.3%, over the past quarter and $55.1 million, or 60.2%, for the full year. Nonaccrual loans decreased by $2.9 million, or 17.1%, over the past quarter and $33.1 million, or 70.1%, over the course of 2015. Net loan charge-offs decreased to $2.8 million for 2015 compared to $15.9 million in 2014. The Company had net recoveries of $143,000 for the fourth quarter of 2015 compared to net charge-offs of $411,000 for the third quarter of 2015 and net charge-offs of $5.6 million for the fourth quarter of 2014.

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 considerably to $33.3 million, or 3.51% of total assets at December 31, 2015, compared with $46.2 million, or 4.85% of total assets, at September 30, 2015, and $93.5 million, or 9.19% of total assets, at December 31, 2014.

Non-performing loans decreased to $14.1 million, or 2.28% of total loans, at December 31, 2015, compared with $17.0 million, or 2.72% of total loans, at September 30, 2015, and $47.3 million, or 7.57% of total loans, at December 31, 2014. The decrease from the previous year was primarily driven by $27.6 million in principal payments received on nonaccrual loans, $5.5 million of nonaccrual loans migrating to OREO, and $5.1 million of charge-offs.

OREO at December 31, 2015 decreased to $19.2 million, compared with $29.2 million at September 30, 2015, and $46.2 million at December 31, 2014. The Company acquired $1.1 million in OREO and sold $8.2 million in OREO during the fourth quarter of 2015. Fair value write-downs arising from reductions in listing prices for certain properties and updated appraisals totaled $2.8 million in the fourth quarter of 2015 compared with $4.5 million in the third quarter of 2015 and $3.0 million in the fourth quarter of 2014. Progress continues in the disposition of OREO. Currently, $5.5 million of OREO property is subject to a contract for sale or letter of intent.

The following table details past due loans and non-performing assets as of:

    December 31,

2015

     September 30,

2015

     June 30,

2015

     March 31,

2015

     December 31,

2014

(in thousands)
Past due loans:
30 – 59 days $ 3,133 $ 1,972 $ 1,941 $ 4,370 $ 3,960
60 – 89 days 241 578 650 1,769 980
90 days or more — — 92 18 151
Nonaccrual loans   14,087   16,987   30,215   36,500   47,175

Total past due and nonaccrual loans

$

17,461

$

19,537

$ 32,898 $ 42,657 $ 52,266
 

Loans past due 90 days or more

$

—

$

—

$ 92 $ 18 $ 151
Nonaccrual loans 14,087 16,987 30,215 36,500 47,175
OREO 19,214 29,177 39,545 43,618 46,197
Other repossessed assets   —   —   —   —   —

Total non-performing assets

$

33,301

$

46,164

$ 69,852 $ 80,136 $ 93,523
 

In addition to nonaccrual loans and OREO, loans classified as Troubled Debt Restructures (TDRs) and on accrual totaled $17.4 million at December 31, 2015, compared to $17.7 million at September 30, 2015, and $22.0 million at December 31, 2014.

Non-interest Income - Non-interest income increased $3.6 million to $7.7 million for the year ended December 31, 2015, compared with $4.1 million for the year ended December 31, 2014. The increase in non-interest income was driven primarily by nonrecurring items including $1.8 million in net gains on sales of securities in 2015 compared to $92,000 in 2014, $1.3 million of rental income from other real estate owned in 2015 compared to $256,000 in 2014, and a gain of $883,000 recognized in the extinguishment of $4.0 million of the Company’s junior subordinated debt in the third quarter of 2015.

Non-interest Expense – Non-interest expense decreased $1.4 million to $11.6 million for the fourth quarter of 2015 compared with $13.0 million for the third quarter of 2015, and decreased $283,000 compared with $11.8 million for the fourth quarter of 2014. The decrease from the third quarter of 2015 and fourth quarter of 2014 was due primarily to lower OREO expenses.

OREO expenses increased by $6.5 million in 2015 compared to 2014. This increase was driven primarily by fair value write-downs resulting from declines in the fair value of the real estate based upon the liquidation of certain properties through auctions, reductions in listing prices for certain properties, and updated appraisals. Non-interest expense before OREO expenses totaled $8.1 million, $7.8 million, and $8.0 million, respectively for the fourth quarter 2015, the third quarter 2015, and the fourth quarter 2014.

Professional fees decreased to $572,000 in the fourth quarter 2015 from $620,000 in the third quarter 2015 and $819,000 in the fourth quarter of 2014. On a year over year basis, professional fees increased by $1.2 million to $2.9 million for 2015 compared to $1.7 million in 2014 and were driven primarily by legal fees and litigation expenses.

