10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2013

Or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                     to                    

Commission file number: 001-33033

PORTER BANCORP, INC.

(Exact name of registrant as specified in its charter)

Kentucky	61-1142247
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
2500 Eastpoint Parkway, Louisville, Kentucky	40223
(Address of principal executive offices)	(Zip Code)

(502) 499-4800

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes   x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes  ¨    No  x

Indicate the number of shares outstanding of each of the issuer’s class of common stock, as of the latest practicable date.

12,301,084 shares of Common Stock, no par value, were outstanding at July 31, 2013.

INDEX

		Page
PART I –	FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS		1
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		36
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		54
ITEM 4.	CONTROLS AND PROCEDURES		54
PART II –	OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS		55
ITEM 1A.	RISK FACTORS		55
ITEM 2.	UNREGISTERED SALES ON EQUITY SECURITIES AND USE OF PROCEEDS		55
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES		55
ITEM 4.	MINE SAFETY DISCLOSURES		55
ITEM 5.	OTHER INFORMATION		55
ITEM 6.	EXHIBITS		55

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

The following consolidated financial statements of Porter Bancorp, Inc. and subsidiary, PBI Bank, Inc. are submitted:

Unaudited Consolidated Balance Sheets for June 30, 2013 and December 31, 2012

Unaudited Consolidated Statements of Operations for the three and six months ended June 30, 2013 and 2012

Unaudited Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2013 and

2012

Unaudited Consolidated Statement of Changes in Stockholders’ Equity for the six months ended June 30, 2013

Unaudited Consolidated Statements of Cash Flows for the six months ended June 30, 2013 and 2012

Notes to Unaudited Consolidated Financial Statements

1

PORTER BANCORP, INC.

Unaudited Consolidated Balance Sheets

(dollars in thousands except share data)

	June 30, 2013			December 31, 2012
Assets
Cash and due from financial institutions	$	61,949		$	46,512
Federal funds sold		2,317			3,060
Cash and cash equivalents		64,266			49,572
Securities available for sale		176,942			178,476
Mortgage loans held for sale		133			507
Loans, net of allowance of $37,559 and $56,680, respectively		737,226			842,412
Premises and equipment		20,368			20,805
Other real estate owned		47,030			43,671
Federal Home Loan Bank stock		10,072			10,072
Bank owned life insurance		8,772			8,398
Accrued interest receivable and other assets		7,322			8,718
Total assets	$	1,072,131		$	1,162,631
Liabilities and Stockholders’ Equity
Deposits
Non-interest bearing	$	106,320		$	114,310
Interest bearing		874,516			950,749
Total deposits		980,836			1,065,059
Repurchase agreements		3,292			2,634
Federal Home Loan Bank advances		5,016			5,604
Accrued interest payable and other liabilities		12,710			10,169
Subordinated capital note		6,525			6,975
Junior subordinated debentures		25,000			25,000
Total liabilities		1,033,379			1,115,441
Stockholders’ equity
Preferred stock, no par, 1,000,000 shares authorized,
Series A – 35,000 issued and outstanding; Liquidation preference of $35.0 million at June 30, 2013		34,930			34,840
Series C – 317,042 issued and outstanding; Liquidation preference of $3.6 million at June 30, 2013		3,283			3,283
Common stock, no par, 86,000,000 shares authorized, 12,322,207 and 12,002,421 shares issued and outstanding, respectively		112,236			112,236
Additional paid-in capital		20,509			20,283
Retained deficit		(128,860	)		(126,517	)
Accumulated other comprehensive income		(3,346	)		3,065
Total stockholders’ equity		38,752			47,190
Total liabilities and stockholders’ equity	$	1,072,131		$	1,162,631

See accompanying notes to unaudited consolidated financial statements.

2

PORTER BANCORP, INC.

Unaudited Consolidated Statements of Operations

(dollars in thousands, except per share data)

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Interest income
Loans, including fees	$	9,954		$	13,689		$	19,987		$	28,201
Taxable securities		848			797			1,715			1,638
Tax exempt securities		231			196			452			446
Fed funds sold and other		135			130			272			282
		11,168			14,812			22,426			30,567
Interest expense
Deposits		2,560			3,726			5,264			7,726
Federal Home Loan Bank advances		41			54			84			111
Subordinated capital note		56			67			114			138
Junior subordinated debentures		157			168			311			339
Federal funds purchased and other		2			2			3			4
		2,816			4,017			5,776			8,318
Net interest income		8,352			10,795			16,650			22,249
Provision for loan losses		—			4,000			450			7,750
Net interest income after provision for loan losses		8,352			6,795			16,200			14,499
Non-interest income
Service charges on deposit accounts		506			556			999			1,110
Income from fiduciary activities		—			291			517			542
Bank card interchange fees		196			199			368			376
Other real estate owned rental income		230			24			342			62
Net gain on sales of securities		703			1,511			703			3,530
Income from bank owned life insurance		305			79			384			158
Other		208			358			482			685
		2,148			3,018			3,795			6,463
Non-interest expense
Salaries and employee benefits		3,999			3,982			8,138			8,294
Occupancy and equipment		913			969			1,844			1,855
Loan collection expense		2,407			586			3,442			946
Other real estate owned expense		1,657			1,205			2,448			2,462
FDIC Insurance		650			832			1,289			1,705
State franchise tax		537			592			1,074			1,184
Professional fees		499			567			905			923
Communications		179			168			354			348
Insurance expense		160			104			311			200
Postage and delivery		102			109			215			231
Other		706			548			1,353			1,161
		11,809			9,662			21,373			19,309
Income (loss) before income taxes		(1,309	)		151			(1,378	)		1,653
Income tax benefit		—			—			—			—
Net income (loss)		(1,309	)		151			(1,378	)		1,653
Less:
Dividends on preferred stock		437			438			875			875
Accretion on Series A preferred stock		45			45			90			90
Earnings (losses) allocated to participating securities		(110	)		(13	)		(131	)		27
Net income (loss) attributable to common shareholders	$	(1,681	)	$	(319	)	$	(2,212	)	$	661
Basic earnings (loss) per common share	$	(0.14	)	$	(0.03	)	$	(0.19	)	$	0.06
Diluted earnings (loss) per common share	$	(0.14	)	$	(0.03	)	$	(0.19	)	$	0.06

See accompanying notes to unaudited consolidated financial statements.

3

PORTER BANCORP, INC.

Unaudited Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

	Three Months Ended June  30,						Six Months Ended June 30,
	2013			2012			2013			2012
Net income (loss)	$	(1,309	)	$	151		$	(1,378	)	$	1,653
Other comprehensive income (loss), net of tax:
Unrealized gain (loss) on securities:
Unrealized gain (loss) arising during the period		(9,086	)		(195	)		(9,160	)		427
Reclassification of amount realized through sales		(703	)		(1,511	)		(703	)		(3,530	)
Included in net loss		(9,789	)		(1,706	)		(9,863	)		(3,103	)
Tax effect		3,426			597			3,452			1,086
Net of tax		(6,363	)		(1,109	)		(6,411	)		(2,017	)
Comprehensive income (loss)	$	(7,672	)	$	(958	)	$	(7,789	)	$	(364	)

See accompanying notes to unaudited consolidated financial statements.

4

PORTER BANCORP, INC.

Unaudited Consolidated Statement of Changes in Stockholders’ Equity

For Six Months Ended June 30, 2013

(dollars in thousands, except share and per share data)

																			Accumulated
	Shares							Amount						Additional					Other
				Series A		Series C				Series A		Series C		Paid-In		Retained			Comprehensive
	Common			Preferred		Preferred		Common		Preferred		Preferred		Capital		Deficit			Income			Total
Balances, January 1, 2013		12,002,421			35,000		317,042	$	112,236	$	34,840	$	3,283	$	20,283	$	(126,517	)	$	3,065		$	47,190
Issuance of unvested stock		325,018			—		—		—		—		—		—		—			—			—
Forfeited unvested stock		(5,232	)		—		—		—		—		—		—		—			—			—
Stock-based compensation expense		—			—		—		—		—		—		226		—			—			226
Net loss		—			—		—		—		—		—		—		(1,378	)		—			(1,378	)
Net change in accumulated other comprehensive income, net of taxes		—			—		—		—		—		—		—		—			(6,411	)		(6,411	)
Dividends 5% on Series A preferred stock		—			—		—		—		—		—		—		(875	)		—			(875	)
Accretion of Series A preferred stock discount		—			—		—		—		90		—		—		(90	)		—			—
Balances, June 30, 2013		12,322,207			35,000		317,042	$	112,236	$	34,930	$	3,283	$	20,509	$	(128,860	)	$	(3,346	)	$	38,752

See accompanying notes to unaudited consolidated financial statements.

5

PORTER BANCORP, INC.

Unaudited Consolidated Statements of Cash Flows

For Six Months Ended June 30, 2013 and 2012

(dollars in thousands)

	2013			2012
Cash flows from operating activities
Net income (loss)	$	(1,378	)	$	1,653
Adjustments to reconcile net loss to net cash from operating activities
Depreciation and amortization		1,042			1,127
Provision for loan losses		450			7,750
Net amortization on securities		1,185			1,566
Stock-based compensation expense		226			215
Net gain on loans originated for sale		(66	)		(122	)
Loans originated for sale		(2,095	)		(5,721	)
Proceeds from sales of loans originated for sale		2,524			6,133
Net gain on sales of investment securities		(703	)		(3,530	)
Net loss on sales of other real estate owned		359			948
Net write-down of other real estate owned		1,284			830
Earnings on bank owned life insurance		(374	)		(148	)
Net change in accrued interest receivable and other assets		1,095			4,282
Net change in accrued interest payable and other liabilities		1,666			(977	)
Net cash from operating activities		5,215			14,006
Cash flows from investing activities
Purchases of available-for-sale securities		(24,929	)		(121,854	)
Sales and calls of available-for-sale securities		1,908			65,695
Maturities and prepayments of available-for-sale securities		17,661			20,848
Proceeds from sale of other real estate owned		10,538			13,072
Improvements to other real estate owned		—			(1	)
Loan originations and payments, net		89,045			58,397
Purchases of premises and equipment, net		(141	)		(318	)
Net cash from investing activities		94,082			35,839
Cash flows from financing activities
Net change in deposits		(84,223	)		(119,041	)
Net change in repurchase agreements		658			763
Repayment of Federal Home Loan Bank advances		(588	)		(718	)
Repayment of subordinated capital note		(450	)		(450	)
Net cash from financing activities		(84,603	)		(119,446	)
Net change in cash and cash equivalents		14,694			(69,601	)
Beginning cash and cash equivalents		49,572			105,962
Ending cash and cash equivalents	$	64,266		$	36,361
Supplemental cash flow information:
Interest paid	$	5,603		$	8,159
Income taxes paid (refunded)		—			(2,000	)
Supplemental non-cash disclosure:
Transfer from loans to other real estate	$	15,555		$	28,126
Financed sales of other real estate owned		15			361

See accompanying notes to unaudited consolidated financial statements.

6

PORTER BANCORP, INC.

Notes to Unaudited Consolidated Financial Statements

Note 1 – Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation – The consolidated financial statements include Porter Bancorp, Inc. (Company or PBI) and its subsidiary, PBI Bank (Bank). The Company owns a 100% interest in the Bank. All significant inter-company transactions and accounts have been eliminated in consolidation.

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, the financial statements do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for six months ended June 30, 2013 are not necessarily indicative of the results that may be expected for the entire year. A description of other significant accounting policies is presented in the notes to the Consolidated Financial Statements for the year ended December 31, 2012 included in the Company’s Annual Report on Form 10-K.

Use of Estimates – To prepare financial statements in conformity with U.S. generally accepted accounting principles, management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and future results could differ. The allowance for loan losses, fair values of financial instruments, stock compensation, deferred tax assets, other intangibles, and fair values of other real estate owned are particularly subject to change.

Reclassifications – Some items in the prior year financial statements were reclassified to conform to the current presentation. The reclassifications did not impact net income or stockholders’ equity.

Note 2 – Going Concern Considerations and Future Plans

The consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business for the foreseeable future. However, the events and circumstances described in this Note raise substantial doubt about the Company’s ability to continue as a going concern.

During the first six months of 2013, we reported net loss to common shareholders of $2.2 million, compared with net income to common shareholders of $661,000 for the first six months of 2012. This was primarily due to decreased net interest income driven by the reduction of the size of our loan portfolio and a decline in our net interest margin, a reduction of $2.8 million in gains on sales of investment securities, an increase in our loan collection expense and continuing costs to carry higher levels of nonperforming assets. This was offset by a decrease in the provision for loan losses expense from $7.8 million for the six months ended June 30, 2012, to $450,000 for the six months ended June 30, 2013.

For the year ended December 31, 2012, we reported net loss to common shareholders of $33.4 million. This loss was attributable primarily to $40.3 million of provision for loan losses expense. A decline in credit quality in our portfolio during the year resulted in net charge-offs of $36.1 million, and OREO expense of $10.5 million resulting from fair value write-downs driven by new appraisals and reduced marketing prices, net loss on sales, and ongoing operating expense. We also had lower net interest margin due to lower average loans outstanding, loans re-pricing at lower rates, and the level of non-performing loans in our portfolio. Net loss to common shareholders of $33.4 million, for the year ended December 31, 2012, compares with net loss to common shareholders of $105.2 million for the year ended December 31, 2011.

In the fourth quarter of 2011, we began deferring the payment of regular quarterly cash dividends on our Series A Preferred Stock issued to the U.S. Treasury. At June 30, 2013, cumulative accrued and unpaid dividends on this stock totaled $3.3 million. We have deferred dividend payments for six quarters and the holder of our Series A Preferred Stock (currently the U.S. Treasury) has the right to appoint up to two representatives to our Board of Directors. We continue to accrue deferred dividends, which are deducted from income to common shareholders for financial statement purposes.

In June 2011, the Bank agreed to a Consent Order with the FDIC and KDFI in which the Bank agreed, among other things, to improve asset quality, reduce loan concentrations, and maintain a minimum Tier 1 leverage ratio of 9% and a minimum total risk based capital ratio of 12%. The Consent Order was included in our Current Report on 8-K filed on June 30, 2011. In October 2012, the Bank entered into a new Consent Order with the FDIC and KDFI again agreeing to maintain a minimum Tier 1 leverage ratio of 9% and a minimum total risk based capital ratio of 12%. The Bank also agreed that if it should be unable to reach the required capital levels, and if directed in writing by the FDIC, then the Bank would within 30 days develop, adopt and implement a written plan to sell or merge itself into another federally insured financial institution or otherwise immediately obtain a sufficient capital investment into the Bank to fully meet the capital requirements.

7

We expect to continue to work with our regulators toward capital ratio compliance as outlined in the written capital plan previously submitted by the Bank. The new Consent Order also requires the Bank to continue to adhere to the plans implemented in response to the June 2011 Consent Order, and includes the substantive provisions of the June 2011 Consent Order. The new Consent Order was included in our Current Report on 8-K filed on September 19, 2012. As of June 30, 2013, the capital ratios required by the Consent Order were not met.

In order to meet these capital requirements, the Board of Directors and management are continuing to evaluate strategies to achieve the following objectives:

• Increasing capital through a possible public offering or private placement of common stock to new and existing shareholders. We have engaged a financial advisor to assist our Board in evaluating our options for increasing capital and redeeming our Series A preferred stock issued to the US Treasury in 2008 under the Capital Purchase Program.

• Continuing to operate the Company and Bank in a safe and sound manner. This strategy will require us to continue to reduce the size of our balance sheet, reduce our lending concentrations, consider selling loans, and reduce other noninterest expense through the disposition of OREO.

• Continuing with succession planning and adding resources to the management team. John T. Taylor was named President and CEO for PBI Bank and appointed to the Board of Directors in July 2012. Effective July 31, 2013, Maria L. Bouvette retired as the Company’s Chairman of the Board and CEO, and as Chairman of the Board of PBI Bank. W. Glenn Hogan is expected to be elected Chairman of the Board of the Company following regulatory approval. John T. Taylor will be named CEO of the Company, following regulatory approval. Additionally, John R. Davis was appointed Chief Credit Officer of PBI Bank in August 2012, with responsibility for establishing and executing the credit quality policies and overseeing credit administration for the organization.

• Evaluating our internal processes and procedures, distribution of labor, and work-flow to ensure we have adequately and appropriately deployed resources in an efficient manner in the current environment. To this end, we believe the opportunity exists to centralize key processes that will lead to improved execution and cost savings.

• Executing on our commitment to improve credit quality and reduce loan concentrations and balance sheet risk.

• We have reduced the size of our loan portfolio significantly from $1.3 billion at December 31, 2010, to $1.1 billion at December 31, 2011, to $899.1 million at December 31, 2012, and $774.8 million at June 30, 2013. We have significantly improved our staffing in the commercial lending area which is now led by Joe C. Seiler.

• Our Consent Order calls for us to reduce our construction and development loans to not more than 75% of total risk-based capital. We are now in compliance with construction and development loans totaling $58.0 million, or 70% of total risk-based capital, at June 30, 2013, down from $70.3 million, or 82% of total risk-based capital, at December 31, 2012.

• Our Consent Order also requires us to reduce non-owner occupied commercial real estate loans, construction and development loans, and multi-family residential real estate loans as a group, to not more than 250% of total risk-based capital. While we have made significant improvements over the last year, we were not in compliance with this concentration limit at June 30, 2013. These loans totaled $270.8 million, or 325% of total risk-based capital, at June 30, 2013 and $311.1 million, or 362% of total risk-based capital, at December 31, 2012.

• We are working to reduce our loan concentrations by curtailing new construction and development lending and new non-owner occupied commercial real estate lending. We are also receiving principal reductions from amortizing credits and pay-downs from our customers who sell properties built for resale. We have reduced the construction loan portfolio from $199.5 million at December 31, 2010 to $58.0 million at June 30, 2013. Our non-owner occupied commercial real estate loans declined from $293.3 million at December 31, 2010 to $165.6 million at June 30, 2013.

• Executing on our commitment to sell other real estate owned and reinvest in quality income producing assets.

• The remediation process for loans secured by real estate has led the Bank to acquire significant levels of OREO in 2012, 2011, and 2010. This trend has continued at a slower pace in 2013. The Bank acquired $33.5 million, $41.9 million, and $90.8 million during 2012, 2011, and 2010, respectively. For the first six months of 2013, we acquired $15.6 million of OREO.

8

• We have incurred significant losses in disposing of this real estate. We incurred losses totaling $9.3 million, $42.8 million, and $13.9 million in 2012, 2011, and 2010, respectively, from sales at less than carrying values and fair value write-downs attributable to declines in appraisal valuations and changes in our pricing strategies. During the six month period ended June 30, 2013, we incurred OREO losses totaling $1.6 million, which consisted of $359,000 in loss on sale and $1.3 million from declining values as evidenced by new appraisals and reduced marketing prices in connection with our sales strategies.

• To ensure that we maximize the value we receive upon the sale of OREO, we continually evaluate sales opportunities and channels. We are targeting multiple sales opportunities and channels through internal marketing and the use of brokers, auctions, technology sales platforms, and bulk sale strategies. Proceeds from the sale of OREO totaled $10.5 million during the six months ended June 30, 2013 and $22.5 million, $26.0 million and $25.0 million during 2012, 2011, and 2010, respectively.

• At December 31, 2012, the OREO portfolio consisted of 51% construction, development, and land assets. At June 30, 2013 this concentration had declined to 43%. This is consistent with our reduction of construction, development and other land loans, which have declined to $58.0 million at June 30, 2013 compared to $70.3 million at December 31, 2012. Over the past six months, the composition of our OREO portfolio has shifted toward commercial real estate and 1-4 family residential properties, which we have found to be more liquid than construction, development, and land assets. Commercial real estate represents 39% of the portfolio at June 30, 2013 compared with 35% at December 31, 2012. 1-4 family residential properties represent 15% of the portfolio at June 30, 2013 compared with 12% at December 31, 2012.

• Evaluating other strategic alternatives, such as the sale of assets or branches.

Bank regulatory agencies can exercise discretion when an institution does not meet the terms of a consent order. Based on individual circumstances, the agencies may issue mandatory directives, impose monetary penalties, initiate changes in management, or take more serious adverse actions.

9

Note 3 – Securities

The fair value of available for sale securities and the related gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) were as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
June 30, 2013:
U.S. Government and federal agency	$	26,604	$	358	$	(659	)	$	26,303
Agency mortgage-backed: residential		71,740		454		(1,625	)		70,569
State and municipal		55,835		974		(1,510	)		55,299
Corporate bonds		23,086		937		(160	)		23,863
Other		572		59		—			631
Total debt securities		177,837		2,782		(3,954	)		176,665
Equity		209		68		—			277
Total	$	178,046	$	2,850	$	(3,954	)	$	176,942
December 31, 2012:
U.S. Government and federal agency	$	5,603	$	530	$	—		$	6,133
Agency mortgage-backed: residential		94,298		1,141		(257	)		95,182
State and municipal		52,485		2,335		(87	)		54,733
Corporate bonds		18,851		1,150		(37	)		19,964
Other		572		46		—			618
Total debt securities		171,809		5,202		(381	)		176,630
Equity		1,359		487		—			1,846
Total	$	173,168	$	5,689	$	(381	)	$	178,476

Sales and calls of available for sale securities were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
	(in thousands)				(in thousands)
Proceeds	$	1,908	$	44,310	$	1,908	$	65,695
Gross gains		704		1,511		704		3,530
Gross losses		1		—		1		—

The amortized cost and fair value of the debt investment securities portfolio are shown by contractual maturity. Contractual maturities may differ from actual maturities if issuers have the right to call or prepay obligations with or without call or prepayment penalties. Mortgage-backed securities not due at a single maturity date are detailed separately.

	June 30, 2013
	Amortized Cost		Fair Value
	(in thousands)
Maturity
Available-for-sale
Within one year	$	17,901	$	17,928
One to five years		14,213		15,289
Five to ten years		64,364		63,449
Beyond ten years		9,619		9,430
Agency mortgage-backed: residential		71,740		70,569
Total	$	177,837	$	176,665

10

Securities pledged at June 30, 2013 and December 31, 2012 had carrying values of approximately $59.0 million and $76.4 million, respectively, and were pledged to secure public deposits and repurchase agreements.

The Company evaluates securities for other than temporary impairment (OTTI) on at least a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to the length of time and the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, underlying credit quality of the issuer, and the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. In analyzing an issuer’s financial condition, the Company may consider whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, the sector or industry trends and cycles affecting the issuer, and the results of reviews of the issuer’s financial condition. Management currently intends to hold all securities with unrealized losses until recovery, which for fixed income securities may be at maturity.

At June 30, 2013, the Company held one equity security. This security was in an unrealized gain position as of June 30, 2013. Management monitors the underlying financial condition of the issuers and current market pricing for this equity security monthly. As of June 30, 2013, management does not believe securities in our portfolio with unrealized losses should be classified as other than temporarily impaired. Management currently intends to hold securities with unrealized losses until recovery, which for fixed income securities may be at maturity.

Securities with unrealized losses at June 30, 2013 and December 31, 2012, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, are as follows:

	Less than 12 Months					12 Months or More					Total
Description of Securities	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
	(in thousands)
June 30, 2013:
U.S Government & federal agency	$	20,428	$	(659	)	$	—	$	—		$	20,428	$	(659	)
Agency mortgage-backed: residential		51,069		(1,474	)		4,525		(151	)		55,594		(1,625	)
State and municipal		31,198		(1,453	)		1,082		(57	)		32,280		(1,510	)
Corporate bonds		7,836		(160	)		—		—			7,836		(160	)
Total temporarily impaired	$	110,531	$	(3,746	)	$	5,607	$	(208	)	$	116,138	$	(3,954	)
December 31, 2012:
Agency mortgage-backed: residential	$	23,375	$	(257	)	$	—	$	—		$	23,375	$	(257	)
State and municipal		7,961		(87	)		—		—			7,961		(87	)
Corporate bonds		3,777		(37	)		—		—			3,777		(37	)
Equity		2		—			—		—			2		—
Total temporarily impaired	$	35,115	$	(381	)	$	—	$	—		$	35,115	$	(381	)

11

Note 4 – Loans

Loans were as follows:

	June 30, 2013			December 31, 2012
	(in thousands)
Commercial	$	51,079		$	52,567
Commercial Real Estate:
Construction		57,951			70,284
Farmland		72,312			80,825
Other		256,859			322,687
Residential Real Estate:
Multi-family		47,253			50,986
1-4 Family		247,248			278,273
Consumer		16,746			20,383
Agriculture		24,613			22,317
Other		724			770
Subtotal		774,785			899,092
Less: Allowance for loan losses		(37,559	)		(56,680	)
Loans, net	$	737,226		$	842,412

The following table presents the activity in the allowance for loan losses by portfolio segment for the three months ended June 30, 2013 and 2012:

	Commercial			Commercial Real Estate			Residential Real  Estate			Consumer			Agriculture			Other		Total
	(in thousands)
June 30, 2013:
Beginning balance	$	4,990		$	22,169		$	11,540		$	716		$	410		$	14	$	39,839
Provision for loan losses		(805	)		321			360			(7	)		127			4		—
Loans charged off		(132	)		(1,866	)		(1,137	)		(203	)		(66	)		—		(3,404	)
Recoveries		595			398			27			88			16			—		1,124
Ending balance	$	4,648		$	21,022		$	10,790		$	594		$	487		$	18	$	37,559
June 30, 2012:
Beginning balance	$	4,082		$	32,982		$	15,720		$	812		$	345		$	12	$	53,953
Provision for loan losses		(78	)		1,003			2,696			97			282			—		4,000
Loans charged off		(210	)		(2,944	)		(2,862	)		(135	)		(287	)		—		(6,438	)
Recoveries		17			8			33			18			3			—		79
Ending balance	$	3,811		$	31,049		$	15,587		$	792		$	343		$	12	$	51,594

12

The following table presents the activity in the allowance for loan losses by portfolio segment for the six months ended June 30, 2013 and 2012:

	Commercial			Commercial Real Estate			Residential Real  Estate			Consumer			Agriculture			Other			Total
	(in thousands)
June 30, 2013:
Beginning balance	$	4,402		$	34,768		$	16,235		$	857		$	403		$	15		$	56,680
Provision for loan losses		633			(124	)		(90	)		79			(51	)		3			450
Loans charged off		(1,108	)		(14,178	)		(5,476	)		(521	)		(83	)		—			(21,366	)
Recoveries		721			556			121			179			218			—			1,795
Ending balance	$	4,648		$	21,022		$	10,790		$	594		$	487		$	18		$	37,559
June 30, 2012:
Beginning balance	$	4,207		$	33,024		$	14,217		$	792		$	325		$	14		$	52,579
Provision for loan losses		11			1,775			5,202			321			443			(2	)		7,750
Loans charged off		(466	)		(3,863	)		(3,891	)		(372	)		(428	)		—			(9,020	)
Recoveries		59			113			59			51			3			—			285
Ending balance	$	3,811		$	31,049		$	15,587		$	792		$	343		$	12		$	51,594

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on the impairment method as of June 30, 2013:

	Commercial		Commercial Real Estate		Residential Real  Estate		Consumer		Agriculture		Other		Total
	(in thousands)
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	1,388	$	7,597	$	1,171	$	21	$	—	$	13	$	10,190
Collectively evaluated for impairment		3,260		13,425		9,619		573		487		5		27,369
Total ending allowance balance	$	4,648	$	21,022	$	10,790	$	594	$	487	$	18	$	37,559
Loans:
Loans individually evaluated for impairment	$	6,448	$	115,387	$	52,359	$	110	$	199	$	535	$	175,038
Loans collectively evaluated for impairment		44,631		271,735		242,142		16,636		24,414		189		599,747
Total ending loans balance	$	51,079	$	387,122	$	294,501	$	16,746	$	24,613	$	724	$	774,785

13

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on the impairment method as of December 31, 2012:

	Commercial		Commercial Real Estate		Residential Real  Estate		Consumer		Agriculture		Other		Total
	(in thousands)
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	263	$	16,046	$	4,641	$	68	$	5	$	11	$	21,034
Collectively evaluated for impairment		4,139		18,722		11,594		789		398		4		35,646
Total ending allowance balance	$	4,402	$	34,768	$	16,235	$	857	$	403	$	15	$	56,680
Loans:
Loans individually evaluated for impairment	$	5,296	$	125,922	$	56,799	$	212	$	55	$	524	$	188,808
Loans collectively evaluated for impairment		47,271		347,874		272,460		20,171		22,262		246		710,284
Total ending loans balance	$	52,567	$	473,796	$	329,259	$	20,383	$	22,317	$	770	$	899,092

Impaired Loans

Impaired loans include restructured loans and commercial, construction, agriculture and commercial real estate loans on nonaccrual or classified as doubtful, whereby collection of the total amount is improbable, or loss, whereby all or a portion of the loan has been written off or a specific allowance for loss has been provided.

The following table presents information related to loans individually evaluated for impairment by class of loans as of and for the three and six months ended June 30, 2013:

					Allowance For Loan Losses Allocated		Three Months Ended June 30, 2013				Six Months Ended June 30, 2013
	Unpaid Principal Balance		Recorded Investment				Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Cash Basis Income Recognized
					(in thousands)
With No Related Allowance Recorded:
Commercial	$	2,230	$	1,898	$	—	$	1,892	$	—	$	1,673	$	—	$	—
Commercial real estate:
Construction		281		191		—		496		6		700		11		11
Farmland		4,369		4,302		—		4,187		105		4,274		172		172
Other		1,737		1,526		—		1,671		253		1,745		257		257
Residential real estate:
Multi-family		637		637		—		638		—		640		—		—
1-4 Family		11,392		10,997		—		12,174		38		12,502		57		57
Consumer		1		1		—		8		—		28		—		—
Agriculture		278		199		—		185		—		138		—		—
Other		17		17		—		8		—		6		—		—
With An Allowance Recorded:
Commercial		5,072		4,550		1,388		4,165		31		4,131		61		—
Commercial real estate:
Construction		23,669		22,347		411		23,414		34		24,094		68		—
Farmland		7,914		5,545		253		5,797		11		6,017		22		—
Other		96,076		81,475		6,933		79,407		352		81,792		682		—
Residential real estate:
Multi-family		14,646		12,937		411		13,046		51		13,666		107		—
1-4 Family		30,342		27,788		760		28,492		115		28,359		218		—
Consumer		178		110		21		155		1		150		1		—
Agriculture		—		—		—		—		—		4		—		—
Other		518		518		13		520		4		521		8		—
Total	$	199,357	$	175,038	$	10,190	$	176,255	$	1,001	$	180,440	$	1,664	$	497

14

The following table presents loans individually evaluated for impairment by class of loan as of December 31, 2012:

	Unpaid Principal Balance		Recorded Investment		Allowance For Loan Losses Allocated		Average Recorded Investment		Interest Income Recognized		Cash Basis Income Recognized
	(in thousands)
With No Related Allowance Recorded:
Commercial	$	1,460	$	1,234	$	—	$	1,637	$	5	$	4
Commercial real estate:
Construction		1,155		1,109		—		1,745		2		2
Farmland		4,448		4,448		—		4,706		57		57
Other		2,134		1,892		—		3,436		3		3
Residential real estate:
Multi-family		643		643		—		910		—		—
1-4 Family		13,539		13,158		—		11,291		56		56
Consumer		70		70		—		219		8		5
Agriculture		45		45		—		366		2		—
Other		—		—		—		—		—		—
With An Allowance Recorded:
Commercial		4,108		4,062		263		3,964		169		27
Commercial real estate:
Construction		26,645		25,455		1,543		19,514		348		5
Farmland		8,557		6,456		734		5,794		43		2
Other		97,699		86,562		13,769		83,087		2,011		185
Residential real estate:
Multi-family		14,906		14,906		1,643		11,187		468		—
1-4 Family		31,021		28,092		2,998		27,404		787		9
Consumer		142		142		68		29		—		—
Agriculture		10		10		5		6		—		—
Other		524		524		11		533		17		—
Total	$	207,106	$	188,808	$	21,034	$	175,828	$	3,976	$	355

Troubled Debt Restructuring

A troubled debt restructuring (TDR) occurs when the Company has agreed to a loan modification in the form of a concession for a borrower who is experiencing financial difficulty. The majority of the Company’s TDRs involve a reduction in interest rate, a deferral of principal for a stated period of time, or an interest only period. All TDRs are considered impaired and the Company has allocated reserves for these loans to reflect the present value of the concessionary terms granted to the customer.

The following table presents the types of TDR loan modifications by portfolio segment outstanding as of June 30, 2013 and December 31, 2012:

	TDRs Performing to Modified Terms		TDRs Not Performing to Modified Terms		Total TDRs
	(in thousands)
June 30, 2013
Commercial
Rate reduction	$	1,981	$	—	$	1,981
Principal deferral		881		—		881
Interest only payments		—		238		238
Commercial Real Estate:
Construction
Rate reduction		3,409		3,353		6,762
Principal deferral		499		—		499
Farmland
Rate reduction		150		—		150
Principal deferral		712		2,438		3,150

15

Other
Rate reduction		29,526		20,463		49,989
Principal deferral		1,182		—		1,182
Interest only payments		2,458		1,489		3,947
Residential Real Estate:
Multi-family
Rate reduction		4,694		6,836		11,530
Interest only payments		647		—		647
1-4 Family
Rate reduction		8,217		11,693		19,910
Consumer
Rate reduction		53		—		53
Other
Rate reduction		518		—		518
Total TDRs	$	54,927	$	46,510	$	101,437

	TDRs Performing to Modified Terms		TDRs Not Performing  to Modified Terms		Total TDRs
	(in thousands)
December 31, 2012
Commercial
Rate reduction	$	1,972	$	—	$	1,972
Principal deferral		887		—		887
Interest only payments		—		958		958
Commercial Real Estate:
Construction
Rate reduction		4,834		4,459		9,293
Farmland
Rate reduction		150		—		150
Principal deferral		725		2,438		3,163
Other
Rate reduction		36,515		22,631		59,146
Principal deferral		1,195		—		1,195
Interest only payments		2,466		2,107		4,573
Residential Real Estate:
Multi-family
Rate reduction		13,087		—		13,087
Interest only payments		652		—		652
1-4 Family
Rate reduction		14,323		7,871		22,194
Consumer
Rate reduction		14		—		14
Other
Rate reduction		524		—		524
Total TDRs	$	77,344	$	40,464	$	117,808

At June 30, 2013, and December 31, 2012, 54% and 66%, respectively, of the Company’s TDRs were performing according to their modified terms. The Company allocated $5.2 million and $15.1 million in reserves to customers whose loan terms have been modified in TDRs as of June 30, 2013, and December 31, 2012, respectively. The Company has committed to lend additional amounts totaling $262,000 and $259,000 as of June 30, 2013, and December 31, 2012, respectively, to customers with outstanding loans that are classified as TDRs.

16

The following tables present a summary of the types of TDR loan modifications by portfolio type that occurred during the three months ended June 30, 2013 and 2012:

	TDRs Performing to Modified Terms		TDRs Not Performing to Modified Terms		Total TDRs
	(in thousands)
June 30, 2013
Commercial Real Estate:
Construction
Principal deferral	$	499	$	—	$	499
Total TDRs	$	499	$	—	$	499

	TDRs Performing to Modified Terms		TDRs Not Performing to Modified Terms		Total TDRs
	(in thousands)
June 30, 2012
Commercial Real Estate:
Construction
Interest only payments	$	152	$	—	$	152
Other
Rate reduction		8,152		—		8,152
Principal deferral		1,196		—		1,196
Interest only payments		2,462		—		2,462
Residential Real Estate:
1-4 Family
Rate reduction		3,086		—		3,086
Principal deferral		—		573		573
Total TDRs	$	15,048	$	573	$	15,621

As of June 30, 2013 and 2012, 100% and 96%, respectively, of the Company’s TDRs that occurred during the three months ended June 30, 2013 and 2012, were performing according to their modified terms. The Company allocated $49,000 and $1.3 million in reserves to customers whose loan terms have been modified during the three months ended June 30, 2013 and 2012, respectively. For modifications occurring during the three month period ended June 30, 2013 and 2012, the post-modification balances approximate the pre-modification balances.

17

The following tables present a summary of the types of TDR loan modifications by portfolio type that occurred during the six months ended June 30, 2013 and 2012:

	TDRs Performing to Modified Terms		TDRs Not Performing to Modified Terms		Total TDRs
	(in thousands)
June 30, 2013
Commercial:
Rate reduction	$	45	$	—	$	45
Commercial Real Estate:
Construction
Rate reduction		—		1,291		1,291
Principal deferral		499		—		499
Other
Rate reduction		1,399		—		1,399
Residential Real Estate:
1-4 Family
Rate reduction		897		—		897
Consumer:
Rate reduction		40		—		40
Total TDRs	$	2,880	$	1,291	$	4,171

	TDRs Performing to Modified Terms		TDRs Not Performing to Modified Terms		Total TDRs
	(in thousands)
June 30, 2012
Commercial:
Interest only payments	$	—	$	1,019	$	1,019
Commercial Real Estate:
Construction
Interest only payments		152		—		152
Other
Rate reduction		11,302		—		11,302
Principal deferral		1,196		—		1,196
Interest only payments		2,462		2,174		4,636
Residential Real Estate:
Multi-family
Rate reduction		8,386		—		8,386
1-4 Family
Rate reduction		8,470		—		8,470
Principal deferral		—		573		573
Total TDRs	$	31,968	$	3,766	$	35,734

As of June 30, 2013 and 2012, 69% and 89%, respectively, of the Company’s TDRs that occurred during the six months ended June 30, 2013 and 2012, were performing according to their modified terms. The Company allocated $230,000 and $2.6 million in reserves to customers whose loan terms have been modified during the six months ended June 30, 2013 and 2012, respectively. For modifications occurring during the six month period ended June 30, 2013 and 2012, the post-modification balances approximate the pre-modification balances.

During the first six months of 2013, approximately $1.5 million TDRs defaulted on their restructured loan and the default occurred within the 12 month period following the loan modification. These defaults were construction and development loans. A default is considered to have occurred once the TDR is past due 90 days or more or it has been placed on nonaccrual. During the first six months of 2012, approximately $7.9 million TDRs defaulted on their restructured loan and the default occurred within the 12 month period following the loan modification. These defaults consisted of $6.3 million in commercial real estate loans, $1.0 million in commercial loans, and $622,000 in 1-4 family residential real estate loans. A default is considered to have occurred once the TDR is past due 90 days or more or it has been placed on nonaccrual.

18

Nonperforming Loans

Nonperforming loans include impaired loans not on accrual and smaller balance homogeneous loans, such as residential mortgage and consumer loans, that are collectively evaluated for impairment.

The following table presents the recorded investment in nonaccrual and loans past due 90 days and still on accrual by class of loan as of June 30, 2013, and December 31, 2012:

	Nonaccrual				Loans Past Due 90 Days And Over Still Accruing
	June 30, 2013		December 31, 2012		June 30, 2013		December 31, 2012
	(in thousands)
Commercial	$	3,333	$	2,437	$	—	$	36
Commercial Real Estate:
Construction		18,630		7,808		—		—
Farmland		8,985		10,030		—		—
Other		43,979		46,036		—		—
Residential Real Estate:
Multi-family		8,020		1,516		—		—
1-4 Family		28,964		26,501		66		50
Consumer		58		135		5		—
Agriculture		199		54		—		—
Other		17		—		—		—
Total	$	112,185	$	94,517	$	71	$	86

The following table presents the aging of the recorded investment in past due loans as of June 30, 2013 and December 31, 2012:

	30 – 59 Days Past Due		60 – 89 Days Past Due		90 Days And  Over Past Due		Nonaccrual		Total Past Due And Nonaccrual
	(in thousands)
June 30, 2013
Commercial	$	1,165	$	133	$	—	$	3,333	$	4,631
Commercial Real Estate:
Construction		—		—		—		18,630		18,630
Farmland		841		389		—		8,985		10,215
Other		2,338		1,805		—		43,979		48,122
Residential Real Estate:
Multi-family		1,191		—		—		8,020		9,211
1-4 Family		2,797		585		66		28,964		32,412
Consumer		194		37		5		58		294
Agriculture		74		30		—		199		303
Other		—		—		—		17		17
Total	$	8,600	$	2,979	$	71	$	112,185	$	123,835

19

	30 – 59 Days Past Due		60 – 89 Days Past Due		90 Days And  Over Past Due		Nonaccrual		Total Past Due And Nonaccrual
	(in thousands)
December 31, 2012
Commercial	$	1,279	$	90	$	36	$	2,437	$	3,842
Commercial Real Estate:
Construction		10,510		5,815		—		7,808		24,133
Farmland		922		58		—		10,030		11,010
Other		5,138		13,037		—		46,036		64,211
Residential Real Estate:
Multi-family		8,762		—		—		1,516		10,278
1-4 Family		11,145		1,221		50		26,501		38,917
Consumer		310		75		—		135		520
Agriculture		153		7		—		54		214
Other		—		—		—		—		—
Total	$	38,219	$	20,303	$	86	$	94,517	$	153,125

Credit Quality Indicators – We categorize loans into risk categories at origination based upon original underwriting. Thereafter, we categorize loans into risk categories based on relevant information about the ability of borrowers to service their debt such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. Loans are analyzed individually by classifying the loans as to credit risk. This analysis includes loans with an outstanding balance greater than $500,000 and non-homogeneous loans, such as commercial and commercial real estate loans. This analysis is performed on a quarterly basis. We do not have any non-rated loans. The following definitions are used for risk ratings:

Watch – Loans classified as watch are those loans which have experienced a potentially adverse development which necessitates increased monitoring.

