PBIB Porter Bancorp, Inc. (delisted)

Porter Bancorp, Inc. (NASDAQ: PBIB) (“the Company”), parent company of Limestone Bank (“the Bank”), today reported unaudited results for the first quarter of 2018. The Company reported net income available to common shareholders for the first quarter of 2018 of $1.9 million, or $0.31 per basic and diluted common share, compared to net income available to common shareholders of $1.6 million, or $0.27 per basic and diluted share, for the first quarter of 2017.

“We are pleased with the favorable financial results for the first quarter of 2018 which were largely driven by quality loan production, net interest income growth, and expense management,” said John T. Taylor, President and CEO. “We are also pleased with the $14.95 million private placement of common stock completed on March 30, 2018, which will provide capital to support the growth of our banking franchise.”

Rebranding – Effective February, 20, 2018, the Bank changed its name to Limestone Bank. We believe the new name reflects the Bank’s Kentucky heritage, which can be traced back more than 110 years. Changing the name of Porter Bancorp, Inc. to Limestone Bancorp, Inc. is on the agenda for the 2018 annual meeting of shareholders.

Net Interest Income – Net interest income before provision expense increased to $8.2 million for the first quarter of 2018, compared with $8.0 million in the fourth quarter of 2017, and $7.7 million in the first quarter of 2017. Average loans increased to $724.2 million for the first quarter of 2018, compared with $695.6 million in the fourth quarter of 2017 and $649.3 million in the first quarter of 2017. Net interest margin increased to 3.63% in the first quarter of 2018, compared with 3.50% in the fourth quarter of 2017 and 3.55% in the first quarter of 2017.

Our yield on earning assets improved to 4.45% in the first quarter of 2018, compared to 4.24% in the fourth quarter of 2017 and 4.23% in the first quarter of 2017. The cost of interest bearing liabilities was 0.96% in the first quarter of 2018, compared to 0.88% for the fourth quarter of 2017, and 0.78% in the first quarter of 2017.

Provision and Allowance for Loan Losses – There was no provision for loan losses in the first quarter of 2017 or 2018 due to ongoing improvements in asset quality and management’s assessment of risk in the loan portfolio.

The allowance for loan losses to total loans was 1.17% at March 31, 2018, compared to 1.15% at December 31, 2017, and 1.35% at March 31, 2017. The reduced level of the allowance from a year over year comparison is primarily driven by declining historical charge-off levels and improving trends in credit quality. Net loan recoveries were $324,000 for the first quarter of 2018, compared to net recoveries of $25,000 for the fourth quarter of 2017, and net charge-offs of $1,000 for the first quarter of 2017.

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 $8.8 million, or 0.88% of total assets at March 31, 2018, compared with $9.9 million, or 1.02% of total assets at December 31, 2017, and $14.7 million, or 1.56% of total assets at March 31, 2017.

Non-performing loans decreased to $4.4 million, or 0.60% of total loans at March 31, 2018, compared with $5.5 million, or 0.77% of total loans at December 31, 2017, and decreased from $8.1 million, or 1.22% of total loans at March 31, 2017. The decrease from the previous quarter was primarily driven by $995,000 in principal payments received on nonaccrual loans. OREO remained unchanged at March 31, 2018, at $4.4 million, compared to December 31, 2017, and decreased compared to $6.6 million at March 31, 2017. The Company acquired $110,000 in OREO and sold $70,000 in OREO during the first quarter of 2018. Fair value write-downs arising from lower marketing prices or new appraisals totaled $60,000 in the first quarter of 2018, compared with $1.9 million in the fourth quarter of 2017, and no write-downs in the first quarter of 2017.

In addition to nonaccrual loans and OREO, loans classified as Troubled Debt Restructures (TDRs) and on accrual totaled $922,000 at March 31, 2018, compared to $1.2 million at December 31, 2017 and March 31, 2017.