Capital – At December 31, 2015, PBI Bank’s Tier 1 leverage ratio improved to 6.08% compared with 6.01% at September 30, 2015, and its Total risk-based capital ratio was 10.58% at December 31, 2015, compared with 10.50% at September 30, 2015. Both are below the minimums of 9.0% and 12.0% required by PBI Bank’s consent order. Management and the Board of Directors remain committed to evaluating and implementing appropriate strategies for increasing the Company’s capital in order to meet the requirements of the consent order.

At December 31, 2015, Porter Bancorp’s leverage ratio was 4.74% compared with 4.73% at September 30, 2015, and its Total risk-based capital ratio was 10.46%, compared with 10.40% at September 30, 2015. At December 31, 2015, PBI Bank’s Common equity Tier I risk-based capital ratio was 8.84% compared with 8.73% at September 30, 2015. Porter Bancorp’s Common equity Tier I risk-based capital ratio was 5.09% compared with 5.07% at September 30, 2015.

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 quarter ending December 31, 2015 follows.

 
 
 

PORTER BANCORP, INC.
Unaudited Financial Information
(in thousands, except share and per share data)

 
      Three Months Ended     Years Ended
12/31/15     9/30/15     12/31/14 12/31/15     12/31/14

 

 

 

Income Statement Data
Interest income $ 9,025 $ 9,179 $ 9,636 $ 36,574 $ 39,513
Interest expense   1,585     1,697     2,169     7,023     9,795  

 

 

 

 

Net interest income 7,440 7,482 7,467 29,551 29,718
Provision for loan losses   (2,300 )   (2,200 )   800     (4,500 )   7,100  

 

 

 

 

 

Net interest income after provision 9,740 9,682 6,667 34,051 22,618
 
Service charges on deposits 475 492 498 1,851 1,988
Bank card interchange fees 195 212 190 839 765
Other real estate owned income 237 380 226 1,346 256
Gains (losses) on sales of securities, net 70 — — 1,766 92
Gain on extinguishment of debt — 883 — 883 —
Other   247     243     244     1,010     978  

 

 

 

 

Non-interest income 1,224 2,210 1,158 7,695 4,079
 
Salaries & employee benefits 4,062 3,920 3,927 15,857 15,658
Occupancy and equipment 936 815 852 3,449 3,497
Professional fees 572 620 819 2,885 1,665
FDIC insurance 539 539 590 2,212 2,272
Data processing expense 268 278 288 1,128 1,106
State franchise and deposit tax 265 285 210 1,120 1,445
Other real estate owned expense 3,506 5,131 3,843 12,302 5,839
Loan collection expense 246 321 348 1,141 2,994
Other   1,171     1,059     971     4,865     4,959  

 

 

 

 

Non-interest expense 11,565 12,968 11,848 44,959 39,435
 
Loss before income taxes (601 ) (1,076 ) (4,023 ) (3,213 ) (12,738 )
Income tax expense (benefit)   —     —     (238 )   —     (1,583 )

 

 

 

 

Net loss (601 ) (1,076 ) (3,785 ) (3,213 ) (11,155 )
Less:
Dividends and accretion on preferred stock — — — — 2,362
Effect of exchange of preferred stock to common stock — — (36,104 ) — (36,104 )
Earnings (losses) allocated to participating securities   (22 )   (45 )   7,977     (336 )   3,159  
 
Net income (loss) attributable to common $ (579 ) $ (1,031 ) $ 24,342   $ (2,877 ) $ 19,428  

 

 

 

 

 
Weighted average shares – Basic 25,967,066 24,681,547 12,767,430 23,245,009 12,240,889
Weighted average shares – Diluted 25,967,066 24,681,547 12,767,430 23,245,009 12,240,889
 
Basic earnings (loss) per common share $ (0.02 ) $ (0.04 ) $ 1.91 $ (0.12 ) $ 1.59
Diluted earnings (loss) per common share $ (0.02 ) $ (0.04 ) $ 1.91 $ (0.12 ) $ 1.59
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 Months Ended     Years Ended
12/31/15     9/30/15     12/31/14 12/31/15     12/31/14

 

 

 

Average Balance Sheet Data
Assets $ 954,934 $ 968,471 $ 1,033,327 $ 984,419 $ 1,049,232
Loans 619,506 639,954 634,872 635,948 662,442
Earning assets 900,418 903,857 952,946 917,546 979,187
Deposits 882,046 893,262 948,899 907,785 961,671
Long-term debt and advances 28,421 32,769 34,127 32,062 34,981
Interest bearing liabilities 793,182 813,753 865,042 826,858 885,757
Stockholders’ equity 33,697 30,920 29,928 33,083 33,881
 