Special Mention – Loans classified as special mention do not have all of the characteristics of substandard or doubtful loans. They have one or more deficiencies which warrant special attention and which corrective action, such as accelerated collection practices, may remedy.

Substandard – Loans classified as substandard are those loans with clear and defined weaknesses such as a highly leveraged position, unfavorable financial ratios, uncertain repayment sources or poor financial condition which may jeopardize the repayment of the debt as contractually agreed. They are characterized by the distinct possibility that we will sustain some losses if the deficiencies are not corrected.

Doubtful – Loans classified as doubtful are those loans which have characteristics similar to substandard loans but with an increased risk that collection or liquidation in full is highly questionable and improbable.

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Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be “Pass” rated loans. As of June 30, 2013, and December 31, 2012, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

	Pass		Watch		Special Mention		Substandard		Doubtful		Total
	(in thousands)
June 30, 2013
Commercial	$	31,050	$	8,304	$	1,322	$	10,355	$	48	$	51,079
Commercial Real Estate:
Construction		19,551		11,532		2,568		24,300		—		57,951
Farmland		43,327		13,006		1,361		14,618		—		72,312
Other		91,608		61,788		9,772		93,437		254		256,859
Residential Real Estate:
Multi-family		15,725		15,940		—		15,588		—		47,253
1-4 Family		138,728		47,358		2,809		58,353		—		247,248
Consumer		14,952		1,104		13		677		—		16,746
Agriculture		21,605		1,415		915		678		—		24,613
Other		189		518		—		17		—		724
Total	$	376,735	$	160,965	$	18,760	$	218,023	$	302	$	774,785

	Pass		Watch		Special Mention		Substandard		Doubtful		Total
	(in thousands)
December 31, 2012
Commercial	$	27,085	$	10,153	$	6,495	$	8,772	$	62	$	52,567
Commercial Real Estate:
Construction		26,085		21,713		3,647		18,839		—		70,284
Farmland		47,017		13,461		3,532		16,815		—		80,825
Other		122,603		66,223		14,955		118,635		271		322,687
Residential Real Estate:
Multi-family		18,387		14,637		—		17,962		—		50,986
1-4 Family		159,975		47,030		5,167		66,101		—		278,273
Consumer		17,232		2,211		35		842		63		20,383
Agriculture		19,256		1,467		869		725		—		22,317
Other		246		524		—		—		—		770
Total	$	437,886	$	177,419	$	34,700	$	248,691	$	396	$	899,092

Note 5 – Other Real Estate Owned

Other real estate owned (OREO) is real estate acquired as a result of foreclosure or by deed in lieu of foreclosure. It is classified as real estate owned until such time as it is sold. When property is acquired as a result of foreclosure or by deed in lieu of foreclosure, it is recorded at its fair market value less cost to sell. Any write-down of the property at the time of acquisition is charged to the allowance for loan losses. Subsequent reductions in fair value are recorded as non-interest expense. To determine the fair value of OREO for smaller dollar single family homes, we consult with internal real estate sales staff and external realtors, investors, and appraisers. If the internally evaluated market price is below our underlying investment in the property, appropriate write-downs are taken.

For larger dollar residential and commercial real estate properties, we obtain a new appraisal of the subject property in connection with the transfer to other real estate owned. We typically obtain updated appraisals each year on the anniversary date of ownership unless a sale is imminent.

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The following table presents the major categories of OREO at the period-ends indicated:

	June 30, 2013			December 31, 2012
	(in thousands)
Commercial Real Estate:
Construction	$	20,592		$	22,912
Farmland		737			618
Other		18,661			15,577
Residential Real Estate:
Multi-family		464			200
1-4 Family		7,323			5,518
		47,777			44,825
Valuation allowance		(747	)		(1,154	)
	$	47,030		$	43,671

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2013			2012			2013			2012
	(in thousands)						(in thousands)
OREO Valuation Allowance Activity:
Beginning balance	$	928		$	1,682		$	1,154		$	1,667
Provision to allowance		977			350			1,284			830
Write-downs		(1,158	)		(308	)		(1,691	)		(773	)
Ending balance	$	747		$	1,724		$	747		$	1,724

Net activity relating to other real estate owned during the six months ended June 30, 2013 and 2012 is as follows:

	2013			2012
	(in thousands)
OREO Activity
OREO as of January 1	$	43,671		$	41,449
Real estate acquired		15,555			28,126
Valuation adjustments for declining market values		(1,284	)		(830	)
Improvements		—			1
Loss on sale		(359	)		(948	)
Proceeds from sale of properties		(10,553	)		(13,433	)
OREO as of June 30	$	47,030		$	54,365

Expenses related to other real estate owned include:

	Three Months Ended June  30,				Six Months Ended June 30,
	2013		2012		2013		2012
	(in thousands)				(in thousands)
Net loss on sales	$	162	$	546	$	359	$	948
Provision to allowance		977		350		1,284		830
Operating expense		518		309		805		684
Total	$	1,657	$	1,205	$	2,448	$	2,462

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Note 6 – Deposits

The following table shows deposits by category:

	June 30, 2013		December 31, 2012
	(in thousands)
Non-interest bearing	$	106,320	$	114,310
Interest checking		78,218		87,234
Money market		65,620		63,715
Savings		40,121		39,227
Certificates of deposit		690,557		760,573
Total	$	980,836	$	1,065,059

Time deposits of $100,000 or more were $288.2 million and $319.5 million at June 30, 2013 and December 31, 2012, respectively.

Scheduled maturities of total time deposits at June 30, 2013 for each of the next five years are as follows (in thousands):

	Retail		Brokered		Total
Year 1	$	362,928	$	—	$	362,928
Year 2		258,311		—		258,311
Year 3		49,930		—		49,930
Year 4		10,034		—		10,034
Year 5		9,277		—		9,277
Thereafter		77		—		77
	$	690,557	$	—	$	690,557

Historically, the Bank has utilized brokered and wholesale deposits to supplement its funding strategy. At December 31, 2012, the Bank held $15.0 million in brokered deposits, which matured and were redeemed in the second quarter of 2013. As stipulated in the Consent Order, PBI Bank is currently restricted from accepting, renewing, or rolling-over brokered deposits without the prior receipt of a waiver on a case-by-case basis from our regulators.

Note 7 – Advances from the Federal Home Loan Bank

Advances from the Federal Home Loan Bank were as follows:

	June 30, 2013		December 31, 2012
	(in thousands)
Monthly amortizing advances with fixed rates from 0.00% to 5.25% and maturities ranging from 2013 through 2033, averaging 3.15% for 2013	$	5,016	$	5,604

Each advance is payable per terms on agreement, with a prepayment penalty. The advances are collateralized by first mortgage loans. The borrowing capacity is based on the market value of the underlying pledged loans rather than the unpaid principal balance of the pledged loans. At June 30, 2013, our additional borrowing capacity with the FHLB was $15.5 million. The availability of our borrowing capacity could be affected by our financial position and the FHLB could require additional collateral or, among other things, exercise its right to deny a funding request, at its discretion. Additionally, any new advances are limited to a one year maturity or less.

Note 8 – Fair Values Measurement

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. We use various valuation techniques to determine fair value, including market, income and cost approaches. There are three levels of inputs that may be used to measure fair values:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that an entity has the ability to access as of the measurement date, or observable inputs.

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Level 2: Significant other observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, and other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. When that occurs, we classify the fair value hierarchy on the lowest level of input that is significant to the fair value measurement. We used the following methods and significant assumptions to estimate fair value.

Securities: The fair values of securities available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges, if available. This valuation method is classified as Level 1 in the fair value hierarchy. For securities where quoted prices are not available, fair values are calculated on market prices of similar securities, or matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities. Matrix pricing relies on the securities’ relationship to similarly traded securities, benchmark curves, and the benchmarking of like securities. Matrix pricing utilizes observable market inputs such as benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, reference data, and industry and economic events. In instances where broker quotes are used, these quotes are obtained from market makers or broker-dealers recognized to be market participants. This valuation method is classified as Level 2 in the fair value hierarchy. For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators. This valuation method is classified as Level 3 in the fair value hierarchy. Discounted cash flows are calculated using spread to swap and LIBOR curves that are updated to incorporate loss severities, volatility, credit spread and optionality. During times when trading is more liquid, broker quotes are used (if available) to validate the model. Rating agency and industry research reports as well as defaults and deferrals on individual securities are reviewed and incorporated into the calculations.

Impaired Loans: An impaired loan is evaluated at the time the loan is identified as impaired and is recorded at fair value less costs to sell. Fair value is measured based on the value of the collateral securing the loan and is classified as Level 3 in the fair value hierarchy. Fair value is determined using several methods. Generally, the fair value of real estate is determined based on appraisals by qualified licensed appraisers. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach.

Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. These routine adjustments are made to adjust the value of a specific property relative to comparable properties for variations in qualities such as location, size, and income production capacity relative to the subject property of the appraisal. Such adjustments are typically significant and result in a Level 3 classification of the inputs for determining fair value.

We routinely apply an internal discount to the value of appraisals used in the fair value evaluation of our impaired loans. The deductions to the appraisal take into account changing business factors and market conditions, as well as potential value impairment in cases where the date of the appraisal of the collateral predates a likely change in market conditions. These deductions range from 10% for routine real estate collateral to 30% for real estate that is determined (1) to have a thin trading market or (2) to be for unique use. This is in addition to estimated discounts for cost to sell of ten percent.

We also apply discounts to the expected fair value of collateral for impaired loans where the likely resolution involves litigation of foreclosure. Resolution of this nature generally results in receiving lower values for real estate collateral in a more aggressive sales environment. We have utilized discounts ranging from 10% to 33% in our impairment evaluations when applicable.

Impaired loans are evaluated quarterly for additional impairment. We obtain updated appraisals on properties securing our loans when circumstances are warranted such as at the time of renewal or when market conditions have significantly changed. This determination is made on a property-by-property basis in light of circumstances in the broader economic climate and our assessment of deterioration of real estate values in the market in which the property is located. The first stage of our assessment involves management’s inspection of the property in question. Management also engages in conversations with local real estate professionals, investors, and market makers to determine the likely marketing time and value range for the property. The second stage involves an assessment of current trends in the regional market. After thorough consideration of these factors, management will either internally evaluate fair value or order a new appraisal.

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Other Real Estate Owned (OREO): OREO is evaluated at the time of acquisition and recorded at fair value as determined by independent appraisal or internal market evaluation less cost to sell. Our quarterly evaluations of OREO for impairment are driven by property type. For smaller dollar single family homes, we consult with internal real estate sales staff and external realtors, investors, and appraisers. Based on these consultations, we determine asking prices for OREO properties we are marketing for sale. If the internally evaluated fair value is below our recorded investment in the property, appropriate write-downs are taken.

For larger dollar commercial real estate properties, we obtain a new appraisal of the subject property in connection with the transfer to other real estate owned. In some of these circumstances, an appraisal is in process at quarter end, and we must make our best estimate of fair value based on our internal evaluation of the property, review of the most recent appraisal, and discussions with the currently engaged appraiser. We typically obtain updated appraisals on the anniversary date of ownership unless a sale is imminent.

We routinely apply an internal discount to the value of appraisals used in the fair value evaluation of our OREO. The deductions to the appraisal take into account changing business factors and market conditions, as well as potential value impairment in cases where our appraisal date predates a likely change in market conditions. These deductions range from 10% for routine real estate to 30% for real estate that is determined (1) to have a thin trading market or (2) to be for unique use. This is in addition to estimated discounts for cost to sell of ten percent.

Financial assets measured at fair value on a recurring basis at June 30, 2013 and December 31, 2012 are summarized below:

			Fair Value Measurements at June 30, 2013 Using
			(in thousands)
Description	Carrying Value		Quoted Prices In Active  Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available-for-sale securities
U.S. Government and federal agency	$	26,303	$	—	$	26,303	$	—
Agency mortgage-backed: residential		70,569		—		70,569		—
State and municipal		55,299		—		55,299		—
Corporate bonds		23,863		—		23,863		—
Other debt securities		631		—		—		631
Equity securities		277		277		—		—
Total	$	176,942	$	277	$	176,034	$	631

			Fair Value Measurements at December 31, 2012 Using
			(in thousands)
Description	Carrying Value		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available-for-sale securities
U.S. Government and federal agency	$	6,133	$	—	$	6,133	$	—
Agency mortgage-backed: residential		95,182		—		95,182		—
State and municipal		54,733		—		54,733		—
Corporate bonds		19,964		—		19,964		—
Other debt securities		618		—		—		618
Equity securities		1,846		1,846		—		—
Total	$	178,476	$	1,846	$	176,012	$	618

There were no transfers between Level 1 and Level 2 during 2013 or 2012.

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The table below presents a reconciliation of all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the periods ended June 30, 2013 and 2012:

	State and  Municipal Securities					Other  Debt Securities
	2013		2012			2013		2012
	(in thousands)
Balances of recurring Level 3 assets at January 1	$	—	$	1,173		$	618	$	606
Total gain (loss) for the period:
Included in other comprehensive income (loss)		—		—			13		—
Sales		—		(1,173	)		—		—
Balance of recurring Level 3 assets at June 30	$	—	$	—		$	631	$	606

Level 3 state and municipal securities valuations are supported by analysis prepared by an independent third party. Their approach to determining fair value involves using recently executed transactions for similar securities and market quotations for similar securities. As securities of this type are not rated by the rating agencies and trading volumes are thin, it was determined that these were valued using Level 3 inputs. We sold our Level 3 municipal securities in the second quarter of 2012 and had no securities of this nature at June 30, 2013.

Our other debt security valuation is determined internally by calculating discounted cash flows using the security’s coupon rate of 6.5% and an estimated current market rate of 9.5% based upon the current yield curve plus spreads that adjust for volatility, credit risk, and optionality. We also consider the issuer(s) publicly filed financial information as well as assumptions regarding the likelihood of deferrals and defaults.

Financial assets measured at fair value on a non-recurring basis are summarized below:

			Fair Value Measurements at June 30, 2013 Using
			(in thousands)
Description	Carrying Value		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans:
Commercial	$	3,162	$	—	$	—	$	3,162
Commercial real estate:
Construction		21,936		—		—		21,936
Farmland		5,292		—		—		5,292
Other		74,541		—		—		74,541
Residential real estate:
Multi-family		12,526		—		—		12,526
1-4 Family		27,028		—		—		27,028
Consumer		90		—		—		90
Other		505		—		—		505
Other real estate owned, net:
Commercial real estate:
Construction		20,270		—		—		20,270
Farmland		725		—		—		725
Other		18,369		—		—		18,369
Residential real estate:
Multi-family		457		—		—		457
1-4 Family		7,209		—		—		7,209

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			Fair Value Measurements at December 31, 2012 Using
			(in thousands)
Description	Carrying Value		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans:
Commercial	$	3,799	$	—	$	—	$	3,799
Commercial real estate:
Construction		23,912		—		—		23,912
Farmland		5,722		—		—		5,722
Other		72,793		—		—		72,793
Residential real estate:
Multi-family		13,263		—		—		13,263
1-4 Family		25,094		—		—		25,094
Consumer		74		—		—		74
Agriculture		5		—		—		5
Other		513		—		—		513
Other real estate owned, net:
Commercial real estate:
Construction		22,323		—		—		22,323
Farmland		602		—		—		602
Other		15,175		—		—		15,175
Residential real estate:
Multi-family		195		—		—		195
1-4 Family		5,376		—		—		5,376

Impaired loans, which are measured for impairment using the fair value of the collateral for collateral dependent loans, had a carrying amount of $155.3 million at June 30, 2013 with a valuation allowance of $10.2 million. This resulted in no additional provision for loan losses for the six months ended June 30, 2013. At December 31, 2012, impaired loans had a carrying amount of $166.2 million, with a valuation allowance of $21.0 million.

Other real estate owned, which is measured at the lower of carrying or fair value less estimated costs to sell, had a net carrying amount of $47.0 million as of June 30, 2013, compared with $43.7 million at December 31, 2012. Fair value write-downs of $1.3 million were recorded on other real estate owned for the six months ended June 30, 2013.

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The following table presents qualitative information about level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at June 30, 2013:

	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Range (Weighted Average)
	(in thousands)
Impaired loans – Commercial	$	3,162	Market value approach	Adjustment for receivables and inventory discounts	16% - 32% (24%)
Impaired loans – Commercial real estate	$	101,769	Sales comparison approach	Adjustment for differences between the comparable sales	0% - 69% (19%)
Impaired loans – Residential real estate	$	39,554	Sales comparison approach	Adjustment for differences between the comparable sales	0% - 50% (15%)
Other real estate owned –Commercial real estate	$	39,364	Sales comparison approach Income approach	Adjustment for differences between the comparable sales Discount or capitalization rate	3% - 56% (24%) 7% - 16% (11%)
Other real estate owned – Residential real estate	$	7,666	Sales comparison approach	Adjustment for differences between the comparable sales	4% - 31% (12%)

The following table presents qualitative information about level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at December 31, 2012:

	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Range (Weighted Average)
	(in thousands)
Impaired loans – Commercial	$	3,799	Market value approach	Adjustment for receivables and inventory discounts	16% - 32% (24%)
Impaired loans – Commercial real estate	$	89,461	Sales comparison approach	Adjustment for differences between the comparable sales	0% - 69% (19%)
Impaired loans – Residential real estate	$	38,357	Sales comparison approach	Adjustment for differences between the comparable sales	0% - 38% (15%)
Other real estate owned – Commercial real estate	$	38,100	Sales comparison approach Income approach	Adjustment for differences between the comparable sales Discount or capitalization rate	3% - 50% (18%) 9% - 16% (12%)
Other real estate owned – Residential real estate	$	5,571	Sales comparison approach	Adjustment for differences between the comparable sales	0% - 30% (9%)

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Carrying amount and estimated fair values of financial instruments were as follows for the periods indicated:

			Fair Value Measurements at June 30, 2013 Using
	Carrying Amount		Level 1		Level 2		Level 3		Total
	(in thousands)
Financial assets
Cash and cash equivalents	$	64,266	$	58,585	$	5,681	$	—	$	64,266
Securities available for sale		176,942		277		176,034		631		176,942
Federal Home Loan Bank stock		10,072		N/A		N/A		N/A		N/A
Mortgage loans held for sale		133		—		133		—		133
Loans, net		737,226		—		—		752,688		752,688
Accrued interest receivable		4,184		—		1,227		2,957		4,184
Financial liabilities
Deposits	$	980,836	$	103,748	$	878,837	$	—	$	982,585
Securities sold under agreements to repurchase		3,292		—		3,292		—		3,292
Federal Home Loan Bank advances		5,016		—		5,019		—		5,019
Subordinated capital notes		6,525		—		—		6,195		6,195
Junior subordinated debentures		25,000		—		—		13,913		13,913
Accrued interest payable		2,277		—		1,042		1,235		2,277

			Fair Value Measurements at December 31, 2012 Using
	Carrying Amount		Level 1		Level 2		Level 3		Total
	(in thousands)
Financial assets
Cash and cash equivalents	$	49,572	$	41,938	$	7,634	$	—	$	49,572
Securities available for sale		178,476		1,846		176,012		618		178,476
Federal Home Loan Bank stock		10,072		N/A		N/A		N/A		N/A
Mortgage loans held for sale		507		—		507		—		507
Loans, net		842,412		—		—		853,996		853,996
Accrued interest receivable		5,138		—		1,150		3,988		5,138
Financial liabilities
Deposits	$	1,065,059	$	114,310	$	955,216	$	—	$	1,069,526
Securities sold under agreements to repurchase		2,634		—		2,634		—		2,634
Federal Home Loan Bank advances		5,604		—		5,607		—		5,607
Subordinated capital notes		6,975		—		—		6,599		6,599
Junior subordinated debentures		25,000		—		—		13,821		13,821
Accrued interest payable		2,104		—		1,173		931		2,104

The methods and assumptions, not previously presented, used to estimate fair values are described as follows:

(a) Cash and Cash Equivalents

The carrying amounts of cash and short-term instruments approximate fair values and are classified as either Level 1 or Level 2. Noninterest bearing deposits are Level 1 whereas interest bearing due from bank accounts and fed funds sold are Level 2.

(b) FHLB Stock

It is not practical to determine the fair value of FHLB stock due to restrictions placed on its transferability.

(c) Loans, Net

Fair values of loans, excluding loans held for sale, are estimated as follows: For variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values resulting in a Level 3 classification. Fair values for other loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality resulting in a Level 3 classification. Impaired loans are valued at the lower of cost or fair value as described previously. The methods utilized to estimate the fair value of loans do not necessarily represent an exit price.

(d) Mortgage Loans Held for Sale

The fair value of loans held for sale is estimated based upon binding contracts and quotes from third party investors resulting in a Level 2 classification.

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(e) Deposits

The fair values disclosed for non-interest bearing deposits are, by definition, equal to the amount payable on demand at the reporting date resulting in a Level 1 classification. The carrying amounts of variable rate interest bearing deposits approximate their fair values at the reporting date resulting in a Level 2 classification. Fair values for fixed rate interest bearing deposits are estimated using a discounted cash flows calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits resulting in a Level 2 classification.

(f) Securities Sold Under Agreements to Repurchase

The carrying amounts of borrowings under repurchase agreements approximate their fair values resulting in a Level 2 classification.

(g) Other Borrowings

The fair values of the Company’s FHLB advances are estimated using discounted cash flow analyses based on the current borrowing rates resulting in a Level 2 classification.

The fair values of the Company’s subordinated capital notes and junior subordinated debentures are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 3 classification.

(h) Accrued Interest Receivable/Payable

The carrying amounts of accrued interest approximate fair value resulting in a Level 2 or Level 3 classification based on the level of the asset or liability with which the accrual is associated.

Note 9 – Income Taxes

Deferred tax assets and liabilities were due to the following as of:

	June 30, 2013			December 31, 2012
	(in thousands)
Deferred tax assets:
Allowance for loan losses	$	13,146		$	19,838
Other real estate owned write-down		9,959			10,408
Net operating loss carry-forward		23,302			15,051
New market tax credit carry-forward		208			208
Alternative minimum tax credit carry-forward		692			692
Net assets from acquisitions		626			592
Other than temporary impairment on securities		374			374
Net unrealized loss on securities available for sale		386			—
Amortization of non-compete agreements		18			19
Other		925			936
		49,636			48,118
Deferred tax liabilities:
Fixed assets		350			409
Net unrealized gain on securities available for sale		—			1,858
FHLB stock dividends		1,276			1,276
Originated mortgage servicing rights		88			98
Other		516			549
		2,230			4,190
Net deferred tax assets before valuation allowance		47,406			43,928
Valuation allowance		(47,406	)		(43,928	)
Net deferred tax asset	$	—		$	—

Our estimate of the realizability of the deferred tax asset depends on our estimate of projected future levels of taxable income as all carryback ability was fully absorbed by our tax loss of approximately $40 million for 2011. In analyzing future taxable income levels, we considered all evidence currently available, both positive and negative. Based on our analysis, we continue to maintain a valuation allowance for all deferred tax assets as of June 30, 2013. Our deferred tax assets and the related valuation allowance are analyzed and adjusted on a quarterly basis.

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The Company does not have any beginning and ending unrecognized tax benefits. The Company does not expect the total amount of unrecognized tax benefits to significantly increase or decrease in the next twelve months. There were no interest and penalties recorded in the income statement or accrued for the six months ended June 30, 2013 or the year ended December 31, 2012 related to unrecognized tax benefits.

The Company and its subsidiaries are subject to U.S. federal income tax and the Company is subject to income tax in the Commonwealth of Kentucky. The Company is no longer subject to examination by taxing authorities for years before 2009.

Note 10 – Stock Plans and Stock Based Compensation

The Company has two stock incentive plans. On February 23, 2006, the Company adopted the Porter Bancorp, Inc. 2006 Stock Incentive Plan. In May 2013, the Board approved an amendment to the plan to increase the number of shares authorized for issuance by 800,000 shares. The 2006 Plan now permits the issuance of up to 1,263,050 shares of the Company’s common stock upon the exercise of stock options or upon the grant of stock awards. As of June 30, 2013, the Company had granted 268,634 unvested shares net of forfeitures and vesting under the stock incentive plan. Shares issued under the plan vest annually on the anniversary date of the grant over five to ten years. The Company has 868,293 shares remaining available for issue under the plan.

On May 15, 2006, the Board of Directors approved the Porter Bancorp, Inc. 2006 Non-Employee Directors Stock Ownership Incentive Plan, which was approved by holders of the Company’s voting common stock on June 8, 2006. On May 22, 2008, shareholders voted to amend the plan to change the form of incentive award from stock options to unvested shares. Under the terms of the plan, 100,000 shares are reserved for issuance to non-employee directors upon the exercise of stock options or upon the grant of unvested stock awards granted under the plan. Prior to the amendment, options were granted automatically under the plan at fair market value on the date of grant. The options vest over a three-year period and have a five year term. Unvested shares are granted automatically under the plan at fair market value on the date of grant and vest semi-annually on the anniversary date of the grant over three years.

On May 16, 2012, holders of the Company’s voting common stock voted to further amend the 2006 Non-Employee Directors Stock Ownership Incentive Plan to award restricted shares having a fair market value of $25,000 annually to each non-employee director, and to increase the number of shares issuable under the Directors’ Plan from 100,000 shares to 400,000 shares. Shares issued under the amended plan vest on December 31 in the year they are granted.

To date, the Company has issued 245,909 unvested shares to non-employee directors. At June 30, 2013, 113,357 shares remain available for issuance under this plan.

The fair value of the 2013 unvested shares issued to certain employees was $111,000, or $0.78 per weighted-average share. The fair value of the 2013 unvested shares issued to the directors was $155,000 or $0.85 per weighted average share. The Company recorded $226,000 and $215,000 of stock-based compensation during the first six months of 2013 and 2012, respectively, to salaries and employee benefits. There was no significant impact on compensation expense resulting from forfeited or expiring shares. We expect substantially all of the unvested shares outstanding at the end of the period will vest according to the vesting schedule. No deferred tax benefit was recognized related to this expense for either period.

The following table summarizes unvested share activity as of and for the periods indicated for the Stock Incentive Plan:

	Six Months Ended June 30, 2013					Twelve Months Ended December 31, 2012
	Shares			Weighted Average Grant Price		Shares			Weighted Average Grant Price
Outstanding, beginning		153,316		$	5.92		96,688		$	13.40
Granted		142,663			0.78		97,197			1.74
Vested		(22,113	)		12.19		(27,362	)		13.04
Forfeited		(5,232	)		14.82		(13,207	)		15.22
Outstanding, ending		268,634		$	2.50		153,316		$	5.92

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The following table summarizes unvested share activity as of and for the periods indicated for the Non-Employee Directors Stock Ownership Incentive Plan:

	Six Months Ended June 30, 2013					Twelve Months Ended December 31, 2012
	Shares			Weighted Average Grant Price		Shares			Weighted Average Grant Price
Outstanding, beginning		80,078		$	1.77		3,538		$	7.91
Granted		182,355			0.85		93,943			1.65
Vested		(16,524	)		2.02		(17,403	)		2.37
Forfeited		—			—		—			—
Outstanding, ending		245,909		$	1.07		80,078		$	1.77

As of June 30, 2013, all stock options issued to non-employee directors had expired and none were exercised during their grant term. The Company’s stock-based incentive awards have exclusively been restricted stock grants since 2008.

The following table summarizes stock option activity:

	Six Months Ended June 30, 2013				Twelve Months Ended December 31, 2012
			Weighted					Weighted
			Average					Average
			Exercise					Exercise
	Shares		Price		Shares			Price
Outstanding, beginning		—	$	—		29,530		$	19.88
Forfeited		—		—		—			—
Expired		—		—		(29,530	)		19.88
Outstanding, ending		—	$	—		—		$	—

No options were issued, outstanding, or exercised during the first six months of 2013. The Company recorded no stock option compensation expense during the six months ended June 30, 2013. No options were modified during the period. As of June 30, 2013, no stock options issued by the Company had been exercised, and all granted options had expired.

Unrecognized stock based compensation expense related to unvested shares for the remainder of 2013 and beyond are estimated as follows (in thousands):

July 2013 – December 2013	$	340
2014		313
2015		174
2016		77
2017 & thereafter		44

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Note 11 – Earnings (Loss) per Share

The factors used in the basic and diluted earnings per share computations follow:

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
	(in thousands, except share and per share data)
Net income (loss)	$	(1,309	)	$	151		$	(1,378	)	$	1,653
Less:
Preferred stock dividends		437			438			875			875
Accretion of Series A preferred stock discount		45			45			90			90
Earnings (loss) allocated to unvested shares		(62	)		(4	)		(69	)		8
Earnings (loss) allocated to Series C preferred		(48	)		(9	)		(62	)		19
Net income (loss) allocated to common shareholders, basic and diluted	$	(1,681	)	$	(319	)	$	(2,212	)	$	661
Basic
Weighted average common shares including unvested common shares outstanding		12,528,932			12,195,232			12,501,854			12,175,850
Less: Weighted average unvested common shares		434,250			129,182			367,297			141,301
Less: Weighted average Series C preferred		332,894			332,894			332,894			332,894
Weighted average common shares outstanding		11,761,788			11,733,156			11,801,663			11,701,655
Basic earnings (loss) per common share	$	(0.14	)	$	(0.03	)	$	(0.19	)	$	0.06
Diluted
Add: Dilutive effects of assumed exercises of common and Preferred Series C stock warrants		—			—			—			—
Weighted average common shares and potential common shares		11,761,788			11,733,156			11,801,663			11,701,655
Diluted earnings (loss) per common share	$	(0.14	)	$	(0.03	)	$	(0.19	)	$	0.06

The Company had no outstanding stock options at June 30, 2013. A warrant for the purchase of 330,561 shares of the Company’s common stock at an exercise price of $15.88 was outstanding at June 30, 2013 and 2012 but was not included in the diluted EPS computation as inclusion would have been anti-dilutive. Finally, warrants for the purchase of 1,380,437 shares of non-voting common stock at an exercise price of $11.50 per share were outstanding at June 30, 2013 and 2012, but were not included in the diluted EPS computation as inclusion would have been anti-dilutive.

Note 12 – Capital Requirements and Restrictions on Retained Earnings

Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can result in regulatory action.

On June 24, 2011, PBI Bank entered into a Consent Order with the FDIC and the Kentucky Department of Financial Institutions. The consent order required the Bank to complete a management study, to maintain Tier 1 capital as a percentage of total assets of at least 9% and a total risk based capital ratio of at least 12%, to develop a plan to reduce our risk position in each substandard asset in excess of $1 million, to complete board review of the adequacy of the allowance for loan losses prior to quarterly Call Report submissions, to adopt procedures which strengthen the loan review function and ensure timely and accurate grading of credit relationships, to charge-off all assets classified as loss, to develop a plan to reduce concentrations of construction and development loans to not more than 75% of total risk based capital and non-owner occupied commercial real estate loans to not more than 250% of total risk based capital, to limit asset growth to no more than 5% in any quarter or 10% annually, to not extend additional credit to any borrower classified substandard without specific board authorization, and to not declare or pay any dividend without the prior consent of our regulators. We are also restricted from accepting, renewing, or rolling-over brokered deposits without the prior receipt of a waiver on a case-by-case basis from our regulators.

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On September 21, 2011, we entered into a Written Agreement with the Federal Reserve Bank of St. Louis. Pursuant to the Agreement, we made formal commitments to use our financial and management resources to serve as a source of strength for the Bank and to assist the Bank in addressing weaknesses identified by the FDIC and the KDFI, to pay no dividends without prior written approval, to pay no interest or principal on subordinated debentures or trust preferred securities without prior written approval, and to submit an acceptable plan to maintain sufficient capital.

In October 2012, PBI Bank entered into a new consent order with the FDIC and KDFI. The new consent order requires the Bank to maintain a minimum Tier 1 leverage ratio of 9% and a minimum total risk based capital ratio of 12%. The Bank also agreed that if it should be unable to reach the required capital levels, and if directed in writing by the FDIC, then the Bank would within 30 days develop, adopt and implement a written plan to sell or merge itself into another federally insured financial institution or otherwise immediately obtain a sufficient capital investment into the Bank to fully meet the capital requirements. We expect to continue to work with our regulators toward capital ratio compliance as outlined in the written capital plan previously submitted by the Bank. The new consent order also requires the Bank to continue to adhere to the plans implemented in response to the June 2011 consent order, and includes the substantive provisions of the June 2011 consent order.

The following table shows the ratios of Tier 1 capital and total capital to risk-adjusted assets and the leverage ratios for Porter Bancorp, Inc. and PBI Bank at the dates indicated:

										June 30, 2013						December 31, 2012
	Regulatory Minimums			Well-Capitalized Minimums			Minimum Capital Ratios Under Consent Order			Porter Bancorp			PBI Bank			Porter Bancorp			PBI Bank
Tier 1 Capital		4.0	%		6.0	%		N/A			6.88	%		8.47	%		6.46	%		7.71	%
Total risk-based capital		8.0			10.0			12.0	%		10.46			10.60			9.81			9.82
Tier 1 leverage ratio		4.0			5.0			9.0			4.91			6.08			4.50			5.37

At June 30, 2013, PBI Bank’s Tier 1 leverage ratio was 6.08%, which is below the 9% minimum capital ratio required by the Consent Order, and its total risk-based capital ratio was 10.60%, which is below the 12% minimum capital ratio required by the Consent Order. Failure to meet minimum capital requirements could result in additional discretionary actions by regulators that, if undertaken, could have a materially adverse effect on our financial condition.

Kentucky banking laws limit the amount of dividends that may be paid to a holding company by its subsidiary banks without prior approval. These laws limit the amount of dividends that may be paid in any calendar year to current year’s net income, as defined in the laws, combined with the retained net income of the preceding two years, less any dividends declared during those periods. PBI Bank has agreed with its primary regulators to obtain their written consent prior to declaring or paying any future dividends. As a practical matter, PBI Bank cannot pay dividends to Porter Bancorp for the foreseeable future.

Note 13 – Contingencies

In the normal course of operations, we are defendants in various legal proceedings. Litigation is subject to inherent uncertainties and unfavorable rulings could occur. We record contingent liabilities resulting from claims against us when a loss is assessed to be probable and the amount of the loss is reasonably estimable. Assessing probability of loss and estimating probable losses requires analysis of multiple factors, including in some cases judgments about the potential actions of third party claimants and courts. Recorded contingent liabilities are based on the best information available and actual losses in any future period are inherently uncertain. Currently, we have accrued approximately $1.7 million related to ongoing litigation matters for which we believe liability is probable and reasonably estimable. Accruals are not made in cases where liability is not probable or the amount cannot be reasonably estimated. We provide disclosure of matters where we believe liability is reasonably possible and which may be material to our consolidated financial statements.

Signature Point Litigation. As disclosed previously, on June 18, 2010, three real estate development companies filed suit in Kentucky state court against PBI Bank and Managed Assets of Kentucky (“MAKY”). Signature Point Condominiums LLC, et al. v. PBI Bank, et al., Jefferson Circuit Court, Case No 10-CI-04295. On July 16, 2013, a jury in Louisville, Kentucky returned a verdict against PBI Bank, awarding the plaintiffs compensatory damages of $1,515,000 and punitive damages of $5,500,000. The case arose from a settlement in which PBI Bank agreed to release the plaintiffs and guarantors from obligations of more than $26 million related to a real estate project in Louisville. The plaintiffs were granted a right of first refusal to repurchase a tract of land within the project. In exchange, the plaintiffs conveyed the real estate securing the loans to PBI Bank. After plaintiffs declined to exercise their right of first refusal, PBI Bank sold the tract to the third party. Plaintiffs alleged that the Bank had knowledge of the third party offer before the conveyance of the land by the Plaintiffs to the Bank. Plaintiffs asserted claims of fraud, breach of fiduciary duty, breach of the duty of good faith and fair dealing, tortious interference with prospective business advantage and conspiracy to commit fraud, negligence, and conspiracy against PBI Bank.

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After conferring with its legal advisors, PBI Bank believes the findings and damages are excessive and contrary to law, and that it has meritorious grounds to seek reconsideration of the verdict and to appeal. PBI Bank intends to file motions to reduce or overturn the award and otherwise for reconsideration of the case. We will continue to defend this matter vigorously. Although we have made provisions in our condensed consolidated financial statements for this self-insured matter, the amount of our legal reserve is less than the original amount of the damages awarded, plus accrued interest. The ultimate outcome of this matter could have a material adverse effect on our financial condition, results of operations or cash flows.

SBAV LP Litigation. In 2010, the Company sold common shares, convertible preferred shares and warrants to purchase common shares to accredited investors for $32 million in a private placement. In the placement, SBAV LP, an affiliate of Clinton Group, Inc. (“CGI”) purchased common shares and warrants for $5,000,016.

On July 11, 2011, CGI sent a letter to the Company, which was also attached as an exhibit to a Schedule 13D CGI filed with the Securities and Exchange Commission on the same date. In its letter CGI questioned the Company’s executive leadership team’s ability to properly manage the Bank’s operations, compliance with GAAP, financial disclosures and relationships with regulators, referencing the consent order PBI Bank entered into with the Federal Deposit Insurance Corporation and the Commonwealth of Kentucky Department of Financial Institutions on June 24, 2011. CGI also stated its belief “that it is likely that a number of representations and warranties made when the CGI affiliate entered into an agreement to purchase shares were false,” and demanded that the Company take immediate steps to “redress such breaches and make CGI and the other purchasers whole.”

During the third quarter of 2011, the Company’s Risk Policy and Oversight Committee, comprised of independent directors, undertook an investigation of the allegations raised in the CGI 13D to evaluate their merit and to ascertain the reasonableness of the Bank’s allowance for loan losses and OREO valuations at the time of Clinton’s investment. The Oversight Committee reported its conclusions to the Company’s Board of Directors in October 2011. While recognizing that opportunities for procedural improvements existed in the Bank’s lending and non-performing asset administration, the Oversight Committee concluded that this did not rise to a level that would result in the financial statements, or representations and warranties with respect to the financial statements, being misleading to investors in the 2010 private placement offering of the Company’s stock. The Oversight Committee further concluded that investors were afforded ample opportunity and access to information for their due diligence, including documentation involving asset valuation estimates, on-site management discussions and additional inquiries during visits to the Company headquarters, and access to loan files of their choosing and the appraisals contained therein, and that the Company’s disclosures were adequate in all material respects.

On January 30, 2012, CGI delivered a demand to inspect the Company’s records pursuant to the Kentucky Business Corporation Act. The Company provided records to CGI in accordance with Kentucky law.

On December 17, 2012, SBAV LP filed a lawsuit against Porter Bancorp, PBI Bank, J. Chester Porter and Maria L. Bouvette in New York state court. The proceeding was removed to New York federal district court on January 16, 2013. SBAV LP v. Porter Bancorp, et. al., Civ. Action 1:13 CV-0372 (S.D.N.Y). The complaint alleges violation of the Kentucky Securities Act, negligent misrepresentation and, against defendants Porter Bancorp and Bouvette, breach of contract. The plaintiff seeks damages in an amount in excess of $4,500,000, or the difference between the $5,000,016 purchase price and the value of the securities when sold by the plaintiff, plus interest at the applicable statutory rate, costs and reasonable attorneys’ fees. On July 10, 2013, the New York federal district court granted the defendants’ motion to transfer the case to federal district court in Kentucky. SBAV LP v. Porter Bancorp, et. al. Civ. Action 3:13-CV-710 (W.D.Ky.) We dispute the material factual allegations made in the complaint and intend to defend the plaintiff’s claims vigorously. We have not accrued liability related to this matter as we believe we have meritorious defenses.

Miller Health Systems Inc. Employee Stock Ownership Plan Regulatory Review. Since 2007, PBI Bank has served as trustee for Employee Stock Ownership Plan (ESOP) purchase transactions. These transactions are subject to regular and routine reviews by the United States Department of Labor (DOL) for compliance with ERISA. Failure to fulfill our fiduciary duties under ERISA with respect to any such plan would subject us to certain financial risks such as claims for damages as well as fines and penalties assessable under ERISA.

