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Form 8-K Porter Bancorp, Inc. For: Apr 27

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April 27, 2016 4:27 PM EDT

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________

FORM 8-K


CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): April 27, 2016


PORTER BANCORP, INC.
(Exact name of registrant as specified in its charter)


Kentucky

001-33033

61-1142247

(State or other jurisdiction of

incorporation and organization)

(Commission

File Number)

(I.R.S. Employer

Identification No.)


2500 Eastpoint Parkway, Louisville, Kentucky, 40223
(Address of principal executive offices)


(502) 499-4800
(Registrant's telephone number, including area code)


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

⃞ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

⃞ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

⃞ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

⃞ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITIONS

On April 27, 2016, Porter Bancorp, Inc. issued a press release announcing its financial results for the first quarter ended March 31, 2016. A copy of the press release is attached hereto as Exhibit 99.1.

The information in this Form 8-K and in Exhibit 99.1 attached hereto is being furnished to the Securities and Exchange Commission pursuant to Item 2.02 – Results of Operations and Financial Condition and shall not be deemed filed for purposes of Section 18 of the Securities Act of 1934, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.

ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS

(d)   Exhibits
Exhibit No.   Description of Exhibit
99.1 Press Release issued by Porter Bancorp, Inc. on April 27, 2016

SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: April 27, 2016

Porter Bancorp, Inc.

 

 

 

 

By:

/s/ Phillip W. Barnhouse

Phillip W. Barnhouse

Chief Financial Officer

EXHIBIT INDEX

Exhibit

Description

 
99.1

Press Release dated April 27, 2016

Exhibit 99.1

Porter Bancorp Reports 1st Quarter 2016 Net Income of $1.4 Million or $0.05 Per Diluted Share

Reports 13% NPA Reduction in 1st Quarter

LOUISVILLE, Ky.--(BUSINESS WIRE)--April 27, 2016--Porter Bancorp, Inc. (NASDAQ: PBIB), parent company of PBI Bank, today reported unaudited results for the first quarter of 2016.

The Company reported that net income attributable to common shareholders for the first quarter of 2016 was $1.4 million, or $0.05 per basic and diluted common share, compared with $409,000, or $0.02 per basic and diluted share, for the first quarter of 2015.

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 first quarter of 2016, non-performing assets were reduced by $4.3 million after achieving reductions of $12.9 million in the fourth quarter of 2015. In addition to lowering the risk profile of the Company, we are pleased to see a return to profitability, as the cost to remediate non-performing assets continues to decline, and we continued the all-important work to attract new customers and provide high quality service to our existing customer base.”

Net Interest Income – Net interest income before provision expense increased to $7.7 million for the first quarter of 2016 compared with $7.4 million in the fourth quarter of 2015, and $7.3 million in the first quarter of 2015. Average loans remained consistent at $620.1 million for the first quarter of 2016 compared with $619.5 million in the fourth quarter of 2015 and declined compared to $643.0 million in the first quarter of 2015. Net interest margin increased to 3.53% in the first quarter of 2016, compared with 3.32% in the fourth quarter of 2015 and 3.21% in the first quarter of 2015.

Our yield on earning assets improved to 4.23% in the first quarter of 2016 compared to 4.02% in the fourth quarter of 2015 and 4.03% in the first quarter of 2015. The yield on earning assets was positively impacted in the first quarter of 2016 by the collection of previously charged-off accrued uncollected interest of approximately $285,000 along with the full unpaid balance on three nonaccrual loans. Our cost of funds was 0.79% in the first quarter of 2016 and the fourth quarter of 2015 and improved from 0.91% in the first quarter of 2015.

Allowance for Loan Losses – The allowance for loan losses to total loans was 1.83% at March 31, 2016 compared to 1.95% at December 31, 2015, and 2.94% at March 31, 2015. The declining level of the allowance is primarily driven by declining historical charge-off levels and improving trends in loan category risk ratings. Net loan charge-offs were $151,000 for the first quarter of 2016, compared to net recoveries of $143,000 for the fourth quarter of 2015 and net charge-offs of $767,000 for the first quarter of 2015. The allowance for loan losses for loans evaluated collectively for impairment was 1.83% at March 31, 2016, compared with 1.98% at December 31, 2015, and 3.18% at March 31, 2015. Because of ongoing improvements in asset quality and management’s assessment of risk in the loan portfolio, a negative provision of $550,000 was recorded for the first quarter of 2016, compared to a negative provision of $2.3 million for the fourth quarter of 2015 and no provision for loan losses in the first quarter of 2015.