Non-interest Income and Expense – Non-interest income for the first quarter of 2018 increased $59,000 to $1.3 million, compared with $1.2 million for the first quarter of 2017. The increase from the first quarter of 2017 was primarily due to an increase in bank card interchange fees of $64,000 as well as an increase in service charges on deposit accounts of $67,000. These increases were partially offset by a decrease in other non-interest income of $69,000.

Non-interest expense decreased $84,000, or 1.20% to $7.2 million for the first quarter of 2018, compared with $7.3 million for the first quarter of 2017.

Capital – The Company completed a private placement of common stock on March 30, 2018. In the transaction, the Company issued 150,000 common shares and 1.0 million non-voting common shares to Patriot Financial Partners III, L.P. at $13.00 per share resulting in total proceeds of $14.950 million of which $5.0 million was contributed as capital to the Bank. The balance of the proceeds will be used for general corporate purposes and to support the growth of the Bank.

At March 31, 2018, the Bank’s Tier 1 leverage ratio was 9.31%, compared with 8.70% at December 31, 2017, and its Total risk-based capital ratio was 12.43% at March 31, 2018, compared with 11.61% at December 31, 2017. At March 31, 2018, the Bank’s Common equity Tier 1 risk-based capital ratio was 11.18%, compared with 10.35% at December 31, 2017. At March 31, 2018, the Company’s Tier 1 leverage ratio was 9.18%, compared with 7.11% at December 31, 2017, and its Total risk-based capital ratio was 12.56%, compared with 10.55% at December 31, 2017. At March 31, 2018, the Company’s Common equity Tier 1 risk-based capital ratio was 8.98%, compared with 6.92% at December 31, 2017.

Deferred Tax Assets and Liabilities – The Company has a net deferred tax asset of $31.0 million at March 31, 2018. Deferred tax assets and liabilities are shown below:

            March 31, December 31, 2018 2017 (in thousands) Deferred tax assets: Net operating loss carry-forward $ 25,362 $ 25,645 Allowance for loan losses 1,790 1,723 Other real estate owned write-down 2,445 2,432 Other   2,269   2,388   31,866   32,188   Deferred tax liabilities: FHLB stock dividends 557 557 Other   312   318   869   875 Net deferred tax asset $ 30,997 $ 31,313  

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 Limestone 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. Limestone 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 that involve risks and uncertainties. Although the Company's management believes the assumptions underlying the forward-looking statements contained herein are reasonable, any of these assumptions could be inaccurate. Therefore, there can be no assurance the forward-looking statements included herein will prove to be accurate. Factors that could cause actual results to differ from those discussed in forward-looking statements include, but are not limited to: economic conditions both generally and more specifically in the markets in which the Company and its subsidiaries operate; competition for the Company's customers from other providers of financial services; government legislation and regulation, which change from time to time and over which the Company has no control; changes in interest rates; material unforeseen changes in liquidity, results of operations, or financial condition of the Company's customers; and other risks detailed in the Company's filings with the Securities and Exchange Commission, all of which are difficult to predict and many of which are beyond the control of the Company. See Risk Factors outlined in the Company's Form 10-K for the year ended December 31, 2017.

Additional Information

Unaudited supplemental financial information for the first quarter ending March 31, 2018, follows.

   

PORTER BANCORP, INC.

Unaudited Financial Information

(in thousands, except share and per share data)

    Three Months Ended 3/31/18     12/31/17     3/31/17

 

 

 

Income Statement Data Interest income $ 10,015 $ 9,717 $ 9,225 Interest expense 1,834 1,716 1,484  

 

 

Net interest income 8,181 8,001 7,741 Provision (negative provision) for loan losses   —   (800

)

  —  

 

Net interest income after provision 8,181 8,801 7,741   Service charges on deposit accounts 568 636 501 Bank card interchange fees 401 403 337 Bank owned life insurance income 99 103 102 Gains (loss) on sales and calls of securities, net — 293 — Other 183 207 252  

 

 