In 2007, we served as Trustee in the Miller Health Systems, Inc. ESOP transaction. This transaction is under review by the United States Department of Labor (DOL) for compliance with ERISA. The DOL has alleged apparent violations of ERISA in this transaction. While there is no litigation at this time, the ultimate outcome of this matter could have a material adverse effect on our financial condition, results of operations or cash flows. We have not recorded accruals for this matter as we believe we fulfilled our fiduciary duties under ERISA and that liability is not probable nor can the amount be reasonably estimated.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This item analyzes our financial condition, change in financial condition and results of operations. It should be read in conjunction with the unaudited condensed consolidated financial statements and accompanying notes presented in Part I, Item 1 of this report.

Cautionary Note Regarding Forward-Looking Statements

This report contains statements about the future expectations, activities and events that constitute forward-looking statements. Forward-looking statements express our beliefs, assumptions and expectations of our future financial and operating performance and growth plans, taking into account information currently available to us. These statements are not statements of historical fact. The words “believe,” “may,” “should,” “anticipate,” “estimate,” “expect,” “intend,” “objective,” “seek,” “plan,” “strive” or similar words, or the negatives of these words, identify forward-looking statements.

Forward-looking statements involve risks and uncertainties that may cause our actual results to differ materially from the expectations of future results we expressed or implied in any forward-looking statements. These risks and uncertainties can be difficult to predict and may be out of our control. Factors that could contribute to differences in our results include, but are not limited to the following:

• Our inability to increase our capital to the levels required by our agreements with bank regulators could have a material adverse effect on our business.

• A significant percentage of our loan portfolio is comprised of non-owner occupied commercial real estate loans, real estate construction and development loans, and multi-family residential real estate loans, all of which carry a higher degree of risk.

• We continue to hold and acquire a significant amount of OREO properties, which could increase operating expenses and result in future losses.

• Our decisions regarding credit risk may not be accurate, and our allowance for loan losses may not be sufficient to cover actual losses.

• Our ability to pay cash dividends on our common and preferred stock and pay interest on the junior subordinated debentures that relate to our trust preferred securities is currently restricted. Our inability to resume paying dividends and interest on these securities may adversely affect our common shareholders.

We also refer you to Part II, Item 1A – Risk Factors in this report and to the risks identified and the cautionary statements discussed in greater detail in our December 31, 2012 Annual Report on Form 10-K.

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Forward-looking statements are not guarantees of performance or results. A forward-looking statement may include a statement of the assumptions or bases underlying the forward-looking statement. The Company believes it has chosen these assumptions or bases in good faith and that they are reasonable. We caution you however, that assumptions or bases almost always vary from actual results, and the differences between assumptions or bases and actual results can be material. The forward-looking statements included in this report speak only as of the date of the report. We have no duty, and do not intend to, update these statements unless applicable laws require us to do so.

Overview

Porter Bancorp, Inc. is a Louisville, Kentucky-based bank holding company which operates 18 full-service banking offices in twelve 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 to Tennessee. We serve south central Kentucky and southern Kentucky from banking offices in Butler, Green, Hart, Edmonson, Barren, Warren, Ohio and Daviess Counties. We also have an office in Lexington, the second largest city in Kentucky. The Bank is a traditional community bank with a wide range of commercial and personal banking products, with an online banking division which delivers competitive deposit products and services under the separate brand of Ascencia.

The Company reported net loss of $1.3 million and $1.4 million, respectively, for the three and six months ended June 30, 2013, compared with net income of $151,000 and $1.7 million, respectively, for the same periods of 2012. After deductions for dividends on preferred stock, accretion on preferred stock, and loss allocated to participating securities, net loss to common shareholders was $1.7 million and $2.2 million, respectively, for the three and six months ended June 30, 2013, compared with net loss to common shareholders of $319,000 for the three months ended June 30, 2012, and net income to common shareholders of $661,000 for the six months ended June 30, 2012.

Basic and diluted income (loss) per common share were ($0.14) and ($0.19) for the three and six months ended June 30, 2013 compared with basic and diluted income (loss) per common share of ($0.03) and $0.06 for the three and six months ended June 30, 2012.

The following significant developments occurred during the six months ended June 30, 2013:

• No provision for loan losses expense was recorded for the second quarter of 2013, and expense for the six months ended June 30, 2013 totaled $450,000, compared with $4.0 million and $7.8 million for the three and six months ended June 30, 2012. The decrease was primarily attributable to the reduction in the loan portfolio size, a decline in loans migrating downward in risk grade classification, and stable collateral values for collateral dependent loans. Net charge-offs of $2.3 million were recognized for the second quarter, and total net charge-offs for the six months ended June 30, 2013 were $19.6 million.

• Net interest margin decreased 25 basis points to 3.15% in the first six months of 2013 compared with 3.40% in the first six months of 2012. The decrease in margin between periods was primarily due to a reduction in interest earning assets coupled with lower rates on those assets and elevated non-accrual loan levels. Average loans decreased 23.6% to $839.5 million in the first six months of 2013 compared with $1.1 billion in the first six months of 2012. Net loans decreased 25.5% to $737.2 million at June 30, 2013, compared with $989.3 million at June 30, 2012.

• We continued to execute on our strategy to reduce our commercial real estate and construction and development loans. Construction and development loans totaled $58.0 million, or 70% of total risk-based capital, at June 30, 2013 compared with $70.3 million, or 82% of total risk-based capital, at December 31, 2012. Non-owner occupied commercial real estate loans, construction and development loans, and multi-family residential real estate loans as a group totaled $270.8 million, or 325% of total risk-based capital, at June 30, 2013 compared with $311.1 million, or 362% of total risk-based capital, at December 31, 2012.

• Loan proceeds received from the repayment of our commercial real estate and construction and development loans were used primarily to redeem maturing certificates of deposit during the quarter. Deposits decreased 7.9% to $980.8 million compared with $1.0 billion at December 31, 2012. Certificate of deposit balances declined $70.0 million during the first six months of 2013 to $690.6 million at June 30, 2013, from $760.6 million at December 31, 2012. Demand deposits decreased 7.0% during the first six months of 2013 compared with December 31, 2012.

• Non-performing loans increased $17.7 million to $112.3 million at June 30, 2013, compared with $94.6 million at December 31, 2012. The increase was primarily attributable to the placement of two significant borrowing relationships on non-accrual during the first quarter. At December 31, 2012, one of these relationships was past due 30-59 days and totaled $23.5 million; the other was past due 60-89 days and totaled $12.7 million. The increase in non-performing loans was partially offset by net loan charge-offs in the first six months of 2013 which totaled $19.6 million. The elevated level of charge-offs resulted primarily from charging off specific reserves for loans that were deemed to be collateral dependent, in accordance with regulatory guidance.

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• Loans past due 30-59 days decreased from $38.2 million at December 31, 2012 to $8.6 million at June 30, 2013 and loans past due 60-89 days decreased from $20.3 million at December 31, 2012 to $3.0 million at June 30, 2013.

• Foreclosed properties were $47.0 million at June 30, 2013, compared with $43.7 million at December 31, 2012, and $54.4 million at June 30, 2012. During the second quarter of 2013, the Company acquired $11.9 million and sold $8.1 million of other real estate owned (“OREO”). In addition, we recorded fair value write-downs of $977,000 during the second quarter reflecting declines in appraisal valuations and changes in pricing strategies. Our ratio of non-performing assets to total assets increased to 14.86% at June 30, 2013, compared with 11.89% at December 31, 2012, and 10.20% at June 30, 2012.

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Regulatory Matters

Since June 2011, the Bank has operated under the terms of a Consent Order with the Federal Deposit Insurance Corporation (“FDIC”) and the Kentucky Department of Financial Institutions (“KDFI”). The Bank agreed, among other things, to improve asset quality, reduce loan concentrations, and maintain a minimum Tier 1 leverage ratio of 9% and a minimum total risk based capital ratio of 12%. In September 2012, the Bank also agreed that if it should be unable to reach the required capital levels, and if directed in writing by the FDIC, then the Bank would within 30 days develop, adopt and implement a written plan to sell or merge itself into another federally insured financial institution or otherwise immediately obtain a sufficient capital investment into the Bank to fully meet the capital requirements. As of June 30, 2013, the Bank had not met the capital ratios required by the Consent Order. Our current Consent Order was included in our Current Reports on 8-K filed on September 25, 2012.

The Board of Directors and management continue to evaluate and implement strategies to meet the obligations of the Consent Order. These include:

• Engaging a financial advisor to assist our Board in evaluating options to increase capital through the sale of common stock and to redeem the preferred stock we issued to the US Treasury in 2008 under its Capital Purchase Program.

• Continuing with succession planning and adding resources to the management team. In 2012, John T. Taylor was named President and CEO of PBI Bank, and John R. Davis was appointed the Bank’s Chief Credit Officer of PBI Bank, with responsibility for establishing and executing the credit quality policies and overseeing credit administration for the entire organization. Mr. Taylor was also recently named to succeed as Maria L. Bouvette as CEO of Porter Bancorp, pending regulatory approval, following Ms. Bouvette’s retirement effective July 31, 2013.

• Evaluating our internal processes and procedures, distribution of labor, and work-flow to ensure we have adequately and appropriately deployed resources in an efficient manner in the current environment. To this end, we believe the opportunity exists to centralize key processes which will lead to improved execution and cost savings.

• Executing on our commitment to improve credit quality and reduce loan concentrations and balance sheet risk.

• We have reduced our loan portfolio significantly from $1.3 billion at December 31, 2010, to $774.8 million at June 30, 2013.

• We have reduced our construction and development loans to less than 75% of total risk-based capital at June 30, 2013, and are now in compliance with the Consent Order.

• We continue to make progress in reducing our non-owner occupied commercial real estate loans, construction and development loans, and multi-family residential real estate loans as a group. These loans represented 325% of total risk-based capital at June 30, 2013, down from 362% at December 31, 2012. Our Consent Order calls for us to reduce this concentration to not more than 250% of total risk-based capital.

• We have curtailed new construction and development lending and new non-owner occupied commercial real estate lending. Outstanding principal balances have also declined due to amortizing credits and pay-downs from borrowers who sell properties built for resale.

• Executing on our commitment to sell OREO in order to reinvest in quality, income-producing assets.

39

• Our acquisition of real estate assets through the loan remediation process slowed during the first six months of 2013, when we acquired $15.6 million of OREO. However, nonaccrual loans totaled $112.2 million at June 30, 2013, and we expect to resolve many of these loans by foreclosure, which could result in further additions to our OREO portfolio.

• We incurred OREO losses totaling $1.6 million during the first six months of 2013, comprised of $359,000 in loss on sale and $1.3 million in fair value write-downs to reflect declines in appraisal valuations and changes in our pricing strategies.

• We continually evaluate opportunities to maximize the value we receive from the sale of OREO. We pursue multiple sales channels through internal marketing and the use of brokers, auctions, technology sales platforms, and bulk sale strategies.

• As we reduced our construction, development and other land loans during the past six months, the composition of our OREO portfolio shifted toward commercial real estate and 1-4 family residential properties, which we have found to be more liquid than construction, development, and land assets. Commercial real estate represents 39% of the portfolio at June 30, 2013 compared with 35% at December 31, 2012. 1-4 family residential properties represent 15% of the portfolio at June 30, 2013 compared with 12% at December 31, 2012.

• Evaluating other strategic alternatives, such as the sale of assets or branches.

Bank regulatory agencies can exercise discretion when an institution does not meet the terms of a consent order. Based on individual circumstances, the agencies may issue mandatory directives, impose monetary penalties, initiate changes in management, or take more serious adverse actions.

Application of Critical Accounting Policies

We continually review our accounting policies and financial information disclosures. A summary of our more significant accounting policies that require the use of estimates and judgments in preparing the financial statements was provided in “Application of Critical Accounting Policies” in Management’s Discussion and Analysis of Financial Condition and Results of Operation in our Annual Report on Form 10-K for the calendar year ended December 31, 2012. Management has discussed the development, selection, and application of our critical accounting policies with our Audit Committee. During the first six months of 2013, there were no material changes in the critical accounting policies and assumptions.

Results of Operations

The following table summarizes components of income and expense and the change in those components for the three months ended June 30, 2013, compared with the same period of 2012:

	For the Three Months Ended June 30,					Change from Prior Period
	2013			2012		Amount			Percent
	(dollars in thousands)
Gross interest income	$	11,168		$	14,812	$	(3,644	)		(24.6	)%
Gross interest expense		2,816			4,017		(1,201	)		(29.9	)
Net interest income		8,352			10,795		(2,443	)		(22.6	)
Provision for loan losses		—			4,000		(4,000	)		(100.0	)
Non-interest income		2,148			3,018		(870	)		(28.8	)
Non-interest expense		11,809			9,662		2,147			22.2
Net income (loss) before taxes		(1,309	)		151		(1,460	)		(966.9	)
Income tax expense (benefit)		—			—		—			—
Net income (loss)		(1,309	)		151		(1,460	)		(966.9	)

Net income for the three months ended June 30, 2013 decreased $1.5 million to a net loss of $1.3 million, compared with net income of $151,000 for the comparable period of 2012. Provision for loan losses expense decreased $4.0 million in the second quarter of 2013 compared with the same period in 2012. This decrease in provision expense is primarily attributable to the reduction in the loan portfolio size, the lower pace of loans migrating downward in risk grade classification, and more stable collateral values for collateral dependent loans. Net charge-offs of $2.3 million were recognized for the second quarter. Those charge-offs were primarily the result of charging off specific reserves for loans that were deemed to be collateral dependent in accordance with regulatory guidance. Net interest income decreased $2.4 million from the 2012 second quarter due to an 11 basis point decline in net interest margin due to lower earning asset levels and lower average rates on earning assets. In addition, net interest income and net interest margin were adversely affected by $1.5 million and $1.3 million of interest lost on nonaccrual loans in the second quarters of 2013 and 2012, respectively.

40

The following table summarizes components of income and expense and the change in those components for the six months ended June 30, 2013, compared with the same period of 2012:

	For the Six Months Ended June 30,					Change from Prior Period
	2013			2012		Amount			Percent
	(dollars in thousands)
Gross interest income	$	22,426		$	30,567	$	(8,141	)		(26.6	)%
Gross interest expense		5,776			8,318		(2,542	)		(30.6	)
Net interest income		16,650			22,249		(5,599	)		(25.2	)
Provision for loan losses		450			7,750		(7,300	)		(94.2	)
Non-interest income		3,795			6,463		(2,668	)		(41.3	)
Non-interest expense		21,373			19,309		2,064			10.7
Net income (loss) before taxes		(1,378	)		1,653		(3,031	)		(183.4	)
Income tax expense (benefit)		—			—		—			—
Net income (loss)		(1,378	)		1,653		(3,031	)		(183.4	)

41

Net income for the six months ended June 30, 2013 decreased $3.0 million to a net loss of $1.4 million, compared with net income of $1.7 million for the comparable period of 2012. Provision for loan losses expense decreased $7.3 million in the first six months of 2013 compared with the same period in 2012. This decrease in provision expense is primarily attributable to the reduction in the loan portfolio size, the lower pace of loans migrating downward in risk grade classification, and more stable collateral values for collateral dependent loans. Net charge-offs of $19.6 million were recognized for the first six months of 2013. Those charge-offs were primarily the result of charging off specific reserves for loans that were deemed to be collateral dependent in accordance with regulatory guidance. Net interest income decreased $5.6 million from the first six months of 2012 due to a 25 basis point decline in net interest margin due to lower earning asset levels and lower average rates on earning assets. In addition, net interest income and net interest margin were adversely affected by $3.0 million and $2.1 million of interest lost on nonaccrual loans in the first six months of 2013 and 2012, respectively.

Net Interest Income – Our net interest income was $8.4 million for the three months ended June 30, 2013, a decrease of $2.4 million, or 22.6%, compared with $10.8 million for the same period in 2012. Net interest spread and margin were 3.11% and 3.24%, respectively, for the second quarter of 2013, compared with 3.20% and 3.35%, respectively, for the second quarter of 2012. Net average non-accrual loans were $115.4 million and $91.6 million for the second quarters of 2013 and 2012, respectively. Net interest income was $16.7 million for the six months ended June 30, 2013, a decrease of $5.6 million, or 25.2%, compared with $22.2 million for the same period of 2012. Net interest spread and margin were 3.02% and 3.15%, respectively, for the first six months of 2013, compared with 3.25% and 3.40%, respectively, for the first six months of 2012. Net average non-accrual loans were $112.3 million and $91.1 million in the first six months of 2013 and 2012, respectively.

Average loans receivable declined approximately $271.6 million for the quarter ended June 30, 2013 compared with the second quarter of 2012. This resulted in a decline in interest revenue of approximately $3.4 million for the quarter ended June 30, 2013 compared with the prior year period. Average loans receivable declined approximately $259.3 million for the six months ended June 30, 2013 compared with the first six months of 2012. This resulted in a decline in interest revenue of approximately $6.3 million for the six months ended June 30, 2013 compared with the prior year period. The decline in loan volume is attributable to our efforts to reduce concentrations in our construction and development loan portfolio and our non-owner occupied commercial real estate loan portfolio, as well as soft loan demand in our markets.

Net interest margin decreased 11 basis points from our margin of 3.35% in the prior year second quarter. The yield on earning assets declined 28 basis points from the second quarter of 2012, compared with a 19 basis point decline in rates paid on interest-bearing liabilities. This resulted in a net $2.4 million reduction in net interest income. Net interest margin for the first six months of 2013 decreased 25 basis points from our margin of 3.40% in the first half of 2012 due primarily to lower average earning assets relative to average interest bearing liabilities. The yield on earning assets declined 43 basis points from the first six months of 2012, compared with a 20 basis point decline in rates paid on interest-bearing liabilities.

Net interest margin for the second quarter of 2013 increased 17 basis points from our margin of 3.07% in the first quarter of 2013, due primarily to higher yield on loans, countered by lower average loan receivables and lower yield on investment securities. Average loan receivables declined $65.6 million from the first quarter of 2013, due to our efforts to reduce concentrations in our construction and development loan portfolio and in our non-owner occupied commercial real estate loan portfolio, and increased charge-offs. Yield on loans was adversely affected by an increase in foregone interest on non-accrual loans. Interest foregone on non-accrual loans totaled $1.5 million in the second quarter of 2013, compared with $1.5 million in the first quarter of 2013, and $1.3 million in the second quarter of 2012. The decrease in yield on investment securities was the result of our reinvestment of scheduled principal and interest payment proceeds into lower-yielding securities. Yield on average earning assets for the second quarter of 2013 increased 16 basis points from 4.15% in the first quarter of 2013, compared with a 2 basis points decrease in rates paid on interest-bearing liabilities from 1.22% in the first quarter of 2013.

42

Average Balance Sheets

The following table presents the average balance sheets for the three month periods ended June 30, 2013 and 2012, along with the related calculations of tax-equivalent net interest income, net interest margin and net interest spread for the related periods.

	Three Months Ended June 30,
	2013								2012
	Average Balance			Interest Earned/ Paid		Average Yield/ Cost			Average Balance			Interest Earned/ Paid		Average Yield/ Cost
	(dollars in thousands)
ASSETS
Interest-earning assets:
Loan receivables (1)(2)	$	806,941		$	9,954		4.95	%	$	1,078,497		$	13,689		5.10	%
Securities
Taxable		145,909			833		2.29			149,482			783		2.11
Tax-exempt (3)		29,896			231		4.77			22,977			196		5.28
FHLB stock		10,072			105		4.18			10,072			107		4.27
Other equity securities		1,305			15		4.61			1,359			14		4.14
Federal funds sold and other		56,392			30		0.21			45,133			23		0.20
Total interest-earning assets		1,050,515			11,168		4.31	%		1,307,520			14,812		4.59	%
Less: Allowance for loan losses		(39,255	)							(53,546	)
Non-interest earning assets		93,547								109,366
Total assets	$	1,104,807							$	1,363,340
LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing liabilities:
Certificates of deposit and other time deposits	$	714,091		$	2,400		1.35	%	$	930,012		$	3,517		1.52	%
NOW and money market deposits		146,477			129		0.35			149,174			169		0.46
Savings accounts		41,090			31		0.30			39,181			40		0.41
Repurchase agreements		2,749			2		0.29			2,121			2		0.38
FHLB advances		5,128			41		3.21			6,538			54		3.32
Junior subordinated debentures		31,524			213		2.71			32,421			235		2.92
Total interest-bearing liabilities		941,059			2,816		1.20	%		1,159,447			4,017		1.39	%
Non-interest-bearing liabilities:
Non-interest-bearing deposits		106,444								112,914
Other liabilities		10,400								6,992
Total liabilities		1,057,903								1,279,353
Stockholders’ equity		46,904								83,987
Total liabilities and stockholders’ equity	$	1,104,807							$	1,363,340
Net interest income				$	8,352							$	10,795
Net interest spread							3.11	%							3.20	%
Net interest margin							3.24	%							3.35	%

(1) Includes loan fees in both interest income and the calculation of yield on loans.

(2) Calculations include non-accruing loans averaging $115.4 and $91.6 million, respectively, in average loan amounts outstanding.

(3) Taxable equivalent yields are calculated assuming a 35% federal income tax rate.

43

The following table presents the average balance sheets for the six month periods ended June 30, 2013 and 2012, along with the related calculations of tax-equivalent net interest income, net interest margin and net interest spread for the related periods.

	Six Months Ended June 30,
	2013								2012
	Average Balance			Interest Earned/ Paid		Average Yield/ Cost			Average Balance			Interest Earned/ Paid		Average Yield/ Cost
	(dollars in thousands)
ASSETS
Interest-earning assets:
Loan receivables (1)(2)	$	839,542		$	19,987		4.80	%	$	1,098,839		$	28,201		5.16	%
Securities
Taxable		145,542			1,685		2.33			137,492			1,609		2.35
Tax-exempt (3)		29,187			452		4.80			25,040			446		5.51
FHLB stock		10,072			213		4.26			10,072			221		4.41
Other equity securities		1,332			30		4.54			1,359			29		4.29
Federal funds sold and other		55,149			59		0.22			56,397			61		0.22
Total interest-earning assets		1,080,824			22,426		4.23	%		1,329,199			30,567		4.66	%
Less: Allowance for loan losses		(47,253	)							(53,220	)
Non-interest earning assets		94,611								111,994
Total assets	$	1,128,182							$	1,387,973
LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing liabilities:
Certificates of deposit and other time deposits	$	731,863		$	4,937		1.36	%	$	953,230		$	7,289		1.54	%
NOW and money market deposits		149,981			262		0.35			151,136			355		0.47
Savings accounts		40,742			65		0.32			38,133			82		0.43
Repurchase agreements		2,658			3		0.23			1,897			4		0.42
FHLB advances		5,275			84		3.21			6,722			111		3.32
Junior subordinated debentures		31,634			425		2.71			32,533			477		2.95
Total interest-bearing liabilities		962,153			5,776		1.21	%		1,183,651			8,318		1.41	%
Non-interest-bearing liabilities:
Non-interest-bearing deposits		108,281								112,785
Other liabilities		10,424								7,214
Total liabilities		1,080,858								1,303,650
Stockholders’ equity		47,324								84,323
Total liabilities and stockholders’ equity	$	1,128,182							$	1,387,973
Net interest income				$	16,650							$	22,249
Net interest spread							3.02	%							3.25	%
Net interest margin							3.15	%							3.40	%

(1) Includes loan fees in both interest income and the calculation of yield on loans.

(2) Calculations include non-accruing loans averaging $112.3 and $91.1 million, respectively, in average loan amounts outstanding.

(3) Taxable equivalent yields are calculated assuming a 35% federal income tax rate.

44

Rate/Volume Analysis

The table below sets forth certain information regarding changes in interest income and interest expense for the periods indicated. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (1) changes in rate (changes in rate multiplied by old volume); (2) changes in volume (changes in volume multiplied by old rate); and (3) changes in rate-volume (change in rate multiplied by change in volume). Changes in rate-volume are proportionately allocated between rate and volume variance.

	Three Months Ended June 30, 2013 vs. 2012									Six Months Ended June 30 2013 vs. 2012
	Increase (decrease) due to change in									Increase (decrease) due to change in
	Rate			Volume			Net Change			Rate			Volume			Net Change
	(in thousands)
Interest-earning assets:
Loan receivables	$	(375	)	$	(3,360	)	$	(3,735	)	$	(1,928	)	$	(6,286	)	$	(8,214	)
Securities		66			19			85			(69	)		151			82
FHLB stock		(2	)		—			(2	)		(8	)		—			(8	)
Other equity securities		2			(1	)		1			2			(1	)		1
Federal funds sold and other		1			6			7			(1	)		(1	)		(2	)
Total increase (decrease) in interest income		(308	)		(3,336	)		(3,644	)		(2,004	)		(6,137	)		(8,141	)
Interest-bearing liabilities:
Certificates of deposit and other time deposits		(362	)		(755	)		(1,117	)		(792	)		(1,560	)		(2,352	)
NOW and money market accounts		(37	)		(3	)		(40	)		(90	)		(3	)		(93	)
Savings accounts		(11	)		2			(9	)		(23	)		6			(17	)
Federal funds purchased and repurchase agreements		—			—			—			(3	)		2			(1	)
FHLB advances		(2	)		(11	)		(13	)		(4	)		(23	)		(27	)
Junior subordinated debentures		(15	)		(7	)		(22	)		(39	)		(13	)		(52	)
Total increase (decrease) in interest expense		(427	)		(774	)		(1,201	)		(951	)		(1,591	)		(2,542	)
Increase (decrease) in net interest income	$	119		$	(2,562	)	$	(2,443	)	$	(1,053	)	$	(4,546	)	$	(5,599	)

Non-Interest Income – The following table presents the major categories of non-interest income for the three and six months ended June 30, 2013:

	For the Three  Months Ended June 30,				For the Six Months Ended June 30,
	2013		2012		2013		2012
	(dollars in thousands)
Service charges on deposit accounts	$	506	$	556	$	999	$	1,110
Income from fiduciary activities		—		291		517		542
Bank card interchange fees		196		199		368		376
Other real estate owned rental income		230		24		342		62
Gains on sales of investment securities, net		703		1,511		703		3,530
Income from bank owned life insurance		305		79		384		158
Other		208		358		482		685
Total non-interest income	$	2,148	$	3,018	$	3,795	$	6,463

Non-interest income for the second quarter ended June 30, 2013 decreased by $870,000, or 28.8%, compared with the second quarter of 2012. For the six months ended June 30, 2013, non-interest income decreased by $2.7 million, or 41.3% to $3.8 million compared with $6.5 million for the same period of 2012.

The decrease in non-interest income between the three month comparative periods was primarily due to a $808,000 reduction in gains on sales of investment securities, as well as lower income from fiduciary activities due to our efforts to transition away from non-traditional trust services, such as ESOP and employee benefit plan services, throughout our markets. These decreases were partially offset by increased other real estate owned rental income and income from bank owned life insurance. The decrease in non-interest income between the six month comparative periods was primarily due to a $2.8 million reduction in gains on sales of investment securities, partially offset by increased other real estate owned rental income and income from bank owned life insurance.

45

Non-interest Expense – The following table presents the major categories of non-interest expense for the three and six months ended June 30, 2013:

	For the Three  Months Ended June 30,				For the Six Months Ended June 30,
	2013		2012		2013		2012
	(dollars in thousands)
Salary and employee benefits	$	3,999	$	3,982	$	8,138	$	8,294
Occupancy and equipment		913		969		1,844		1,855
Other real estate owned expense		1,657		1,205		2,448		2,462
FDIC insurance		650		832		1,289		1,705
Loan collection expense		2,407		586		3,442		946
Professional fees		499		567		905		923
State franchise tax		537		592		1,074		1,184
Communications		179		168		354		348
Postage and delivery		102		109		215		231
Office supplies		73		68		146		178
Advertising		57		28		116		61
Insurance expense		160		104		311		200
Other		576		452		1,091		922
Total non-interest expense	$	11,809	$	9,662	$	21,373	$	19,309

Non-interest expense for the second quarter ended June 30, 2013 increased $2.1 million, or 22.2%, compared with the second quarter of 2012. For the six months ended June 30, 2013, non-interest expense increased $2.1 million, or 10.7% to $21.4 million compared with $19.3 million for the first six months of 2012. The increases in non-interest expense for the second quarter and six months ended June 30, 2013 were primarily attributable to higher loan collection and insurance expenses, as well as an increase in other real estate owned expense in the second quarter of 2013 due to increased valuation write-downs on OREO properties and property maintenance expense. These items were partially offset by reductions in FDIC insurance and state franchise tax.

Income Tax Expense – No income taxes were recorded for the first six months of 2013. The income tax effect on net loss before taxes for the six months ended June 30, 2013, increased our deferred tax assets and related valuation allowance by $3.5 million. See Footnote 9, “Income Taxes.”

Effective tax rates differ from the federal statutory rate of 35% applied to income before income taxes due to the following:

	For the Three  Months Ended June 30,						For the Six Months Ended June 30,
	2013			2012			2013			2012
	(dollars in thousands)
Federal statutory rate times financial statement income	$	(458	)	$	53		$	(482	)	$	579
Effect of:
Valuation allowance		554			35			677			(384	)
Tax-exempt income		(79	)		(70	)		(158	)		(159	)
Non-taxable life insurance income		(26	)		(26	)		(52	)		(52	)
Other, net		9			8			15			16
Total	$	—		$	—		$	—		$	—

46

Analysis of Financial Condition

Total assets decreased $90.5 million, or 7.8%, to $1.1 billion at June 30, 2013, from $1.2 billion at December 31, 2012. This decrease was primarily attributable to a decrease of $105.2 million in net loans, and was partially offset by increases of $14.7 million cash and cash equivalents. The decrease in net loans was due to loan payoffs outpacing loan funding and efforts to move impaired loans through the collection, foreclosure, and disposition process. The increase in cash and cash equivalents was due to cash inflows related to loan payments and maturities of securities.

Loans Receivable – Loans receivable decreased $124.3 million, or 13.8%, during the six months ended June 30, 2013 to $774.8 million. Our commercial, commercial real estate and real estate construction portfolios decreased by an aggregate of $88.2 million, or 16.7%, during the six months and comprised 56.6% of the total loan portfolio at June 30, 2013. The decline in loans receivable was attributable to net charge-offs of $19.6 million, transfers to OREO of $15.6 million, and loan payoffs outpacing loan funding by approximately $89.1 million.

Loan Portfolio Composition – The following table presents a summary of the loan portfolio at the dates indicated, net of deferred loan fees, by type. There are no foreign loans in our portfolio. Except for commercial real estate and residential real estate, there is no concentration of loans in any industry exceeding 10% of total loans.

	As of June 30, 2013					As of December 31, 2012
	Amount		Percent			Amount		Percent
	(dollars in thousands)
Commercial	$	51,079		6.60	%	$	52,567		5.85	%
Commercial Real Estate
Construction		57,951		7.48			70,284		7.82
Farmland		72,312		9.33			80,825		8.99
Other		256,859		33.15			322,687		35.89
Residential Real Estate
Multi-family		47,253		6.10			50,986		5.67
1-4 Family		247,248		31.91			278,273		30.95
Consumer		16,746		2.16			20,383		2.27
Agriculture		24,613		3.18			22,317		2.48
Other		724		0.09			770		0.08
Total loans	$	774,785		100.00	%	$	899,092		100.00	%

Non-Performing Assets – Non-performing assets consist of loans past due 90 days or more still on accrual, loans on which interest is no longer accrued, real estate acquired through foreclosure, and repossessed assets.

The following table sets forth information with respect to non-performing assets as of June 30, 2013 and December 31, 2012.

	June 30, 2013			December 31, 2012
	(dollars in thousands)
Loans past due 90 days or more still on accrual	$	71		$	86
Non-accrual loans		112,185			94,517
Total non-performing loans		112,256			94,603
Real estate acquired through foreclosure		47,030			43,671
Other repossessed assets		—			—
Total non-performing assets	$	159,286		$	138,274
Non-performing loans to total loans		14.49	%		10.52	%
Non-performing assets to total assets		14.86	%		11.89	%
Allowance for non-performing loans	$	7,368		$	13,250
Allowance for non-performing loans to non-performing loans		6.56	%		14.01	%

47

Nonperforming loans at June 30, 2013, were $112.3 million, or 14.49% of total loans, compared with $81.7 million, or 7.85% of total loans, at June 30, 2012, and $94.6 million, or 10.52% of total loans at December 31, 2012. The increase from December 31, 2012 to June 30, 2013 was primarily attributable to loans for two significant borrowing relationships, which together totaled $36.2 million, being placed on non-accrual in the first quarter. At December 31, 2012, these relationships were past due 30-59 days and 60-89 days, respectively. The increase in non-accrual loans was partially offset by net loan charge-offs in the first six months of 2013 which totaled $19.6 million. These elevated charge-offs were primarily the result of charging off specific reserves for loans that were deemed to be collateral dependent, in accordance with regulatory guidance.

Loans past due 30-59 days decreased from $38.2 million at December 31, 2012 to $8.6 million at June 30, 2013. Loans past due 60-89 days decreased from $20.3 million at December 31, 2012 to $3.0 million at June 30, 2013. This represents a $46.9 million decrease from December 31, 2012 to June 30, 2013, in loans past due 30-89 days. These decreases were primarily in the 1-4 family residential real estate, and construction segments of the portfolio. We considered this trend in delinquency levels during the evaluation of qualitative trends in the portfolio when establishing the general component of our allowance for loan losses.

A troubled debt restructuring (TDR) occurs when the Company has agreed to a loan modification in the form of a concession for a borrower who is experiencing financial difficulty. The majority of the Company’s TDRs involve a reduction in interest rate, a deferral of principal for a stated period of time, or an interest only period. All TDRs are considered impaired, and the Company has allocated reserves for these loans to reflect the present value of the concessionary terms granted to the customer. If the loan is considered collateral dependent, it is reported net of allocated reserves, at the fair value of the collateral.

We do not have a formal loan modification program. Rather, we work with individual customers on a case-by-case basis to facilitate the orderly collection of our principal and interest before a loan becomes a non-performing loan. If a customer is unable to make contractual payments, we review the particular circumstances of that customer’s situation and negotiate a revised payment stream. In other words, we identify performing customers experiencing financial difficulties, and through negotiations, we lower their interest rate, most typically on a short-term basis for three to six months. Our goal when restructuring a credit is to afford the customer a reasonable period of time to remedy the issue causing cash flow constraints within their business so that they can return to performing status over time.

Our loan modifications have taken the form of reduction in interest rate and/or curtailment of scheduled principal payments for a short-term period, usually three to six months, but in some cases until maturity of the loan. In some circumstances we restructure real estate secured loans in a bifurcated fashion whereby we have a fully amortizing “A” loan at a market interest rate and an interest-only “B” loan at a reduced interest rate. Our restructured loans are all collateral secured loans. If a customer fails to perform under the modified terms, we place the loan(s) on non-accrual status and begin the process of working with the customer to liquidate the underlying collateral to satisfy the debt.

At June 30, 2013, we had 119 restructured loans totaling $101.4 million with borrowers who experienced deterioration in financial condition compared with 123 loans totaling $117.8 million at December 31, 2012. In general, these loans were granted interest rate reductions to provide cash flow relief to customers experiencing cash flow difficulties. Of these loans, 7 loans totaling approximately $5.7 million were also granted principal payment deferrals until maturity. There were no concessions made to forgive principal relative to these loans, although we have recorded partial charge-offs for certain restructured loans. In general, these loans are secured by first liens on 1-4 residential or commercial real estate properties, or farmland. Restructured loans also include $3.1 million of commercial loans. At June 30, 2013, $54.9 million of our restructured loans were accruing and $46.5 million were on nonaccrual.

In accordance with current guidance, we continue to report restructured loans as restructured until such time as the loan is paid in full, otherwise settled, sold, or charged-off. If the customer fails to perform, we place the loan on non-accrual status and seek to liquidate the underlying collateral for these loans. Our non-accrual policy for restructured loans is identical to our non-accrual policy for all loans. Our policy calls for a loan to be reported as non-accrual if it is maintained on a cash basis because of deterioration in the financial condition of the borrower, payment in full of principal and interest is not expected, or principal or interest has been in default for a period of 90 days or more unless the assets are both well secured and in the process of collection. Changes in value for impairment, including the amount attributed to the passage of time, are recorded entirely within the provision for loan losses.

We consider any loan that is restructured for a borrower experiencing financial difficulties due to a borrower’s potential inability to pay in accordance with contractual terms to be a troubled debt restructure. Specifically, we consider a concession involving a modification of the loan terms, such as (i) a reduction of the stated interest rate, (ii) reduction or deferral of principal, or (iii) reduction or deferral of accrued interest at a stated interest rate lower than the current market rate for new debt with similar risk all to be troubled debt restructurings. When a modification of terms is made for a competitive reason, we do not consider that to be a troubled debt restructuring. A primary example of a competitive modification would be an interest rate reduction for a performing customer’s loan to a market rate as the result of a market decline in rates.

See Footnote 4, “Loans,” to the financial statements for additional disclosure related to troubled debt restructuring.

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Foreclosed Properties – Foreclosed properties at June 30, 2013 were $47.0 million compared with $54.4 million at June 30, 2012 and $43.7 million at December 31, 2012. See Footnote 5, “Other Real Estate Owned,” to the financial statements. During the first six months of 2013, we acquired $15.6 million of OREO properties, and sold properties totaling approximately $10.9 million. We value foreclosed properties at fair value less estimated costs to sell when acquired and expect to liquidate these properties to recover our investment in the due course of business.

Other real estate owned (OREO) is recorded at fair market value less estimated cost to sell at time of acquisition. Any write-down of the property at the time of acquisition is charged to the allowance for loan losses. Subsequent reductions in fair value are recorded as non-interest expense. To determine the fair value of OREO for smaller dollar single family homes, we consult with internal real estate sales staff and external realtors, investors, and appraisers. If the internally evaluated market price is below our underlying investment in the property, appropriate write-downs are recorded.

For larger dollar commercial real estate properties, we obtain a new appraisal of the subject property in connection with the transfer to OREO. In some of these circumstances, an appraisal is in process at quarter end and we must make our best estimate of the fair value of the underlying collateral based on our internal evaluation of the property, our review of the most recent appraisal, and discussions with the currently engaged appraiser. We typically obtain updated appraisals on the anniversary date of ownership unless a sale is imminent.

Net loss on sales, write-downs, and operating expenses for OREO totaled $2.4 million for the six months ended June 30, 2013, compared with $2.5 million for the same period of 2012. During the six months ended June 30, 2013, fair value write-downs of $1.3 million were recorded to reflect declining values evidenced by new appraisals and our reduction of marketing prices in connection with our sales strategies.

Allowance for Loan Losses – The allowance for loan losses is based on management’s continuing review and evaluation of individual loans, loss experience, current economic conditions, risk characteristics of various categories of loans and such other factors that, in management’s judgment, require current recognition in estimating loan losses.

Management has established loan grading procedures that result in specific allowance allocations for any estimated inherent risk of loss. For loans not individually evaluated, a general allowance allocation is computed using factors developed over time based on actual loss experience. The specific and general allocations plus consideration of qualitative factors represent management’s best estimate of probable losses contained in the loan portfolio at the evaluation date. Although the allowance for loan losses is comprised of specific and general allocations, the entire allowance is available to absorb any credit losses.

Our loan loss reserve, as a percentage of total loans at June 30, 2013, decreased to 4.85% from 4.96% at June 30, 2012, and from 6.30% at December 31, 2012. No provision for loan losses was recorded for the second quarter of 2013 compared with $4.0 million for the second quarter of 2012. Provision for loan losses decreased $7.3 million to $450,000 for the first six months of 2013 compared with $7.8 million for the first six months of 2012. The decrease in the second quarter was primarily attributable to the $124.3 million reduction in the loan portfolio size, net loan charge-offs of $2.3 million, the lower pace of loans migrating downward in risk grade classification, and more stable collateral values for collateral dependent loans.

Net loan charge-offs for the second quarter of 2013 were $2.3 million, or 0.28% of average loans, compared with $6.4 million, or 0.59% of average loans, for the second quarter of 2012, and $4.3 million, or 0.47% of average loans, for the fourth quarter of 2012. Net loan charge-offs for the first six months of 2013 were $19.6 million, or 2.33% of average loans, compared with $8.7 million, or 0.79% of average loans, for the first six months of 2013. Our allowance for loan losses to non-performing loans was 33.46% at June 30, 2013, compared with 59.91% at December 31, 2012, and 63.12% at June 30, 2012. Additionally, the elevated charge-offs in the first quarter of 2013 were primarily the result of charging off specific reserves for loans that were deemed to be collateral dependent during the quarter in accordance with regulatory guidance. The change in this metric between periods is attributable to the fluctuation in historical loss experience, qualitative factors, non-accrual loans, and provision expense.

