LOUISVILLE, Ky.--(BUSINESS WIRE)--February 2, 2015--Porter Bancorp, Inc. (NASDAQ: PBIB), parent company of PBI Bank, today reported unaudited results for the fourth quarter of 2014.

The Company reported that net income attributable to common shareholders for the year ended December 31, 2014, was $19.4 million, or $1.59 per diluted common share, compared with a net loss attributable to common shareholders of $3.4 million, or ($0.29) per diluted share, for the year ended December 31, 2013.

In December 2014, the Company completed a non-cash equity exchange transaction with investors. The exchange transaction consisted of the cancellation of all of the Company’s issued and outstanding Series A Preferred Stock, accrued dividends thereon, and Series C Preferred Stock having an aggregate book value of approximately $45.7 million in exchange for newly issued common and preferred securities having a fair value of approximately $9.6 million. The effect of the preferred stock exchange to common shareholders totaled approximately $36.1 million. The transaction is fully described in 8-Ks filed on November 24, 2014 and December 10, 2014 as well as in the definitive proxy statement filed January 30, 2015.

The Company reported a net loss of $3.8 million and $11.2 million for the three months and year ended December 31, 2014, compared with a net loss of $506,000 and $1.6 million for the three months and year ended December 31, 2013. After additions for the effect of the non-cash equity exchange and deductions for dividends on preferred stock and earnings allocated to participating securities, the Company reported net income attributable to common shareholders of $24.3 million and $19.4 million for the three months and year ended December 31, 2014, compared with a net loss attributable to common shareholders of $1.0 million and $3.4 million for the three months and year ended December 31, 2013.

Net Interest Income – Net interest income before provision expense increased to $7.5 million for the fourth quarter of 2014 compared with $7.3 million in the third quarter of 2014, and decreased from $7.6 million in the fourth quarter of 2013. Average loans declined to $634.9 million for the fourth quarter of 2014 compared with $640.0 million in the third quarter of 2014 and $719.2 million in the fourth quarter of 2013. Net interest margin increased to 3.16% in the fourth quarter of 2014, compared with 3.10% in the third quarter of 2014 and 2.96% in the fourth quarter of 2013 primarily driven over the past quarter by improving cost of funds which declined to 0.99% in the fourth quarter of 2014, compared with 1.13% in the third quarter of 2014 and 1.15% in the fourth quarter of 2013.

Allowance for Loan Losses – The allowance for loan losses to total loans was 3.10% at December 31, 2014 compared to 3.79% at September 30, 2014, and 3.96% at December 31, 2013. 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 declined to $15.9 million in 2014 from $29.3 million in 2013 and $36.1 million in 2012. The allowance for loan losses for loans evaluated collectively for impairment was 3.37% at December 31, 2014, compared with 4.00% at September 30, 2014, and 4.41% at December 31, 2013. Provision for loan losses expense of $800,000 was recorded for the fourth quarter of 2014, while no provision was recorded for the third quarter of 2014 or the fourth quarter of 2013. Provision expense of $7.1 million was recorded for 2014, compared to $700,000 for the year ended December 31, 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 $94.0 million, or 9.2% of total assets at December 31, 2014, compared with $99.2 million, or 9.6% of total assets at September 30, 2014, and $132.9 million, or 12.4% of total assets at December 31, 2013.

Non-performing loans increased to $47.3 million, or 7.57% of total loans, at December 31, 2014, compared with $44.7 million, or 7.00% of total loans at September 30, 2014 and decreased from $102.0 million, or 14.4% of total loans at December 31, 2013. The increase from the previous quarter was primarily driven by $7.4 million in loans placed on nonaccrual during the period, offset by $675,000 of nonaccrual loans migrating to OREO, $1.8 million in principal payments received on nonaccrual loans, and $2.3 million of charge-offs.

OREO at December 31, 2014 decreased to $46.2 million, compared with $54.5 million at September 30, 2014 and increased from $30.9 million at December 31, 2013. The Company acquired $675,000 in OREO and sold $5.8 million in OREO during the fourth quarter of 2014. Fair value write-downs arising from new appraisals or lower marketing prices totaled $3.0 million in the fourth quarter of 2014, compared with $600,000 in the third quarter of 2014 and $882,000 in the fourth quarter of 2013.