Non-interest income 1,251 1,642 1,192   Salaries & employee benefits 3,788 3,657 3,947 Occupancy and equipment 895 919 821 Professional fees 205 202 303 Marketing expense 300 218 254 FDIC insurance 182 357 342 Data processing expense 324 325 292 State franchise and deposit tax 282 281 225 Other real estate owned expense 82 1,881 (16

)

Litigation and loan collection expense 53 58 3 Other 1,058 1,174 1,082  

 

Non-interest expense 7,169 9,072 7,253   Income before income taxes 2,263 1,371 1,680 Income tax expense (benefit) 329 (31,899 ) —  

 

 

 

Net income 1,934 33,270 1,680 Less: Earnings allocated to participating securities 34 797 44     Net income attributable to common $ 1,900 $ 32,473 $ 1,636  

 

 

 

  Weighted average shares – Basic 6,173,397 6,109,991 6,063,026 Weighted average shares – Diluted 6,173,397 6,109,991 6,063,026   Basic earnings per common share $ 0.31 $ 5.31 $ 0.27 Diluted earnings per common share $ 0.31 $ 5.31 $ 0.27 Cash dividends declared per common share $ 0.00 $ 0.00 $ 0.00    

PORTER BANCORP, INC.

Unaudited Financial Information

(in thousands, except share and per share data)

      Three Months Ended 3/31/18     12/31/17     3/31/17

 

 

 

Average Balance Sheet Data Assets $ 987,390 $ 960,269 $ 937,616 Loans 724,203 695,646 649,325 Earning assets 915,762 916,561 892,292 Deposits 834,695 862,625 853,556 Long-term debt and advances 74,063 50,335 35,956 Interest bearing liabilities 777,140 774,507 767,461 Stockholders’ equity 73,205 41,397 33,732     Performance Ratios Return on average assets 0.79 % 13.75 % 0.73 % Return on average equity 10.71 318.85 20.20 Yield on average earning assets (tax equivalent) 4.45 4.24 4.23 Cost of interest bearing liabilities 0.96 0.88 0.78 Net interest margin (tax equivalent) 3.63 3.50 3.55 Efficiency ratio 76.01 97.03 81.19     Loan Charge-off Data Loans charged-off $ (47 ) $ (201 ) $ (326 ) Recoveries   371     226     325   Net recoveries (charge-offs) $ 324 $ 25 $ (1 )     Nonaccrual Loan Activity Nonaccrual loans at beginning of period $ 5,457 $ 5,769 $ 9,216 Net principal pay-downs (995 ) (488 ) (1,452 ) Charge-offs (1 ) (137 ) (229 ) Loans foreclosed and transferred to OREO (110 ) — (100 ) Loans returned to accrual status — — (136 ) Loans placed on nonaccrual during the period   19     313     803   Nonaccrual loans at end of period $ 4,370   $ 5,457   $ 8,102       Troubled Debt Restructurings (TDRs) Accruing $ 922 $ 1,217 $ 1,244 Nonaccrual   1,362     1,829     3,374   Total $ 2,284 $ 3,046 $ 4,618   Other Real Estate Owned (OREO) Activity OREO at beginning of period $ 4,409 $ 6,330 $ 6,821 Real estate acquired 110 — 100 Valuation adjustment write-downs (60 ) (1,865 ) — Proceeds from sales of properties (70 ) (55 ) (388 ) Gain (loss) on sales, net   (4 )   (1 )   38   OREO at end of period $ 4,385   $ 4,409   $ 6,571        

PORTER BANCORP, INC.