The majority of our nonperforming loans are secured by real estate collateral and the underlying collateral coverage for nonperforming loans supports the likelihood of collection of our principal. We have assessed these loans for collectability and considered, among other things, the borrower’s ability to repay, the value of the underlying collateral, and other market conditions to ensure the allowance for loan losses is adequate to absorb probable incurred losses. Our allowance for non-performing loans to non-performing loans was 6.65% at June 30, 2013 compared with 14.42% at June 30, 2012, and 14.01% at December 31, 2012. The decline in this metric from December 31, 2012 to June 30, 2013 was primarily attributable to charging off specific reserves for loans that were deemed to be collateral dependent during the quarter in accordance with regulatory guidance.

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An analysis of changes in the allowance for loan losses and selected ratios for the three and six month periods ended June 30, 2013 and 2012, and for the year ended December 31, 2012 follows:

	Three Months Ended June 30,						Six Months Ended June 30,						Year  Ended December 31, 2012
	2013			2012			2013			2012
	(in thousands)
Balance at beginning of period	$	39,839			53,953		$	56,680		$	52,579		$	52,579
Provision for loan losses		—			4,000			450			7,750			40,250
Recoveries		1,124			79			1,795			285			1,366
Charge-offs		(3,404	)		(6,438	)		(21,366	)		(9,020	)		(37,515	)
Balance at end of period		37,559			51,594			37,559			51,594			56,680
Allowance for loan losses to period-end loans		4.85	%		4.96	%		4.85	%		4.96	%		6.30	%
Net charge-offs to average loans		0.28	%		0.59	%		2.33	%		0.79	%		3.50	%
Allowance for loan losses to non-performing loans		33.46	%		63.12	%		33.46	%		63.12	%		59.91	%
Allowance for loan losses for loans individually evaluated for impairment	$	10,190		$	5,620		$	10,190		$	5,620		$	21,034
Loans individually evaluated for impairment		175,038			175,650			175,038			175,650			188,808
Allowance for loan losses to loans individually evaluated for impairment		5.82	%		3.20	%		5.82	%		3.20	%		11.14	%
Allowance for loan losses for loans collectively evaluated for impairment	$	27,369		$	45,974		$	27,369		$	45,974		$	35,646
Loans collectively evaluated for impairment		599,747			865,259			599,747			865,259			710,284
Allowance for loan losses to loans collectively evaluated for impairment		4.56	%		5.31	%		4.56	%		5.31	%		5.02	%

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Liabilities – Total liabilities at June 30, 2013 were $1.0 billion compared with $1.1 billion at December 31, 2012, a decrease of $82.1 million, or 7.4%. This decrease was primarily attributable to a decrease in deposits of $84.2 million, or 7.9%, to $980.8 million at June 30, 2013 from $1.1 billion at December 31, 2012. Certificate of deposit balances declined $70.0 million during the first six months of 2013 to $690.6 million at June 30, 2013 from $760.6 million at December 31, 2012. The decrease in deposits follows management’s strategy to match liability funding levels with lower loan balances.

Federal Home Loan Bank advances decreased by $588,000, or 10.5%, to $5.0 million at June 30, 2013, from $5.6 million at December 31, 2012. These advances are used from time to time to fund asset growth and manage interest rate risk in accordance with our asset/liability management strategies.

Deposits are our primary source of funds. The following table sets forth the average daily balances and weighted average rates paid for our deposits for the periods indicated:

	For the Six Months Ended June 30, 2013					For the Year Ended December 31, 2012
	Average Balance		Average Rate			Average Balance		Average Rate
	(dollars in thousands)
Demand	$	108,281				$	113,325
Interest checking		85,142		0.27	%		89,820		0.37	%
Money market		64,839		0.46			63,212		0.49
Savings		40,742		0.32			38,665		0.40
Certificates of deposit		731,863		1.36			912,061		1.52
Total deposits	$	1,030,867		1.03	%	$	1,217,083		1.20	%

The following table sets forth the average daily balances and weighted average rates paid for our certificates of deposit for the periods indicated:

	For the Six Months Ended June 30, 2013					For the Year Ended December 31, 2012
	Average Balance		Average Rate			Average Balance		Average Rate
	(dollars in thousands)
Less than $100,000	$	422,815		1.30	%	$	478,502		1.40	%
$100,000 or more		309,048		1.45	%		433,559		1.64	%
Total	$	731,863		1.36	%	$	912,601		1.52	%

The following table shows at June 30, 2013 the amount of our time deposits of $100,000 or more by time remaining until maturity:

Maturity Period	Retail		Brokered		Total
	(in thousands)
Three months or less	$	45,265	$	—	$	45,265
Three months through six months		39,963		—		39,963
Six months through twelve months		54,614		—		54,614
Over twelve months		148,406		—		148,406
Total	$	288,248	$	—	$	288,248

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Liquidity

Liquidity risk arises from the possibility we may not be able to satisfy current or future financial commitments, or may become unduly reliant on alternative funding sources. The objective of liquidity risk management is to ensure that we meet the cash flow requirements of depositors and borrowers, as well as our operating cash needs, taking into account all on- and off-balance sheet funding demands. Liquidity risk management also involves ensuring that we meet our cash flow needs at a reasonable cost. We maintain an investment and funds management policy, which identifies primary sources of liquidity, establishes procedures for monitoring and measuring liquidity, and establishes minimum liquidity requirements in compliance with regulatory guidance. Our Asset Liability Committee regularly monitors and reviews our liquidity position.

Funds are available from a number of sources, including the sale of securities in the available-for-sale portion of the investment portfolio, principal pay-downs on loans and mortgage-backed securities, customer deposit inflows, brokered deposits and other wholesale funding. Our investment portfolio totaled $176.9 million at June 30, 2013. $116.1 million of our securities currently have an unrealized loss of $4.0 million. Historically, we have utilized brokered and wholesale deposits to supplement our funding strategy. The Bank previously held $15.0 million in brokered deposits, which matured in the second quarter of 2013. We are currently restricted from accepting, renewing, or rolling-over brokered deposits without the prior receipt of a waiver on a case-by-case basis from our regulators. We intend to redeem the brokered deposits at maturity in the normal course of business.

Traditionally, we have borrowed from the FHLB to supplement our funding requirements. The advances are collateralized by first mortgage residential loans. The borrowing capacity is based on the market value of the underlying pledged loans. At June 30, 2013, our additional borrowing capacity with the FHLB was $15.5 million. Any new advances are limited to a one year maturity or less.

We also have federal funds borrowing lines from major correspondent banks totaling $5.0 million on a secured basis. Management believes our sources of liquidity are adequate to meet expected cash needs for the foreseeable future. However, the availability of these lines could be affected by our financial position, and our lenders could exercise their right to deny a funding request at their discretion. We are also subject to FDIC interest rate restrictions for deposits. As such, we are permitted to offer up to the “national rate” plus 75 basis points as published weekly by the FDIC.

We use cash to pay dividends on common stock, if and when declared by the Board of Directors, and to service debt. The main sources of funding include dividends paid by PBI Bank and financing obtained in the capital markets. During 2011, Porter Bancorp contributed $13.1 million to its subsidiary, PBI Bank, which substantially decreased its liquid assets. The contribution was made to strengthen the Bank’s capital in an effort to help it comply with its capital ratio requirements under the consent order. Liquid assets decreased from $20.3 million at December 31, 2010, to $3.0 million at June 30, 2013. Since the Bank is unlikely to be in a position to pay dividends to the parent company for the foreseeable future, cash inflows for the parent are limited to earnings on investment securities, sales of investment securities, and interest on deposits with the Bank. These cash inflows along with the liquid assets held at June 30, 2013, totaling $3.0 million, are needed for the ongoing cash operating expenses of the parent company which have been reduced and are expected to be approximately $1.1 million for 2013. We have elected to defer payments on our Series A preferred stock and on our trust preferred securities. Parent company liquidity could be improved if a capital raise was completed.

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Capital

In the fourth quarter of 2011, we began deferring the payment of regular quarterly cash dividends on our Series A Preferred Stock issued to the U.S. Treasury. At June 30, 2013, cumulative accrued and unpaid dividends on this stock totaled $3.3 million. We have deferred dividend payments for six quarters and the holder of our Series A Preferred Stock (currently the U.S. Treasury) has the right to appoint up to two representatives to our Board of Directors. We continue to accrue deferred dividends, which are deducted from income to common shareholders for financial statement purposes.

In addition, effective with the fourth quarter of 2011, we began deferring interest payments on our junior subordinated notes which resulted in a deferral of distributions on our trust preferred securities. We have the option to defer interest payments from time-to-time for a period not to exceed 20 consecutive quarters. Thereafter, we must pay all deferred interest and resume quarterly interest payments or we will be in default. Future cash dividends on our common stock are subject to the prior payment of all deferred distributions on our trust preferred securities. At June 30, 2013, cumulative accrued and unpaid interest on our junior subordinated notes totaled $1.2 million.

Stockholders’ equity decreased $8.4 million to $38.7 million at June 30, 2013, compared with $47.2 million at December 31, 2012. The decrease was due to the current year net loss, further reduced by dividends declared (accrued and unpaid) on cumulative preferred stock and an increase in unrealized loss on available for sale securities.

Each of the federal bank regulatory agencies has established risk-based capital requirements for banking organizations. In addition, PBI Bank has agreed with its primary regulators to maintain a ratio of total capital to total risk-weighted assets (“total risk-based capital ratio”) of at least 12.0%, and a ratio of Tier 1 capital to total assets (“leverage ratio”) of 9.0%.

The following table shows the ratios of Tier 1 capital and total capital to risk-adjusted assets and the leverage ratios for Porter Bancorp, Inc. and PBI Bank at the dates indicated:

							Minimum Capital Ratios Under Consent Order			June 30, 2013						December 31, 2012
	Regulatory Minimums			Well-Capitalized Minimums						Porter Bancorp			PBI Bank			Porter Bancorp			PBI Bank
Tier 1 Capital		4.0	%		6.0	%		N/A			6.88	%		8.47	%		6.46	%		7.71	%
Total risk-based capital		8.0			10.0			12.0	%		10.46			10.60			9.81			9.82
Tier 1 leverage ratio		4.0			5.0			9.0			4.91			6.08			4.50			5.37

At June 30, 2013, PBI Bank’s Tier 1 leverage ratio was 6.08%, which is below the 9% minimum capital ratio required by the Consent Order, and its total risk-based capital ratio was 10.60%, which is below the 12% minimum capital ratio required by the Consent Order. Failure to meet minimum capital requirements could result in additional discretionary actions by regulators that, if undertaken, could have a materially adverse effect on our financial condition.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Company’s interest sensitivity profile was asset sensitive at June 30, 2013, and December 31, 2012. Given a 100 basis point increase in interest rates sustained for one year, base net interest income would increase by an estimated 1.1% at June 30, 2013, compared with an increase of 4.11% at December 31, 2012, and is within the risk tolerance parameters of our risk management policy. Given a 200 basis point increase in interest rates sustained for one year, base net interest income would increase by an estimated 2.3% at June 30, 2013, compared with an increase of 8.11% at December 31, 2012, and is within the risk tolerance parameters of our risk management policy.

The following table indicates the estimated impact on net interest income under various interest rate scenarios for the twelve months following June 30, 2013, as calculated using the static shock model approach:

	Change in Future Net Interest Income
	Dollar Change		Percentage Change
	(dollars in thousands)
+ 200 basis points	$	649		2.31	%
+ 100 basis points		311		1.10

We did not run a model simulation for declining interest rates as of June 30, 2013, because the Federal Reserve effectively lowered the federal funds target rate between 0.00% to 0.25% in December 2008. Therefore, no significant further short-term rate reductions can occur.

Item 4. Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, we carried out an evaluation, under the supervision and with the participation of our management, including our president and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934). Based on this evaluation, our president and chief financial officer concluded that, as of the end of the fiscal quarter covered by this report, these disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is: (a) recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and (b) accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure. Additionally, there was no change in our internal control over financial reporting during the fiscal quarter covered by this report that has materially affected, or is reasonably likely to materially affect, the internal control over financial reporting.

54

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

In the normal course of operations, we are defendants in various legal proceedings. Except as described in Footnote 13, “Contingencies” in the Notes to our consolidated financial statement, in the opinion of management, there is no known legal proceeding pending which an adverse decision would be expected to result in a material adverse change in our business or consolidated financial position. See Footnote 13, “Contingencies” in the Notes to our consolidated financial statements for additional detail regarding ongoing legal proceedings.

Item 1A. Risk Factors

PBI Bank provides trust services to our customers. From time to time, PBI Bank has served as trustee for Employee Stock Ownership Plans (ESOPs) including service as transaction trustee in ESOP purchase transactions. In this capacity, we are charged with acting as a fiduciary with respect to the ESOP. ESOP transactions are subject to review by the United States Department of Labor (DOL). At any given time, we may serve as trustee for ESOPs under review by the DOL, and failure to fulfill our fiduciary duties under ERISA with respect to any such plan could subject us to certain financial risks such as claims for damages as well as fines and penalties assessable under ERISA.

In addition to the foregoing, we also refer you the detailed cautionary statements and discussion of risks that affect our Company and its business in “Item 1A – Risk Factors” of our December 31, 2012 Annual Report on Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

Item 3. Default Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

The appointment of Joseph C. (Joe) Seiler as Executive Vice President of PBI Bank and head of the Bank’s commercial banking business became effective on August 7, 2013, following regulatory approval.

Mr. Seiler, age 47, most recently served as Executive Vice President, Asset Resolution Team, of PNC Bank, Inc. in Louisville, Kentucky. Prior to joining PNC Bank in 2009, he served as Executive Vice President & Managing Director, Investment Real Estate Group for National City Bank of Louisville, Kentucky. He is also actively involved in professional and civic organizations in Louisville and most recently served as the treasurer for a non-profit organization with $3 million in annual revenue and $2 million in assets.

He holds a Master’s Degree in Business Administration from the University of Louisville and a Bachelor of Arts Degree in Economics from Centre College in Danville, Kentucky.

Item 6. Exhibits

(a) Exhibits

The following exhibits are filed or furnished as part of this report:

Exhibit Number	Description of Exhibit
10.1	Employment Agreement of Joseph C. Seiler, Executive Vice President.
10.2	Employment Agreement of Phillip W. Barnhouse, Chief Financial Officer and Chief Operating Officer.
31.1	Certification of Principal Executive Officer, pursuant to Rule 13a—14(a).
31.2	Certification of Principal Financial Officer, pursuant to Rule 13a—14(a).
32.1	Certification of Principal Executive Officer, pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Principal Financial Officer, pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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101 The following financial statements from the Company’s Quarterly Report on Form 10Q for the quarter ended June 30, 2013, formatted in XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income (Loss), (iv) Consolidated Statement of Changes in Stockholders’ Equity, (v) Consolidated Statements of Cash Flows, (vi) Notes to Consolidated Financial Statements.

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SIGNATURES

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

	PORTER BANCORP, INC. (Registrant)
August 8, 2013	By:	/s/ John T. Taylor
		John T. Taylor President

August 8, 2013	By:	/s/ Phillip W. Barnhouse
		Phillip W. Barnhouse Chief Financial Officer and Chief Accounting Officer

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EX-10.1

Exhibit 10.1

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of the 7^TH day of August, 2013 (the “Effective Date”), between PBI Bank, Inc., a Kentucky-chartered commercial bank (the “Bank” or the “Employer”), and Joseph C. Seiler (the “Executive”), and joined in by Porter Bancorp, Inc. (the “Corporation”) for the purposes set forth in Sections 3(d) and (e) hereof.

WITNESSETH

WHEREAS, the Bank desires to employ the Executive as its Executive Vice President—Head of Commercial Banking—Senior Lending Officer;

WHEREAS, the Employer desires to be ensured of the Executive’s active participation in the business of the Employer; and

WHEREAS, the Executive is willing to serve the Employer on the terms and conditions hereinafter set forth;

NOW THEREFORE, in consideration of the mutual agreements herein contained, and upon the other terms and conditions hereinafter provided, the Employer and the Executive hereby agree as follows:

1. Definitions. The following words and terms shall have the meanings set forth below for the purposes of this Agreement:

(a) Base Salary. “Base Salary” shall have the meaning set forth in Section 3(b) hereof.

(b) Cause. Termination of the Executive’s employment for “Cause” shall mean termination because of personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of any law, rule or regulation (other than traffic violations or similar offenses) or final consent or cease-and-desist order or material breach of any provision of this Agreement.

(c) Change in Control. “Change in Control” shall mean a change in the ownership of the Corporation, or the Bank, a change in the effective control of the Corporation or the Bank or a change in the ownership of a substantial portion of the assets of the Corporation or the Bank, in each case as provided under Section 409A of the Code and the regulations thereunder.

(d) Code. “Code” shall mean the Internal Revenue Code of 1986, as amended.

(e) Date of Termination. “Date of Termination” shall mean (i) if the Executive’s employment is terminated for Cause, the date on which the Notice of Termination is given, and (ii) if the Executive’s employment is terminated for any other reason, the date specified in such Notice of Termination.

(f) Disability. “Disability” shall mean the Executive (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Employer.

(g) Good Reason. Termination by the Executive of the Executive’s employment for “Good Reason” shall mean termination by the Executive based on:

(i) any material breach of this Agreement by the Employer, including without limitation any of the following: (A) a material diminution in the Executive’s base compensation, (B) a material diminution in the Executive’s authority, duties or responsibilities, or (C) any requirement that the Executive report to a corporate officer or employee of the Bank other than: (1) the President and CEO of the Bank; (2) the Board of Directors; or (3) from time to time with respect to specified matters, a director of either the Corporation or the Bank who is designated by a majority of the full Board of Directors of the Bank, or

(ii) any material change in the Metro Louisville, Kentucky location at which the Executive must perform his services under this Agreement;

provided, however, that prior to any termination of employment for Good Reason, the Executive must first provide written notice to the Bank within ninety (90) days of the initial existence of the condition, describing the existence of such condition, and the Bank shall thereafter have the right to remedy the condition within thirty (30) days of the date the Bank received the written notice from the Executive. If the Bank remedies the condition within such thirty (30) day cure period, then no Good Reason shall be deemed to exist with respect to such condition. If the Bank does not remedy the condition within such thirty (30) day cure period, then the Executive may deliver a Notice of Termination for Good Reason at any time within sixty (60) days following the expiration of such cure period.

(h) Notice of Termination. Any purported termination of the Executive’s employment by the Employer for any reason, including without limitation for Cause, Disability or Retirement, or by the Executive for any reason, including without limitation for Good Reason, shall be communicated by a written “Notice of Termination” to the other party hereto. For purposes of this Agreement, a “Notice of Termination” shall mean a dated notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated, (iii) specifies a Date of Termination, which shall be not less than thirty (30) nor more than ninety (90) days after such Notice of Termination is given, except in the case of the termination of the Executive’s employment for Cause, which shall be effective immediately, and (iv) is given in the manner specified in Section 11 hereof.

(i) Retirement. “Retirement” shall mean the Executive’s voluntary or involuntary termination of employment, as applicable, upon reaching at least age 65, but shall not include an involuntary termination for Cause.

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2. Term of Employment.

(a) The Bank hereby employs the Executive as Executive Vice President—Head of Commercial Banking—Senior Lending Officer and the Executive hereby accepts said employment and agrees to render such services to the Employer on the terms and conditions set forth in this Agreement. The term of employment under this Agreement shall be for three years beginning on the Effective Date. Prior to the second annual anniversary of the Effective Date and each annual anniversary thereafter, the Board of Directors of the Bank shall consider and review (with appropriate corporate documentation thereof, and after taking into account all relevant factors, including the Executive’s performance hereunder) a one-year extension of the term of this Agreement. If the Board of Directors approves such an extension, then the term of this Agreement shall be so extended as of the relevant annual anniversary of the Effective Date unless the Executive gives written notice to the Employer of the Executive’s election not to extend the term, with such written notice to be given not less than thirty (30) days prior to any such relevant annual anniversary of the Effective Date; provided, however, that if the Bank is deemed to be in “troubled condition” as defined in 12 C.F.R. §§225.71 or 303.101(c) (or any successors thereto) as of the applicable annual anniversary of the Effective Date, then the term of this Agreement shall not be extended unless and until the Employer shall have received all requisite regulatory approvals, non-objections or consents to such renewal pursuant to the provisions of 12 C.F.R. Part 359. If the Board of Directors elects not to extend the term, it shall give written notice of such decision to the Executive not less than thirty (30) days prior to any such annual anniversary of the Effective Date. If any party gives timely notice that the term will not be extended as of any annual anniversary of the Effective Date, then this Agreement and the rights and obligations provided herein shall terminate at the conclusion of its remaining term, except to the extent set forth in Section 5(d) (including the provisions referenced in such section) and Section 7. References herein to the term of this Agreement shall refer both to the initial term and successive terms.

(b) During the term of this Agreement, the Executive shall perform such executive services for the Bank as may be consistent with his titles and from time to time assigned to him by the Bank’s President and CEO or by the Bank’s Board of Directors.

(c) The Executive represents and warrants that his entering into this Agreement, and his performance of his duties as Executive Vice President—Head of Commercial Banking—Senior Lending Officer of the Bank, will not breach or give rise to any cause of action against the Executive, the Corporation or the Bank under the terms of any agreements between the Executive and any prior employer (a “Prior Agreement”). The Executive shall comply with any surviving terms of any Prior Agreement, including terms concerning competition, non-solicitation and confidentiality.

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3. Compensation and Benefits.

(a) The Employer shall pay the Executive a sum of $20,000 in exchange for his execution of this Agreement as a “Transition Payment”.

(b) The Employer shall compensate and pay the Executive for his services during the term of this Agreement at a minimum base salary of $230,000 per year (“Base Salary”), which may be increased from time to time in such amounts as may be determined by the Board of Directors of the Employer and may not be decreased without the Executive’s express written consent. The Executive acknowledges and agrees that no increase in the Base Salary is expected to occur during the first two years following the Effective Date.

(c) During the term of this Agreement, the Executive shall be entitled to participate in and receive the benefits of any pension or other retirement benefit plan, profit sharing, stock incentive, or other plans, benefits and privileges given to employees and executives of the Employer, to the extent commensurate with his then duties and responsibilities, as fixed by the Board of Directors of the Employer. The Employer shall not make any changes in such plans, benefits or privileges which would adversely affect the Executive’s rights or benefits thereunder, unless such change occurs pursuant to a program applicable to all executive officers of the Employer and does not result in a proportionately greater adverse change in the rights of or benefits to the Executive as compared with any other executive officer of the Employer. Nothing paid to the Executive under any plan or arrangement presently in effect or made available in the future shall be deemed to be in lieu of the salary payable to the Executive pursuant to Section 3(b) hereof.

(d) During the term of this Agreement, the Executive shall be entitled to paid annual vacation in accordance with the policies as established from time to time by the Board of Directors of the Employer, which shall in no event be less than four weeks per annum. The Executive shall not be entitled to receive any additional compensation from the Employer for failure to take a vacation, nor shall the Executive be able to accumulate unused vacation time from one year to the next, except to the extent authorized by the Board of Directors of the Employer.

(e) 2013 Restricted Stock Award. On the Effective Date, the Corporation will grant a restricted stock award to the Executive equaling the lesser of 100,000 shares or the number of shares that has a grant date value (i.e., number of shares times market value per share) equal to one-third of the Executive’s projected total compensation to be received from the Employers for 2013. The 2013 Restricted Stock Award is subject to shareholder approval and to the shares being available under the Corporation’s Amended and Restated 2006 Stock Incentive Plan (the “2006 Plan”). The Executive’s total compensation for 2013 for purposes of this award will equal the sum of the Executive’s Base Salary to be earned in 2013 and the grant date value of the 2013 restricted stock award. The vesting of the 2013 restricted stock award will comply with the requirements set forth in the rules published by the U.S. Department of the Treasury in 31 C.F.R. Part 30 (the “TARP Regulations”), with the vesting to be accelerated in the event of the Executive’s death or disability. Consistent with the TARP Regulations, the restricted stock award will also provide for accelerated vesting in the event of a change in control as defined in 26 C.F.R. §1.409A-3(i)(5)(i), provided that no accelerated vesting upon a change in control shall occur if at the time of the change in control any of the following is applicable: (i) the Corporation is still subject to its written agreement with the Federal Reserve Bank of St. Louis dated

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September 21, 2011, as such agreement may be amended or replaced from time to time, (ii) the Bank is still subject to the Consent Order issued by the Federal Deposit Insurance Corporation on June 24, 2011, as such order may be amended or replaced from time to time, or (iii) either the Corporation or the Bank is deemed to be in “troubled condition” as defined in either 12 C.F.R. §225.71 or 12 C.F.R. §303.101(c) (or any successors thereto), unless prior to or in connection with the change in control the Employers have received all requisite regulatory approvals, non-objections or consents to such acceleration pursuant to the provisions of 12 C.F.R. Part 359. The other terms of the 2013 restricted stock award shall comply with the “2006 Plan”.

4. Expenses. The Employer shall reimburse the Executive or otherwise provide for or pay for all reasonable expenses incurred by the Executive in furtherance of or in connection with the business of the Employer, including, but not by way of limitation, traveling expenses, and all reasonable entertainment expenses, subject to such reasonable documentation and other limitations as may be established by the Board of Directors of the Employer. If such expenses are paid in the first instance by the Executive, the Employer shall reimburse the Executive therefor. Such reimbursement shall be paid promptly by the Employer and in any event no later than March 15 of the year immediately following the year in which such expenses were incurred.

5. Termination.

(a) The Employer shall have the right, at any time upon prior Notice of Termination, to terminate the Executive’s employment hereunder for any reason, including, without limitation, termination for Cause, Disability or Retirement, and the Executive shall have the right, upon prior Notice of Termination, to terminate his employment hereunder for any reason.

(b) In the event that (i) the Executive’s employment is terminated by the Employer for Cause or (ii) the Executive terminates his employment hereunder other than for Disability, Retirement, death or Good Reason, the Executive shall have no right pursuant to this Agreement to compensation or other benefits for any period after the applicable Date of Termination.

(c) In the event that the Executive’s employment is terminated as a result of Disability, Retirement or the Executive’s death during the term of this Agreement, the Executive shall have no right pursuant to this Agreement to compensation or other benefits for any period after the applicable Date of Termination.

(d) In the event that (A) the Executive’s employment is terminated by (i) the Employer for other than Cause, Disability, Retirement or the Executive’s death during the term of this Agreement, (ii) the Executive for Good Reason during the term of this Agreement or (iii) subject to the last sentence of this Section 5(d), the Employer for other than Cause, Disability, Retirement or the Executive’s death within six months following the expiration of the term of this Agreement in accordance with the terms of Section 2(a) hereof, and (B) the Executive has been employed by the Employer for at least one year as of the Date of Termination, then the Employer shall, in consideration of the Executive’s agreements in Section 7 below and subject to the provisions of Sections 5(e), 5(f), 6, 18 and 19 hereof, if applicable, pay to the Executive a cash severance amount equal to one (1) times the Executive’s then current annual Base Salary (the “Severance Payment”). The Severance Payment shall be paid in a lump sum within ten (10) business days following the later of the Date of Termination or the expiration of the revocation period provided for in the general release to be executed by the Executive pursuant to Section

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5(e) below. The Severance Payment shall be in lieu of, and not in addition to, any Base Salary or other compensation or benefits that would have been paid under Sections 3(a) and 3(b) above in the absence of a termination of employment, and the Executive shall have no rights pursuant to this Agreement to any Base Salary or other benefits for any period after the applicable Date of Termination. The Executive’s right to severance under Section 5(d)(iii) above shall be subject to the following: (Y) the expiration of this Agreement in accordance with the terms of Section 2(a) hereof shall be for a reason other than a notice of non-renewal of the term of this Agreement having been provided by the Executive, and (Z) as of the date of termination of the Executive’s employment, the Bank is not deemed to be in “troubled condition” as defined in 12 C.F.R. §§225.71 or 303.101(c) (or any successors thereto).

(e) The Executive’s right to receive the severance set forth in Section 5(d) above shall be conditioned upon the Executive’s execution of a general release which releases the Bank and the Corporation and their directors, officers and employees from any claims that the Executive may have under various laws and regulations and the expiration of any right the Executive may have to revoke such general release, with such revocation right not being exercised. If either the time period for paying the severance set forth in Section 5(d) or the time period that the Executive has to consider the terms of the general release (including any revocation period under such release) commences in one calendar year and ends in the succeeding calendar year, then the severance payment set forth in Section 5(d) above shall not be paid until the succeeding calendar year.

(f) If prior to the Executive’s receipt of the Severance Payment set forth in Section 5(d) above it is determined that the Executive (i) committed any fraudulent act or omission, breach of trust or fiduciary duty, or insider abuse with regard to the Employers that has had or is likely to have a material adverse effect on either of the Employers, (ii) is substantially responsible for the insolvency of, the appointment of a conservator or receiver for, or the troubled condition, as defined by applicable regulations of the appropriate federal banking agency, of the Employer, (iii) has materially violated any applicable federal or state banking law or regulation that has had or is likely to have a material adverse effect on the Employer, or (iv) has violated or conspired to violate Sections 215, 656, 657, 1005, 1006, 1007, 1014, 1302 or 1344 of Title 18 of the United State Code, or Sections 1341 or 1343 of Title 18 affecting the Bank, then the Severance Payment shall not be provided to the Executive. If it is determined after the Executive receives the Severance Payment that any of the matters set forth in clauses (i) through (iv) of this Section 5(f) are applicable to the Executive, then the Executive shall promptly (and in any event within ten (10) business days following written notice to the Executive) return an amount equal to the Severance Payment to the Employer in immediately available funds.

6. Limitation of Benefits under Certain Circumstances. If the payment pursuant to Section 5(d) hereof, either alone or together with other payments and benefits which the Executive has the right to receive from the Employer, would constitute a “parachute payment” under Section 280G of the Code, then the amount payable by the Employer pursuant to Section 5(d) hereof shall be reduced by the minimum amount necessary to result in no portion of the amount payable by the Employer under Section 5(d) being non-deductible to the Employer pursuant to Section 280G of the Code and subject to the excise tax imposed under Section 4999 of the Code. The determination of any reduction in the amount payable pursuant to Section 5(d) shall be based upon the opinion of independent tax counsel selected by the Employer and paid

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for by the Employer. Such counsel shall promptly prepare the foregoing opinion, but in no event later than ten (10) days from the Date of Termination, and may use such actuaries as such counsel deems necessary or advisable for the purpose. Nothing contained herein shall result in a reduction of any payments or benefits to which the Executive may be entitled upon termination of employment under any circumstances other than as specified in this Section 6, or a reduction in the payment specified in Section 5(d) below zero.

7. Restrictive Covenants

(a) Trade Secrets. The Executive acknowledges that he has had, and will have, access to confidential information of the Bank and the Corporation (including, but not limited to, current and prospective confidential know-how, customer lists, marketing plans, business plans, financial and pricing information, and information regarding acquisitions, mergers and/or joint ventures) concerning the business, customers, contacts, prospects, and assets of the Bank and the Corporation that is unique, valuable and not generally known outside the Bank and the Corporation, and that was obtained from the Bank and the Corporation or which was learned as a result of the performance of services by the Executive on behalf of the Employer (“Trade Secrets”). Trade Secrets shall not include any information that: (i) is now, or hereafter becomes, through no act or failure to act on the part of the Executive that constitutes a breach of this Section 7, generally known or available to the public; (ii) is known to the Executive at the time such information was obtained from the Bank or the Corporation; (iii) is hereafter furnished without restriction on disclosure to the Executive by a third party, other than an employee or agent of the Bank or the Corporation, who is not under any obligation of confidentiality to the Bank or the Corporation or an Affiliate; (iv) is disclosed with the written approval of the Bank and the Corporation; or (v) is required to be disclosed or provided by law, court order, order of any regulatory agency having jurisdiction or similar compulsion, including pursuant to or in connection with any legal proceeding involving the parties hereto; provided however, that such disclosure shall be limited to the extent so required or compelled; and provided further, however, that if the Executive is required to disclose such confidential information, he shall give the Employer notice of such disclosure and cooperate in seeking suitable protections. Other than in the course of performing services for the Employer, the Executive will not, at any time, directly or indirectly use, divulge, furnish or make accessible to any person any Trade Secrets, but instead will keep all Trade Secrets strictly and absolutely confidential. The Executive will deliver promptly to the Employer, at the termination of his employment or at any other time at the request of the Employers, without retaining any copies, all documents and other materials in his possession relating, directly or indirectly, to any Trade Secrets.

(b) Non-Competition. Unless the Executive’s employment is terminated in connection with or following a Change in Control, then for a period of twelve (12) months after termination of employment, including a termination of employment pursuant to Section 5(d)(iii) above (the “Restricted Period”), the Executive will not, directly or indirectly, (i) become a director, officer, employee, principal, agent, shareholder, consultant or independent contractor of any insured depository institution, trust company or parent holding company of any such institution or company which has an office in any county in the Commonwealth of Kentucky in which the Bank also maintains an office; provided, however, that this paragraph shall not apply if Employer terminates Executive without cause during the first year of Executive’s employment, or if Employer elects not to renew Executive’s employment at the end of the term of this Agreement, or at the end of any extended term. Notwithstanding the foregoing, nothing in this

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Agreement shall prevent the Executive from owning for passive investment purposes not intended to circumvent this Agreement, less than five percent (5%) of the publicly traded voting securities of any company engaged in the banking, financial services or other business similar to or competitive with the Bank (so long as the Executive has no power to manage, operate, advise, consult with or control the competing enterprise and no power, alone or in conjunction with other affiliated parties, to select a director, manager, general partner, or similar governing official of the competing enterprise other than in connection with the normal and customary voting powers afforded the Executive in connection with any permissible equity ownership).

(c) Non-Solicitation of Employees. During the Restricted Period, the Executive shall not, directly or indirectly, solicit, induce or hire, or attempt to solicit, induce or hire, any current employee of the Bank or the Corporation, or any individual who becomes an employee during the Restricted Period, to leave his or her employment with the Bank or the Corporation or join or become affiliated with any other business or entity, or in any way interfere with the employment relationship between any employee and the Bank or the Corporation.

(d) Non-Solicitation of Customers. During the Restricted Period, the Executive shall not, directly or indirectly, solicit or induce, or attempt to solicit or induce, any customer, lender, supplier, licensee, licensor or other business relation of the Bank or the Corporation to terminate its relationship or contract with the Bank or the Corporation, to cease doing business with the Bank or the Corporation, or in any way interfere with the relationship between any such customer, lender, supplier, licensee or business relation and the Bank or the Corporation (including making any negative or derogatory statements or communications concerning the Bank or the Corporation or their directors, officers or employees).

(e) Irreparable Harm. The Executive acknowledges that: (i) the Executive’s compliance with Section 7 of this Agreement is necessary to preserve and protect the proprietary rights, Trade Secrets, and the goodwill of the Bank and the Corporation as going concerns, and (ii) any failure by the Executive to comply with the provisions of this Agreement will result in irreparable and continuing injury for which there will be no adequate remedy at law. In the event that the Executive fails to comply with the terms and conditions of this Agreement, the obligations of the Employer to pay the severance benefits set forth in Section 5 shall cease, and the Employer will be entitled, in addition to other relief that may be proper, to all types of equitable relief (including, but not limited to, the issuance of an injunction and/or temporary restraining order and the recoupment of any severance previously paid) that may be necessary to cause the Executive to comply with this Agreement, to restore to the Bank and the Corporation their property, and to make the Employer whole.

(f) Survival. The provisions set forth in this Section 7 shall survive termination of this Agreement.

(g) Scope Limitations. If the scope, period of time or area of restriction specified in this Section 7 are or would be judged to be unreasonable in any court proceeding, then the period of time, scope or area of restriction will be reduced or limited in the manner and to the extent necessary to make the restriction reasonable, so that the restriction may be enforced in those areas, during the period of time and in the scope that are or would be judged to be reasonable.

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8. Mitigation; Exclusivity of Benefits.

(a) The Executive shall not be required to mitigate the amount of any benefits hereunder by seeking other employment or otherwise, nor shall the amount of any such benefits be reduced by any compensation earned by the Executive as a result of employment by another employer after the Date of Termination or otherwise.

(b) The specific arrangements referred to herein are not intended to exclude any other benefits which may be available to the Executive upon a termination of employment with the Employer pursuant to employee benefit plans of the Employer or otherwise.

9. Withholding. All payments required to be made by the Employer hereunder to the Executive shall be subject to the withholding of such amounts, if any, relating to tax and other payroll deductions as the Employer may reasonably determine should be withheld pursuant to any applicable law or regulation.

10. Assignability. The Corporation and the Bank may assign this Agreement and their rights and obligations hereunder in whole, but not in part, to any corporation, bank or other entity with or into which the Corporation or the Bank may hereafter merge or consolidate or to which the Corporation or the Bank may transfer all or substantially all of its respective assets, if in any such case said corporation, bank or other entity shall by operation of law or expressly in writing assume all obligations of the Bank or the Corporation hereunder as fully as if it had been originally made a party hereto, but may not otherwise assign this Agreement or their rights and obligations hereunder. The Executive may not assign or transfer this Agreement or any rights or obligations hereunder.

11. Notice. For the purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by certified or registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below:

To the Bank:	Chairman of the Board
	PBI Bank, Inc.
	2500 Eastpoint Parkway
	Louisville, Kentucky 40223
To the Corporation:	Chairman of the Board
	Porter Bancorp, Inc.
	2500 Eastpoint Parkway
	Louisville, Kentucky 40223
To the Executive:	Joseph C. Seiler
	At the address last appearing on the personnel records of the Employers

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12. Amendment; Waiver. No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by the Executive and such officer or officers as may be specifically designated by the Boards of Directors of the Bank and the Corporation to sign on their behalf. No waiver by any party hereto at any time of any breach by any other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.

13. Governing Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the United States where applicable and otherwise by the substantive laws of the Commonwealth of Kentucky.

14. Nature of Obligations. Nothing contained herein shall create or require the Employer to create a trust of any kind to fund any benefits which may be payable hereunder, and to the extent that the Executive acquires a right to receive benefits from the Employer hereunder, such right shall be no greater than the right of any unsecured general creditor of the Employer.

15. Headings. The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

16. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provisions of this Agreement, which shall remain in full force and effect.

17. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

18. Regulatory Actions. The following provisions shall be applicable to the parties hereto or any successor thereto, and shall be controlling in the event of a conflict with any other provision of this Agreement, including without limitation Section 5 hereof.

(a) If the Executive is suspended from office and/or temporarily prohibited from participating in the conduct of the Bank’s affairs pursuant to notice served under Section 8(e)(3) or Section 8(g)(1) of the Federal Deposit Insurance Act (“FDIA”)(12 U.S.C. §§1818(e)(3) and 1818(g)(1)), the Bank’s obligations under this Agreement shall be suspended as of the date of service, unless stayed by appropriate proceedings. If the charges in the notice are dismissed, the Bank may, in its discretion: (i) pay the Executive all or part of the compensation withheld while its obligations under this Agreement were suspended, and (ii) reinstate (in whole or in part) any of its obligations which were suspended.

(b) If the Executive is removed from office and/or permanently prohibited from participating in the conduct of the Bank’s affairs by an order issued under Section 8(e)(4) or Section 8(g)(1) of the FDIA (12 U.S.C. §§1818(e)(4) and (g)(1)), all obligations of the Bank under this Agreement shall terminate as of the effective date of the order, but vested rights of the Executive and the Bank as of the date of termination shall not be affected.

(c) If the Bank is in default, as defined in Section 3(x)(1) of the FDIA (12 U.S.C. §1813(x)(1)), all obligations under this Agreement shall terminate as of the date of default, but vested rights of the Executive and the Bank as of the date of termination shall not be affected.

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19. Regulatory Prohibition. Notwithstanding any other provision of this Agreement to the contrary, any payments made to the Executive pursuant to this Agreement, or otherwise, are subject to and conditioned upon their compliance with Section 18(k) of the FDIA (12 U.S.C. §1828(k)) and 12 C.F.R. Part 359.

20. Payment of Costs and Legal Fees and Reinstatement of Benefits. In the event any dispute or controversy arising under or in connection with the Executive’s termination is resolved in favor of the Executive, whether by judgment, arbitration or settlement, the Executive shall be entitled to the payment of (a) all reasonable legal fees incurred by the Executive in resolving such dispute or controversy, and (b) any back-pay, including Base Salary, bonuses and any other cash compensation, fringe benefits and any compensation and benefits due to the Executive under this Agreement.

21. Arbitration. Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled by arbitration in accordance with the rules then in effect of the district office of the American Arbitration Association (“AAA”) located nearest to the home office of the Bank, and judgment upon the award rendered may be entered in any court having jurisdiction thereof, except to the extent that the parties may otherwise reach a mutual settlement of such issue.