 
Performance Ratios
Return on average assets (0.25 )% (0.44 )% (1.45 )% (0.33 )% (1.06 )%
Return on average equity (7.08 ) (13.81 ) (50.18 ) (9.71 ) (32.92 )
Yield on average earning assets (tax equivalent) 4.02 4.07 4.06 4.03 4.09
Cost of interest bearing liabilities 0.79 0.83 0.99 0.85 1.11
Net interest margin (tax equivalent) 3.32 3.33 3.16 3.27 3.09
Efficiency ratio 134.57 133.80 137.37 126.72 117.00
 
 
Loan Charge-off Data
Loans charged-off $ (961 ) $ (1,580 ) $ (6,197 ) $ (6,132 ) $ (19,426 )
Recoveries   1,104     1,169     563     3,309     3,566  
Net (charge-offs) recoveries $ 143 $ (411 ) $ (5,634 ) $ (2,823 ) $ (15,860 )
 
 
Nonaccrual Loan Activity
Nonaccrual loans at beginning of period $ 16,987 $ 30,215 $ 44,670 $ 47,175 $ 101,767
Net principal pay-downs (2,472 ) (9,028 ) (1,825 ) (27,590 ) (27,494 )
Charge-offs (756 ) (1,333 ) (2,291 ) (5,126 ) (14,105 )
Loans foreclosed and transferred to OREO (1,063 ) (3,495 ) (675 ) (5,503 ) (31,698 )
Loans returned to accrual status (29 ) (902 ) (116 ) (1,629 ) (3,405 )
Loans placed on nonaccrual during the period   1,420     1,530     7,412     6,760     22,110  
Nonaccrual loans at end of period $ 14,087   $ 16,987   $ 47,175   $ 14,087   $ 47,175  
 
 
Troubled Debt Restructurings (TDRs)
Accruing $ 17,440 $ 17,656 $ 21,985 $ 17,440 $ 21,985
Nonaccrual   3,544     3,788     20,507     3,544     20,507  
Total $ 20,984 $ 21,444 $ 42,492 $ 20,984 $ 42,492
 
Other Real Estate Owned (OREO) Activity
OREO at beginning of period $ 29,177 $ 39,545 $ 54,507 $ 46,197 $ 30,892
Real estate acquired 1,063 3,495 675 5,513 32,338
Valuation adjustment write-downs (2,775 ) (4,450 ) (3,005 ) (9,855 ) (4,255 )
Proceeds from sales of properties (8,150 ) (9,397 ) (5,831 ) (22,567 ) (13,084 )
Gain (loss) on sales, net   (101 )   (16 )   (149 )   (74 )   306  
OREO at end of period $ 19,214   $ 29,177   $ 46,197   $ 19,214   $ 46,197  

 
 
 

PORTER BANCORP, INC.
Unaudited Financial Information
(in thousands, except share and per share data)

 
      As of
12/31/15     9/30/15     6/30/15     3/31/15     12/31/14     9/30/14
 
Assets
Loans $ 618,666 $ 624,414 $ 648,321 $ 632,428 $ 624,999 $ 638,360
Allowance for loan losses   (12,041 )   (14,198 )   (16,809 )   (18,597 )   (19,364 )   (24,198 )
Net loans 606,625 610,216 631,512 613,831 605,635 614,162
Loans held for sale 186 71 125 — 8,926 —
Securities held to maturity 42,075 42,138 42,202 42,263 42,325 42,386
Securities available for sale 144,978 146,837 151,758 157,290 190,791 192,146
Federal funds sold & interest bearing deposits 85,329 73,940 63,987 101,872 66,011 73,494
Cash and due from financial institutions 8,006 6,540 7,403 7,899 14,169 11,336
Premises and equipment 18,812 19,109 19,167 19,323 19,507 19,649
Bank owned life insurance 9,441 9,381 9,320 9,231 9,167 9,103
FHLB Stock 7,323 7,323 7,323 7,323 7,323 7,323
Other real estate owned 19,214 29,177 39,545 43,618 46,197 54,507
Accrued interest receivable and other assets   6,733     6,748     6,998     7,056     7,938     6,608  
Total Assets $ 948,722   $ 951,480   $ 979,340   $ 1,009,706   $ 1,017,989   $ 1,030,714  
 
Liabilities and Equity
Certificates of deposit $ 499,827 $ 534,031 $ 564,253 $ 597,117 $ 574,681 $ 609,682
Interest checking 97,515 83,247 84,627 86,614 91,086 76,431
Money market 125,935 119,324 110,529 102,349 109,734 100,890
Savings   34,677     35,131     35,942     36,418     36,430     36,364  
Total interest bearing deposits 757,954 771,733 795,351 822,498 811,931 823,367
Demand deposits   120,043     106,160     108,800     108,011     114,910     110,165  
Total deposits 877,997 877,893 904,151 930,509 926,841 933,532
Federal funds purchased & repurchase agreements — — 1,265 1,145 1,341 1,817
FHLB advances 3,081 3,255 3,430 3,597 15,752 16,940
Junior subordinated debentures 25,050 25,275 29,500 29,725 29,950 30,175
Accrued interest payable and other liabilities   10,577     11,249     10,949     10,758     10,640     18,922  
Total liabilities 916,705 917,672 949,295 975,734 984,524 1,001,386
 