Unaudited Financial Information

(in thousands, except share and per share data)

    As of 3/31/18     12/31/17     9/30/17     6/30/17     3/31/17         Assets Loans $ 729,432 $ 712,115 $ 682,511 $ 654,938 $ 664,183 Allowance for loan losses   (8,526 )   (8,202 )   (8,977 )   (8,885 )   (8,966 ) Net loans 720,906 703,913 673,534 646,053 655,217 Loans held for sale — 70 — — — Securities held to maturity — — 41,424 41,635 41,752 Securities available for sale 160,812 152,720 149,797 154,993 156,001 Federal funds sold & interest bearing deposits 30,073 25,966 37,812 51,413 32,329 Cash and due from financial institutions 7,610 8,137 9,557 9,297 5,456 Premises and equipment 16,789 16,789 16,975 17,164 17,687 Bank owned life insurance 15,323 15,229 15,131 15,033 14,935 FHLB Stock 7,323 7,323 7,323 7,323 7,323 Other real estate owned 4,385 4,409 6,330 6,318 6,571 Deferred taxes, net 30,997 31,313 — — — Accrued interest receivable and other assets   5,886     4,932     5,082     5,228     5,083   Total Assets $ 1,000,104   $ 970,801   $ 962,965   $ 954,457   $ 942,354     Liabilities and Equity Certificates of deposit $ 431,921 $ 424,235 $ 445,577 $ 458,068 $ 470,029 Interest checking 92,048 99,383 94,523 97,169 104,811 Money market 150,974 151,388 156,905 153,700 122,434 Savings   35,984     34,632     35,946     36,363     36,380   Total interest bearing deposits 710,927 709,638 732,951 745,300 733,654 Demand deposits   135,984     137,386     133,896     129,518     127,049   Total deposits 846,911 847,024 866,847 874,818 860,703 FHLB advances 26,752 11,797 16,847 2,158 17,313 Junior subordinated debentures 23,025 23,250 23,475 23,700 23,925 Senior debt 10,000 10,000 10,000 10,000 — Accrued interest payable and other liabilities   5,186     6,057     5,728     5,388     4,908   Total liabilities 911,874 898,128 922,897 916,064 906,849   Preferred stockholders’ equity 2,771 2,771 2,771 2,771 2,771 Common stockholders’ equity   85,459     69,902     37,297     35,622     32,734   Total stockholders’ equity   88,230     72,673     40,068     38,393     35,505   Total Liabilities and Stockholders’ Equity $ 1,000,104   $ 970,801   $ 962,965   $ 954,457   $ 942,354     Ending shares outstanding 7,409,864 6,259,864 6,259,864 6,259,864 6,247,520 Book value per common share $ 11.53 $ 11.17 $ 5.96 $ 5.69 $ 5.24 Tangible book value per common share 11.53 11.17 5.96 5.69 5.23      

PORTER BANCORP, INC.

Unaudited Financial Information

(in thousands, except share and per share data)