22. Entire Agreement. This Agreement embodies the entire agreement between the Bank, the Corporation and the Executive with respect to the matters agreed to herein. All prior agreements between the Bank, the Corporation and the Executive with respect to the matters agreed to herein are hereby superseded and shall have no force or effect.

(Signature page follows)

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IN WITNESS WHEREOF, this Agreement has been executed as of the date first written above.

PORTER BANCORP, INC.
By:	/s/ John Taylor
	John Taylor
	President
PBI BANK, INC.
By:	/s/ John Taylor
	John Taylor
	President and Chief Executive Officer
EXECUTIVE
By:	/s/ Joseph C. Seiler
	Joseph C. Seiler

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EX-10.2

Exhibit 10.2

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of the 7^TH day of August, 2013 (the “Effective Date”), between Porter Bancorp, Inc., a chartered bank holding company (the “Corporation”), PBI Bank, Inc., a Kentucky-chartered commercial bank (the “Bank”), and Phillip W. Barnhouse (the “Executive”).

WITNESSETH

WHEREAS, the Bank desires to employ the Executive as its Chief Operating Officer as well as to continue employing the Executive in his current capacity as its Chief Financial Officer;

WHEREAS, the Corporation desires to continue employing the Executive in his current capacity as its Chief Financial Officer;

WHEREAS, the Bank and the Corporation (referred to together herein as the “Employers”) desire to be ensured of the Executive’s continued active participation in the business of the Employers; and

WHEREAS, the Executive is willing to serve the Employers as the Corporation’s Chief Financial Officer, the Bank’s Chief Financial Officer, and the Bank’s Chief Operating Officer on the terms and conditions hereinafter set forth;

NOW THEREFORE, in consideration of the mutual agreements herein contained, and upon the other terms and conditions hereinafter provided, the Employers and the Executive hereby agree as follows:

1. Definitions. The following words and terms shall have the meanings set forth below for the purposes of this Agreement:

(a) Base Salary. “Base Salary” shall have the meaning set forth in Section 3(a) hereof.

(b) Cause. Termination of the Executive’s employment for “Cause” shall mean termination because of personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of any law, rule or regulation (other than traffic violations or similar offenses) or final consent or cease-and-desist order or material breach of any provision of this Agreement.

(c) Change in Control. “Change in Control” shall mean a change in the ownership of the Corporation, or the Bank, a change in the effective control of the Corporation or the Bank or a change in the ownership of a substantial portion of the assets of the Corporation or the Bank, in each case as provided under Section 409A of the Code and the regulations thereunder.

(d) Code. “Code” shall mean the Internal Revenue Code of 1986, as amended.

(e) Date of Termination. “Date of Termination” shall mean (i) if the Executive’s employment is terminated for Cause, the date on which the Notice of Termination is given, and (ii) if the Executive’s employment is terminated for any other reason, the date specified in such Notice of Termination.

(f) Disability. “Disability” shall mean the Executive (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Employers.

(g) Good Reason. Termination by the Executive of the Executive’s employment for “Good Reason” shall mean termination by the Executive based on:

(i) any material breach of this Agreement by the Employers, including without limitation any of the following: (A) a material diminution in the Executive’s base compensation, (B) a material diminution in the Executive’s authority, duties or responsibilities, or (C) any requirement that the Executive report to a corporate officer or employee of the Corporation or the Bank instead of reporting directly to the Boards of Directors, other than (I) the President of the Corporation with respect to the Executive’s duties relating to the Corporation or the President and Chief Executive Officer of the Bank with respect to the Executive’s duties relating to the Bank and (II) from time to time with respect to specified matters, a director of either the Corporation or the Bank who is designated by a majority of the full Board of Directors of either the Corporation or the Bank, or

(ii) any material change in the Metro Louisville, Kentucky location at which the Executive must perform his services under this Agreement;

provided, however, that prior to any termination of employment for Good Reason, the Executive must first provide written notice to the Corporation and the Bank within ninety (90) days of the initial existence of the condition, describing the existence of such condition, and the Corporation and the Bank shall thereafter have the right to remedy the condition within thirty (30) days of the date the Corporation and the Bank received the written notice from the Executive. If the Corporation and the Bank remedy the condition within such thirty (30) day cure period, then no Good Reason shall be deemed to exist with respect to such condition. If the Corporation and the Bank do not remedy the condition within such thirty (30) day cure period, then the Executive may deliver a Notice of Termination for Good Reason at any time within sixty (60) days following the expiration of such cure period.

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(h) Notice of Termination. Any purported termination of the Executive’s employment by the Employers for any reason, including without limitation for Cause, Disability or Retirement, or by the Executive for any reason, including without limitation for Good Reason, shall be communicated by a written “Notice of Termination” to the other party hereto. For purposes of this Agreement, a “Notice of Termination” shall mean a dated notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated, (iii) specifies a Date of Termination, which shall be not less than thirty (30) nor more than ninety (90) days after such Notice of Termination is given, except in the case of the termination of the Executive’s employment for Cause, which shall be effective immediately, and (iv) is given in the manner specified in Section 11 hereof.

(i) Retirement. “Retirement” shall mean the Executive’s voluntary or involuntary termination of employment, as applicable, upon reaching at least age 65, but shall not include an involuntary termination for Cause.

2. Term of Employment.

(a) The Bank hereby employs the Executive as its Chief Operating Officer and agrees to continue to employ Executive as its Chief Financial Officer, the Corporation hereby agrees to continue to employ Executive as its Chief Financial Officer, and the Executive hereby accepts all said employment and agrees to render such services to the Employers on the terms and conditions set forth in this Agreement. The term of employment under this Agreement shall be for three years beginning on the Effective Date. Prior to the second annual anniversary of the Effective Date and each annual anniversary thereafter, the Board of Directors of each of the Corporation and the Bank shall consider and review (with appropriate corporate documentation thereof, and after taking into account all relevant factors, including the Executive’s performance hereunder) a one-year extension of the term of this Agreement. If the Boards of Directors approve such an extension, then the term of this Agreement shall be so extended as of the relevant annual anniversary of the Effective Date unless the Executive gives written notice to the Employers of the Executive’s election not to extend the term, with such written notice to be given not less than thirty (30) days prior to any such relevant annual anniversary of the Effective Date; provided, however, that if either the Corporation or the Bank is deemed to be in “troubled condition” as defined in 12 C.F.R. §§225.71 or 303.101(c) (or any successors thereto) as of the applicable annual anniversary of the Effective Date, then the term of this Agreement shall not be extended unless and until the Employers shall have received all requisite regulatory approvals, non-objections or consents to such renewal pursuant to the provisions of 12 C.F.R. Part 359. If either Board of Directors elects not to extend the term, it shall give written notice of such decision to the Executive not less than thirty (30) days prior to any such annual anniversary of the Effective Date. If any party gives timely notice that the term will not be extended as of any annual anniversary of the Effective Date, then this Agreement and the rights and obligations provided herein shall terminate at the conclusion of its remaining term, except to the extent set forth in Section 5(d) (including the provisions referenced in such section) and Section 7. References herein to the term of this Agreement shall refer both to the initial term and successive terms.

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(b) During the term of this Agreement, the Executive shall perform such executive services for the Corporation and the Bank as may be consistent with his titles and from time to time assigned to him by the Bank’s President and Chief Executive Officer or Board of Directors with respect to Executive’s duties relating to the Bank or by the Corporation’s President or Board of Directors with respect to Executive’s duties relating to the Corporation.

(c) The Executive represents and warrants that his entering into this Agreement, and his performance of his duties as Chief Operating Officer and Chief Financial Officer of the Bank and Chief Financial Officer of the Corporation, will not breach or give rise to any cause of action against the Executive, the Corporation, or the Bank under the terms of any agreements between the Executive and any prior employer (a “Prior Agreement”). The Executive shall comply with any surviving terms of any Prior Agreement, including terms concerning competition, non-solicitation and confidentiality.

3. Compensation and Benefits.

(a) The Employers shall compensate and pay the Executive for his services during the term of this Agreement at a minimum base salary of $225,000 per year (“Base Salary”), which may be increased from time to time in such amounts as may be determined by the Boards of Directors of the Employers and may not be decreased without the Executive’s express written consent. The Executive acknowledges and agrees that no increase in the Base Salary is expected to occur during the first two years following the Effective Date.

(b) During the term of this Agreement, the Executive shall be entitled to participate in and receive the benefits of any pension or other retirement benefit plan, profit sharing, stock incentive, or other plans, benefits and privileges given to employees and executives of the Employers, to the extent commensurate with his then duties and responsibilities, as fixed by the Boards of Directors of the Employers. The Employers shall not make any changes in such plans, benefits or privileges which would adversely affect the Executive’s rights or benefits thereunder, unless such change occurs pursuant to a program applicable to all executive officers of the Employers and does not result in a proportionately greater adverse change in the rights of or benefits to the Executive as compared with any other executive officer of the Employers. Nothing paid to the Executive under any plan or arrangement presently in effect or made available in the future shall be deemed to be in lieu of the salary payable to the Executive pursuant to Section 3(a) hereof.

(c) During the term of this Agreement, the Executive shall be entitled to paid annual vacation in accordance with the policies as established from time to time by the Boards of Directors of the Employers, which shall in no event be less than four weeks per annum. The Executive shall not be entitled to receive any additional compensation from the Employers for failure to take a vacation, nor shall the Executive be able to accumulate unused vacation time from one year to the next, except to the extent authorized by the Boards of Directors of the Employers.

(d) 2013 Restricted Stock Award. The Corporation will grant a restricted stock award to the Executive of 50,000 Corporation shares (the “2013 Restricted Stock Award”), if and when such shares become available under the Corporation’s Amended and Restated 2006 Stock Incentive Plan (the “2006 Plan”). The 2013 Restricted Stock Award is subject to shareholder

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approval. The vesting of the 2013 Restricted Stock Award will comply with the requirements set forth in the rules published by the U.S. Department of the Treasury in 31 C.F.R. Part 30 (the “TARP Regulations”), with the vesting to be accelerated in the event of the Executive’s death or disability. Consistent with the TARP Regulations, the 2013 Restricted Stock Award will also provide for accelerated vesting in the event of a change in control as defined in 26 C.F.R. §1.409A-3(i)(5)(i), provided that no accelerated vesting upon a change in control shall occur if at the time of the change in control any of the following is applicable: (i) the Corporation is still subject to its written agreement with the Federal Reserve Bank of St. Louis dated September 21, 2011, as such agreement may be amended or replaced from time to time, (ii) the Bank is still subject to the Consent Order issued by the Federal Deposit Insurance Corporation on October 12, 2012, as such order may be amended or replaced from time to time, or (iii) either the Corporation or the Bank is deemed to be in “troubled condition” as defined in either 12 C.F.R. §225.71 or 12 C.F.R. §303.101(c) (or any successors thereto), unless prior to or in connection with the change in control the Employers have received all requisite regulatory approvals, non-objections or consents to such acceleration pursuant to the provisions of 12 C.F.R. Part 359. The other terms of the 2013 Restricted Stock Award shall comply with the “2006 Plan”.

(e) Except as may otherwise be agreed to by the Corporation and the Bank, the Executive’s compensation, benefits and severance set forth in this Agreement shall be paid by the Corporation and the Bank in the same proportion as the time and services actually expended by the Executive on the business of the Corporation and the business of the Bank, respectively, with any amounts paid by the Corporation to be credited towards the obligations of the Bank under this Agreement. No provision contained in this Agreement shall require the Bank to pay any portion of the Executive’s compensation, benefits, severance and expenses required to be paid by the Corporation pursuant to this Agreement.

4. Expenses. The Employers shall reimburse the Executive or otherwise provide for or pay for all reasonable expenses incurred by the Executive in furtherance of or in connection with the business of the Employers, including, but not by way of limitation, traveling expenses, and all reasonable entertainment expenses, subject to such reasonable documentation and other limitations as may be established by the Boards of Directors of the Employers. If such expenses are paid in the first instance by the Executive, the Employers shall reimburse the Executive therefor. Such reimbursement shall be paid promptly by the Employers and in any event no later than March 15 of the year immediately following the year in which such expenses were incurred.

5. Termination.

(a) The Employers shall have the right, at any time upon prior Notice of Termination, to terminate the Executive’s employment hereunder for any reason, including, without limitation, termination for Cause, Disability or Retirement, and the Executive shall have the right, upon prior Notice of Termination, to terminate his employment hereunder for any reason.

(b) In the event that (i) the Executive’s employment is terminated by the Employers for Cause or (ii) the Executive terminates his employment hereunder other than for Disability, Retirement, death or Good Reason, the Executive shall have no right pursuant to this Agreement to compensation or other benefits for any period after the applicable Date of Termination.

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(c) In the event that the Executive’s employment is terminated as a result of Disability, Retirement or the Executive’s death during the term of this Agreement, the Executive shall have no right pursuant to this Agreement to compensation or other benefits for any period after the applicable Date of Termination.

(d) In the event that the Executive’s employment is terminated by (i) the Employers for other than Cause, Disability, Retirement or the Executive’s death during the term of this Agreement, (ii) the Executive for Good Reason during the term of this Agreement or (iii) subject to the last sentence of this Section 5(d), the Employers for other than Cause, Disability, Retirement or the Executive’s death within six months following the expiration of the term of this Agreement in accordance with the terms of Section 2(a) hereof, then the Employers shall, in consideration of the Executive’s agreements in Section 7 below and subject to the provisions of Sections 5(e), 5(f), 6, 18 and 19 hereof, if applicable, pay to the Executive a cash severance amount equal to one (1) times the Executive’s then current annual Base Salary (the “Severance Payment”). The Severance Payment shall be paid in a lump sum within ten (10) business days following the later of the Date of Termination or the expiration of the revocation period provided for in the general release to be executed by the Executive pursuant to Section 5(e) below. The Severance Payment shall be in lieu of, and not in addition to, any Base Salary or other compensation or benefits that would have been paid under Sections 3(a) above in the absence of a termination of employment, and the Executive shall have no rights pursuant to this Agreement to any Base Salary or other benefits for any period after the applicable Date of Termination. The Executive’s right to severance under Section 5(d)(iii) above shall be subject to the following: (Y) the expiration of this Agreement in accordance with the terms of Section 2(a) hereof shall be for a reason other than a notice of non-renewal of the term of this Agreement having been provided by the Executive, and (Z) as of the date of termination of the Executive’s employment, neither the Corporation nor the Bank is deemed to be in “troubled condition” as defined in 12 C.F.R. §§225.71 or 303.101(c) (or any successors thereto).

(e) The Executive’s right to receive the severance set forth in Section 5(d) above shall be conditioned upon the Executive’s execution of a general release which releases the Employers and their directors, officers and employees from any claims that the Executive may have under various laws and regulations and the expiration of any right the Executive may have to revoke such general release, with such revocation right not being exercised. If either the time period for paying the severance set forth in Section 5(d) or the time period that the Executive has to consider the terms of the general release (including any revocation period under such release) commences in one calendar year and ends in the succeeding calendar year, then the severance payment set forth in Section 5(d) above shall not be paid until the succeeding calendar year.

(f) If prior to the Executive’s receipt of the Severance Payment set forth in Section 5(d) above it is determined that the Executive (i) committed any fraudulent act or omission, breach of trust or fiduciary duty, or insider abuse with regard to the Employers that has had or is likely to have a material adverse effect on either of the Employers, (ii) is substantially responsible for the insolvency of, the appointment of a conservator or receiver for, or the troubled condition, as defined by applicable regulations of the appropriate federal banking agency, of either of the Employers, (iii) has materially violated any applicable federal or state banking law or regulation that has had or is likely to have a material adverse effect on either of the Employers, or (iv) has violated or conspired to violate Sections 215, 656, 657, 1005, 1006, 1007, 1014, 1302 or 1344 of Title 18 of the United State Code, or Sections 1341 or 1343 of Title

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18 affecting the Bank, then the Severance Payment shall not be provided to the Executive. If it is determined after the Executive receives the Severance Payment that any of the matters set forth in clauses (i) through (iv) of this Section 5(f) are applicable to the Executive, then the Executive shall promptly (and in any event within ten (10) business days following written notice to the Executive) return an amount equal to the Severance Payment to the Employers in immediately available funds.

6. Limitation of Benefits under Certain Circumstances. If the payment pursuant to Section 5(d) hereof, either alone or together with other payments and benefits which the Executive has the right to receive from the Employers, would constitute a “parachute payment” under Section 280G of the Code, then the amount payable by the Employers pursuant to Section 5(d) hereof shall be reduced by the minimum amount necessary to result in no portion of the amount payable by the Employers under Section 5(d) being non-deductible to the Employers pursuant to Section 280G of the Code and subject to the excise tax imposed under Section 4999 of the Code. The determination of any reduction in the amount payable pursuant to Section 5(d) shall be based upon the opinion of independent tax counsel selected by the Employers and paid for by the Employers. Such counsel shall promptly prepare the foregoing opinion, but in no event later than ten (10) days from the Date of Termination, and may use such actuaries as such counsel deems necessary or advisable for the purpose. Nothing contained herein shall result in a reduction of any payments or benefits to which the Executive may be entitled upon termination of employment under any circumstances other than as specified in this Section 6, or a reduction in the payment specified in Section 5(d) below zero.

7. Restrictive Covenants

(a) Trade Secrets. The Executive acknowledges that he has had, and will have, access to confidential information of the Employers (including, but not limited to, current and prospective confidential know-how, customer lists, marketing plans, business plans, financial and pricing information, and information regarding acquisitions, mergers and/or joint ventures) concerning the business, customers, contacts, prospects, and assets of the Employers that is unique, valuable and not generally known outside the Employers, and that was obtained from the Employers or which was learned as a result of the performance of services by the Executive on behalf of the Employers (“Trade Secrets”). Trade Secrets shall not include any information that: (i) is now, or hereafter becomes, through no act or failure to act on the part of the Executive that constitutes a breach of this Section 7, generally known or available to the public; (ii) is known to the Executive at the time such information was obtained from the Employers; (iii) is hereafter furnished without restriction on disclosure to the Executive by a third party, other than an employee or agent of the Employers, who is not under any obligation of confidentiality to the Employers or an Affiliate; (iv) is disclosed with the written approval of the Employers; or (v) is required to be disclosed or provided by law, court order, order of any regulatory agency having jurisdiction or similar compulsion, including pursuant to or in connection with any legal proceeding involving the parties hereto; provided however, that such disclosure shall be limited to the extent so required or compelled; and provided further, however, that if the Executive is required to disclose such confidential information, he shall give the Employers notice of such disclosure and cooperate in seeking suitable protections. Other than in the course of performing services for the Employers, the Executive will not, at any time, directly or indirectly use, divulge, furnish or make accessible to any person any Trade Secrets, but instead will keep all Trade Secrets strictly and absolutely confidential. The Executive will deliver promptly to the Employers, at the termination of his employment or at any other time at the request of the Employers, without retaining any copies, all documents and other materials in his possession relating, directly or indirectly, to any Trade Secrets.

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(b) Non-Competition. Unless the Executive’s employment is terminated in connection with or following a Change in Control, then for a period of twelve (12) months after termination of employment, including a termination of employment pursuant to Section 5(d)(iii) above (the “Restricted Period”), the Executive will not, directly or indirectly, (i) become a director, officer, employee, principal, agent, shareholder, consultant or independent contractor of any insured depository institution, trust company or parent holding company of any such institution or company which has an office in any county in the Commonwealth of Kentucky in which the Bank also maintains an office. Notwithstanding the foregoing, nothing in this Agreement shall prevent the Executive from owning for passive investment purposes not intended to circumvent this Agreement, less than five percent (5%) of the publicly traded voting securities of any company engaged in the banking, financial services or other business similar to or competitive with the Employers (so long as the Executive has no power to manage, operate, advise, consult with or control the competing enterprise and no power, alone or in conjunction with other affiliated parties, to select a director, manager, general partner, or similar governing official of the competing enterprise other than in connection with the normal and customary voting powers afforded the Executive in connection with any permissible equity ownership).

(c) Non-Solicitation of Employees. During the Restricted Period, the Executive shall not, directly or indirectly, solicit, induce or hire, or attempt to solicit, induce or hire, any current employee of the Employers, or any individual who becomes an employee during the Restricted Period, to leave his or her employment with the Employers or join or become affiliated with any other business or entity, or in any way interfere with the employment relationship between any employee and the Employers.

(d) Non-Solicitation of Customers. During the Restricted Period, the Executive shall not, directly or indirectly, solicit or induce, or attempt to solicit or induce, any customer, lender, supplier, licensee, licensor or other business relation of the Employers to terminate its relationship or contract with the Employers, to cease doing business with the Employers, or in any way interfere with the relationship between any such customer, lender, supplier, licensee or business relation and the Employers (including making any negative or derogatory statements or communications concerning the Employers or their directors, officers or employees).

(e) Irreparable Harm. The Executive acknowledges that: (i) the Executive’s compliance with Section 7 of this Agreement is necessary to preserve and protect the proprietary rights, Trade Secrets, and the goodwill of the Employers as going concerns, and (ii) any failure by the Executive to comply with the provisions of this Agreement will result in irreparable and continuing injury for which there will be no adequate remedy at law. In the event that the Executive fails to comply with the terms and conditions of this Agreement, the obligations of the Employers to pay the severance benefits set forth in Section 5 shall cease, and the Employers will be entitled, in addition to other relief that may be proper, to all types of equitable relief (including, but not limited to, the issuance of an injunction and/or temporary restraining order and the recoupment of any severance previously paid) that may be necessary to cause the Executive to comply with this Agreement, to restore to the Employers their property, and to make the Employers whole.

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(f) Survival. The provisions set forth in this Section 7 shall survive termination of this Agreement.

(g) Scope Limitations. If the scope, period of time or area of restriction specified in this Section 7 are or would be judged to be unreasonable in any court proceeding, then the period of time, scope or area of restriction will be reduced or limited in the manner and to the extent necessary to make the restriction reasonable, so that the restriction may be enforced in those areas, during the period of time and in the scope that are or would be judged to be reasonable.

8. Mitigation; Exclusivity of Benefits.

(a) The Executive shall not be required to mitigate the amount of any benefits hereunder by seeking other employment or otherwise, nor shall the amount of any such benefits be reduced by any compensation earned by the Executive as a result of employment by another employer after the Date of Termination or otherwise.

(b) The specific arrangements referred to herein are not intended to exclude any other benefits which may be available to the Executive upon a termination of employment with the Employers pursuant to employee benefit plans of the Employers or otherwise.

9. Withholding. All payments required to be made by the Employers hereunder to the Executive shall be subject to the withholding of such amounts, if any, relating to tax and other payroll deductions as the Employers may reasonably determine should be withheld pursuant to any applicable law or regulation.

10. Assignability. The Corporation and the Bank may assign this Agreement and their rights and obligations hereunder in whole, but not in part, to any corporation, bank or other entity with or into which the Corporation or the Bank may hereafter merge or consolidate or to which the Corporation or the Bank may transfer all or substantially all of its respective assets, if in any such case said corporation, bank or other entity shall by operation of law or expressly in writing assume all obligations of the Employers hereunder as fully as if it had been originally made a party hereto, but may not otherwise assign this Agreement or their rights and obligations hereunder. The Executive may not assign or transfer this Agreement or any rights or obligations hereunder.

11. Notice. For the purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by certified or registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below:

To the Bank:	John Taylor
	President and CEO
	PBI Bank, Inc.
	2500 Eastpoint Parkway
	Louisville, Kentucky 40223

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To the Corporation:	John Taylor
	President
	Porter Bancorp, Inc.
	2500 Eastpoint Parkway
	Louisville, Kentucky 40223
To the Executive:	Phillip W. Barnhouse
	At the address last appearing on the personnel records of the Employers

12. Amendment; Waiver. No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by the Executive and such officer or officers as may be specifically designated by the Boards of Directors of the Employers to sign on their behalf. No waiver by any party hereto at any time of any breach by any other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.

13. Governing Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the United States where applicable and otherwise by the substantive laws of the Commonwealth of Kentucky.

14. Nature of Obligations. Nothing contained herein shall create or require the Employers to create a trust of any kind to fund any benefits which may be payable hereunder, and to the extent that the Executive acquires a right to receive benefits from the Employers hereunder, such right shall be no greater than the right of any unsecured general creditor of the Employers.

15. Headings. The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

16. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provisions of this Agreement, which shall remain in full force and effect.

17. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

18. Regulatory Actions. The following provisions shall be applicable to the parties hereto or any successor thereto, and shall be controlling in the event of a conflict with any other provision of this Agreement, including without limitation Section 5 hereof.

(a) If the Executive is suspended from office and/or temporarily prohibited from participating in the conduct of the Bank’s affairs pursuant to notice served under Section 8(e)(3) or Section 8(g)(1) of the Federal Deposit Insurance Act (“FDIA”)(12 U.S.C. §§1818(e)(3) and 1818(g)(1)), the Bank’s obligations under this Agreement shall be suspended as of the date of service, unless stayed by appropriate proceedings. If the charges in the notice are dismissed, the Bank may, in its discretion: (i) pay the Executive all or part of the compensation withheld while its obligations under this Agreement were suspended, and (ii) reinstate (in whole or in part) any of its obligations which were suspended.

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(b) If the Executive is removed from office and/or permanently prohibited from participating in the conduct of the Bank’s affairs by an order issued under Section 8(e)(4) or Section 8(g)(1) of the FDIA (12 U.S.C. §§1818(e)(4) and (g)(1)), all obligations of the Bank under this Agreement shall terminate as of the effective date of the order, but vested rights of the Executive, and the Bank as of the date of termination shall not be affected.

(c) If the Bank is in default, as defined in Section 3(x)(1) of the FDIA (12 U.S.C. §1813(x)(1)), all obligations under this Agreement shall terminate as of the date of default, but vested rights of the Executive and the Bank as of the date of termination shall not be affected.

19. Regulatory Prohibition. Notwithstanding any other provision of this Agreement to the contrary, any payments made to the Executive pursuant to this Agreement, or otherwise, are subject to and conditioned upon their compliance with Section 18(k) of the FDIA (12 U.S.C. §1828(k)) and 12 C.F.R. Part 359.

20. Payment of Costs and Legal Fees and Reinstatement of Benefits. In the event any dispute or controversy arising under or in connection with the Executive’s termination is resolved in favor of the Executive, whether by judgment, arbitration or settlement, the Executive shall be entitled to the payment of (a) all reasonable legal fees incurred by the Executive in resolving such dispute or controversy, and (b) any back-pay, including Base Salary, bonuses and any other cash compensation, fringe benefits and any compensation and benefits due to the Executive under this Agreement.

21. Arbitration. Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled by arbitration in accordance with the rules then in effect of the district office of the American Arbitration Association (“AAA”) located nearest to the home office of the Bank, and judgment upon the award rendered may be entered in any court having jurisdiction thereof, except to the extent that the parties may otherwise reach a mutual settlement of such issue.

22. Entire Agreement. This Agreement embodies the entire agreement between the Employers and the Executive with respect to the matters agreed to herein. All prior agreements between the Employers and the Executive with respect to the matters agreed to herein are hereby superseded and shall have no force or effect.

(Signature page follows)

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IN WITNESS WHEREOF, this Employment Agreement has been executed as of August 7, 2013.

PORTER BANCORP, INC.
By:	/s/ John Taylor
	John Taylor
	President
PBI BANK, INC.
By:	/s/ John Taylor
	John Taylor
	President and Chief Executive Officer
EXECUTIVE
By:	/s/ Phillip W. Barnhouse
	Phillip W. Barnhouse

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EX-31.1

Exhibit 31.1

Porter Bancorp, Inc.

Rule 13a-14(a) Certification

of President

I, John T. Taylor, President of Porter Bancorp, Inc. (the “Company”), certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of the Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: August 8, 2013	/s/ John T. Taylor
	John T. Taylor President

EX-31.2

Exhibit 31.2

Porter Bancorp, Inc.

Rule 13a-14(a) Certification

of Chief Financial Officer

I, Phillip W. Barnhouse, Chief Financial Officer of Porter Bancorp, Inc. (the “Company”), certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of the Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: August 8, 2013	/s/ Phillip W. Barnhouse
	Phillip W. Barnhouse Chief Financial Officer

EX-32.1

Exhibit 32.1

SECTION 906 CERTIFICATION

In connection with the Quarterly Report on Form 10-Q of Porter Bancorp, Inc. (the “Company”) for the quarterly period ended June 30, 2013, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John T. Taylor, President of the Company, do hereby certify, in accordance with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

	PORTER BANCORP, INC.
Dated: August 8, 2013	By:	/s/ John T. Taylor
		John T. Taylor President

EX-32.2

Exhibit 32.2

SECTION 906 CERTIFICATION

In connection with the Quarterly Report on Form 10-Q of Porter Bancorp, Inc. (the “Company”) for the quarterly period ended June 30, 2013, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Phillip W. Barnhouse, Chief Financial Officer of the Company, do hereby certify, in accordance with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

	PORTER BANCORP, INC.
Dated: August 8, 2013	By:	/s/ Phillip W. Barnhouse
		Phillip W. Barnhouse Chief Financial Officer

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Contingencies - Additional Information (Detail) (USD $)	1 Months Ended	6 Months Ended	12 Months Ended		1 Months Ended		12 Months Ended	6 Months Ended
	Jun. 30, 2010 Plaintiff	Jun. 30, 2013	Dec. 31, 2010	Jul. 16, 2013 Scenario, Forecast	Jul. 16, 2013 Scenario, Forecast Compensatory Damages	Jul. 16, 2013 Scenario, Forecast Punitive Damages	Dec. 31, 2010 Clinton Group, Inc.	Jun. 30, 2013 Minimum	Jun. 30, 2013 Maximum
Commitments and Contingencies Disclosure [Line Items]
Accrued litigation liability		$ 1,700,000
Damages awarding to plaintiff					1,515,000	5,500,000
Total amount reinstated if the conveyance agreement is rescinded				26,000,000
Number of Plaintiffs	3
Equity and warrants issued in private placement			32,000,000				5,000,016
Loss contingency damage sought by plaintiff								$ 4,500,000	$ 5,000,016
Loss Contingency damage sought by plaintiff		The plaintiff seeks damages in an amount in excess of $4,500,000, or the difference between the $5,000,016 purchase price and the value of the securities when sold by the plaintiff, plus interest at the applicable statutory rate, costs and reasonable attorneys' fees.

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Income Taxes

6 Months Ended

Jun. 30, 2013

Income Taxes

Note 9 – Income Taxes

Deferred tax assets and liabilities were due to the following as of:

	June 30, 2013			December 31, 2012
	(in thousands)
Deferred tax assets:
Allowance for loan losses	$	13,146		$	19,838
Other real estate owned write-down		9,959			10,408
Net operating loss carry-forward		23,302			15,051
New market tax credit carry-forward		208			208
Alternative minimum tax credit carry-forward		692			692
Net assets from acquisitions		626			592
Other than temporary impairment on securities		374			374
Net unrealized loss on securities available for sale		386			—
Amortization of non-compete agreements		18			19
Other		925			936
		49,636			48,118
Deferred tax liabilities:
Fixed assets		350			409
Net unrealized gain on securities available for sale		—			1,858
FHLB stock dividends		1,276			1,276
Originated mortgage servicing rights		88			98
Other		516			549
		2,230			4,190
Net deferred tax assets before valuation allowance		47,406			43,928
Valuation allowance		(47,406	)		(43,928	)
Net deferred tax asset	$	—		$	—

Our estimate of the realizability of the deferred tax asset depends on our estimate of projected future levels of taxable income as all carryback ability was fully absorbed by our tax loss of approximately $40 million for 2011. In analyzing future taxable income levels, we considered all evidence currently available, both positive and negative. Based on our analysis, we continue to maintain a valuation allowance for all deferred tax assets as of June 30, 2013. Our deferred tax assets and the related valuation allowance are analyzed and adjusted on a quarterly basis.

The Company does not have any beginning and ending unrecognized tax benefits. The Company does not expect the total amount of unrecognized tax benefits to significantly increase or decrease in the next twelve months. There were no interest and penalties recorded in the income statement or accrued for the six months ended June 30, 2013 or the year ended December 31, 2012 related to unrecognized tax benefits.

The Company and its subsidiaries are subject to U.S. federal income tax and the Company is subject to income tax in the Commonwealth of Kentucky. The Company is no longer subject to examination by taxing authorities for years before 2009.

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Scheduled of Deposits by Category (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Deposits [Line Items]
Non-interest bearing	$ 106,320	$ 114,310
Interest checking	78,218	87,234
Money market	65,620	63,715
Savings	40,121	39,227
Certificates of deposit	690,557	760,573
Total deposits	$ 980,836	$ 1,065,059

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Consolidated Statements of Operations (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Interest income
Loans, including fees	$ 9,954	$ 13,689	$ 19,987	$ 28,201
Taxable securities	848	797	1,715	1,638
Tax exempt securities	231	196	452	446
Fed funds sold and other	135	130	272	282
Interest and Dividend Income, Operating, Total	11,168	14,812	22,426	30,567
Interest expense
Deposits	2,560	3,726	5,264	7,726
Federal Home Loan Bank advances	41	54	84	111
Subordinated capital note	56	67	114	138
Junior subordinated debentures	157	168	311	339
Federal funds purchased and other	2	2	3	4
Interest Expense, Total	2,816	4,017	5,776	8,318
Net interest income	8,352	10,795	16,650	22,249
Provision for loan losses		4,000	450	7,750
Net interest income after provision for loan losses	8,352	6,795	16,200	14,499
Non-interest income
Service charges on deposit accounts	506	556	999	1,110
Income from fiduciary activities		291	517	542
Bank card interchange fees	196	199	368	376
Other real estate owned rental income	230	24	342	62
Net gain on sales of securities	703	1,511	703	3,530
Income from bank owned life insurance	305	79	384	158
Other	208	358	482	685
Noninterest Income, Total	2,148	3,018	3,795	6,463
Non-interest expense
Salaries and employee benefits	3,999	3,982	8,138	8,294
Occupancy and equipment	913	969	1,844	1,855
Loan collection expense	2,407	586	3,442	946
Other real estate owned expense	1,657	1,205	2,448	2,462
FDIC Insurance	650	832	1,289	1,705
State franchise tax	537	592	1,074	1,184
Professional fees	499	567	905	923
Communications	179	168	354	348
Insurance expense	160	104	311	200
Postage and delivery	102	109	215	231
Other	706	548	1,353	1,161
Noninterest Expense, Total	11,809	9,662	21,373	19,309
Income (loss) before income taxes	(1,309)	151	(1,378)	1,653
Income tax benefit
Net income (loss)	(1,309)	151	(1,378)	1,653
Less:
Dividends on preferred stock	437	438	875	875
Accretion on Series A preferred stock	45	45	90	90
Earnings (losses) allocated to participating securities	(110)	(13)	(131)	27
Net income (loss) attributable to common shareholders	$ (1,681)	$ (319)	$ (2,212)	$ 661
Basic earnings (loss) per common share	$ (0.14)	$ (0.03)	$ (0.19)	$ 0.06
Diluted earnings (loss) per common share	$ (0.14)	$ (0.03)	$ (0.19)	$ 0.06

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Going Concern Considerations and Future Plans

6 Months Ended

Jun. 30, 2013

Going Concern Considerations and Future Plans

Note 2 – Going Concern Considerations and Future Plans

The consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business for the foreseeable future. However, the events and circumstances described in this Note raise substantial doubt about the Company’s ability to continue as a going concern.

During the first six months of 2013, we reported net loss to common shareholders of $2.2 million, compared with net income to common shareholders of $661,000 for the first six months of 2012. This was primarily due to decreased net interest income driven by the reduction of the size of our loan portfolio and a decline in our net interest margin, a reduction of $2.8 million in gains on sales of investment securities, an increase in our loan collection expense and continuing costs to carry higher levels of nonperforming assets. This was offset by a decrease in the provision for loan losses expense from $7.8 million for the six months ended June 30, 2012, to $450,000 for the six months ended June 30, 2013.

For the year ended December 31, 2012, we reported net loss to common shareholders of $33.4 million. This loss was attributable primarily to $40.3 million of provision for loan losses expense. A decline in credit quality in our portfolio during the year resulted in net charge-offs of $36.1 million, and OREO expense of $10.5 million resulting from fair value write-downs driven by new appraisals and reduced marketing prices, net loss on sales, and ongoing operating expense. We also had lower net interest margin due to lower average loans outstanding, loans re-pricing at lower rates, and the level of non-performing loans in our portfolio. Net loss to common shareholders of $33.4 million, for the year ended December 31, 2012, compares with net loss to common shareholders of $105.2 million for the year ended December 31, 2011.

In the fourth quarter of 2011, we began deferring the payment of regular quarterly cash dividends on our Series A Preferred Stock issued to the U.S. Treasury. At June 30, 2013, cumulative accrued and unpaid dividends on this stock totaled $3.3 million. We have deferred dividend payments for six quarters and the holder of our Series A Preferred Stock (currently the U.S. Treasury) has the right to appoint up to two representatives to our Board of Directors. We continue to accrue deferred dividends, which are deducted from income to common shareholders for financial statement purposes.

In June 2011, the Bank agreed to a Consent Order with the FDIC and KDFI in which the Bank agreed, among other things, to improve asset quality, reduce loan concentrations, and maintain a minimum Tier 1 leverage ratio of 9% and a minimum total risk based capital ratio of 12%. The Consent Order was included in our Current Report on 8-K filed on June 30, 2011. In October 2012, the Bank entered into a new Consent Order with the FDIC and KDFI again agreeing to maintain a minimum Tier 1 leverage ratio of 9% and a minimum total risk based capital ratio of 12%. The Bank also agreed that if it should be unable to reach the required capital levels, and if directed in writing by the FDIC, then the Bank would within 30 days develop, adopt and implement a written plan to sell or merge itself into another federally insured financial institution or otherwise immediately obtain a sufficient capital investment into the Bank to fully meet the capital requirements.

We expect to continue to work with our regulators toward capital ratio compliance as outlined in the written capital plan previously submitted by the Bank. The new Consent Order also requires the Bank to continue to adhere to the plans implemented in response to the June 2011 Consent Order, and includes the substantive provisions of the June 2011 Consent Order. The new Consent Order was included in our Current Report on 8-K filed on September 19, 2012. As of June 30, 2013, the capital ratios required by the Consent Order were not met.

In order to meet these capital requirements, the Board of Directors and management are continuing to evaluate strategies to achieve the following objectives:

• Increasing capital through a possible public offering or private placement of common stock to new and existing shareholders. We have engaged a financial advisor to assist our Board in evaluating our options for increasing capital and redeeming our Series A preferred stock issued to the US Treasury in 2008 under the Capital Purchase Program.

• Continuing to operate the Company and Bank in a safe and sound manner. This strategy will require us to continue to reduce the size of our balance sheet, reduce our lending concentrations, consider selling loans, and reduce other noninterest expense through the disposition of OREO.

• Continuing with succession planning and adding resources to the management team. John T. Taylor was named President and CEO for PBI Bank and appointed to the Board of Directors in July 2012. Effective July 31, 2013, Maria L. Bouvette retired as the Company’s Chairman of the Board and CEO, and as Chairman of the Board of PBI Bank. W. Glenn Hogan is expected to be elected Chairman of the Board of the Company following regulatory approval. John T. Taylor will be named CEO of the Company, following regulatory approval. Additionally, John R. Davis was appointed Chief Credit Officer of PBI Bank in August 2012, with responsibility for establishing and executing the credit quality policies and overseeing credit administration for the organization.

• Evaluating our internal processes and procedures, distribution of labor, and work-flow to ensure we have adequately and appropriately deployed resources in an efficient manner in the current environment. To this end, we believe the opportunity exists to centralize key processes that will lead to improved execution and cost savings.

• Executing on our commitment to improve credit quality and reduce loan concentrations and balance sheet risk.

• We have reduced the size of our loan portfolio significantly from $1.3 billion at December 31, 2010, to $1.1 billion at December 31, 2011, to $899.1 million at December 31, 2012, and $774.8 million at June 30, 2013. We have significantly improved our staffing in the commercial lending area which is now led by Joe C. Seiler.

• Our Consent Order calls for us to reduce our construction and development loans to not more than 75% of total risk-based capital. We are now in compliance with construction and development loans totaling $58.0 million, or 70% of total risk-based capital, at June 30, 2013, down from $70.3 million, or 82% of total risk-based capital, at December 31, 2012.

• Our Consent Order also requires us to reduce non-owner occupied commercial real estate loans, construction and development loans, and multi-family residential real estate loans as a group, to not more than 250% of total risk-based capital. While we have made significant improvements over the last year, we were not in compliance with this concentration limit at June 30, 2013. These loans totaled $270.8 million, or 325% of total risk-based capital, at June 30, 2013 and $311.1 million, or 362% of total risk-based capital, at December 31, 2012.