Preferred stockholders’ equity 2,771 2,771 2,771 2,771 8,552 38,283
Common stockholders’ equity (deficit)   29,246     31,037     27,274     31,201     24,913     (8,955 )
Total stockholders’ equity   32,017     33,808     30,045     33,972     33,465     29,328  
Total Liabilities and Stockholders’ Equity $ 948,722   $ 951,480   $ 979,340   $ 1,009,706   $ 1,017,989   $ 1,030,714  
 
Ending shares outstanding 26,947,533 26,949,205 25,759,223 25,663,495 14,890,514 13,099,400
Book value per common share $ 1.09 $ 1.15 $ 1.06 $ 1.22 $ 1.67 $ (0.68 )
Tangible book value per common share 1.07 1.13 1.03 1.18 1.61 (0.76 )

 
 
 

PORTER BANCORP, INC.
Unaudited Financial Information
(in thousands, except share and per share data)

 
      As of
12/31/15     9/30/15     6/30/15     3/31/15     12/31/14     9/30/14
Asset Quality Data
Loans 90 days or more past due still on accrual $ — $ — $ 92 $ 18 $ 151 $ —
Nonaccrual loans   14,087     16,987     30,215     36,500     47,175     44,670  
Total non-performing loans 14,087 16,987 30,307 36,518 47,326 44,670
Real estate acquired through foreclosures 19,214 29,177 39,545 43,618 46,197 54,507
Other repossessed assets   —     —     —     —     —     —  
Total non-performing assets $ 33,301   $ 46,164   $ 69,852   $ 80,136   $ 93,523   $ 99,177  
 
Non-performing loans to total loans 2.28 % 2.72 % 4.67 % 5.77 % 7.57 % 7.00 %
Non-performing assets to total assets 3.51 4.85 7.13 7.94 9.19 9.62
Allowance for loan losses to non-performing loans 85.48 83.58 55.46 50.93 40.92 54.17
 
Allowance for loans evaluated individually $ 428 $ 469 $ 842 $ 254 $ 752 $ 1,788
Loans evaluated individually for impairment 31,776 34,895 49,011 55,299 71,993 78,695
Allowance as % of loans evaluated individually 1.35 % 1.34 % 1.72 % 0.46 % 1.04 % 2.27 %
 
Allowance for loans evaluated collectively $ 11,613 $ 13,729 $ 15,967 $ 18,343 $ 18,612 $ 22,410
Loans evaluated collectively for impairment 586,890 589,519 599,310 577,129 553,006 559,665
Allowance as % of loans evaluated collectively 1.98 % 2.33 % 2.66 % 3.18 % 3.37 % 4.00 %
 
Allowance for loan losses to total loans 1.95 % 2.27 % 2.59 % 2.94 % 3.10 % 3.79 %
 
Loans by Risk Category
Pass $ 517,484 $ 508,470 $ 509,843 $ 480,545 $ 461,126 $ 446,166
Watch 63,363 66,726 67,712 76,876 68,200 83,711
Special Mention 1,395 1,700 1,718 1,110 4,189 4,431
Substandard 36,424 47,518 69,048 73,897 91,484 104,052
Doubtful   —     —     —     —     —     —  
Total $ 618,666 $ 624,414 $ 648,321 $ 632,428 $ 624,999 $ 638,360
 
Risk-based Capital Ratios - Company
Tier I leverage ratio 4.74 % 4.73 % 4.25 % 4.13 % 4.51 % 4.02 %
Common equity Tier I risk-based capital ratio 5.09 5.07 4.42 4.68 N/A N/A
Tier I risk-based capital ratio 6.89 6.86 6.02 5.85 6.70 5.93
Total risk-based capital ratio 10.46 10.40 10.25 10.00 10.61 10.05
 
Risk-based Capital Ratios – PBI Bank
Tier I leverage ratio 6.08 % 6.01 % 5.95 % 5.84 % 5.78 % 6.09 %
Common equity Tier I risk-based capital ratio 8.84 8.73 8.43 8.32 N/A N/A
Tier I risk-based capital ratio 8.84 8.73 8.43 8.32 8.59 8.99
Total risk-based capital ratio 10.58 10.50 10.34 10.26 10.57 11.01
 
FTE employees 244 246 253 258 264 268