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 $29.0 million, or 3.09% of total assets at March 31, 2016, compared with $33.3 million, or 3.51% of total assets at December 31, 2015, and $80.1 million, or 7.94% of total assets at March 31, 2015.

Non-performing loans decreased to $11.1 million, or 1.79% of total loans at March 31, 2016, compared with $14.1 million, or 2.28% of total loans at December 31, 2015, and decreased from $36.5 million, or 5.77% of total loans at March 31, 2015. The decrease from the previous quarter was primarily driven by $2.7 million in principal payments received on nonaccrual loans, $441,000 of nonaccrual loans migrating to OREO, and $644,000 in charge-offs.

OREO at March 31, 2016, decreased to $17.9 million, compared with $19.2 million at December 31, 2015, and $43.6 million at March 31, 2015. The Company acquired $441,000 in OREO and sold $1.3 million in OREO during the first quarter of 2016. Fair value write-downs arising from lower marketing prices or new appraisals totaled $500,000 in the first quarter of 2016, compared with $2.8 million in the fourth quarter of 2015 and $300,000 in the first quarter of 2015.

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

         
       

March 31,
2016

   

December 31,
2015

   

September 30,
2015

   

June 30,
2015

   

March 31,
2015

(in thousands)

Past due loans:
30 – 59 days $ 1,829 $ 3,133 $ 1,972 $ 1,941 $ 4,370
60 – 89 days 62 241 578 650 1,769
90 days or more — — — 92 18
Nonaccrual loans   11,119   14,087   16,987   30,215   36,500

Total past due and nonaccrual loans

$

13,010

$

17,461

$ 19,537 $ 32,898 $ 42,657
 

Loans past due 90 days or more

$

—

$

—

$ — $ 92 $ 18
Nonaccrual loans 11,119 14,087 16,987 30,215 36,500
OREO 17,861 19,214 29,177 39,545 43,618
Other repossessed assets   —   —   —   —   —

Total non-performing Assets

$

28,980

$

33,301

$ 46,164 $ 69,852 $ 80,136
 

In addition to nonaccrual loans and OREO, loans classified as Troubled Debt Restructures (TDRs) and on accrual totaled $14.9 million at March 31, 2016, compared to $17.4 million at December 31, 2015 and $18.8 million at March 31, 2015.

Non-interest Income – Non-interest income increased $167,000 to $1.4 million for the first quarter of 2016, compared with $1.2 million for the fourth quarter of 2015, and decreased $1.3 million compared with $2.7 million for the first quarter of 2015. Gain on sales of securities was $203,000 in the first quarter of 2016, compared to $70,000 in the fourth quarter of 2015 and $1.5 million in the first quarter of 2015.

Non-interest Expense – Non-interest expense decreased $3.5 million to $8.1 million for the first quarter of 2016, compared with $11.6 million for the fourth quarter of 2015, and decreased $1.3 million compared with $9.4 million for the first quarter of 2015. This decrease from the fourth quarter of 2015 was primarily due to a reduction in OREO expenses of approximately $2.8 million as fair value write-downs based upon reductions in listing prices as well as new appraisals declined from $2.8 million in the fourth quarter of 2015 to $500,000 in the first quarter of 2016. We also had reductions in professional fees and loan collection expenses in the first quarter of 2016 compared to the fourth and first quarters of 2015.