• We are working to reduce our loan concentrations by curtailing new construction and development lending and new non-owner occupied commercial real estate lending. We are also receiving principal reductions from amortizing credits and pay-downs from our customers who sell properties built for resale. We have reduced the construction loan portfolio from $199.5 million at December 31, 2010 to $58.0 million at June 30, 2013. Our non-owner occupied commercial real estate loans declined from $293.3 million at December 31, 2010 to $165.6 million at June 30, 2013.

• Executing on our commitment to sell other real estate owned and reinvest in quality income producing assets.

• The remediation process for loans secured by real estate has led the Bank to acquire significant levels of OREO in 2012, 2011, and 2010. This trend has continued at a slower pace in 2013. The Bank acquired $33.5 million, $41.9 million, and $90.8 million during 2012, 2011, and 2010, respectively. For the first six months of 2013, we acquired $15.6 million of OREO.

• We have incurred significant losses in disposing of this real estate. We incurred losses totaling $9.3 million, $42.8 million, and $13.9 million in 2012, 2011, and 2010, respectively, from sales at less than carrying values and fair value write-downs attributable to declines in appraisal valuations and changes in our pricing strategies. During the six month period ended June 30, 2013, we incurred OREO losses totaling $1.6 million, which consisted of $359,000 in loss on sale and $1.3 million from declining values as evidenced by new appraisals and reduced marketing prices in connection with our sales strategies.

• To ensure that we maximize the value we receive upon the sale of OREO, we continually evaluate sales opportunities and channels. We are targeting multiple sales opportunities and channels through internal marketing and the use of brokers, auctions, technology sales platforms, and bulk sale strategies. Proceeds from the sale of OREO totaled $10.5 million during the six months ended June 30, 2013 and $22.5 million, $26.0 million and $25.0 million during 2012, 2011, and 2010, respectively.

• At December 31, 2012, the OREO portfolio consisted of 51% construction, development, and land assets. At June 30, 2013 this concentration had declined to 43%. This is consistent with our reduction of construction, development and other land loans, which have declined to $58.0 million at June 30, 2013 compared to $70.3 million at December 31, 2012. Over the past six months, the composition of our OREO portfolio has shifted toward commercial real estate and 1-4 family residential properties, which we have found to be more liquid than construction, development, and land assets. Commercial real estate represents 39% of the portfolio at June 30, 2013 compared with 35% at December 31, 2012. 1-4 family residential properties represent 15% of the portfolio at June 30, 2013 compared with 12% at December 31, 2012.

• Evaluating other strategic alternatives, such as the sale of assets or branches.

Bank regulatory agencies can exercise discretion when an institution does not meet the terms of a consent order. Based on individual circumstances, the agencies may issue mandatory directives, impose monetary penalties, initiate changes in management, or take more serious adverse actions.

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Loans (Tables)

6 Months Ended

Jun. 30, 2013

Loans

Loans were as follows:

	June 30, 2013			December 31, 2012
	(in thousands)
Commercial	$	51,079		$	52,567
Commercial Real Estate:
Construction		57,951			70,284
Farmland		72,312			80,825
Other		256,859			322,687
Residential Real Estate:
Multi-family		47,253			50,986
1-4 Family		247,248			278,273
Consumer		16,746			20,383
Agriculture		24,613			22,317
Other		724			770
Subtotal		774,785			899,092
Less: Allowance for loan losses		(37,559	)		(56,680	)
Loans, net	$	737,226		$	842,412

Activity in Allowance for Loan Losses by Portfolio Segment

The following table presents the activity in the allowance for loan losses by portfolio segment for the three months ended June 30, 2013 and 2012:

	Commercial			Commercial Real Estate			Residential Real  Estate			Consumer			Agriculture			Other		Total
	(in thousands)
June 30, 2013:
Beginning balance	$	4,990		$	22,169		$	11,540		$	716		$	410		$	14	$	39,839
Provision for loan losses		(805	)		321			360			(7	)		127			4		—
Loans charged off		(132	)		(1,866	)		(1,137	)		(203	)		(66	)		—		(3,404	)
Recoveries		595			398			27			88			16			—		1,124
Ending balance	$	4,648		$	21,022		$	10,790		$	594		$	487		$	18	$	37,559
June 30, 2012:
Beginning balance	$	4,082		$	32,982		$	15,720		$	812		$	345		$	12	$	53,953
Provision for loan losses		(78	)		1,003			2,696			97			282			—		4,000
Loans charged off		(210	)		(2,944	)		(2,862	)		(135	)		(287	)		—		(6,438	)
Recoveries		17			8			33			18			3			—		79
Ending balance	$	3,811		$	31,049		$	15,587		$	792		$	343		$	12	$	51,594

The following table presents the activity in the allowance for loan losses by portfolio segment for the six months ended June 30, 2013 and 2012:

	Commercial			Commercial Real Estate			Residential Real  Estate			Consumer			Agriculture			Other			Total
	(in thousands)
June 30, 2013:
Beginning balance	$	4,402		$	34,768		$	16,235		$	857		$	403		$	15		$	56,680
Provision for loan losses		633			(124	)		(90	)		79			(51	)		3			450
Loans charged off		(1,108	)		(14,178	)		(5,476	)		(521	)		(83	)		—			(21,366	)
Recoveries		721			556			121			179			218			—			1,795
Ending balance	$	4,648		$	21,022		$	10,790		$	594		$	487		$	18		$	37,559
June 30, 2012:
Beginning balance	$	4,207		$	33,024		$	14,217		$	792		$	325		$	14		$	52,579
Provision for loan losses		11			1,775			5,202			321			443			(2	)		7,750
Loans charged off		(466	)		(3,863	)		(3,891	)		(372	)		(428	)		—			(9,020	)
Recoveries		59			113			59			51			3			—			285
Ending balance	$	3,811		$	31,049		$	15,587		$	792		$	343		$	12		$	51,594

Balance in Allowance for Loan Losses and Recorded Investment in Loans by Portfolio Segment and Based on Impairment Method

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on the impairment method as of June 30, 2013:

	Commercial		Commercial Real Estate		Residential Real  Estate		Consumer		Agriculture		Other		Total
	(in thousands)
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	1,388	$	7,597	$	1,171	$	21	$	—	$	13	$	10,190
Collectively evaluated for impairment		3,260		13,425		9,619		573		487		5		27,369
Total ending allowance balance	$	4,648	$	21,022	$	10,790	$	594	$	487	$	18	$	37,559
Loans:
Loans individually evaluated for impairment	$	6,448	$	115,387	$	52,359	$	110	$	199	$	535	$	175,038
Loans collectively evaluated for impairment		44,631		271,735		242,142		16,636		24,414		189		599,747
Total ending loans balance	$	51,079	$	387,122	$	294,501	$	16,746	$	24,613	$	724	$	774,785

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on the impairment method as of December 31, 2012:

	Commercial		Commercial Real Estate		Residential Real  Estate		Consumer		Agriculture		Other		Total
	(in thousands)
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	263	$	16,046	$	4,641	$	68	$	5	$	11	$	21,034
Collectively evaluated for impairment		4,139		18,722		11,594		789		398		4		35,646
Total ending allowance balance	$	4,402	$	34,768	$	16,235	$	857	$	403	$	15	$	56,680
Loans:
Loans individually evaluated for impairment	$	5,296	$	125,922	$	56,799	$	212	$	55	$	524	$	188,808
Loans collectively evaluated for impairment		47,271		347,874		272,460		20,171		22,262		246		710,284
Total ending loans balance	$	52,567	$	473,796	$	329,259	$	20,383	$	22,317	$	770	$	899,092

Loans Individually Evaluated for Impairment by Class of Loans

The following table presents information related to loans individually evaluated for impairment by class of loans as of and for the three and six months ended June 30, 2013:

					Allowance For Loan Losses Allocated		Three Months Ended June 30, 2013				Six Months Ended June 30, 2013
	Unpaid Principal Balance		Recorded Investment				Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Cash Basis Income Recognized
					(in thousands)
With No Related Allowance Recorded:
Commercial	$	2,230	$	1,898	$	—	$	1,892	$	—	$	1,673	$	—	$	—
Commercial real estate:
Construction		281		191		—		496		6		700		11		11
Farmland		4,369		4,302		—		4,187		105		4,274		172		172
Other		1,737		1,526		—		1,671		253		1,745		257		257
Residential real estate:
Multi-family		637		637		—		638		—		640		—		—
1-4 Family		11,392		10,997		—		12,174		38		12,502		57		57
Consumer		1		1		—		8		—		28		—		—
Agriculture		278		199		—		185		—		138		—		—
Other		17		17		—		8		—		6		—		—
With An Allowance Recorded:
Commercial		5,072		4,550		1,388		4,165		31		4,131		61		—
Commercial real estate:
Construction		23,669		22,347		411		23,414		34		24,094		68		—
Farmland		7,914		5,545		253		5,797		11		6,017		22		—
Other		96,076		81,475		6,933		79,407		352		81,792		682		—
Residential real estate:
Multi-family		14,646		12,937		411		13,046		51		13,666		107		—
1-4 Family		30,342		27,788		760		28,492		115		28,359		218		—
Consumer		178		110		21		155		1		150		1		—
Agriculture		—		—		—		—		—		4		—		—
Other		518		518		13		520		4		521		8		—
Total	$	199,357	$	175,038	$	10,190	$	176,255	$	1,001	$	180,440	$	1,664	$	497

The following table presents loans individually evaluated for impairment by class of loan as of December 31, 2012:

	Unpaid Principal Balance		Recorded Investment		Allowance For Loan Losses Allocated		Average Recorded Investment		Interest Income Recognized		Cash Basis Income Recognized
	(in thousands)
With No Related Allowance Recorded:
Commercial	$	1,460	$	1,234	$	—	$	1,637	$	5	$	4
Commercial real estate:
Construction		1,155		1,109		—		1,745		2		2
Farmland		4,448		4,448		—		4,706		57		57
Other		2,134		1,892		—		3,436		3		3
Residential real estate:
Multi-family		643		643		—		910		—		—
1-4 Family		13,539		13,158		—		11,291		56		56
Consumer		70		70		—		219		8		5
Agriculture		45		45		—		366		2		—
Other		—		—		—		—		—		—
With An Allowance Recorded:
Commercial		4,108		4,062		263		3,964		169		27
Commercial real estate:
Construction		26,645		25,455		1,543		19,514		348		5
Farmland		8,557		6,456		734		5,794		43		2
Other		97,699		86,562		13,769		83,087		2,011		185
Residential real estate:
Multi-family		14,906		14,906		1,643		11,187		468		—
1-4 Family		31,021		28,092		2,998		27,404		787		9
Consumer		142		142		68		29		—		—
Agriculture		10		10		5		6		—		—
Other		524		524		11		533		17		—
Total	$	207,106	$	188,808	$	21,034	$	175,828	$	3,976	$	355

Types of Troubled Debt Restructuring Loan Modification by Portfolio Segment Outstanding

The following table presents the types of TDR loan modifications by portfolio segment outstanding as of June 30, 2013 and December 31, 2012:

	TDRs Performing to Modified Terms		TDRs Not Performing to Modified Terms		Total TDRs
	(in thousands)
June 30, 2013
Commercial
Rate reduction	$	1,981	$	—	$	1,981
Principal deferral		881		—		881
Interest only payments		—		238		238
Commercial Real Estate:
Construction
Rate reduction		3,409		3,353		6,762
Principal deferral		499		—		499
Farmland
Rate reduction		150		—		150
Principal deferral		712		2,438		3,150
Other
Rate reduction		29,526		20,463		49,989
Principal deferral		1,182		—		1,182
Interest only payments		2,458		1,489		3,947
Residential Real Estate:
Multi-family
Rate reduction		4,694		6,836		11,530
Interest only payments		647		—		647
1-4 Family
Rate reduction		8,217		11,693		19,910
Consumer
Rate reduction		53		—		53
Other
Rate reduction		518		—		518
Total TDRs	$	54,927	$	46,510	$	101,437

	TDRs Performing to Modified Terms		TDRs Not Performing  to Modified Terms		Total TDRs
	(in thousands)
December 31, 2012
Commercial
Rate reduction	$	1,972	$	—	$	1,972
Principal deferral		887		—		887
Interest only payments		—		958		958
Commercial Real Estate:
Construction
Rate reduction		4,834		4,459		9,293
Farmland
Rate reduction		150		—		150
Principal deferral		725		2,438		3,163
Other
Rate reduction		36,515		22,631		59,146
Principal deferral		1,195		—		1,195
Interest only payments		2,466		2,107		4,573
Residential Real Estate:
Multi-family
Rate reduction		13,087		—		13,087
Interest only payments		652		—		652
1-4 Family
Rate reduction		14,323		7,871		22,194
Consumer
Rate reduction		14		—		14
Other
Rate reduction		524		—		524
Total TDRs	$	77,344	$	40,464	$	117,808

The following tables present a summary of the types of TDR loan modifications by portfolio type that occurred during the three months ended June 30, 2013 and 2012:

	TDRs Performing to Modified Terms		TDRs Not Performing to Modified Terms		Total TDRs
	(in thousands)
June 30, 2013
Commercial Real Estate:
Construction
Principal deferral	$	499	$	—	$	499
Total TDRs	$	499	$	—	$	499

	TDRs Performing to Modified Terms		TDRs Not Performing to Modified Terms		Total TDRs
	(in thousands)
June 30, 2012
Commercial Real Estate:
Construction
Interest only payments	$	152	$	—	$	152
Other
Rate reduction		8,152		—		8,152
Principal deferral		1,196		—		1,196
Interest only payments		2,462		—		2,462
Residential Real Estate:
1-4 Family
Rate reduction		3,086		—		3,086
Principal deferral		—		573		573
Total TDRs	$	15,048	$	573	$	15,621

The following tables present a summary of the types of TDR loan modifications by portfolio type that occurred during the six months ended June 30, 2013 and 2012:

	TDRs Performing to Modified Terms		TDRs Not Performing to Modified Terms		Total TDRs
	(in thousands)
June 30, 2013
Commercial:
Rate reduction	$	45	$	—	$	45
Commercial Real Estate:
Construction
Rate reduction		—		1,291		1,291
Principal deferral		499		—		499
Other
Rate reduction		1,399		—		1,399
Residential Real Estate:
1-4 Family
Rate reduction		897		—		897
Consumer:
Rate reduction		40		—		40
Total TDRs	$	2,880	$	1,291	$	4,171

	TDRs Performing to Modified Terms		TDRs Not Performing to Modified Terms		Total TDRs
	(in thousands)
June 30, 2012
Commercial:
Interest only payments	$	—	$	1,019	$	1,019
Commercial Real Estate:
Construction
Interest only payments		152		—		152
Other
Rate reduction		11,302		—		11,302
Principal deferral		1,196		—		1,196
Interest only payments		2,462		2,174		4,636
Residential Real Estate:
Multi-family
Rate reduction		8,386		—		8,386
1-4 Family
Rate reduction		8,470		—		8,470
Principal deferral		—		573		573
Total TDRs	$	31,968	$	3,766	$	35,734

Nonperforming loans

The following table presents the recorded investment in nonaccrual and loans past due 90 days and still on accrual by class of loan as of June 30, 2013, and December 31, 2012:

	Nonaccrual				Loans Past Due 90 Days And Over Still Accruing
	June 30, 2013		December 31, 2012		June 30, 2013		December 31, 2012
	(in thousands)
Commercial	$	3,333	$	2,437	$	—	$	36
Commercial Real Estate:
Construction		18,630		7,808		—		—
Farmland		8,985		10,030		—		—
Other		43,979		46,036		—		—
Residential Real Estate:
Multi-family		8,020		1,516		—		—
1-4 Family		28,964		26,501		66		50
Consumer		58		135		5		—
Agriculture		199		54		—		—
Other		17		—		—		—
Total	$	112,185	$	94,517	$	71	$	86

The following table presents the aging of the recorded investment in past due loans as of June 30, 2013 and December 31, 2012:

	30 – 59 Days Past Due		60 – 89 Days Past Due		90 Days And  Over Past Due		Nonaccrual		Total Past Due And Nonaccrual
	(in thousands)
June 30, 2013
Commercial	$	1,165	$	133	$	—	$	3,333	$	4,631
Commercial Real Estate:
Construction		—		—		—		18,630		18,630
Farmland		841		389		—		8,985		10,215
Other		2,338		1,805		—		43,979		48,122
Residential Real Estate:
Multi-family		1,191		—		—		8,020		9,211
1-4 Family		2,797		585		66		28,964		32,412
Consumer		194		37		5		58		294
Agriculture		74		30		—		199		303
Other		—		—		—		17		17
Total	$	8,600	$	2,979	$	71	$	112,185	$	123,835

	30 – 59 Days Past Due		60 – 89 Days Past Due		90 Days And  Over Past Due		Nonaccrual		Total Past Due And Nonaccrual
	(in thousands)
December 31, 2012
Commercial	$	1,279	$	90	$	36	$	2,437	$	3,842
Commercial Real Estate:
Construction		10,510		5,815		—		7,808		24,133
Farmland		922		58		—		10,030		11,010
Other		5,138		13,037		—		46,036		64,211
Residential Real Estate:
Multi-family		8,762		—		—		1,516		10,278
1-4 Family		11,145		1,221		50		26,501		38,917
Consumer		310		75		—		135		520
Agriculture		153		7		—		54		214
Other		—		—		—		—		—
Total	$	38,219	$	20,303	$	86	$	94,517	$	153,125

Risk Category of Loans by Class of Loans

As of June 30, 2013, and December 31, 2012, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

	Pass		Watch		Special Mention		Substandard		Doubtful		Total
	(in thousands)
June 30, 2013
Commercial	$	31,050	$	8,304	$	1,322	$	10,355	$	48	$	51,079
Commercial Real Estate:
Construction		19,551		11,532		2,568		24,300		—		57,951
Farmland		43,327		13,006		1,361		14,618		—		72,312
Other		91,608		61,788		9,772		93,437		254		256,859
Residential Real Estate:
Multi-family		15,725		15,940		—		15,588		—		47,253
1-4 Family		138,728		47,358		2,809		58,353		—		247,248
Consumer		14,952		1,104		13		677		—		16,746
Agriculture		21,605		1,415		915		678		—		24,613
Other		189		518		—		17		—		724
Total	$	376,735	$	160,965	$	18,760	$	218,023	$	302	$	774,785

	Pass		Watch		Special Mention		Substandard		Doubtful		Total
	(in thousands)
December 31, 2012
Commercial	$	27,085	$	10,153	$	6,495	$	8,772	$	62	$	52,567
Commercial Real Estate:
Construction		26,085		21,713		3,647		18,839		—		70,284
Farmland		47,017		13,461		3,532		16,815		—		80,825
Other		122,603		66,223		14,955		118,635		271		322,687
Residential Real Estate:
Multi-family		18,387		14,637		—		17,962		—		50,986
1-4 Family		159,975		47,030		5,167		66,101		—		278,273
Consumer		17,232		2,211		35		842		63		20,383
Agriculture		19,256		1,467		869		725		—		22,317
Other		246		524		—		—		—		770
Total	$	437,886	$	177,419	$	34,700	$	248,691	$	396	$	899,092

XML

Stock Plans and Stock Based Compensation - Additional Information (Detail) (USD $)	6 Months Ended					1 Months Ended	6 Months Ended			1 Months Ended				3 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013 Unvested Shares Non Employee Director	Jun. 30, 2013 Unvested Shares Employee	Jun. 30, 2013 Unvested Shares Director	May 31, 2006 2006 Non-Employee Directors Stock Ownership Incentive Plan	Jun. 30, 2013 2006 Non-Employee Directors Stock Ownership Incentive Plan	May 16, 2012 2006 Non-Employee Directors Stock Ownership Incentive Plan	May 15, 2006 2006 Non-Employee Directors Stock Ownership Incentive Plan	May 31, 2006 2006 Non-Employee Directors Stock Ownership Incentive Plan Equity Option	May 31, 2006 2006 Non-Employee Directors Stock Ownership Incentive Plan Unvested Shares	Jun. 30, 2013 2006 Stock Incentive Plan	Feb. 23, 2006 2006 Stock Incentive Plan	Jun. 30, 2013 2006 Stock Incentive Plan Unvested Shares	Jun. 30, 2013 2006 Stock Incentive Plan Unvested Shares Minimum	Jun. 30, 2013 2006 Stock Incentive Plan Unvested Shares Maximum	May 31, 2013 2006 Stock Incentive Plan Amendment
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares authorized								400,000	100,000				1,263,050				800,000
Unvested shares granted			245,909											268,634
Shares remaining available for issue	113,357											868,293
Award vesting period										3 years	3 years				5 years	10 years
Term of options						5 years
Restricted shares award, fair market value							$ 25,000
Fair value of unvested shares issued				111,000	155,000
Fair value of unvested shares issued per weighted-average share				$ 0.78	$ 0.85
Stock-based compensation	$ 226,000	$ 215,000

XML

Advances from Federal Home Loan Bank (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Monthly amortizing advances with fixed rates from 0.00% to 5.25% and maturities ranging from 2013 through 2033, averaging 3.15% for 2013	$ 5,016	$ 5,604

XML

Stock Plans and Stock Based Compensation

6 Months Ended

Jun. 30, 2013

Stock Plans and Stock Based Compensation

Note 10 – Stock Plans and Stock Based Compensation

The Company has two stock incentive plans. On February 23, 2006, the Company adopted the Porter Bancorp, Inc. 2006 Stock Incentive Plan. In May 2013, the Board approved an amendment to the plan to increase the number of shares authorized for issuance by 800,000 shares. The 2006 Plan now permits the issuance of up to 1,263,050 shares of the Company’s common stock upon the exercise of stock options or upon the grant of stock awards. As of June 30, 2013, the Company had granted 268,634 unvested shares net of forfeitures and vesting under the stock incentive plan. Shares issued under the plan vest annually on the anniversary date of the grant over five to ten years. The Company has 868,293 shares remaining available for issue under the plan.

On May 15, 2006, the Board of Directors approved the Porter Bancorp, Inc. 2006 Non-Employee Directors Stock Ownership Incentive Plan, which was approved by holders of the Company’s voting common stock on June 8, 2006. On May 22, 2008, shareholders voted to amend the plan to change the form of incentive award from stock options to unvested shares. Under the terms of the plan, 100,000 shares are reserved for issuance to non-employee directors upon the exercise of stock options or upon the grant of unvested stock awards granted under the plan. Prior to the amendment, options were granted automatically under the plan at fair market value on the date of grant. The options vest over a three-year period and have a five year term. Unvested shares are granted automatically under the plan at fair market value on the date of grant and vest semi-annually on the anniversary date of the grant over three years.

On May 16, 2012, holders of the Company’s voting common stock voted to further amend the 2006 Non-Employee Directors Stock Ownership Incentive Plan to award restricted shares having a fair market value of $25,000 annually to each non-employee director, and to increase the number of shares issuable under the Directors’ Plan from 100,000 shares to 400,000 shares. Shares issued under the amended plan vest on December 31 in the year they are granted.

To date, the Company has issued 245,909 unvested shares to non-employee directors. At June 30, 2013, 113,357 shares remain available for issuance under this plan.

The fair value of the 2013 unvested shares issued to certain employees was $111,000, or $0.78 per weighted-average share. The fair value of the 2013 unvested shares issued to the directors was $155,000 or $0.85 per weighted average share. The Company recorded $226,000 and $215,000 of stock-based compensation during the first six months of 2013 and 2012, respectively, to salaries and employee benefits. There was no significant impact on compensation expense resulting from forfeited or expiring shares. We expect substantially all of the unvested shares outstanding at the end of the period will vest according to the vesting schedule. No deferred tax benefit was recognized related to this expense for either period.

The following table summarizes unvested share activity as of and for the periods indicated for the Stock Incentive Plan:

	Six Months Ended June 30, 2013					Twelve Months Ended December 31, 2012
	Shares			Weighted Average Grant Price		Shares			Weighted Average Grant Price
Outstanding, beginning		153,316		$	5.92		96,688		$	13.40
Granted		142,663			0.78		97,197			1.74
Vested		(22,113	)		12.19		(27,362	)		13.04
Forfeited		(5,232	)		14.82		(13,207	)		15.22
Outstanding, ending		268,634		$	2.50		153,316		$	5.92

The following table summarizes unvested share activity as of and for the periods indicated for the Non-Employee Directors Stock Ownership Incentive Plan:

	Six Months Ended June 30, 2013					Twelve Months Ended December 31, 2012
	Shares			Weighted Average Grant Price		Shares			Weighted Average Grant Price
Outstanding, beginning		80,078		$	1.77		3,538		$	7.91
Granted		182,355			0.85		93,943			1.65
Vested		(16,524	)		2.02		(17,403	)		2.37
Forfeited		—			—		—			—
Outstanding, ending		245,909		$	1.07		80,078		$	1.77

As of June 30, 2013, all stock options issued to non-employee directors had expired and none were exercised during their grant term. The Company’s stock-based incentive awards have exclusively been restricted stock grants since 2008.

The following table summarizes stock option activity:

	Six Months Ended June 30, 2013				Twelve Months Ended December 31, 2012
			Weighted					Weighted
			Average					Average
			Exercise					Exercise
	Shares		Price		Shares			Price
Outstanding, beginning		—	$	—		29,530		$	19.88
Forfeited		—		—		—			—
Expired		—		—		(29,530	)		19.88
Outstanding, ending		—	$	—		—		$	—

No options were issued, outstanding, or exercised during the first six months of 2013. The Company recorded no stock option compensation expense during the six months ended June 30, 2013. No options were modified during the period. As of June 30, 2013, no stock options issued by the Company had been exercised, and all granted options had expired.

Unrecognized stock based compensation expense related to unvested shares for the remainder of 2013 and beyond are estimated as follows (in thousands):

July 2013 – December 2013	$	340
2014		313
2015		174
2016		77
2017 & thereafter		44

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Risk Category of Loans by Class of Loans (Detail) (USD $)	Jun. 30, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Financing Receivable, Recorded Investment [Line Items]
Gross loans	$ 774,785,000	$ 899,092,000	$ 1,100,000,000	$ 1,300,000,000
Commercial
Financing Receivable, Recorded Investment [Line Items]
Gross loans	51,079,000	52,567,000
Commercial Real Estate
Financing Receivable, Recorded Investment [Line Items]
Gross loans	387,122,000	473,796,000
Commercial Real Estate | Construction
Financing Receivable, Recorded Investment [Line Items]
Gross loans	57,951,000	70,284,000		199,500,000
Commercial Real Estate | Farmland
Financing Receivable, Recorded Investment [Line Items]
Gross loans	72,312,000	80,825,000
Commercial Real Estate | Other
Financing Receivable, Recorded Investment [Line Items]
Gross loans	256,859,000	322,687,000
Residential Real Estate
Financing Receivable, Recorded Investment [Line Items]
Gross loans	294,501,000	329,259,000
Residential Real Estate | Multi-Family
Financing Receivable, Recorded Investment [Line Items]
Gross loans	47,253,000	50,986,000
Residential Real Estate | 1-4 Family
Financing Receivable, Recorded Investment [Line Items]
Gross loans	247,248,000	278,273,000
Consumer
Financing Receivable, Recorded Investment [Line Items]
Gross loans	16,746,000	20,383,000
Agriculture
Financing Receivable, Recorded Investment [Line Items]
Gross loans	24,613,000	22,317,000
Other
Financing Receivable, Recorded Investment [Line Items]
Gross loans	724,000	770,000
Pass
Financing Receivable, Recorded Investment [Line Items]
Gross loans	376,735,000	437,886,000
Pass | Commercial
Financing Receivable, Recorded Investment [Line Items]
Gross loans	31,050,000	27,085,000
Pass | Commercial Real Estate | Construction
Financing Receivable, Recorded Investment [Line Items]
Gross loans	19,551,000	26,085,000
Pass | Commercial Real Estate | Farmland
Financing Receivable, Recorded Investment [Line Items]
Gross loans	43,327,000	47,017,000
Pass | Commercial Real Estate | Other
Financing Receivable, Recorded Investment [Line Items]
Gross loans	91,608,000	122,603,000
Pass | Residential Real Estate | Multi-Family
Financing Receivable, Recorded Investment [Line Items]
Gross loans	15,725,000	18,387,000
Pass | Residential Real Estate | 1-4 Family
Financing Receivable, Recorded Investment [Line Items]
Gross loans	138,728,000	159,975,000
Pass | Consumer
Financing Receivable, Recorded Investment [Line Items]
Gross loans	14,952,000	17,232,000
Pass | Agriculture
Financing Receivable, Recorded Investment [Line Items]
Gross loans	21,605,000	19,256,000
Pass | Other
Financing Receivable, Recorded Investment [Line Items]
Gross loans	189,000	246,000
Watch
Financing Receivable, Recorded Investment [Line Items]
Gross loans	160,965,000	177,419,000
Watch | Commercial
Financing Receivable, Recorded Investment [Line Items]
Gross loans	8,304,000	10,153,000
Watch | Commercial Real Estate | Construction
Financing Receivable, Recorded Investment [Line Items]
Gross loans	11,532,000	21,713,000
Watch | Commercial Real Estate | Farmland
Financing Receivable, Recorded Investment [Line Items]
Gross loans	13,006,000	13,461,000
Watch | Commercial Real Estate | Other
Financing Receivable, Recorded Investment [Line Items]
Gross loans	61,788,000	66,223,000
Watch | Residential Real Estate | Multi-Family
Financing Receivable, Recorded Investment [Line Items]
Gross loans	15,940,000	14,637,000
Watch | Residential Real Estate | 1-4 Family
Financing Receivable, Recorded Investment [Line Items]
Gross loans	47,358,000	47,030,000
Watch | Consumer
Financing Receivable, Recorded Investment [Line Items]
Gross loans	1,104,000	2,211,000
Watch | Agriculture
Financing Receivable, Recorded Investment [Line Items]
Gross loans	1,415,000	1,467,000
Watch | Other
Financing Receivable, Recorded Investment [Line Items]
Gross loans	518,000	524,000
Special Mention
Financing Receivable, Recorded Investment [Line Items]
Gross loans	18,760,000	34,700,000
Special Mention | Commercial
Financing Receivable, Recorded Investment [Line Items]
Gross loans	1,322,000	6,495,000
Special Mention | Commercial Real Estate | Construction
Financing Receivable, Recorded Investment [Line Items]
Gross loans	2,568,000	3,647,000
Special Mention | Commercial Real Estate | Farmland
Financing Receivable, Recorded Investment [Line Items]
Gross loans	1,361,000	3,532,000
Special Mention | Commercial Real Estate | Other
Financing Receivable, Recorded Investment [Line Items]
Gross loans	9,772,000	14,955,000
Special Mention | Residential Real Estate | 1-4 Family
Financing Receivable, Recorded Investment [Line Items]
Gross loans	2,809,000	5,167,000
Special Mention | Consumer
Financing Receivable, Recorded Investment [Line Items]
Gross loans	13,000	35,000
Special Mention | Agriculture
Financing Receivable, Recorded Investment [Line Items]
Gross loans	915,000	869,000
Substandard
Financing Receivable, Recorded Investment [Line Items]
Gross loans	218,023,000	248,691,000
Substandard | Commercial
Financing Receivable, Recorded Investment [Line Items]
Gross loans	10,355,000	8,772,000
Substandard | Commercial Real Estate | Construction
Financing Receivable, Recorded Investment [Line Items]
Gross loans	24,300,000	18,839,000
Substandard | Commercial Real Estate | Farmland
Financing Receivable, Recorded Investment [Line Items]
Gross loans	14,618,000	16,815,000
Substandard | Commercial Real Estate | Other
Financing Receivable, Recorded Investment [Line Items]
Gross loans	93,437,000	118,635,000
Substandard | Residential Real Estate | Multi-Family
Financing Receivable, Recorded Investment [Line Items]
Gross loans	15,588,000	17,962,000
Substandard | Residential Real Estate | 1-4 Family
Financing Receivable, Recorded Investment [Line Items]
Gross loans	58,353,000	66,101,000
Substandard | Consumer
Financing Receivable, Recorded Investment [Line Items]
Gross loans	677,000	842,000
Substandard | Agriculture
Financing Receivable, Recorded Investment [Line Items]
Gross loans	678,000	725,000
Substandard | Other
Financing Receivable, Recorded Investment [Line Items]
Gross loans	17,000
Doubtful
Financing Receivable, Recorded Investment [Line Items]
Gross loans	302,000	396,000
Doubtful | Commercial
Financing Receivable, Recorded Investment [Line Items]
Gross loans	48,000	62,000
Doubtful | Commercial Real Estate | Other
Financing Receivable, Recorded Investment [Line Items]
Gross loans	254,000	271,000
Doubtful | Consumer
Financing Receivable, Recorded Investment [Line Items]
Gross loans		$ 63,000

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Advances from Federal Home Loan Bank (Parenthetical) (Detail)	6 Months Ended
	Jun. 30, 2013
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Advances from federal home loan bank, fixed rate from	0.00%
Advances from federal home loan bank, fixed rate to	5.25%
Advances from federal home loan bank, average rate	3.15%
Advances from federal home loan bank, maturities from	2013
Advances from federal home loan bank, maturities through	2033

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Securities - Additional Information (Detail) (USD $)	Jun. 30, 2013	Dec. 31, 2012
Schedule of Available-for-sale Securities [Line Items]
Securities pledged, carrying values	$ 59,000,000	$ 76,400,000
Unrealized loss, less than 12 months	3,746,000	381,000
Equity
Schedule of Available-for-sale Securities [Line Items]
Number of securities	1
Unrealized loss, less than 12 months	$ 0

XML

Advances from the Federal Home Loan Bank (Tables)

6 Months Ended

Jun. 30, 2013

Advances from Federal Home Loan Bank

Advances from the Federal Home Loan Bank were as follows:

	June 30, 2013		December 31, 2012
	(in thousands)
Monthly amortizing advances with fixed rates from 0.00% to 5.25% and maturities ranging from 2013 through 2033, averaging 3.15% for 2013	$	5,016	$	5,604

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Deposits (Tables)

6 Months Ended

Jun. 30, 2013

Scheduled of Deposits by Category

The following table shows deposits by category:

	June 30, 2013		December 31, 2012
	(in thousands)
Non-interest bearing	$	106,320	$	114,310
Interest checking		78,218		87,234
Money market		65,620		63,715
Savings		40,121		39,227
Certificates of deposit		690,557		760,573
Total	$	980,836	$	1,065,059

Scheduled Maturities of Total Time Deposits

Scheduled maturities of total time deposits at June 30, 2013 for each of the next five years are as follows (in thousands):

	Retail		Brokered		Total
Year 1	$	362,928	$	—	$	362,928
Year 2		258,311		—		258,311
Year 3		49,930		—		49,930
Year 4		10,034		—		10,034
Year 5		9,277		—		9,277
Thereafter		77		—		77
	$	690,557	$	—	$	690,557

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Recorded Investment in Nonaccrual and Loans Past due 90 Days and Still on Accrual by Class of Loan (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual	$ 112,185	$ 94,517
Loans Past Due 90 Day And Over Still Accruing	71	86
Commercial
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual	3,333	2,437
Loans Past Due 90 Day And Over Still Accruing		36
Commercial Real Estate | Construction
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual	18,630	7,808
Commercial Real Estate | Farmland
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual	8,985	10,030
Commercial Real Estate | Other
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual	43,979	46,036
Residential Real Estate | Multi-Family
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual	8,020	1,516
Residential Real Estate | 1-4 Family
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual	28,964	26,501
Loans Past Due 90 Day And Over Still Accruing	66	50
Consumer
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual	58	135
Loans Past Due 90 Day And Over Still Accruing	5
Agriculture
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual	199	54
Other
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual	$ 17

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Going Concern Considerations and Future Plans - Additional Information (Detail) (USD $)	3 Months Ended		6 Months Ended		12 Months Ended			6 Months Ended	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010	Jun. 30, 2013 Sales Strategy Change	Jun. 30, 2013 Commercial Real Estate	Jun. 30, 2012 Commercial Real Estate	Jun. 30, 2013 Commercial Real Estate	Jun. 30, 2012 Commercial Real Estate	Dec. 31, 2012 Commercial Real Estate	Jun. 30, 2013 Commercial Real Estate Other real estate owned, net	Dec. 31, 2012 Commercial Real Estate Other real estate owned, net	Jun. 30, 2013 Real estate construction Other real estate owned, net	Dec. 31, 2012 Real estate construction Other real estate owned, net	Jun. 30, 2013 Non-owner occupied commercial real estate loans Commercial Real Estate	Dec. 31, 2010 Non-owner occupied commercial real estate loans Commercial Real Estate	Jun. 30, 2013 Construction Commercial Real Estate	Dec. 31, 2012 Construction Commercial Real Estate	Dec. 31, 2010 Construction Commercial Real Estate	Jun. 30, 2013 1-4 Family Other real estate owned, net	Dec. 31, 2012 1-4 Family Other real estate owned, net	Jun. 30, 2013 Consent order	Oct. 31, 2012 Consent order	Jun. 24, 2011 Consent order	Jun. 30, 2013 Consent order Construction and development loans	Dec. 31, 2012 Consent order Construction and development loans	Jun. 24, 2011 Consent order Construction and development loans	Jun. 30, 2013 Consent order Non-owner occupied commercial real estate loans	Dec. 31, 2012 Consent order Non-owner occupied commercial real estate loans	Jun. 24, 2011 Consent order Non-owner occupied commercial real estate loans
Recent Developments [Line Items]
Net income (loss) available to common shareholders	$ (1,681,000)	$ (319,000)	$ (2,212,000)	$ 661,000	$ 33,400,000	$ 105,200,000
Gain on sale of investment securities			703,000	3,530,000
Decrease in provision expense		4,000,000	450,000	7,750,000	40,300,000				321,000	1,003,000	(124,000)	1,775,000
Net loan charge-offs					36,100,000
Other real estate owned expense	1,657,000	1,205,000	2,448,000	2,462,000	10,500,000
Cumulative accrued and unpaid dividends	3,300,000		3,300,000
Tier I leverage ratio, regulatory minimum	4.00%	9.00%	4.00%	9.00%																					9.00%	9.00%	9.00%
Total risk-based capital, regulatory minimum	8.00%	12.00%	8.00%	12.00%																					12.00%	12.00%	12.00%
Gross loans	774,785,000		774,785,000		899,092,000	1,100,000,000	1,300,000,000		387,122,000		387,122,000		473,796,000					165,600,000	293,300,000	57,951,000	70,284,000	199,500,000
Maximum concentration of loans to total risk based capital																												70.00%	82.00%	75.00%	325.00%	362.00%	250.00%
Maximum risk based capital loans																												58,000,000	70,300,000		270,800,000	311,100,000
OREO acquired during the period			15,600,000		33,500,000	41,900,000	90,800,000
Fair value adjustments and loss on sale of OREO			1,600,000		9,300,000	42,800,000	13,900,000
Losses on sale of OREO	(162,000)	(546,000)	(359,000)	(948,000)				359,000
Net write-down of other real estate owned			1,284,000	830,000				1,300,000
Proceeds from sale of OREO			10,500,000		22,500,000	26,000,000	25,000,000
Percentage of OREO portfolio														39.00%	35.00%	43.00%	51.00%						15.00%	12.00%
Construction, development and other land loans																$ 58,000,000	$ 70,300,000

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Loans (Detail) (USD $)	Jun. 30, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	$ 774,785,000	$ 899,092,000	$ 1,100,000,000	$ 1,300,000,000
Less: Allowance for loan losses	(37,559,000)	(56,680,000)
Loans, net	737,226,000	842,412,000
Commercial
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	51,079,000	52,567,000
Less: Allowance for loan losses	(4,648,000)	(4,402,000)
Commercial Real Estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	387,122,000	473,796,000
Less: Allowance for loan losses	(21,022,000)	(34,768,000)
Commercial Real Estate | Construction
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	57,951,000	70,284,000		199,500,000
Commercial Real Estate | Farmland
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	72,312,000	80,825,000
Commercial Real Estate | Other
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	256,859,000	322,687,000
Residential Real Estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	294,501,000	329,259,000
Less: Allowance for loan losses	(10,790,000)	(16,235,000)
Residential Real Estate | Multi-Family
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	47,253,000	50,986,000
Residential Real Estate | 1-4 Family
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	247,248,000	278,273,000
Consumer
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	16,746,000	20,383,000
Less: Allowance for loan losses	(594,000)	(857,000)
Agriculture
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	24,613,000	22,317,000
Less: Allowance for loan losses	(487,000)	(403,000)
Other
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	724,000	770,000
Less: Allowance for loan losses	$ (18,000)	$ (15,000)