    As of 3/31/18     12/31/17     9/30/17     6/30/17     3/31/17 Asset Quality Data Loan 90 days or more past due still on accrual $ — $ 1 $ — $ — $ — Nonaccrual loans   4,370     5,457     5,769     6,509     8,102   Total non-performing loans 4,370 5,458 5,769 6,509 8,102 Real estate acquired through foreclosures 4,385 4,409 6,330 6,318 6,571 Other repossessed assets   —     —     —     —     —   Total non-performing assets $ 8,755   $ 9,867   $ 12,099   $ 12,827   $ 14,673     Non-performing loans to total loans 0.60 % 0.77 % 0.85 % 0.99 % 1.22 % Non-performing assets to total assets 0.88 1.02 1.26 1.34 1.56 Allowance for loan losses to non-performing loans 195.10 150.27 155.61 136.50 110.66   Allowance for loans evaluated individually $ 282 $ 219 $ 425 $ 254 $ 332 Loans evaluated individually for impairment 5,775 7,173 7,509 8,273 9,891 Allowance as % of loans evaluated individually 4.88 % 3.05 % 5.66 % 3.07 % 3.36 %   Allowance for loans evaluated collectively $ 8,244 $ 7,983 $ 8,552 $ 8,631 $ 8,634 Loans evaluated collectively for impairment 723,657 704,942 675,002 646,665 654,292 Allowance as % of loans evaluated collectively 1.14 % 1.13 % 1.27 % 1.33 % 1.32 %   Allowance for loan losses to total loans 1.17 % 1.15 % 1.32 % 1.36 % 1.35 %   Loans by Risk Category Pass $ 695,507 $ 673,033 $ 633,203 $ 610,356 $ 617,361 Watch 17,938 25,715 35,167 29,433 26,442 Special Mention 162 164 598 604 492 Substandard 15,825 13,203 13,543 14,545 19,888 Doubtful   —     —     —     —     —   Total $ 729,432 $ 712,115 $ 682,511 $ 654,938 $ 664,183   Loans by Past Due Status Past due loans: 30 – 59 days $ 6,402 $ 1,478 $ 872 $ 1,328 $ 972 60 – 89 days 472 171 612 765 289 90 days or more — 1 — — — Nonaccrual loans   4,370     5,457     5,769     6,509     8,102   Total past due and nonaccrual loans $ 11,244 $ 7,107 $ 7,253 $ 8,602 $ 9,363   Risk-based Capital Ratios - Company Tier I leverage ratio 9.18 % 7.11 % 5.85 % 5.65 % 5.43 % Common equity Tier I risk-based capital ratio 8.98 6.92 5.49 5.58 5.29 Tier I risk-based capital ratio 11.03 8.44 7.31 7.46 7.09 Total risk-based capital ratio 12.56 10.55 10.05 10.44 10.15   Risk-based Capital Ratios – Limestone Bank Tier I leverage ratio 9.31 % 8.70 % 7.73 % 7.54 % 6.37 % Common equity Tier I risk-based capital ratio 11.18 10.35 9.66 9.97 8.33 Tier I risk-based capital ratio 11.18 10.35 9.66 9.97 8.33 Total risk-based capital ratio 12.43 11.61 11.10 11.50 9.89   FTE employees 214 217 217 221 230  

Non-GAAP Financial Measures Reconciliation

Tangible book value per common share is a non-GAAP financial measure derived from GAAP-based amounts. We calculate tangible book value per common share by excluding the balance of intangible assets from common stockholders’ equity. We calculate tangible book value per common share by dividing tangible common equity by common shares outstanding, as compared to book value per common share, which we calculate by dividing common stockholders’ equity by common shares outstanding. We believe this is consistent with bank regulatory agency treatment, which excludes tangible assets from the calculation of risk-based capital.

The efficiency ratio is a non-GAAP measure of expense control relative to revenue from net interest income and fee income. We calculate the efficiency ratio by dividing total non-interest expenses as determined under GAAP by net interest income and total non-interest income, but excluding net gains on the sale of securities from the calculation. We believe this provides a reasonable measure of primary banking expenses relative to primary banking revenue.

    As of 3/31/18     12/31/17     9/30/17     6/30/17     3/31/17 Tangible Book Value Per Share (in thousands, except share and per share data)   Common stockholder’s equity $ 85,459 $ 69,902 $ 37,297 $ 35,622 $ 32,734 Less: Intangible assets   —   —   —   —   42 Tangible common equity 85,459 69,902 37,297 35,622 32,692   Shares Outstanding   7,409,864   6,259,864   6,259,864   6,259,864   6,247,520 Tangible book value per common share $ 11.53 $ 11.17 $ 5.96 $ 5.69 $ 5.23 Book value per common share 11.53 11.17 5.96 5.69 5.24       Three Months Ended 3/31/18   12/31/17   3/31/17

 

 

 

Efficiency Ratio (in thousands)   Net interest income $ 8,181 $ 8,001 $ 7,741 Non-interest income 1,251 1,642 1,192 Less: Net gain on securities   —   293   — Revenue used for efficiency ratio   9,432   9,350   8,933 Non-interest expense 7,169 9,072 7,253   Efficiency ratio 76.01 % 97.03 % 81.19 %  

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Porter Bancorp, Inc.John T. Taylor, 502-499-4800Chief Executive Officer