Capital – At March 31, 2016, PBI Bank’s Tier 1 leverage ratio was 6.39% compared with 6.08% at December 31, 2015, and its Total risk-based capital ratio was 10.64% at March 31, 2016, compared with 10.58% at December 31, 2015, which are below the minimums of 9.0% and 12.0% required by the Bank’s Consent Order. At March 31, 2016, Porter Bancorp’s leverage ratio was 5.03% compared with 4.74% at December 31, 2015, and its Total risk-based capital ratio was 10.46%, compared with 10.46% at December 31, 2015. At March 31, 2016, PBI Bank’s Common equity Tier I risk-based capital ratio was 8.94%, and Porter Bancorp’s Common equity Tier I risk-based capital ratio was 5.21%.

Subsequent to March 31, 2015, the Company completed a private placement of common stock to accredited investors on April 15, 2016. In the transaction, the Company issued 2.9 million common shares and 1.1 million non-voting common shares at $1.25 each resulting in total proceeds of $5.0 million. Approximately $2.8 million of the proceeds were directed by investors to make interest payments and bring current the Company’s trust preferred securities which had been in deferral since 2011. The balance of the proceeds will be used for general corporate purposes and to support the Company’s wholly-owned subsidiary, PBI Bank.

Among the accredited investors participating in the transaction were John T. Taylor, our CEO, and Directors Bradford T. Ray and James M. Parsons. After the transaction, the Company had issued and outstanding 22,986,177 common shares and 7,958,000 non-voting common shares.

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 PBI 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. PBI 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. 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 first quarter ending March 31, 2016 follows.

 

PORTER BANCORP, INC.

Unaudited Financial Information

(in thousands, except share and per share data)

 
        Three Months Ended
3/31/16     12/31/15     3/31/15

 

 

 

Income Statement Data
Interest income $ 9,185 $ 9,025 $ 9,203
Interest expense   1,534     1,585     1,913

 

 

Net interest income 7,651 7,440 7,290
Provision (negative provision) for loan losses   (550 )   (2,300 )   —
 
Net interest income after provision 8,201 9,740 7,290
 
Service charges on deposits 429 475 409
Bank card interchange fees 202 195 203
Other real estate owned income 256 237 357
Gains (losses) on sales of securities, net 203 70 1,497
Other   301     247     230

 

 

Non-interest income 1,391 1,224 2,696
 
Salaries & employee benefits 3,822 4,062 3,847
Occupancy and equipment 854 936 870
Professional fees 385 572 979
FDIC insurance 523 539 570
Data processing expense 297 268 304
State Franchise and deposit tax 255 265 285
Other real estate owned expense 668 3,506 733
Loan collection expense 82 246 283
Other   1,205     1,171     1,521

 

 

Non-interest expense 8,091 11,565 9,392
 
Income (loss) before income taxes 1,501 (601 ) 594
Income tax expense   21     —     —

 

 

 

 

Net income (loss) 1,480 (601 ) 594
Less:
Earnings (losses) allocated to participating securities   51     (22 )   185
 
Net income (loss) attributable to common $ 1,429   $ (579 ) $ 409

 

 

 

 
Weighted average shares – Basic 26,025,327 25,967,066 17,493,397
Weighted average shares – Diluted 26,025,327 25,967,066 17,493,397
 
Basic earnings (loss) per common share $ 0.05 $ (0.02 ) $ 0.02
Diluted earnings (loss) per common share $ 0.05 $ (0.02 ) $ 0.02
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
3/31/16     12/31/15     3/31/15

 

 

 

Average Balance Sheet Data
Assets $ 937,378 $ 954,934 $ 1,011,561
Loans 620,077 619,506 642,959
Earning assets 881,635 900,418 936,037
Deposits 865,125 882,046 931,698
Long-term debt and advances 28,033 28,421 33,902
Interest bearing liabilities 779,438 793,182 854,423
Stockholders’ equity 33,546 33,697 33,971
 
 
Performance Ratios
Return on average assets 0.64 % (0.25 )% 0.24 %
Return on average equity 17.74 (7.08 ) 7.09
Yield on average earning assets (tax equivalent) 4.23 4.02 4.03
Cost of interest bearing liabilities 0.79 0.79 0.91
Net interest margin (tax equivalent) 3.53 3.32 3.21
Efficiency ratio 91.54 134.57 110.64
 