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Major Categories of Other Real Estate Owned (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011
Real Estate Properties [Line Items]
Other Real Estate Owned, Gross	$ 47,777		$ 44,825
Valuation allowance	(747)	(928)	(1,154)	(1,724)	(1,682)	(1,667)
Other real estate owned	47,030		43,671	54,365		41,449
Commercial Real Estate | Construction
Real Estate Properties [Line Items]
Other Real Estate Owned, Gross	20,592		22,912
Commercial Real Estate | Farmland
Real Estate Properties [Line Items]
Other Real Estate Owned, Gross	737		618
Commercial Real Estate | Other
Real Estate Properties [Line Items]
Other Real Estate Owned, Gross	18,661		15,577
Residential Real Estate | Multi-Family
Real Estate Properties [Line Items]
Other Real Estate Owned, Gross	464		200
Residential Real Estate | 1-4 Family
Real Estate Properties [Line Items]
Other Real Estate Owned, Gross	$ 7,323		$ 5,518

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Earnings (Loss) per Share (Tables)

6 Months Ended

Jun. 30, 2013

Computation of Basic and Diluted Earnings Per Share

The factors used in the basic and diluted earnings per share computations follow:

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
	(in thousands, except share and per share data)
Net income (loss)	$	(1,309	)	$	151		$	(1,378	)	$	1,653
Less:
Preferred stock dividends		437			438			875			875
Accretion of Series A preferred stock discount		45			45			90			90
Earnings (loss) allocated to unvested shares		(62	)		(4	)		(69	)		8
Earnings (loss) allocated to Series C preferred		(48	)		(9	)		(62	)		19
Net income (loss) allocated to common shareholders, basic and diluted	$	(1,681	)	$	(319	)	$	(2,212	)	$	661
Basic
Weighted average common shares including unvested common shares outstanding		12,528,932			12,195,232			12,501,854			12,175,850
Less: Weighted average unvested common shares		434,250			129,182			367,297			141,301
Less: Weighted average Series C preferred		332,894			332,894			332,894			332,894
Weighted average common shares outstanding		11,761,788			11,733,156			11,801,663			11,701,655
Basic earnings (loss) per common share	$	(0.14	)	$	(0.03	)	$	(0.19	)	$	0.06
Diluted
Add: Dilutive effects of assumed exercises of common and Preferred Series C stock warrants		—			—			—			—
Weighted average common shares and potential common shares		11,761,788			11,733,156			11,801,663			11,701,655
Diluted earnings (loss) per common share	$	(0.14	)	$	(0.03	)	$	(0.19	)	$	0.06

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Carrying Amount and Estimated Fair Values of Financial Instruments (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Financial assets
Securities available for sale	$ 176,942	$ 178,476
Carrying Amount
Financial assets
Cash and cash equivalents	64,266	49,572
Securities available for sale	176,942	178,476
Federal Home Loan Bank stock	10,072	10,072
Mortgage loans held for sale	133	507
Loans, net	737,226	842,412
Accrued interest receivable	4,184	5,138
Financial liabilities
Deposits	980,836	1,065,059
Securities sold under agreements to repurchase	3,292	2,634
Federal Home Loan Bank advances	5,016	5,604
Accrued interest payable	2,277	2,104
Carrying Amount | Subordinated capital notes
Financial liabilities
Subordinated capital notes	6,525	6,975
Carrying Amount | Junior subordinated debentures
Financial liabilities
Subordinated capital notes	25,000	25,000
Quoted Prices In Active Markets for Identical Assets (Level 1)
Financial assets
Cash and cash equivalents	58,585	41,938
Securities available for sale	277	1,846
Financial liabilities
Deposits	103,748	114,310
Significant Other Observable Inputs (Level 2)
Financial assets
Cash and cash equivalents	5,681	7,634
Securities available for sale	176,034	176,012
Mortgage loans held for sale	133	507
Accrued interest receivable	1,227	1,150
Financial liabilities
Deposits	878,837	955,216
Securities sold under agreements to repurchase	3,292	2,634
Federal Home Loan Bank advances	5,019	5,607
Accrued interest payable	1,042	1,173
Significant Unobservable Inputs (Level 3)
Financial assets
Securities available for sale	631	618
Loans, net	752,688	853,996
Accrued interest receivable	2,957	3,988
Financial liabilities
Accrued interest payable	1,235	931
Significant Unobservable Inputs (Level 3) | Subordinated capital notes
Financial liabilities
Subordinated capital notes	6,195	6,599
Significant Unobservable Inputs (Level 3) | Junior subordinated debentures
Financial liabilities
Subordinated capital notes	13,913	13,821
Fair Value
Financial assets
Cash and cash equivalents	64,266	49,572
Securities available for sale	176,942	178,476
Mortgage loans held for sale	133	507
Loans, net	752,688	853,996
Accrued interest receivable	4,184	5,138
Financial liabilities
Deposits	982,585	1,069,526
Securities sold under agreements to repurchase	3,292	2,634
Federal Home Loan Bank advances	5,019	5,607
Accrued interest payable	2,277	2,104
Fair Value | Subordinated capital notes
Financial liabilities
Subordinated capital notes	6,195	6,599
Fair Value | Junior subordinated debentures
Financial liabilities
Subordinated capital notes	$ 13,913	$ 13,821

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Computation of Basic and Diluted Earnings Per Share (Detail) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Dec. 31, 2012	Dec. 31, 2011
Schedule of Earnings Per Share, Basic and Diluted, by Common Class [Line Items]
Net income (loss)	$ (1,309)	$ 151	$ (1,378)	$ 1,653
Less:
Preferred stock dividends	437	438	875	875
Accretion of Series A preferred stock discount	45	45	90	90
Earnings (loss) allocated to Series C preferred	110	13	131	(27)
Net income (loss) allocated to common shareholders, basic and diluted	(1,681)	(319)	(2,212)	661	33,400	105,200
Basic
Less: Weighted average Series C preferred	11,761,788	11,733,156	11,801,663	11,701,655
Basic earnings (loss) per common share	$ (0.14)	$ (0.03)	$ (0.19)	$ 0.06
Diluted
Add: Dilutive effects of assumed exercises of common and Preferred Series C stock warrants
Weighted average common shares and potential common shares	11,761,788	11,733,156	11,801,663	11,701,655
Diluted earnings (loss) per common share	$ (0.14)	$ (0.03)	$ (0.19)	$ 0.06
Unvested Shares
Less:
Earnings (loss) allocated to Series C preferred	(62)	(4)	(69)	8
Unvested shares
Basic
Less: Weighted average Series C preferred	434,250	129,182	367,297	141,301
Series C Preferred Stock
Less:
Earnings (loss) allocated to Series C preferred	$ (48)	$ (9)	$ (62)	$ 19
Basic
Less: Weighted average Series C preferred	332,894	332,894	332,894	332,894
Common Stock and Series C Preferred Stock | Unvested shares
Basic
Weighted average common shares including unvested common shares outstanding	12,528,932	12,195,232	12,501,854	12,175,850

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Qualitative Information About Level Three Fair Value Measurements for Financial Instruments Measured at Fair Value on Non-Recurring Basis (Detail) (Fair Value, Measurements, Nonrecurring, USD $) In Thousands, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2013	Dec. 31, 2012
Impaired Loans | Commercial
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value	$ 3,162	$ 3,799
Valuation Technique(s)	Market value approach	Market value approach
Unobservable Input(s)	Adjustment for receivables and inventory discounts	Adjustment for receivables and inventory discounts
Impaired loans - Commercial, Capitalization rate	24.00%	24.00%
Impaired Loans | Commercial | Minimum
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Impaired loans - Commercial, Capitalization rate	16.00%	16.00%
Impaired Loans | Commercial | Maximum
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Impaired loans - Commercial, Capitalization rate	32.00%	32.00%
Impaired Loans | Commercial Real Estate
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value	101,769	89,461
Valuation Technique(s)	Sales comparison approach	Sales comparison approach
Unobservable Input(s)	Adjustment for differences between the comparable sales	Adjustment for differences between the comparable sales
Impaired loans - Residential real estate, Adjustment for differences between the comparable sales	19.00%	19.00%
Impaired Loans | Commercial Real Estate | Minimum
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Impaired loans - Residential real estate, Adjustment for differences between the comparable sales	0.00%	0.00%
Impaired Loans | Commercial Real Estate | Maximum
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Impaired loans - Residential real estate, Adjustment for differences between the comparable sales	69.00%	69.00%
Impaired Loans | Residential Real Estate
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value	39,554	38,357
Valuation Technique(s)	Sales comparison approach	Sales comparison approach
Unobservable Input(s)	Adjustment for differences between the comparable sales	Adjustment for differences between the comparable sales
Impaired loans - Residential real estate, Adjustment for differences between the comparable sales	15.00%	15.00%
Impaired Loans | Residential Real Estate | Minimum
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Impaired loans - Residential real estate, Adjustment for differences between the comparable sales	0.00%	0.00%
Impaired Loans | Residential Real Estate | Maximum
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Impaired loans - Residential real estate, Adjustment for differences between the comparable sales	50.00%	38.00%
Other real estate owned, net | Commercial Real Estate
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value	39,364	38,100
Valuation Technique(s)	Sales comparison approach	Sales comparison approach
Unobservable Input(s)	Adjustment for differences between the comparable sales	Adjustment for differences between the comparable sales
Impaired loans - Commercial, Capitalization rate	11.00%	12.00%
Impaired loans - Residential real estate, Adjustment for differences between the comparable sales	24.00%	18.00%
Other real estate owned, net | Commercial Real Estate | Income Approach Valuation Technique
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Valuation Technique(s)	Income comparison approach	Income comparison approach
Unobservable Input(s)	Discount or capitalization rate	Discount or capitalization rate
Other real estate owned, net | Commercial Real Estate | Minimum
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Impaired loans - Commercial, Capitalization rate	7.00%	9.00%
Impaired loans - Residential real estate, Adjustment for differences between the comparable sales	3.00%	3.00%
Other real estate owned, net | Commercial Real Estate | Maximum
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Impaired loans - Commercial, Capitalization rate	16.00%	16.00%
Impaired loans - Residential real estate, Adjustment for differences between the comparable sales	56.00%	50.00%
Other real estate owned, net | Residential Real Estate
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Impaired loans - Residential real estate, Adjustment for differences between the comparable sales	12.00%	9.00%
Other real estate owned, net | Residential Real Estate | Minimum
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Impaired loans - Residential real estate, Adjustment for differences between the comparable sales	4.00%	0.00%
Other real estate owned, net | Residential Real Estate | Maximum
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Impaired loans - Residential real estate, Adjustment for differences between the comparable sales	31.00%	30.00%
Other real estate owned, net | Residential Mortgage
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value	$ 7,666	$ 5,571
Valuation Technique(s)	Sales comparison approach	Sales comparison approach
Unobservable Input(s)	Adjustment for differences between the comparable sales	Adjustment for differences between the comparable sales

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Loans Individually Evaluated for Impairment by Class of Loans (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended	6 Months Ended	12 Months Ended
	Jun. 30, 2013	Jun. 30, 2013	Dec. 31, 2012
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	$ 199,357	$ 199,357	$ 207,106
Recorded Investment	175,038	175,038	188,808
Allowance For Loan Losses Allocated	10,190	10,190	21,034
Average Recorded Investment	176,255	180,440	175,828
Interest Income Recognized	1,001	1,664	3,976
Cash Basis Income Recognized		497	355
Commercial
Financing Receivable, Impaired [Line Items]
Recorded Investment	6,448	6,448	5,296
Commercial Real Estate
Financing Receivable, Impaired [Line Items]
Recorded Investment	115,387	115,387	125,922
Residential Real Estate
Financing Receivable, Impaired [Line Items]
Recorded Investment	52,359	52,359	56,799
Consumer
Financing Receivable, Impaired [Line Items]
Recorded Investment	110	110	212
Agriculture
Financing Receivable, Impaired [Line Items]
Recorded Investment	199	199	55
Other
Financing Receivable, Impaired [Line Items]
Recorded Investment	535	535	524
Impaired Financing Receivables with No Related Allowance | Commercial
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	2,230	2,230	1,460
Recorded Investment	1,898	1,898	1,234
Average Recorded Investment	1,892	1,673	1,637
Interest Income Recognized			5
Cash Basis Income Recognized			4
Impaired Financing Receivables with No Related Allowance | Commercial Real Estate | Construction
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	281	281	1,155
Recorded Investment	191	191	1,109
Average Recorded Investment	496	700	1,745
Interest Income Recognized	6	11	2
Cash Basis Income Recognized		11	2
Impaired Financing Receivables with No Related Allowance | Commercial Real Estate | Farmland
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	4,369	4,369	4,448
Recorded Investment	4,302	4,302	4,448
Average Recorded Investment	4,187	4,274	4,706
Interest Income Recognized	105	172	57
Cash Basis Income Recognized		172	57
Impaired Financing Receivables with No Related Allowance | Commercial Real Estate | Other
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	1,737	1,737	2,134
Recorded Investment	1,526	1,526	1,892
Average Recorded Investment	1,671	1,745	3,436
Interest Income Recognized	253	257	3
Cash Basis Income Recognized		257	3
Impaired Financing Receivables with No Related Allowance | Residential Real Estate | Multi-Family
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	637	637	643
Recorded Investment	637	637	643
Average Recorded Investment	638	640	910
Impaired Financing Receivables with No Related Allowance | Residential Real Estate | 1-4 Family
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	11,392	11,392	13,539
Recorded Investment	10,997	10,997	13,158
Average Recorded Investment	12,174	12,502	11,291
Interest Income Recognized	38	57	56
Cash Basis Income Recognized		57	56
Impaired Financing Receivables with No Related Allowance | Consumer
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	1	1	70
Recorded Investment	1	1	70
Average Recorded Investment	8	28	219
Interest Income Recognized			8
Cash Basis Income Recognized			5
Impaired Financing Receivables with No Related Allowance | Agriculture
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	278	278	45
Recorded Investment	199	199	45
Average Recorded Investment	185	138	366
Interest Income Recognized			2
Impaired Financing Receivables with No Related Allowance | Other
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	17	17
Recorded Investment	17	17
Average Recorded Investment	8	6
Impaired Financing Receivables with An Allowance Recorded | Commercial
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	5,072	5,072	4,108
Recorded Investment	4,550	4,550	4,062
Allowance For Loan Losses Allocated	1,388	1,388	263
Average Recorded Investment	4,165	4,131	3,964
Interest Income Recognized	31	61	169
Cash Basis Income Recognized			27
Impaired Financing Receivables with An Allowance Recorded | Commercial Real Estate | Construction
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	23,669	23,669	26,645
Recorded Investment	22,347	22,347	25,455
Allowance For Loan Losses Allocated	411	411	1,543
Average Recorded Investment	23,414	24,094	19,514
Interest Income Recognized	34	68	348
Cash Basis Income Recognized			5
Impaired Financing Receivables with An Allowance Recorded | Commercial Real Estate | Farmland
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	7,914	7,914	8,557
Recorded Investment	5,545	5,545	6,456
Allowance For Loan Losses Allocated	253	253	734
Average Recorded Investment	5,797	6,017	5,794
Interest Income Recognized	11	22	43
Cash Basis Income Recognized			2
Impaired Financing Receivables with An Allowance Recorded | Commercial Real Estate | Other
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	96,076	96,076	97,699
Recorded Investment	81,475	81,475	86,562
Allowance For Loan Losses Allocated	6,933	6,933	13,769
Average Recorded Investment	79,407	81,792	83,087
Interest Income Recognized	352	682	2,011
Cash Basis Income Recognized			185
Impaired Financing Receivables with An Allowance Recorded | Residential Real Estate | Multi-Family
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	14,646	14,646	14,906
Recorded Investment	12,937	12,937	14,906
Allowance For Loan Losses Allocated	411	411	1,643
Average Recorded Investment	13,046	13,666	11,187
Interest Income Recognized	51	107	468
Impaired Financing Receivables with An Allowance Recorded | Residential Real Estate | 1-4 Family
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	30,342	30,342	31,021
Recorded Investment	27,788	27,788	28,092
Allowance For Loan Losses Allocated	760	760	2,998
Average Recorded Investment	28,492	28,359	27,404
Interest Income Recognized	115	218	787
Cash Basis Income Recognized			9
Impaired Financing Receivables with An Allowance Recorded | Consumer
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	178	178	142
Recorded Investment	110	110	142
Allowance For Loan Losses Allocated	21	21	68
Average Recorded Investment	155	150	29
Interest Income Recognized	1	1
Impaired Financing Receivables with An Allowance Recorded | Agriculture
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance			10
Recorded Investment			10
Allowance For Loan Losses Allocated			5
Average Recorded Investment		4	6
Impaired Financing Receivables with An Allowance Recorded | Other
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	518	518	524
Recorded Investment	518	518	524
Allowance For Loan Losses Allocated	13	13	11
Average Recorded Investment	520	521	533
Interest Income Recognized	$ 4	$ 8	$ 17

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Summary of Unvested Share Activity for Non-Employee Directors (Detail) (Unvested shares, Non Employee Director, USD $)	6 Months Ended	12 Months Ended
	Jun. 30, 2013	Dec. 31, 2012
Unvested shares | Non Employee Director
Shares
Outstanding, beginning	80,078	3,538
Granted	182,355	93,943
Vested	(16,524)	(17,403)
Forfeited
Outstanding, ending	245,909	80,078
Weighted Average Exercise Price
Outstanding, beginning	$ 1.77	$ 7.91
Granted	$ 0.85	$ 1.65
Vested	$ 2.02	$ 2.37
Forfeited
Outstanding, ending	$ 1.07	$ 1.77

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Other Real Estate Owned (Tables)

6 Months Ended

Jun. 30, 2013

Major Categories of Other Real Estate Owned

The following table presents the major categories of OREO at the period-ends indicated:

	June 30, 2013			December 31, 2012
	(in thousands)
Commercial Real Estate:
Construction	$	20,592		$	22,912
Farmland		737			618
Other		18,661			15,577
Residential Real Estate:
Multi-family		464			200
1-4 Family		7,323			5,518
		47,777			44,825
Valuation allowance		(747	)		(1,154	)
	$	47,030		$	43,671

Other Real Estate Owned Valuation Allowance Activity

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2013			2012			2013			2012
	(in thousands)						(in thousands)
OREO Valuation Allowance Activity:
Beginning balance	$	928		$	1,682		$	1,154		$	1,667
Provision to allowance		977			350			1,284			830
Write-downs		(1,158	)		(308	)		(1,691	)		(773	)
Ending balance	$	747		$	1,724		$	747		$	1,724

Net activity relating to other real estate owned during the six months ended June 30, 2013 and 2012 is as follows:

	2013			2012
	(in thousands)
OREO Activity
OREO as of January 1	$	43,671		$	41,449
Real estate acquired		15,555			28,126
Valuation adjustments for declining market values		(1,284	)		(830	)
Improvements		—			1
Loss on sale		(359	)		(948	)
Proceeds from sale of properties		(10,553	)		(13,433	)
OREO as of June 30	$	47,030		$	54,365

Expenses Related to Other Real Estate Owned

Expenses related to other real estate owned include:

	Three Months Ended June  30,				Six Months Ended June 30,
	2013		2012		2013		2012
	(in thousands)				(in thousands)
Net loss on sales	$	162	$	546	$	359	$	948
Provision to allowance		977		350		1,284		830
Operating expense		518		309		805		684
Total	$	1,657	$	1,205	$	2,448	$	2,462

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Consolidated Statement of Changes in Stockholders' Equity (USD $) In Thousands, except Share data	Total	Common	Series A Preferred	Series C Preferred	Additional Paid-In Capital	Retained Deficit	Accumulated Other Comprehensive Income
Beginning Balances at Dec. 31, 2012	$ 47,190	$ 112,236	$ 34,840	$ 3,283	$ 20,283	$ (126,517)	$ 3,065
Beginning Balances (in shares) at Dec. 31, 2012		12,002,421	35,000	317,042
Issuance of unvested stock		325,018
Forfeited unvested stock (in shares)		(5,232)
Forfeited unvested stock
Stock-based compensation expense	226				226
Net loss	(1,378)					(1,378)
Net change in accumulated other comprehensive income, net of taxes	(6,411)						(6,411)
Dividends 5% on Series A preferred stock	(875)					(875)
Accretion of Series A preferred stock discount			90			(90)
Ending Balances at Jun. 30, 2013	$ 38,752	$ 112,236	$ 34,930	$ 3,283	$ 20,509	$ (128,860)	$ (3,346)
Ending Balances (in shares) at Jun. 30, 2013		12,322,207	35,000	317,042

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Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	6 Months Ended		12 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Dec. 31, 2012
Cash flows from operating activities
Net income (loss)	$ (1,378)	$ 1,653
Adjustments to reconcile net loss to net cash from operating activities
Depreciation and amortization	1,042	1,127
Provision for loan losses	450	7,750	40,300
Net amortization on securities	1,185	1,566
Stock-based compensation expense	226	215
Net gain on loans originated for sale	(66)	(122)
Loans originated for sale	(2,095)	(5,721)
Proceeds from sales of loans originated for sale	2,524	6,133
Net gain on sales of investment securities	(703)	(3,530)
Net loss on sales of other real estate owned	359	948
Net write-down of other real estate owned	1,284	830
Earnings on bank owned life insurance	(374)	(148)
Net change in accrued interest receivable and other assets	1,095	4,282
Net change in accrued interest payable and other liabilities	1,666	(977)
Net cash from operating activities	5,215	14,006
Cash flows from investing activities
Purchases of available-for-sale securities	(24,929)	(121,854)
Sales and calls of available-for-sale securities	1,908	65,695
Maturities and prepayments of available-for-sale securities	17,661	20,848
Proceeds from sale of other real estate owned	10,538	13,072
Improvements to other real estate owned		(1)
Loan originations and payments, net	89,045	58,397
Purchases of premises and equipment, net	(141)	(318)
Net cash from investing activities	94,082	35,839
Cash flows from financing activities
Net change in deposits	(84,223)	(119,041)
Net change in repurchase agreements	658	763
Repayment of Federal Home Loan Bank advances	(588)	(718)
Repayment of subordinated capital note	(450)	(450)
Net cash from financing activities	(84,603)	(119,446)
Net change in cash and cash equivalents	14,694	(69,601)
Beginning cash and cash equivalents	49,572	105,962	105,962
Ending cash and cash equivalents	64,266	36,361	49,572
Supplemental cash flow information:
Interest paid	5,603	8,159
Income taxes paid (refunded)		(2,000)
Supplemental non-cash disclosure:
Transfer from loans to other real estate	15,555	28,126
Financed sales of other real estate owned	$ 15	$ 361

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Securities

6 Months Ended

Jun. 30, 2013

Securities

Note 3 – Securities

The fair value of available for sale securities and the related gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) were as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
June 30, 2013:
U.S. Government and federal agency	$	26,604	$	358	$	(659	)	$	26,303
Agency mortgage-backed: residential		71,740		454		(1,625	)		70,569
State and municipal		55,835		974		(1,510	)		55,299
Corporate bonds		23,086		937		(160	)		23,863
Other		572		59		—			631
Total debt securities		177,837		2,782		(3,954	)		176,665
Equity		209		68		—			277
Total	$	178,046	$	2,850	$	(3,954	)	$	176,942
December 31, 2012:
U.S. Government and federal agency	$	5,603	$	530	$	—		$	6,133
Agency mortgage-backed: residential		94,298		1,141		(257	)		95,182
State and municipal		52,485		2,335		(87	)		54,733
Corporate bonds		18,851		1,150		(37	)		19,964
Other		572		46		—			618
Total debt securities		171,809		5,202		(381	)		176,630
Equity		1,359		487		—			1,846
Total	$	173,168	$	5,689	$	(381	)	$	178,476

Sales and calls of available for sale securities were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
	(in thousands)				(in thousands)
Proceeds	$	1,908	$	44,310	$	1,908	$	65,695
Gross gains		704		1,511		704		3,530
Gross losses		1		—		1		—

The amortized cost and fair value of the debt investment securities portfolio are shown by contractual maturity. Contractual maturities may differ from actual maturities if issuers have the right to call or prepay obligations with or without call or prepayment penalties. Mortgage-backed securities not due at a single maturity date are detailed separately.

	June 30, 2013
	Amortized Cost		Fair Value
	(in thousands)
Maturity
Available-for-sale
Within one year	$	17,901	$	17,928
One to five years		14,213		15,289
Five to ten years		64,364		63,449
Beyond ten years		9,619		9,430
Agency mortgage-backed: residential		71,740		70,569
Total	$	177,837	$	176,665

Securities pledged at June 30, 2013 and December 31, 2012 had carrying values of approximately $59.0 million and $76.4 million, respectively, and were pledged to secure public deposits and repurchase agreements.

The Company evaluates securities for other than temporary impairment (OTTI) on at least a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to the length of time and the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, underlying credit quality of the issuer, and the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. In analyzing an issuer’s financial condition, the Company may consider whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, the sector or industry trends and cycles affecting the issuer, and the results of reviews of the issuer’s financial condition. Management currently intends to hold all securities with unrealized losses until recovery, which for fixed income securities may be at maturity.

At June 30, 2013, the Company held one equity security. This security was in an unrealized gain position as of June 30, 2013. Management monitors the underlying financial condition of the issuers and current market pricing for this equity security monthly. As of June 30, 2013, management does not believe securities in our portfolio with unrealized losses should be classified as other than temporarily impaired. Management currently intends to hold securities with unrealized losses until recovery, which for fixed income securities may be at maturity.

Securities with unrealized losses at June 30, 2013 and December 31, 2012, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, are as follows:

	Less than 12 Months					12 Months or More					Total
Description of Securities	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
	(in thousands)
June 30, 2013:
U.S Government & federal agency	$	20,428	$	(659	)	$	—	$	—		$	20,428	$	(659	)
Agency mortgage-backed: residential		51,069		(1,474	)		4,525		(151	)		55,594		(1,625	)
State and municipal		31,198		(1,453	)		1,082		(57	)		32,280		(1,510	)
Corporate bonds		7,836		(160	)		—		—			7,836		(160	)
Total temporarily impaired	$	110,531	$	(3,746	)	$	5,607	$	(208	)	$	116,138	$	(3,954	)
December 31, 2012:
Agency mortgage-backed: residential	$	23,375	$	(257	)	$	—	$	—		$	23,375	$	(257	)
State and municipal		7,961		(87	)		—		—			7,961		(87	)
Corporate bonds		3,777		(37	)		—		—			3,777		(37	)
Equity		2		—			—		—			2		—
Total temporarily impaired	$	35,115	$	(381	)	$	—	$	—		$	35,115	$	(381	)

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Earnings or Loss Per Share - Additional Information (Detail) (USD $)	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Common Stock
Earnings Per Share Disclosure [Line Items]
Warrant exercise price	$ 15.88	$ 15.88
Nonvoting Common Stock
Earnings Per Share Disclosure [Line Items]
Warrant exercise price	$ 11.50	$ 11.50
Warrant | Common Stock
Earnings Per Share Disclosure [Line Items]
Shares/warrants of common stock not considered in computing diluted earnings per share	330,561	330,561
Warrant | Nonvoting Common Stock
Earnings Per Share Disclosure [Line Items]
Shares/warrants of common stock not considered in computing diluted earnings per share	1,380,437	1,380,437

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Basis of Presentation and Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2013

Basis of Presentation and Summary of Significant Accounting Policies

Note 1 – Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation – The consolidated financial statements include Porter Bancorp, Inc. (Company or PBI) and its subsidiary, PBI Bank (Bank). The Company owns a 100% interest in the Bank. All significant inter-company transactions and accounts have been eliminated in consolidation.

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, the financial statements do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for six months ended June 30, 2013 are not necessarily indicative of the results that may be expected for the entire year. A description of other significant accounting policies is presented in the notes to the Consolidated Financial Statements for the year ended December 31, 2012 included in the Company’s Annual Report on Form 10-K.

Use of Estimates – To prepare financial statements in conformity with U.S. generally accepted accounting principles, management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and future results could differ. The allowance for loan losses, fair values of financial instruments, stock compensation, deferred tax assets, other intangibles, and fair values of other real estate owned are particularly subject to change.

Reclassifications – Some items in the prior year financial statements were reclassified to conform to the current presentation. The reclassifications did not impact net income or stockholders’ equity.

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Activity in Allowance for Loan Losses by Portfolio Segment (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Dec. 31, 2012
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	$ 39,839	$ 53,953	$ 56,680	$ 52,579	$ 52,579
Provision for loan losses		4,000	450	7,750	40,300
Loans charged off	(3,404)	(6,438)	(21,366)	(9,020)
Recoveries	1,124	79	1,795	285
Ending balance	37,559	51,594	37,559	51,594	56,680
Commercial
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	4,990	4,082	4,402	4,207	4,207
Provision for loan losses	(805)	(78)	633	11
Loans charged off	(132)	(210)	(1,108)	(466)
Recoveries	595	17	721	59
Ending balance	4,648	3,811	4,648	3,811
Commercial Real Estate
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	22,169	32,982	34,768	33,024	33,024
Provision for loan losses	321	1,003	(124)	1,775
Loans charged off	(1,866)	(2,944)	(14,178)	(3,863)
Recoveries	398	8	556	113
Ending balance	21,022	31,049	21,022	31,049
Residential Real Estate
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	11,540	15,720	16,235	14,217	14,217
Provision for loan losses	360	2,696	(90)	5,202
Loans charged off	(1,137)	(2,862)	(5,476)	(3,891)
Recoveries	27	33	121	59
Ending balance	10,790	15,587	10,790	15,587
Consumer
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	716	812	857	792	792
Provision for loan losses	(7)	97	79	321
Loans charged off	(203)	(135)	(521)	(372)
Recoveries	88	18	179	51
Ending balance	594	792	594	792
Agriculture
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	410	345	403	325	325
Provision for loan losses	127	282	(51)	443
Loans charged off	(66)	(287)	(83)	(428)
Recoveries	16	3	218	3
Ending balance	487	343	487	343
Other
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	14	12	15	14	14
Provision for loan losses	4		3	(2)
Ending balance	$ 18	$ 12	$ 18	$ 12

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Fair Values Measurement (Tables)

6 Months Ended

Jun. 30, 2013

Financial Assets Measured at Fair Value on Recurring and Non-recurring Basis

Financial assets measured at fair value on a recurring basis at June 30, 2013 and December 31, 2012 are summarized below:

			Fair Value Measurements at June 30, 2013 Using
			(in thousands)
Description	Carrying Value		Quoted Prices In Active  Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available-for-sale securities
U.S. Government and federal agency	$	26,303	$	—	$	26,303	$	—
Agency mortgage-backed: residential		70,569		—		70,569		—
State and municipal		55,299		—		55,299		—
Corporate bonds		23,863		—		23,863		—
Other debt securities		631		—		—		631
Equity securities		277		277		—		—
Total	$	176,942	$	277	$	176,034	$	631

			Fair Value Measurements at December 31, 2012 Using
			(in thousands)
Description	Carrying Value		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available-for-sale securities
U.S. Government and federal agency	$	6,133	$	—	$	6,133	$	—
Agency mortgage-backed: residential		95,182		—		95,182		—
State and municipal		54,733		—		54,733		—
Corporate bonds		19,964		—		19,964		—
Other debt securities		618		—		—		618
Equity securities		1,846		1,846		—		—
Total	$	178,476	$	1,846	$	176,012	$	618

There were no transfers between Level 1 and Level 2 during 2013 or 2012.

Financial assets measured at fair value on a non-recurring basis are summarized below:

			Fair Value Measurements at June 30, 2013 Using
			(in thousands)
Description	Carrying Value		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans:
Commercial	$	3,162	$	—	$	—	$	3,162
Commercial real estate:
Construction		21,936		—		—		21,936
Farmland		5,292		—		—		5,292
Other		74,541		—		—		74,541
Residential real estate:
Multi-family		12,526		—		—		12,526
1-4 Family		27,028		—		—		27,028
Consumer		90		—		—		90
Other		505		—		—		505
Other real estate owned, net:
Commercial real estate:
Construction		20,270		—		—		20,270
Farmland		725		—		—		725
Other		18,369		—		—		18,369
Residential real estate:
Multi-family		457		—		—		457
1-4 Family		7,209		—		—		7,209

			Fair Value Measurements at December 31, 2012 Using
			(in thousands)
Description	Carrying Value		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans:
Commercial	$	3,799	$	—	$	—	$	3,799
Commercial real estate:
Construction		23,912		—		—		23,912
Farmland		5,722		—		—		5,722
Other		72,793		—		—		72,793
Residential real estate:
Multi-family		13,263		—		—		13,263
1-4 Family		25,094		—		—		25,094
Consumer		74		—		—		74
Agriculture		5		—		—		5
Other		513		—		—		513
Other real estate owned, net:
Commercial real estate:
Construction		22,323		—		—		22,323
Farmland		602		—		—		602
Other		15,175		—		—		15,175
Residential real estate:
Multi-family		195		—		—		195
1-4 Family		5,376		—		—		5,376

Reconciliation of all Assets Measured at Fair Value on Recurring Basis Using Significant Unobservable Inputs Level 3

The table below presents a reconciliation of all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the periods ended June 30, 2013 and 2012:

	State and  Municipal Securities					Other  Debt Securities
	2013		2012			2013		2012
	(in thousands)
Balances of recurring Level 3 assets at January 1	$	—	$	1,173		$	618	$	606
Total gain (loss) for the period:
Included in other comprehensive income (loss)		—		—			13		—
Sales		—		(1,173	)		—		—
Balance of recurring Level 3 assets at June 30	$	—	$	—		$	631	$	606

Qualitative Information About Level Three Fair Value Measurements for Financial Instruments Measured at Fair Value on Non-Recurring Basis

The following table presents qualitative information about level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at June 30, 2013:

	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Range (Weighted Average)
	(in thousands)
Impaired loans – Commercial	$	3,162	Market value approach	Adjustment for receivables and inventory discounts	16% - 32% (24%)
Impaired loans – Commercial real estate	$	101,769	Sales comparison approach	Adjustment for differences between the comparable sales	0% - 69% (19%)
Impaired loans – Residential real estate	$	39,554	Sales comparison approach	Adjustment for differences between the comparable sales	0% - 50% (15%)
Other real estate owned –Commercial real estate	$	39,364	Sales comparison approach Income approach	Adjustment for differences between the comparable sales Discount or capitalization rate	3% - 56% (24%) 7% - 16% (11%)
Other real estate owned – Residential real estate	$	7,666	Sales comparison approach	Adjustment for differences between the comparable sales	4% - 31% (12%)

The following table presents qualitative information about level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at December 31, 2012:

	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Range (Weighted Average)
	(in thousands)
Impaired loans – Commercial	$	3,799	Market value approach	Adjustment for receivables and inventory discounts	16% - 32% (24%)
Impaired loans – Commercial real estate	$	89,461	Sales comparison approach	Adjustment for differences between the comparable sales	0% - 69% (19%)
Impaired loans – Residential real estate	$	38,357	Sales comparison approach	Adjustment for differences between the comparable sales	0% - 38% (15%)
Other real estate owned – Commercial real estate	$	38,100	Sales comparison approach Income approach	Adjustment for differences between the comparable sales Discount or capitalization rate	3% - 50% (18%) 9% - 16% (12%)
Other real estate owned – Residential real estate	$	5,571	Sales comparison approach	Adjustment for differences between the comparable sales	0% - 30% (9%)

Carrying Amount and Estimated Fair Values of Financial Instruments

Carrying amount and estimated fair values of financial instruments were as follows for the periods indicated: 

			Fair Value Measurements at June 30, 2013 Using
	Carrying Amount		Level 1		Level 2		Level 3		Total
	(in thousands)
Financial assets
Cash and cash equivalents	$	64,266	$	58,585	$	5,681	$	—	$	64,266
Securities available for sale		176,942		277		176,034		631		176,942
Federal Home Loan Bank stock		10,072		N/A		N/A		N/A		N/A
Mortgage loans held for sale		133		—		133		—		133
Loans, net		737,226		—		—		752,688		752,688
Accrued interest receivable		4,184		—		1,227		2,957		4,184
Financial liabilities
Deposits	$	980,836	$	103,748	$	878,837	$	—	$	982,585
Securities sold under agreements to repurchase		3,292		—		3,292		—		3,292
Federal Home Loan Bank advances		5,016		—		5,019		—		5,019
Subordinated capital notes		6,525		—		—		6,195		6,195
Junior subordinated debentures		25,000		—		—		13,913		13,913
Accrued interest payable		2,277		—		1,042		1,235		2,277

			Fair Value Measurements at December 31, 2012 Using
	Carrying Amount		Level 1		Level 2		Level 3		Total
	(in thousands)
Financial assets
Cash and cash equivalents	$	49,572	$	41,938	$	7,634	$	—	$	49,572
Securities available for sale		178,476		1,846		176,012		618		178,476
Federal Home Loan Bank stock		10,072		N/A		N/A		N/A		N/A
Mortgage loans held for sale		507		—		507		—		507
Loans, net		842,412		—		—		853,996		853,996
Accrued interest receivable		5,138		—		1,150		3,988		5,138
Financial liabilities
Deposits	$	1,065,059	$	114,310	$	955,216	$	—	$	1,069,526
Securities sold under agreements to repurchase		2,634		—		2,634		—		2,634
Federal Home Loan Bank advances		5,604		—		5,607		—		5,607
Subordinated capital notes		6,975		—		—		6,599		6,599
Junior subordinated debentures		25,000		—		—		13,821		13,821
Accrued interest payable		2,104		—		1,173		931		2,104

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Capital Requirements and Restrictions on Retained Earnings (Tables)

6 Months Ended

Jun. 30, 2013

Ratios of Tier One Capital and Total Capital to Risk-Adjusted Assets and Leverage Ratios

The following table shows the ratios of Tier 1 capital and total capital to risk-adjusted assets and the leverage ratios for Porter Bancorp, Inc. and PBI Bank at the dates indicated:

										June 30, 2013						December 31, 2012
	Regulatory Minimums			Well-Capitalized Minimums			Minimum Capital Ratios Under Consent Order			Porter Bancorp			PBI Bank			Porter Bancorp			PBI Bank
Tier 1 Capital		4.0	%		6.0	%		N/A			6.88	%		8.47	%		6.46	%		7.71	%
Total risk-based capital		8.0			10.0			12.0	%		10.46			10.60			9.81			9.82
Tier 1 leverage ratio		4.0			5.0			9.0			4.91			6.08			4.50			5.37

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Unrecognized Stock Based Compensation Expense Related to Unvested Shares (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
July 2013 - December 2013	$ 340
2014	313
2015	174
2016	77
2017 & thereafter	$ 44

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Amortized Cost and Fair Value of Debt Investment Securities Portfolio by Contractual Maturity (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013
Amortized Cost
Within one year	$ 17,901
One to five years	14,213
Five to ten years	64,364
Beyond ten years	9,619
Agency mortgage-backed: residential	71,740
Total	177,837
Fair Value
Within one year	17,928
One to five years	15,289
Five to ten years	63,449
Beyond ten years	9,430
Agency mortgage-backed: residential	70,569
Total	$ 176,665

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Summary of Stock Option Activity (Detail) (USD $)	6 Months Ended	12 Months Ended
	Jun. 30, 2013	Dec. 31, 2012
Options
Outstanding, beginning		29,530
Forfeited
Expired		(29,530)
Outstanding, ending
Weighted Average Exercise Price
Outstanding, beginning		$ 19.88
Forfeited
Expired		$ 19.88
Outstanding, ending

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Scheduled Maturities of Total Time Deposits (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013
Deposit Liabilities [Line Items]
Year 1	$ 362,928
Year 2	258,311
Year 3	49,930
Year 4	10,034
Year 5	9,277
Thereafter	77
Time Deposits, Total	690,557
Retail
Deposit Liabilities [Line Items]
Year 1	362,928
Year 2	258,311
Year 3	49,930
Year 4	10,034
Year 5	9,277
Thereafter	77
Time Deposits, Total	$ 690,557

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Other Real Estate Owned Valuation Allowance Activity (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
OREO Valuation Allowance Activity:
Beginning balance	$ 928	$ 1,682	$ 1,154	$ 1,667
Provision to allowance	977	350	1,284	830
Write-downs	(1,158)	(308)	(1,691)	(773)
Ending balance	$ 747	$ 1,724	$ 747	$ 1,724

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Loans - Additional Information (Detail) (USD $)	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2012 Commercial Real Estate	Jun. 30, 2012 Commercial	Jun. 30, 2012 Residential Real Estate 1-4 Family	Jun. 30, 2013 Troubled Debt Restructurings Term Modification One	Dec. 31, 2012 Troubled Debt Restructurings Term Modification One	Jun. 30, 2013 Troubled Debt Restructurings Term Modification Two	Jun. 30, 2012 Troubled Debt Restructurings Term Modification Two	Jun. 30, 2013 Troubled Debt Restructurings Term Modification Three	Jun. 30, 2012 Troubled Debt Restructurings Term Modification Three
Accounts, Notes, Loans and Financing Receivable [Line Items]
Percentage of Company's TDRs that were performing according to modified terms						54.00%	66.00%	100.00%	96.00%	69.00%	89.00%
Reserves to customers whose loan terms have been modified in TDRs outstanding						$ 5,200,000	$ 15,100,000	$ 49,000	$ 1,300,000	$ 230,000	$ 2,600,000
Commitment to lend additional amount to customers with outstanding loans that are classified as TDRs						262,000	259,000
TDRs defaulted on restructured loan	1,500,000	7,900,000
Past due period over which a default is considered to have occurred		90 days
TDRs defaulted on restructured loan			6,300,000	1,000,000	622,000
Minimum outstanding loan balance for credit risk analysis	$ 500,000

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Consolidated Balance Sheets (Parenthetical) (USD $)	Jun. 30, 2013	Dec. 31, 2012
Loans, allowance	$ 37,559,000	$ 56,680,000
Preferred stock, no par
Preferred stock, shares authorized	1,000,000	1,000,000
Common stock, no par
Common stock, shares authorized	86,000,000	86,000,000
Common stock, shares issued	12,322,207	12,002,421
Common stock, shares outstanding	12,322,207	12,002,421
Preferred stock Series A
Preferred stock, issued	35,000	35,000
Preferred stock, outstanding	35,000	35,000
Preferred stock, Liquidation preference	35,000,000
Preferred stock Series C
Preferred stock, issued	317,042	317,042
Preferred stock, outstanding	317,042	317,042
Preferred stock, Liquidation preference	$ 3,600,000

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Deposits

6 Months Ended

Jun. 30, 2013

Deposits

Note 6 – Deposits

The following table shows deposits by category:

	June 30, 2013		December 31, 2012
	(in thousands)
Non-interest bearing	$	106,320	$	114,310
Interest checking		78,218		87,234
Money market		65,620		63,715
Savings		40,121		39,227
Certificates of deposit		690,557		760,573
Total	$	980,836	$	1,065,059

Time deposits of $100,000 or more were $288.2 million and $319.5 million at June 30, 2013 and December 31, 2012, respectively.