		December 31, 2014		September 30, 2014	June 30, 2014		March 31, 2014		December 31, 2013
		(in thousands)
Past due loans:
30 – 59 days	$	3,960	$	3,507	$	3,057	$	5,667	$	10,696
60 – 89 days		980		3,333		991		1,232		775
90 days or more		151		—		—		—		232
Nonaccrual loans		47,175		44,670		44,375		77,344		101,767
Total past due and nonaccrual loans	$	52,266	$	51,510	$	48,423	$	84,243	$	113,470

Loans past due 90 days or more	$	151	$	—	$	—	$	—	$	232
Nonaccrual loans		47,175		44,670		44,375		77,344		101,767
OREO		46,197		54,507		56,882		45,918		30,892
Other repossessed assets		—		—		—		—		—
Total non-performing assets	$	93,523	$	99,177	$	101,257	$	123,262	$	132,891

In addition to nonaccrual loans and OREO, loans classified as Troubled Debt Restructures (TDRs) and on accrual totaled $22.0 million at December 31, 2014, compared to $28.1 million at September 30, 2014 and $44.3 million at December 31, 2013.

Loans Held for Sale – During the fourth quarter of 2014, we identified and transferred to loans held for sale certain substandard accruing commercial loans. The loans were transferred to held for sale at the lower of cost or fair value. In accordance with generally accepted accounting principles, the credit component of any writedown upon transfer to held for sale is reflected in charge-offs to the allowance for loan losses. Loans held for sale total $8.9 million at December 31, 2014.

Non-interest Expense – Non-interest expense increased $2.6 million to $11.8 million for the fourth quarter of 2014, compared with $9.3 million for the third quarter of 2014, and increased $2.8 million compared with $9.0 million for the fourth quarter of 2013. While loan collection expenses decreased approximately $510,000 in the fourth quarter of 2014 compared to the third quarter of 2014, OREO expenses increased approximately $3.3 million primarily as a result of fair value writedowns resulting from declines in the fair value of the real estate based upon updated appraisals and reduced marketing prices.

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 there is 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 December 31, 2014 tax benefit is entirely due to unrealized gains in other comprehensive income that are presented in current operations in accordance with applicable accounting standards.

Capital – At December 31, 2014, PBI Bank’s Tier 1 leverage ratio was 5.78% compared with 6.09% at September 30, 2014, and its Total risk-based capital ratio was 10.57% at December 31, 2014 compared with 11.01% at September 30, 2014, which are below the minimums of 9.0% and 12.0% required by the Bank’s Consent Order. At December 31, 2014, Porter Bancorp’s leverage ratio was 4.51% compared with 4.02% at September 30, 2014, and its Total risk-based capital ratio was 10.61%, compared with 10.05% at September 30, 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.

Shares Issued and Outstanding – At December 31, 2014, we had 14,890,514 shares of common stock issued and outstanding. We also had 40,536 shares of Series B preferred stock and 64,580 shares of Series D preferred stock issued and outstanding. The Series B preferred shares will automatically convert to 4,053,600 common shares and the Series D preferred shares will automatically convert to 6,458,000 non-voting common shares on the third business day following shareholder approval. A special meeting of shareholders to vote on this matter is expected to be held on February 25, 2015.

The following table presents our unaudited book value and tangible book value per common and non-voting common share as of December 31, 2014 reflecting the proforma impact of the automatic conversion of Series B and Series D preferred shares into common and non-voting common shares following shareholder approval as fully described in the definitive proxy statement filed January 30, 2015:


		As of December 31, 2014 Unaudited		Conversion Adjustments Resulting from Shareholder Approval (1)		December 31, 2014 Proforma Unaudited
		(dollars in thousands, except share and per share amounts)

Common shareholders’ equity	$	24,913	$	5,781		$	30,694
Preferred shareholders’ equity		8,552		(5,781	)		2,771
Total shareholders’ equity	$	33,465	$	—		$	33,465

Common shares issued and outstanding		14,890,514		4,053,600			18,944,114
Non-voting common shares issued and outstanding		—		6,458,000			6,458,000
Total common and non-voting common shares		14,890,514		10,511,600			25,402,114

Book value per common and non-voting common share	$	1.67				$	1.21
Tangible book value per common and non-voting common share (2)		1.61					1.17

(1) The Series B and D preferred stock were recorded at issuance at fair value based on the 30-day post-announcement daily average closing price of $0.55 per common share. Upon shareholder approval, the Series B and D preferred shares convert to common and non-voting common shares.
(2) Common equity is reduced by intangible assets totaling $929,000 in computing tangible book value per common and non-voting common shares.