 
Loan Charge-off Data
Loans charged-off $ (749 ) $ (961 ) $ (1,327 )
Recoveries   598     1,104     560  
Net (charge-offs) recoveries $ (151 ) $ 143 $ (767 )
 
 
Nonaccrual Loan Activity
Nonaccrual loans at beginning of period $ 14,087 $ 16,987 $ 47,175
Net principal pay-downs (2,712 ) (2,472 ) (10,754 )
Charge-offs (644 ) (756 ) (955 )
Loans foreclosed and transferred to OREO (441 ) (1,063 ) (337 )
Loans returned to accrual status (84 ) (29 ) (78 )
Loans placed on nonaccrual during the period   913     1,420     1,449  
Nonaccrual loans at end of period $ 11,119   $ 14,087   $ 36,500  
 
 
Troubled Debt Restructurings (TDRs)
Accruing $ 14,867 $ 17,440 $ 18,798
Nonaccrual   3,479     3,544     19,002  
Total $ 18,346 $ 20,984 $ 37,800
 
Other Real Estate Owned (OREO) Activity
OREO at beginning of period $ 19,214 $ 29,177 $ 46,197
Real estate acquired 441 1,063 347
Valuation adjustment write-downs (500 ) (2,775 ) (300 )
Proceeds from sales of properties (1,349 ) (8,150 ) (2,629 )
Gain (loss) on sales, net   55     (101 )   3  
OREO at end of period $ 17,861   $ 19,214   $ 43,618  
 
 

PORTER BANCORP, INC.

Unaudited Financial Information

(in thousands, except share and per share data)

 
        As of
3/31/16     12/31/15     9/30/15     6/30/15     3/31/15     12/31/14
 
Assets
Loans $ 619,827 $ 618,666 $ 624,414 $ 648,321 $ 632,428 $ 624,999
Allowance for loan losses   (11,340 )   (12,041 )   (14,198 )   (16,809 )   (18,597 )   (19,364 )
Net loans 608,487 606,625 610,216 631,512 613,831 605,635
Loans held for sale 113 186 71 125 — 8,926
Securities held to maturity 42,011 42,075 42,138 42,202 42,263 42,325
Securities available for sale 141,525 144,978 146,837 151,758 157,290 190,791
Federal funds sold & interest bearing deposits 72,209 85,329 73,940 63,987 101,872 66,011
Cash and due from financial institutions 8,097 8,006 6,540 7,403 7,899 14,169
Premises and equipment 18,751 18,812 19,109 19,167 19,323 19,507
Bank owned life insurance 14,531 9,441 9,381 9,320 9,231 9,167
FHLB Stock 7,323 7,323 7,323 7,323 7,323 7,323
Other real estate owned 17,861 19,214 29,177 39,545 43,618 46,197
Accrued interest receivable and other assets   7,251     6,733     6,748     6,998     7,056     7,938  
Total Assets $ 938,159   $ 948,722   $ 951,480   $ 979,340   $ 1,009,706   $ 1,017,989  
 
Liabilities and Equity
Certificates of deposit $ 478,965 $ 499,827 $ 534,031 $ 564,253 $ 597,117 $ 574,681
Interest checking 96,465 97,515 83,247 84,627 86,614 91,086
Money market 134,684 125,935 119,324 110,529 102,349 109,734
Savings   35,197     34,677     35,131     35,942     36,418     36,430  
Total interest bearing deposits 745,311 757,954 771,733 795,351 822,498 811,931
Demand deposits   120,302     120,043     106,160     108,800     108,011     114,910  
Total deposits 865,613 877,997 877,893 904,151 930,509 926,841
Federal funds purchased & repurchase agreements — — — 1,265 1,145 1,341
FHLB advances 2,932 3,081 3,255 3,430 3,597 15,752
Junior subordinated debentures 24,825 25,050 25,275 29,500 29,725 29,950
Accrued interest payable and other liabilities   10,181     10,577     11,249     10,949     10,758     10,640  
Total liabilities 903,551 916,705 917,672 949,295 975,734 984,524
 