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.

Unaudited supplemental financial information for the fourth quarter ending December 31, 2014 follows.


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

	Three Months Ended									Years Ended
	12/31/14			9/30/14			12/31/13			12/31/14				12/31/13

Income Statement Data
Interest income	$	9,636		$	9,814		$	10,259		$		39,513		$	43,228
Interest expense		2,169			2,477			2,673				9,795			11,143

Net interest income		7,467			7,337			7,586				29,718			32,085
Provision for loan losses		800			—			—				7,100			700

Net interest income after provision		6,667			7,337			7,586				22,618			31,385

Service charges on deposits		498			535			523				1,988			2,058
Bank card interchange fees		190			209			176				765			718
Income from bank owned life insurance		69			69			75				276			534
Other real estate owned income		226			5			3				256			399
Gains (losses) on sales of securities, net		—			46			(4	)			92			723
Income from fiduciary activities		—			—			—				—			517
Other		175			193			184				702			970

Non-interest income		1,158			1,057			957				4,079			5,919

Salaries & employee benefits		3,927			4,041			3,526				15,658			15,501
Occupancy and equipment		852			857			855				3,497			3,583
Loan collection expense		348			858			734				2,994			4,707
Other real estate owned expense		3,843			560			1,399				5,839			4,516
FDIC insurance		590			571			511				2,272			2,378
Franchise and deposit tax		210			405			333				1,445			1,944
Professional fees		819			630			484				2,771			1,892
Communications expense		171			181			180				752			711
Insurance expense		116			157			166				575			648
Postage and delivery		106			97			109				407			423
Data processing expense		288			270			107				1,106			184
Advertising		268			164			118				563			308
Other		310			490			527				1,556			2,095

Non-interest expense		11,848			9,281			9,049				39,435			38,890

Income (loss) before income taxes		(4,023	)		(887	)		(506	)			(12,738	)		(1,586	)
Income tax expense (benefit)		(238	)		(38	)		—				(1,583	)		—

Net income (loss)		(3,785	)		(849	)		(506	)			(11,155	)		(1,586	)
Less:
Dividends and accretion on preferred stock		—			786			632				2,362			2,079
Effect of exchange of preferred stock to common stock		(36,104	)		—			—				(36,104	)		—
Earnings allocated to participating securities		7,977			(162	)		(110	)			3,159			(267	)

Net income (loss) attributable to common	$	24,342		$	(1,473	)	$	(1,028	)	$		19,428		$	(3,398	)


Weighted average shares – Basic		12,767,430			12,086,843			11,907,766			12,240,889				11,794,738
Weighted average shares – Diluted		12,767,430			12,086,843			11,907,766			12,240,889				11,794,738

Basic earnings (loss) per common share	$	1.91		$	(0.12	)	$	(0.09	)	$	1.59			$	(0.29	)
Diluted earnings (loss) per common share	$	1.91		$	(0.12	)	$	(0.09	)	$	1.59			$	(0.29	)
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
	12/31/14			9/30/14			12/31/13			12/31/14			12/31/13

Average Balance Sheet Data
Assets	$	1,033,327		$	1,033,818		$	1,081,908		$	1,049,232		$	1,098,400
Loans		634,872			640,011			719,163			662,442			788,176
Earning assets		952,946			954,217			1,033,083			979,187			1,050,142
Deposits		948,899			947,989			989,847			961,671			1,004,052
Long-term debt and advances		34,127			35,202			35,652			34,981			36,394
Interest bearing liabilities		865,042			873,520			922,519			885,757			937,406
Stockholders’ equity		29,928			31,101			38,035			33,881			42,631


Performance Ratios
Return on average assets		(1.45)	%		(0.33)	%		(0.19)	%		(1.06)	%		(0.14)	%
Return on average equity		(50.18)			(10.83)			(5.28)			(33.42)			(3.72)
Yield on average earning assets (tax equivalent)		4.06			4.13			3.99			4.09			4.16
Cost of interest bearing liabilities		0.99			1.13			1.15			1.11			1.19
Net interest margin (tax equivalent)		3.16			3.10			2.96			3.09			3.10
Efficiency ratio		137.37			111.18			105.87			117.00			104.32


Loan Charge-off Data
Loans charged-off	$	(6,197	)	$	(1,824	)	$	(4,171	)	$	(19,426	)	$	(32,608	)
Recoveries		563			889			541			3,566			3,352
Net charge-offs	$	(5,634	)	$	(935	)	$	(3,630	)	$	(15,860	)	$	(29,256	)


Nonaccrual Loan Activity
Nonaccrual loans at beginning of period	$	44,670		$	44,375		$	106,922		$	101,767		$	94,517
Net principal pay-downs		(1,825	)		(3,229	)		(5,151	)		(27,494	)		(24,750	)
Charge-offs		(2,291	)		(1,217	)		(3,232	)		(14,105	)		(29,348	)
Loans foreclosed and transferred to OREO		(675	)		(797	)		(2,064	)		(31,698	)		(20,606	)
Loans returned to accrual status		(116	)		(57	)		(2,459	)		(3,405	)		(3,558	)
Loans placed on nonaccrual during the period		7,412			5,595			7,751			22,110			85,512
Nonaccrual loans at end of period	$	47,175		$	44,670		$	101,767		$	47,175		$	101,767


Troubled Debt Restructurings (TDRs)
Accruing	$	21,985		$	28,114		$	44,346		$	21,985		$	44,346
Nonaccrual		20,507			21,415			46,916			20,507			46,916
Total	$	42,492		$	49,529		$	91,262		$	42,492		$	91,262

Other Real Estate Owned (OREO) Activity
OREO at beginning of period	$	54,507		$	56,882		$	41,857		$	30,892		$	43,671
Real estate acquired		675			797			2,064			32,338			20,606
Valuation adjustment write-downs		(3,005	)		(600	)		(882	)		(4,255	)		(2,466	)
Proceeds from sales of properties		(5,831	)		(2,973	)		(12,205	)		(13,084	)		(30,787	)
Gain (loss) on sales, net		(149	)		401			58			306			(132	)
OREO at end of period	$	46,197		$	54,507		$	30,892		$	46,197		$	30,892


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

		As of
		12/31/14		9/30/14			6/30/14				3/31/14			12/31/13			12/31/12

Assets
Loans	$	624,999		$	638,360		$	643,030		$	682,591		$	709,326		$	899,092
Allowance for loan losses		(19,364	)		(24,198	)		(25,133	)		(25,415	)		(28,124	)		(56,680	)
Net loans		605,635			614,162			617,897			657,176			681,202			842,412
Loans held for sale		8,926			—			280			—			149			507
Securities held to maturity		42,325			42,386			43,488			43,550			43,612			—
Securities available for sale		190,791			192,146			180,723			166,442			163,344			178,476
Federal funds sold & interest bearing deposits		66,011			73,494			95,353			99,286			103,669			41,161
Cash and due from financial institutions		14,169			11,336			6,913			7,449			7,465			8,411
Premises and equipment		19,507			19,649			19,788			19,821			19,983			20,805
Bank owned life insurance		9,167			9,103			9,039			8,981			8,911			8,398
FHLB Stock		7,323			7,323			7,323			7,323			10,072			10,072
Other real estate owned		46,197			54,507			56,882			45,918			30,892			43,671
Accrued interest receivable and other assets		7,938			6,608			7,181			7,584			6,822			8,718
Total Assets	$	1,017,989		$	1,030,714		$	1,044,867		$	1,063,530		$	1,076,121		$	1,162,631

Liabilities and Equity
Certificates of deposit	$	574,681		$	609,682		$	631,110		$	656,475		$	679,952		$	760,573
Interest checking		91,086			76,431			76,625			79,689			84,626			87,234
Money market		109,734			100,890			95,946			89,678			79,349			63,715
Savings		36,430			36,364			37,178			38,524			36,292			39,227
Total interest bearing deposits		811,931			823,367			840,859			864,366			880,219			950,749
Demand deposits		114,910			110,165			109,956			110,507			107,486			114,310
Total deposits		926,841			933,532			950,815			974,873			987,705			1,065,059
Federal funds purchased & repurchase agreements		1,341			1,817			2,451			2,240			2,470			2,634
FHLB advances		15,752			16,940			14,134			4,345			4,492			5,604
Junior subordinated debentures		29,950			30,175			30,400			30,625			30,850			31,975
Accrued interest payable and other liabilities		10,640			18,922			16,453			15,110			14,673			10,169
Total liabilities		984,524			1,001,386			1,014,253			1,027,193			1,040,190			1,115,441