Preferred stockholders’ equity 2,771 2,771 2,771 2,771 2,771 8,552
Common stockholders’ equity (deficit)   31,837     29,246     31,037     27,274     31,201     24,913  
Total stockholders’ equity   34,608     32,017     33,808     30,045     33,972     33,465  
Total Liabilities and Stockholders’ Equity $ 938,159   $ 948,722   $ 951,480   $ 979,340   $ 1,009,706   $ 1,017,989  
 
Ending shares outstanding 26,944,177 26,947,533 26,949,205 25,759,223 25,663,495 14,890,514
Book value per common share $ 1.18 $ 1.09 $ 1.15 $ 1.06 $ 1.22 $ 1.67
Tangible book value per common share 1.17 1.07 1.13 1.03 1.18 1.61
 
 

PORTER BANCORP, INC.

Unaudited Financial Information

(in thousands, except share and per share data)

 
        As of
3/31/16     12/31/15     9/30/15     6/30/15     3/31/15     12/31/14
Asset Quality Data
Loan 90 days or more past due still on accrual $ — $ — $ — $ 92 $ 18 $ 151
Nonaccrual loans   11,119     14,087     16,987     30,215     36,500     47,175  
Total non-performing loans 11,119 14,087 16,987 30,307 36,518 47,326
Real estate acquired through foreclosures 17,861 19,214 29,177 39,545 43,618 46,197
Other repossessed assets   —     —     —     —     —     —  
Total non-performing assets $ 28,980   $ 33,301   $ 46,164   $ 69,852   $ 80,136   $ 93,523  
 
Non-performing loans to total loans 1.79 % 2.28 % 2.72 % 4.67 % 5.77 % 7.57 %
Non-performing assets to total assets 3.09 3.51 4.85 7.13 7.94 9.19
Allowance for loan losses to non-performing loans 101.99 85.48 83.58 55.46 50.93 40.92
 
Allowance for loans evaluated individually $ 464 $ 428 $ 469 $ 842 $ 254 $ 752
Loans evaluated individually for impairment 26,236 31,776 34,895 49,011 55,299 71,993
Allowance as % of loans evaluated individually 1.77 % 1.35 % 1.34 % 1.72 % 0.46 % 1.04 %
 
Allowance for loans evaluated collectively $ 10,876 $ 11,613 $ 13,729 $ 15,967 $ 18,343 $ 18,612
Loans evaluated collectively for impairment 593,591 586,890 589,519 599,310 577,129 553,006
Allowance as % of loans evaluated collectively 1.83 % 1.98 % 2.33 % 2.66 % 3.18 % 3.37 %
 
Allowance for loan losses to total loans 1.83 % 1.95 % 2.27 % 2.59 % 2.94 % 3.10 %
 
Loans by Risk Category
Pass $ 534,451 $ 517,484 $ 508,470 $ 509,843 $ 480,545 $ 461,126
Watch 59,265 63,363 66,726 67,712 76,876 68,200
Special Mention 1,383 1,395 1,700 1,718 1,110 4,189
Substandard 24,728 36,424 47,518 69,048 73,897 91,484
Doubtful   —     —     —     —     —     —  
Total $ 619,827 $ 618,666 $ 624,414 $ 648,321 $ 632,428 $ 624,999
 
Risk-based Capital Ratios - Company
Tier I leverage ratio 5.03 % 4.74 % 4.73 % 4.25 % 4.13 % 4.51 %
Common equity Tier I risk-based capital ratio 5.21 5.09 5.07 4.42 4.68 N/A
Tier I risk-based capital ratio 7.03 6.89 6.86 6.02 5.85 6.70
Total risk-based capital ratio 10.46 10.46 10.40 10.25 10.00 10.61
 
Risk-based Capital Ratios – PBI Bank
Tier I leverage ratio 6.39 % 6.08 % 6.01 % 5.95 % 5.84 % 5.78 %
Common equity Tier I risk-based capital ratio 8.94 8.84 8.73 8.43 8.32 N/A
Tier I risk-based capital ratio 8.94 8.84 8.73 8.43 8.32 8.59
Total risk-based capital ratio 10.64 10.58 10.50 10.34 10.26 10.57
 
FTE employees 246 244 246 253 258 264
 

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


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