Preferred stockholders’ equity		8,552			38,283			38,283			38,283			38,283			38,123
Common stockholders’ equity (deficit)		24,913			(8,955	)		(7,669	)		(1,946	)		(2,352	)		9,067
Total stockholders’ equity		33,465			29,328			30,614			36,337			35,931			47,190
Total Liabilities and Stockholders’ Equity	$	1,017,989		$	1,030,714		$	1,044,867		$	1,063,530		$	1,076,121		$	1,162,631

Ending shares outstanding		14,890,514			13,099,400			13,104,853			12,894,741			12,840,999			12,002,421
Book value per common share	$	1.67		$	(0.68	)	$	(0.59	)	$	(0.15	)	$	(0.18	)	$	0.74
Tangible book value per common share		1.61			(0.76	)		(0.67	)		(0.25	)		(0.29	)		0.58


PORTER BANCORP, INC. Unaudited Financial Information (in thousands, except share and per share data)
		As of
		12/31/14			9/30/14			6/30/14			3/31/14			12/31/13			12/31/12
Asset Quality Data
Loan 90 days or more past due still on accrual	$	151		$	—		$	—		$	—		$	232		$	86
Nonaccrual loans		47,175			44,670			44,375			77,344			101,767			94,517
Total non-performing loans		47,326			44,670			44,375			77,344			101,999			94,603
Real estate acquired through foreclosures		46,197			54,507			56,882			45,918			30,892			43,671
Other repossessed assets		—			—			—			—			—			—
Total non-performing assets	$	93,523		$	99,177		$	101,257		$	123,262		$	132,891		$	138,274

Non-performing loans to total loans		7.57	%		7.00	%		6.90	%		11.33	%		14.38	%		10.52	%
Non-performing assets to total assets		9.19			9.62			9.69			11.59			12.35			11.89
Allowance for loan losses to non-performing loans		40.92			54.17			56.64			32.86			27.57			59.91

Allowance for loans evaluated individually	$	752		$	1,788		$	1,753		$	2,453		$	3,471		$	21,034
Loans evaluated individually for impairment		71,993			78,695			79,742			122,158			149,883			188,808
Allowance as % of loans evaluated individually		1.04	%		2.27	%		2.20	%		2.01	%		2.32	%		11.14	%

Allowance for loans evaluated collectively	$	18,612		$	22,410		$	23,380		$	22,962		$	24,653		$	35,646
Loans evaluated collectively for impairment		553,006			559,665			563,288			560,433			559,443			710,284
Allowance as % of loans evaluated collectively		3.37	%		4.00	%		4.15	%		4.10	%		4.41	%		5.02	%

Allowance for loan losses to total loans		3.10	%		3.79	%		3.91	%		3.72	%		3.96	%		6.30	%

Loans by Risk Category
Pass	$	461,126		$	446,166		$	434,853		$	415,144		$	369,529		$	437,886
Watch		68,200			83,711			91,208			104,171			144,316			177,419
Special Mention		4,189			4,431			3,223			4,069			5,865			34,700
Substandard		91,484			104,052			113,746			159,207			189,616			248,691
Doubtful		—			—			—			—			—			396
Total	$	624,999		$	638,360		$	643,030		$	682,591		$	709,326		$	899,092

Risk-based Capital Ratios - Company
Tier I leverage ratio		4.51	%		4.02	%		4.10	%		4.87	%		4.95	%		4.50	%
Tier I risk-based capital ratio		6.70			5.93			6.19			7.22			7.34			6.46
Total risk-based capital ratio		10.61			10.05			10.27			10.93			11.03			9.81

Risk-based Capital Ratios – PBI Bank
Tier I leverage ratio		5.78	%		6.09	%		5.96	%		6.36	%		6.28	%		5.37	%
Tier I risk-based capital ratio		8.59			8.99			9.00			9.44			9.35			7.71
Total risk-based capital ratio		10.57			11.01			11.06			11.50			11.44			9.82

FTE employees		264			268			275			263			260			278

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

Exhibit No.		Description of Exhibit
99.1		Press Release issued by Porter Bancorp, Inc. on February 2, 2015

Date: February 2, 2015	Porter Bancorp Inc.

	By:	/s/ Phillip W. Barnhouse
		Phillip W. Barnhouse
		Chief Financial Officer

Exhibit	Description

99.1	Press Release dated February 2, 2015