Scheduled maturities of total time deposits at June 30, 2013 for each of the next five years are as follows (in thousands):

	Retail		Brokered		Total
Year 1	$	362,928	$	—	$	362,928
Year 2		258,311		—		258,311
Year 3		49,930		—		49,930
Year 4		10,034		—		10,034
Year 5		9,277		—		9,277
Thereafter		77		—		77
	$	690,557	$	—	$	690,557

Historically, the Bank has utilized brokered and wholesale deposits to supplement its funding strategy. At December 31, 2012, the Bank held $15.0 million in brokered deposits, which matured and were redeemed in the second quarter of 2013. As stipulated in the Consent Order, PBI Bank is currently restricted from accepting, renewing, or rolling-over brokered deposits without the prior receipt of a waiver on a case-by-case basis from our regulators.

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Consolidated Statements of Comprehensive Income (Loss) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Net income (loss)	$ (1,309)	$ 151	$ (1,378)	$ 1,653
Unrealized gain (loss) on securities:
Unrealized gain (loss) arising during the period	(9,086)	(195)	(9,160)	427
Reclassification of amount realized through sales	(703)	(1,511)	(703)	(3,530)
Included in net loss	(9,789)	(1,706)	(9,863)	(3,103)
Tax effect	3,426	597	3,452	1,086
Net of tax	(6,363)	(1,109)	(6,411)	(2,017)
Comprehensive income (loss)	$ (7,672)	$ (958)	$ (7,789)	$ (364)

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Advances from Federal Home Loan Bank - Additional Information (Detail) (Federal Home Loan Bank Advances, USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2013
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Additional borrowing capacity with the Federal Home Loan Bank	$ 15.5
Maximum
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
New advances maturity period	1 year

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Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Assets
Cash and due from financial institutions	$ 61,949	$ 46,512
Federal funds sold	2,317	3,060
Cash and cash equivalents	64,266	49,572
Securities available for sale	176,942	178,476
Mortgage loans held for sale	133	507
Loans, net of allowance of $37,559 and $56,680, respectively	737,226	842,412
Premises and equipment	20,368	20,805
Other real estate owned	47,030	43,671
Federal Home Loan Bank stock	10,072	10,072
Bank owned life insurance	8,772	8,398
Accrued interest receivable and other assets	7,322	8,718
Total assets	1,072,131	1,162,631
Deposits
Non-interest bearing	106,320	114,310
Interest bearing	874,516	950,749
Total deposits	980,836	1,065,059
Repurchase agreements	3,292	2,634
Federal Home Loan Bank advances	5,016	5,604
Accrued interest payable and other liabilities	12,710	10,169
Subordinated capital note	6,525	6,975
Junior subordinated debentures	25,000	25,000
Total liabilities	1,033,379	1,115,441
Stockholders' equity
Common stock, no par, 86,000,000 shares authorized, 12,322,207 and 12,002,421 shares issued and outstanding, respectively	112,236	112,236
Additional paid-in capital	20,509	20,283
Retained deficit	(128,860)	(126,517)
Accumulated other comprehensive income	(3,346)	3,065
Total stockholders' equity	38,752	47,190
Total liabilities and stockholders' equity	1,072,131	1,162,631
Preferred stock Series A
Stockholders' equity
Preferred stock	34,930	34,840
Preferred stock Series C
Stockholders' equity
Preferred stock	$ 3,283	$ 3,283

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Net Activity Relating to Other Real Estate Owned Activity (Detail) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Real Estate Properties [Line Items]
OREO as of January 1			$ 43,671,000	$ 41,449,000
Real estate acquired			15,555,000	28,126,000
Valuation adjustments	(977,000)	(350,000)	(1,284,000)	(830,000)
Improvements				1,000
Loss on sale	(162,000)	(546,000)	(359,000)	(948,000)
Proceeds from sale of properties			(10,553,000)	(13,433,000)
OREO as of June 30	47,030,000	54,365,000	47,030,000	54,365,000
Declining Market Values
Real Estate Properties [Line Items]
Valuation adjustments			$ (1,284,000)	$ (830,000)

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Ratios of Tier One Capital and Total Capital to Risk-Adjusted Assets and Leverage Ratios (Detail)	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013 Porter Bancorp	Dec. 31, 2012 Porter Bancorp	Jun. 30, 2013 PBI Bank	Dec. 31, 2012 PBI Bank
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Tier I Capital, regulatory minimum	4.00%
Total risk-based capital, regulatory minimum	8.00%	12.00%
Tier I leverage ratio, regulatory minimum	4.00%	9.00%
Tier I Capital, Well-Capitalized minimum	6.00%
Total risk-based capital, Well-Capitalized minimum	10.00%
Tier I leverage ratio, Well-Capitalized minimum	5.00%
Tier 1 Capital			6.88%	6.46%	8.47%	7.71%
Total risk-based capital			10.46%	9.81%	10.60%	9.82%
Tier 1 leverage ratio			4.91%	4.50%	6.08%	5.37%

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Income Taxes (Tables)

6 Months Ended

Jun. 30, 2013

Deferred Tax Assets and Liabilities

Deferred tax assets and liabilities were due to the following as of:

	June 30, 2013			December 31, 2012
	(in thousands)
Deferred tax assets:
Allowance for loan losses	$	13,146		$	19,838
Other real estate owned write-down		9,959			10,408
Net operating loss carry-forward		23,302			15,051
New market tax credit carry-forward		208			208
Alternative minimum tax credit carry-forward		692			692
Net assets from acquisitions		626			592
Other than temporary impairment on securities		374			374
Net unrealized loss on securities available for sale		386			—
Amortization of non-compete agreements		18			19
Other		925			936
		49,636			48,118
Deferred tax liabilities:
Fixed assets		350			409
Net unrealized gain on securities available for sale		—			1,858
FHLB stock dividends		1,276			1,276
Originated mortgage servicing rights		88			98
Other		516			549
		2,230			4,190
Net deferred tax assets before valuation allowance		47,406			43,928
Valuation allowance		(47,406	)		(43,928	)
Net deferred tax asset	$	—		$	—

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Securities (Tables)

6 Months Ended

Jun. 30, 2013

Fair Value of Available for Sale Securities and Related Gross Unrealized Gains and Losses

The fair value of available for sale securities and the related gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) were as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
June 30, 2013:
U.S. Government and federal agency	$	26,604	$	358	$	(659	)	$	26,303
Agency mortgage-backed: residential		71,740		454		(1,625	)		70,569
State and municipal		55,835		974		(1,510	)		55,299
Corporate bonds		23,086		937		(160	)		23,863
Other		572		59		—			631
Total debt securities		177,837		2,782		(3,954	)		176,665
Equity		209		68		—			277
Total	$	178,046	$	2,850	$	(3,954	)	$	176,942
December 31, 2012:
U.S. Government and federal agency	$	5,603	$	530	$	—		$	6,133
Agency mortgage-backed: residential		94,298		1,141		(257	)		95,182
State and municipal		52,485		2,335		(87	)		54,733
Corporate bonds		18,851		1,150		(37	)		19,964
Other		572		46		—			618
Total debt securities		171,809		5,202		(381	)		176,630
Equity		1,359		487		—			1,846
Total	$	173,168	$	5,689	$	(381	)	$	178,476

Sales and Calls of Available for Sale Securities

Sales and calls of available for sale securities were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
	(in thousands)				(in thousands)
Proceeds	$	1,908	$	44,310	$	1,908	$	65,695
Gross gains		704		1,511		704		3,530
Gross losses		1		—		1		—

Amortized Cost and Fair Value of Debt Investment Securities Portfolio by Contractual Maturity

	June 30, 2013
	Amortized Cost		Fair Value
	(in thousands)
Maturity
Available-for-sale
Within one year	$	17,901	$	17,928
One to five years		14,213		15,289
Five to ten years		64,364		63,449
Beyond ten years		9,619		9,430
Agency mortgage-backed: residential		71,740		70,569
Total	$	177,837	$	176,665

Securities with Unrealized Losses

Securities with unrealized losses at June 30, 2013 and December 31, 2012, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, are as follows:

	Less than 12 Months					12 Months or More					Total
Description of Securities	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
	(in thousands)
June 30, 2013:
U.S Government & federal agency	$	20,428	$	(659	)	$	—	$	—		$	20,428	$	(659	)
Agency mortgage-backed: residential		51,069		(1,474	)		4,525		(151	)		55,594		(1,625	)
State and municipal		31,198		(1,453	)		1,082		(57	)		32,280		(1,510	)
Corporate bonds		7,836		(160	)		—		—			7,836		(160	)
Total temporarily impaired	$	110,531	$	(3,746	)	$	5,607	$	(208	)	$	116,138	$	(3,954	)
December 31, 2012:
Agency mortgage-backed: residential	$	23,375	$	(257	)	$	—	$	—		$	23,375	$	(257	)
State and municipal		7,961		(87	)		—		—			7,961		(87	)
Corporate bonds		3,777		(37	)		—		—			3,777		(37	)
Equity		2		—			—		—			2		—
Total temporarily impaired	$	35,115	$	(381	)	$	—	$	—		$	35,115	$	(381	)

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Types of Troubled Debt Restructuring Loan Modification by Portfolio Segment Outstanding (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Dec. 31, 2012
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring	$ 101,437		$ 101,437		$ 117,808
TDR Loan Modifications during 12 months	499	15,621	4,171	35,734
Commercial | Rate Reduction
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring	1,981		1,981		1,972
TDR Loan Modifications during 12 months			45
Commercial | Principal Deferral
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring	881		881		887
Commercial | Interest Only Payments
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring	238		238		958
TDR Loan Modifications during 12 months				1,019
Commercial Real Estate | Construction | Rate Reduction
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring	6,762		6,762		9,293
TDR Loan Modifications during 12 months			1,291
Commercial Real Estate | Construction | Principal Deferral
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring	499		499
TDR Loan Modifications during 12 months	499		499
Commercial Real Estate | Construction | Interest Only Payments
Financing Receivable, Modifications [Line Items]
TDR Loan Modifications during 12 months		152		152
Commercial Real Estate | Farmland | Rate Reduction
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring	150		150		150
Commercial Real Estate | Farmland | Principal Deferral
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring	3,150		3,150		3,163
Commercial Real Estate | Other | Rate Reduction
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring	49,989		49,989		59,146
TDR Loan Modifications during 12 months		8,152	1,399	11,302
Commercial Real Estate | Other | Principal Deferral
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring	1,182		1,182		1,195
TDR Loan Modifications during 12 months		1,196		1,196
Commercial Real Estate | Other | Interest Only Payments
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring	3,947		3,947		4,573
TDR Loan Modifications during 12 months		2,462		4,636
Residential Real Estate | Rate Reduction
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring					14
Residential Real Estate | Multi-Family | Rate Reduction
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring	11,530		11,530		13,087
TDR Loan Modifications during 12 months				8,386
Residential Real Estate | Multi-Family | Interest Only Payments
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring	647		647		652
Residential Real Estate | 1-4 Family | Rate Reduction
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring	19,910		19,910		22,194
TDR Loan Modifications during 12 months		3,086	897	8,470
Residential Real Estate | 1-4 Family | Principal Deferral
Financing Receivable, Modifications [Line Items]
TDR Loan Modifications during 12 months		573		573
Other | Rate Reduction
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring	518		518		524
Consumer | Rate Reduction
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring	53		53
TDR Loan Modifications during 12 months			40
TDRs Performing to Modified Terms
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring	54,927		54,927		77,344
TDR Loan Modifications during 12 months	499	15,048	2,880	31,968
TDRs Performing to Modified Terms | Commercial | Rate Reduction
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring	1,981		1,981		1,972
TDR Loan Modifications during 12 months			45
TDRs Performing to Modified Terms | Commercial | Principal Deferral
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring	881		881		887
TDRs Performing to Modified Terms | Commercial Real Estate | Construction | Rate Reduction
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring	3,409		3,409		4,834
TDRs Performing to Modified Terms | Commercial Real Estate | Construction | Principal Deferral
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring	499		499
TDR Loan Modifications during 12 months	499		499
TDRs Performing to Modified Terms | Commercial Real Estate | Construction | Interest Only Payments
Financing Receivable, Modifications [Line Items]
TDR Loan Modifications during 12 months		152		152
TDRs Performing to Modified Terms | Commercial Real Estate | Farmland | Rate Reduction
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring	150		150		150
TDRs Performing to Modified Terms | Commercial Real Estate | Farmland | Principal Deferral
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring	712		712		725
TDRs Performing to Modified Terms | Commercial Real Estate | Other | Rate Reduction
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring	29,526		29,526		36,515
TDR Loan Modifications during 12 months		8,152	1,399	11,302
TDRs Performing to Modified Terms | Commercial Real Estate | Other | Principal Deferral
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring	1,182		1,182		1,195
TDR Loan Modifications during 12 months		1,196		1,196
TDRs Performing to Modified Terms | Commercial Real Estate | Other | Interest Only Payments
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring	2,458		2,458		2,466
TDR Loan Modifications during 12 months		2,462		2,462
TDRs Performing to Modified Terms | Residential Real Estate | Rate Reduction
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring					14
TDRs Performing to Modified Terms | Residential Real Estate | Multi-Family | Rate Reduction
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring	4,694		4,694		13,087
TDR Loan Modifications during 12 months				8,386
TDRs Performing to Modified Terms | Residential Real Estate | Multi-Family | Interest Only Payments
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring	647		647		652
TDRs Performing to Modified Terms | Residential Real Estate | 1-4 Family | Rate Reduction
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring	8,217		8,217		14,323
TDR Loan Modifications during 12 months		3,086	897	8,470
TDRs Performing to Modified Terms | Other | Rate Reduction
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring	518		518		524
TDRs Performing to Modified Terms | Consumer | Rate Reduction
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring	53		53
TDR Loan Modifications during 12 months			40
TDRs Not Performing to Modified Terms
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring	46,510		46,510		40,464
TDR Loan Modifications during 12 months		573	1,291	3,766
TDRs Not Performing to Modified Terms | Commercial | Interest Only Payments
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring	238		238		958
TDR Loan Modifications during 12 months				1,019
TDRs Not Performing to Modified Terms | Commercial Real Estate | Construction | Rate Reduction
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring	3,353		3,353		4,459
TDR Loan Modifications during 12 months			1,291
TDRs Not Performing to Modified Terms | Commercial Real Estate | Farmland | Principal Deferral
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring	2,438		2,438		2,438
TDRs Not Performing to Modified Terms | Commercial Real Estate | Other | Rate Reduction
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring	20,463		20,463		22,631
TDRs Not Performing to Modified Terms | Commercial Real Estate | Other | Interest Only Payments
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring	1,489		1,489		2,107
TDR Loan Modifications during 12 months				2,174
TDRs Not Performing to Modified Terms | Residential Real Estate | Multi-Family | Rate Reduction
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring	6,836		6,836
TDRs Not Performing to Modified Terms | Residential Real Estate | 1-4 Family | Rate Reduction
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring	11,693		11,693		7,871
TDRs Not Performing to Modified Terms | Residential Real Estate | 1-4 Family | Principal Deferral
Financing Receivable, Modifications [Line Items]
TDR Loan Modifications during 12 months		$ 573		$ 573

XML

Deposits - Additional Information (Detail) (USD $)	Jun. 30, 2013	Dec. 31, 2012
Deposit Liabilities [Line Items]
Time deposits of $100,000 or more	$ 288,200,000	$ 319,500,000
Deposits	980,836,000	1,065,059,000
Brokered
Deposit Liabilities [Line Items]
Deposits		$ 15,000,000

XML

Deferred Tax Assets and Liabilities (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Deferred tax assets:
Allowance for loan losses	$ 13,146	$ 19,838
Other real estate owned write-down	9,959	10,408
Net operating loss carry-forward	23,302	15,051
New market tax credit carry-forward	208	208
Alternative minimum tax credit carry-forward	692	692
Net assets from acquisitions	626	592
Other than temporary impairment on securities	374	374
Net unrealized loss on securities available for sale	386
Amortization of non-compete agreements	18	19
Other	925	936
Deferred Tax Assets, Gross, Total	49,636	48,118
Deferred tax liabilities:
Fixed assets	350	409
Net unrealized gain on securities available for sale		1,858
FHLB stock dividends	1,276	1,276
Originated mortgage servicing rights	88	98
Other	516	549
Deferred Tax Liabilities, Net, Total	2,230	4,190
Net deferred tax assets before valuation allowance	47,406	43,928
Valuation allowance	(47,406)	(43,928)
Net deferred tax asset

XML

Securities with Unrealized Losses (Detail) (USD $)	Jun. 30, 2013	Dec. 31, 2012
Investments, Unrealized Loss Position [Line Items]
Fair value, less than 12 months	$ 110,531,000	$ 35,115,000
Unrealized loss, less than 12 months	(3,746,000)	(381,000)
Fair value, 12 months or more	5,607,000
Unrealized loss, 12 months or more	(208,000)
Fair value, total	116,138,000	35,115,000
Unrealized loss, total	(3,954,000)	(381,000)
Agency mortgage-backed: residential
Investments, Unrealized Loss Position [Line Items]
Fair value, less than 12 months	51,069,000	23,375,000
Unrealized loss, less than 12 months	(1,474,000)	(257,000)
Fair value, 12 months or more	4,525,000
Unrealized loss, 12 months or more	(151,000)
Fair value, total	55,594,000	23,375,000
Unrealized loss, total	(1,625,000)	(257,000)
U.S. Government and federal agency
Investments, Unrealized Loss Position [Line Items]
Fair value, less than 12 months	20,428,000
Unrealized loss, less than 12 months	(659,000)
Fair value, total	20,428,000
Unrealized loss, total	(659,000)
State and municipal
Investments, Unrealized Loss Position [Line Items]
Fair value, less than 12 months	31,198,000	7,961,000
Unrealized loss, less than 12 months	(1,453,000)	(87,000)
Fair value, 12 months or more	1,082,000
Unrealized loss, 12 months or more	(57,000)
Fair value, total	32,280,000	7,961,000
Unrealized loss, total	(1,510,000)	(87,000)
Corporate bonds
Investments, Unrealized Loss Position [Line Items]
Fair value, less than 12 months	7,836,000	3,777,000
Unrealized loss, less than 12 months	(160,000)	(37,000)
Fair value, total	7,836,000	3,777,000
Unrealized loss, total	(160,000)	(37,000)
Equity
Investments, Unrealized Loss Position [Line Items]
Fair value, less than 12 months		2,000
Fair value, total		$ 2,000

XML

Fair Value of Available for Sale Securities and Related Gross Unrealized Gains and Losses (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	$ 178,046	$ 173,168
Gross Unrealized Gains	2,850	5,689
Gross Unrealized Losses	(3,954)	(381)
Fair Value	176,942	178,476
Debt securities
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	177,837	171,809
Gross Unrealized Gains	2,782	5,202
Gross Unrealized Losses	(3,954)	(381)
Fair Value	176,665	176,630
Debt securities | U.S. Government and federal agency
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	26,604	5,603
Gross Unrealized Gains	358	530
Gross Unrealized Losses	(659)
Fair Value	26,303	6,133
Debt securities | Agency mortgage-backed: residential
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	71,740	94,298
Gross Unrealized Gains	454	1,141
Gross Unrealized Losses	(1,625)	(257)
Fair Value	70,569	95,182
Debt securities | State and municipal
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	55,835	52,485
Gross Unrealized Gains	974	2,335
Gross Unrealized Losses	(1,510)	(87)
Fair Value	55,299	54,733
Debt securities | Corporate bonds
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	23,086	18,851
Gross Unrealized Gains	937	1,150
Gross Unrealized Losses	(160)	(37)
Fair Value	23,863	19,964
Debt securities | Other
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	572	572
Gross Unrealized Gains	59	46
Fair Value	631	618
Equity
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	209	1,359
Gross Unrealized Gains	68	487
Fair Value	$ 277	$ 1,846

XML

Sales and Calls of Available for Sale Securities (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Gain (Loss) on Investments [Line Items]
Proceeds	$ 1,908	$ 44,310	$ 1,908	$ 65,695
Gross gains	704	1,511	704	3,530
Gross losses	$ 1		$ 1

XML

Other Real Estate Owned

6 Months Ended

Jun. 30, 2013

Other Real Estate Owned

Note 5 – Other Real Estate Owned

Other real estate owned (OREO) is real estate acquired as a result of foreclosure or by deed in lieu of foreclosure. It is classified as real estate owned until such time as it is sold. When property is acquired as a result of foreclosure or by deed in lieu of foreclosure, it is recorded at its fair market value less cost to sell. Any write-down of the property at the time of acquisition is charged to the allowance for loan losses. Subsequent reductions in fair value are recorded as non-interest expense. To determine the fair value of OREO for smaller dollar single family homes, we consult with internal real estate sales staff and external realtors, investors, and appraisers. If the internally evaluated market price is below our underlying investment in the property, appropriate write-downs are taken.

For larger dollar residential and commercial real estate properties, we obtain a new appraisal of the subject property in connection with the transfer to other real estate owned. We typically obtain updated appraisals each year on the anniversary date of ownership unless a sale is imminent.

The following table presents the major categories of OREO at the period-ends indicated:

	June 30, 2013			December 31, 2012
	(in thousands)
Commercial Real Estate:
Construction	$	20,592		$	22,912
Farmland		737			618
Other		18,661			15,577
Residential Real Estate:
Multi-family		464			200
1-4 Family		7,323			5,518
		47,777			44,825
Valuation allowance		(747	)		(1,154	)
	$	47,030		$	43,671

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2013			2012			2013			2012
	(in thousands)						(in thousands)
OREO Valuation Allowance Activity:
Beginning balance	$	928		$	1,682		$	1,154		$	1,667
Provision to allowance		977			350			1,284			830
Write-downs		(1,158	)		(308	)		(1,691	)		(773	)
Ending balance	$	747		$	1,724		$	747		$	1,724

Net activity relating to other real estate owned during the six months ended June 30, 2013 and 2012 is as follows:

	2013			2012
	(in thousands)
OREO Activity
OREO as of January 1	$	43,671		$	41,449
Real estate acquired		15,555			28,126
Valuation adjustments for declining market values		(1,284	)		(830	)
Improvements		—			1
Loss on sale		(359	)		(948	)
Proceeds from sale of properties		(10,553	)		(13,433	)
OREO as of June 30	$	47,030		$	54,365

Expenses related to other real estate owned include:

	Three Months Ended June  30,				Six Months Ended June 30,
	2013		2012		2013		2012
	(in thousands)				(in thousands)
Net loss on sales	$	162	$	546	$	359	$	948
Provision to allowance		977		350		1,284		830
Operating expense		518		309		805		684
Total	$	1,657	$	1,205	$	2,448	$	2,462

XML

Financial Assets Measured at Fair Value on Non Recurring Basis (Detail) (Fair Value, Measurements, Nonrecurring, USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Other real estate owned, net | Commercial Real Estate | Construction
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other Real Estate Owned	$ 20,270	$ 22,323
Other real estate owned, net | Commercial Real Estate | Farmland
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other Real Estate Owned	725	602
Other real estate owned, net | Commercial Real Estate | Other
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other Real Estate Owned	18,369	15,175
Other real estate owned, net | Residential Real Estate | Multi-Family
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other Real Estate Owned	457	195
Other real estate owned, net | Residential Real Estate | 1-4 Family
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other Real Estate Owned	7,209	5,376
Impaired Loans | Commercial
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans fair value	3,162	3,799
Impaired Loans | Commercial Real Estate | Construction
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans fair value	21,936	23,912
Impaired Loans | Commercial Real Estate | Farmland
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans fair value	5,292	5,722
Impaired Loans | Commercial Real Estate | Other
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans fair value	74,541	72,793
Impaired Loans | Residential Real Estate | Multi-Family
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans fair value	12,526	13,263
Impaired Loans | Residential Real Estate | 1-4 Family
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans fair value	27,028	25,094
Impaired Loans | Consumer
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans fair value	90	74
Impaired Loans | Other
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans fair value	505	513
Impaired Loans | Agriculture
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans fair value		5
Quoted Prices In Active Markets for Identical Assets (Level 1) | Other real estate owned, net | Commercial Real Estate | Construction
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other Real Estate Owned
Quoted Prices In Active Markets for Identical Assets (Level 1) | Other real estate owned, net | Commercial Real Estate | Farmland
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other Real Estate Owned
Quoted Prices In Active Markets for Identical Assets (Level 1) | Other real estate owned, net | Commercial Real Estate | Other
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other Real Estate Owned
Quoted Prices In Active Markets for Identical Assets (Level 1) | Other real estate owned, net | Residential Real Estate | Multi-Family
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other Real Estate Owned
Quoted Prices In Active Markets for Identical Assets (Level 1) | Other real estate owned, net | Residential Real Estate | 1-4 Family
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other Real Estate Owned
Quoted Prices In Active Markets for Identical Assets (Level 1) | Impaired Loans | Commercial
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans fair value
Quoted Prices In Active Markets for Identical Assets (Level 1) | Impaired Loans | Commercial Real Estate | Construction
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans fair value
Quoted Prices In Active Markets for Identical Assets (Level 1) | Impaired Loans | Commercial Real Estate | Farmland
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans fair value
Quoted Prices In Active Markets for Identical Assets (Level 1) | Impaired Loans | Commercial Real Estate | Other
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans fair value
Quoted Prices In Active Markets for Identical Assets (Level 1) | Impaired Loans | Residential Real Estate | Multi-Family
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans fair value
Quoted Prices In Active Markets for Identical Assets (Level 1) | Impaired Loans | Residential Real Estate | 1-4 Family
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans fair value
Quoted Prices In Active Markets for Identical Assets (Level 1) | Impaired Loans | Consumer
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans fair value
Quoted Prices In Active Markets for Identical Assets (Level 1) | Impaired Loans | Other
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans fair value
Quoted Prices In Active Markets for Identical Assets (Level 1) | Impaired Loans | Agriculture
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans fair value
Significant Other Observable Inputs (Level 2) | Other real estate owned, net | Commercial Real Estate | Construction
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other Real Estate Owned
Significant Other Observable Inputs (Level 2) | Other real estate owned, net | Commercial Real Estate | Farmland
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other Real Estate Owned
Significant Other Observable Inputs (Level 2) | Other real estate owned, net | Commercial Real Estate | Other
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other Real Estate Owned
Significant Other Observable Inputs (Level 2) | Other real estate owned, net | Residential Real Estate | Multi-Family
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other Real Estate Owned
Significant Other Observable Inputs (Level 2) | Other real estate owned, net | Residential Real Estate | 1-4 Family
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other Real Estate Owned
Significant Other Observable Inputs (Level 2) | Impaired Loans | Commercial
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans fair value
Significant Other Observable Inputs (Level 2) | Impaired Loans | Commercial Real Estate | Construction
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans fair value
Significant Other Observable Inputs (Level 2) | Impaired Loans | Commercial Real Estate | Farmland
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans fair value
Significant Other Observable Inputs (Level 2) | Impaired Loans | Commercial Real Estate | Other
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans fair value
Significant Other Observable Inputs (Level 2) | Impaired Loans | Residential Real Estate | Multi-Family
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans fair value
Significant Other Observable Inputs (Level 2) | Impaired Loans | Residential Real Estate | 1-4 Family
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans fair value
Significant Other Observable Inputs (Level 2) | Impaired Loans | Consumer
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans fair value
Significant Other Observable Inputs (Level 2) | Impaired Loans | Other
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans fair value
Significant Other Observable Inputs (Level 2) | Impaired Loans | Agriculture
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans fair value
Significant Unobservable Inputs (Level 3) | Other real estate owned, net | Commercial Real Estate | Construction
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other Real Estate Owned	20,270	22,323
Significant Unobservable Inputs (Level 3) | Other real estate owned, net | Commercial Real Estate | Farmland
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other Real Estate Owned	725	602
Significant Unobservable Inputs (Level 3) | Other real estate owned, net | Commercial Real Estate | Other
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other Real Estate Owned	18,369	15,175
Significant Unobservable Inputs (Level 3) | Other real estate owned, net | Residential Real Estate | Multi-Family
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other Real Estate Owned	457	195
Significant Unobservable Inputs (Level 3) | Other real estate owned, net | Residential Real Estate | 1-4 Family
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other Real Estate Owned	7,209	5,376
Significant Unobservable Inputs (Level 3) | Impaired Loans | Commercial
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans fair value	3,162	3,799
Significant Unobservable Inputs (Level 3) | Impaired Loans | Commercial Real Estate | Construction
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans fair value	21,936	23,912
Significant Unobservable Inputs (Level 3) | Impaired Loans | Commercial Real Estate | Farmland
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans fair value	5,292	5,722
Significant Unobservable Inputs (Level 3) | Impaired Loans | Commercial Real Estate | Other
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans fair value	74,541	72,793
Significant Unobservable Inputs (Level 3) | Impaired Loans | Residential Real Estate | Multi-Family
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans fair value	12,526	13,263
Significant Unobservable Inputs (Level 3) | Impaired Loans | Residential Real Estate | 1-4 Family
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans fair value	27,028	25,094
Significant Unobservable Inputs (Level 3) | Impaired Loans | Consumer
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans fair value	90	74
Significant Unobservable Inputs (Level 3) | Impaired Loans | Other
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans fair value	505	513
Significant Unobservable Inputs (Level 3) | Impaired Loans | Agriculture
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans fair value		$ 5

XML

Stock Plans and Stock Based Compensation (Tables)

6 Months Ended

Jun. 30, 2013

Summary of Unvested Share Activity

The following table summarizes unvested share activity as of and for the periods indicated for the Stock Incentive Plan:

	Six Months Ended June 30, 2013					Twelve Months Ended December 31, 2012
	Shares			Weighted Average Grant Price		Shares			Weighted Average Grant Price
Outstanding, beginning		153,316		$	5.92		96,688		$	13.40
Granted		142,663			0.78		97,197			1.74
Vested		(22,113	)		12.19		(27,362	)		13.04
Forfeited		(5,232	)		14.82		(13,207	)		15.22
Outstanding, ending		268,634		$	2.50		153,316		$	5.92

Summary of Unvested Share Activity for Non-Employee Directors

The following table summarizes unvested share activity as of and for the periods indicated for the Non-Employee Directors Stock Ownership Incentive Plan:

	Six Months Ended June 30, 2013					Twelve Months Ended December 31, 2012
	Shares			Weighted Average Grant Price		Shares			Weighted Average Grant Price
Outstanding, beginning		80,078		$	1.77		3,538		$	7.91
Granted		182,355			0.85		93,943			1.65
Vested		(16,524	)		2.02		(17,403	)		2.37
Forfeited		—			—		—			—
Outstanding, ending		245,909		$	1.07		80,078		$	1.77

Summary of Stock Option Activity

The following table summarizes stock option activity:

	Six Months Ended June 30, 2013				Twelve Months Ended December 31, 2012
			Weighted					Weighted
			Average					Average
			Exercise					Exercise
	Shares		Price		Shares			Price
Outstanding, beginning		—	$	—		29,530		$	19.88
Forfeited		—		—		—			—
Expired		—		—		(29,530	)		19.88
Outstanding, ending		—	$	—		—		$	—

Unrecognized Stock Based Compensation Expense Related to Unvested Shares

Unrecognized stock based compensation expense related to unvested shares for the remainder of 2013 and beyond are estimated as follows (in thousands):

July 2013 – December 2013	$	340
2014		313
2015		174
2016		77
2017 & thereafter		44

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Balance in Allowance for Loan Losses and Recorded Investment in Loans by Portfolio Segment and Based on Impairment Method (Detail) (USD $)	Jun. 30, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Allowance for loan losses:
Individually evaluated for impairment	$ 10,190,000	$ 21,034,000
Collectively evaluated for impairment	27,369,000	35,646,000
Total ending allowance balance	37,559,000	56,680,000
Loans:
Loans individually evaluated for impairment	175,038,000	188,808,000
Loans collectively evaluated for impairment	599,747,000	710,284,000
Total ending loans balance	774,785,000	899,092,000	1,100,000,000	1,300,000,000
Commercial
Allowance for loan losses:
Individually evaluated for impairment	1,388,000	263,000
Collectively evaluated for impairment	3,260,000	4,139,000
Total ending allowance balance	4,648,000	4,402,000
Loans:
Loans individually evaluated for impairment	6,448,000	5,296,000
Loans collectively evaluated for impairment	44,631,000	47,271,000
Total ending loans balance	51,079,000	52,567,000
Commercial Real Estate
Allowance for loan losses:
Individually evaluated for impairment	7,597,000	16,046,000
Collectively evaluated for impairment	13,425,000	18,722,000
Total ending allowance balance	21,022,000	34,768,000
Loans:
Loans individually evaluated for impairment	115,387,000	125,922,000
Loans collectively evaluated for impairment	271,735,000	347,874,000
Total ending loans balance	387,122,000	473,796,000
Residential Real Estate
Allowance for loan losses:
Individually evaluated for impairment	1,171,000	4,641,000
Collectively evaluated for impairment	9,619,000	11,594,000
Total ending allowance balance	10,790,000	16,235,000
Loans:
Loans individually evaluated for impairment	52,359,000	56,799,000
Loans collectively evaluated for impairment	242,142,000	272,460,000
Total ending loans balance	294,501,000	329,259,000
Consumer
Allowance for loan losses:
Individually evaluated for impairment	21,000	68,000
Collectively evaluated for impairment	573,000	789,000
Total ending allowance balance	594,000	857,000
Loans:
Loans individually evaluated for impairment	110,000	212,000
Loans collectively evaluated for impairment	16,636,000	20,171,000
Total ending loans balance	16,746,000	20,383,000
Agriculture
Allowance for loan losses:
Individually evaluated for impairment		5,000
Collectively evaluated for impairment	487,000	398,000
Total ending allowance balance	487,000	403,000
Loans:
Loans individually evaluated for impairment	199,000	55,000
Loans collectively evaluated for impairment	24,414,000	22,262,000
Total ending loans balance	24,613,000	22,317,000
Other
Allowance for loan losses:
Individually evaluated for impairment	13,000	11,000
Collectively evaluated for impairment	5,000	4,000
Total ending allowance balance	18,000	15,000
Loans:
Loans individually evaluated for impairment	535,000	524,000
Loans collectively evaluated for impairment	189,000	246,000
Total ending loans balance	$ 724,000	$ 770,000

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Fair Values Measurement

6 Months Ended

Jun. 30, 2013

Fair Values Measurement

Note 8 – Fair Values Measurement

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. We use various valuation techniques to determine fair value, including market, income and cost approaches. There are three levels of inputs that may be used to measure fair values:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that an entity has the ability to access as of the measurement date, or observable inputs.

Level 2: Significant other observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, and other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. When that occurs, we classify the fair value hierarchy on the lowest level of input that is significant to the fair value measurement. We used the following methods and significant assumptions to estimate fair value.

Securities: The fair values of securities available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges, if available. This valuation method is classified as Level 1 in the fair value hierarchy. For securities where quoted prices are not available, fair values are calculated on market prices of similar securities, or matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities. Matrix pricing relies on the securities’ relationship to similarly traded securities, benchmark curves, and the benchmarking of like securities. Matrix pricing utilizes observable market inputs such as benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, reference data, and industry and economic events. In instances where broker quotes are used, these quotes are obtained from market makers or broker-dealers recognized to be market participants. This valuation method is classified as Level 2 in the fair value hierarchy. For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators. This valuation method is classified as Level 3 in the fair value hierarchy. Discounted cash flows are calculated using spread to swap and LIBOR curves that are updated to incorporate loss severities, volatility, credit spread and optionality. During times when trading is more liquid, broker quotes are used (if available) to validate the model. Rating agency and industry research reports as well as defaults and deferrals on individual securities are reviewed and incorporated into the calculations.

Impaired Loans: An impaired loan is evaluated at the time the loan is identified as impaired and is recorded at fair value less costs to sell. Fair value is measured based on the value of the collateral securing the loan and is classified as Level 3 in the fair value hierarchy. Fair value is determined using several methods. Generally, the fair value of real estate is determined based on appraisals by qualified licensed appraisers. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach.

Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. These routine adjustments are made to adjust the value of a specific property relative to comparable properties for variations in qualities such as location, size, and income production capacity relative to the subject property of the appraisal. Such adjustments are typically significant and result in a Level 3 classification of the inputs for determining fair value.

We routinely apply an internal discount to the value of appraisals used in the fair value evaluation of our impaired loans. The deductions to the appraisal take into account changing business factors and market conditions, as well as potential value impairment in cases where the date of the appraisal of the collateral predates a likely change in market conditions. These deductions range from 10% for routine real estate collateral to 30% for real estate that is determined (1) to have a thin trading market or (2) to be for unique use. This is in addition to estimated discounts for cost to sell of ten percent.

We also apply discounts to the expected fair value of collateral for impaired loans where the likely resolution involves litigation of foreclosure. Resolution of this nature generally results in receiving lower values for real estate collateral in a more aggressive sales environment. We have utilized discounts ranging from 10% to 33% in our impairment evaluations when applicable.

Impaired loans are evaluated quarterly for additional impairment. We obtain updated appraisals on properties securing our loans when circumstances are warranted such as at the time of renewal or when market conditions have significantly changed. This determination is made on a property-by-property basis in light of circumstances in the broader economic climate and our assessment of deterioration of real estate values in the market in which the property is located. The first stage of our assessment involves management’s inspection of the property in question. Management also engages in conversations with local real estate professionals, investors, and market makers to determine the likely marketing time and value range for the property. The second stage involves an assessment of current trends in the regional market. After thorough consideration of these factors, management will either internally evaluate fair value or order a new appraisal.

Other Real Estate Owned (OREO): OREO is evaluated at the time of acquisition and recorded at fair value as determined by independent appraisal or internal market evaluation less cost to sell. Our quarterly evaluations of OREO for impairment are driven by property type. For smaller dollar single family homes, we consult with internal real estate sales staff and external realtors, investors, and appraisers. Based on these consultations, we determine asking prices for OREO properties we are marketing for sale. If the internally evaluated fair value is below our recorded investment in the property, appropriate write-downs are taken.

For larger dollar commercial real estate properties, we obtain a new appraisal of the subject property in connection with the transfer to other real estate owned. In some of these circumstances, an appraisal is in process at quarter end, and we must make our best estimate of fair value based on our internal evaluation of the property, review of the most recent appraisal, and discussions with the currently engaged appraiser. We typically obtain updated appraisals on the anniversary date of ownership unless a sale is imminent.

We routinely apply an internal discount to the value of appraisals used in the fair value evaluation of our OREO. The deductions to the appraisal take into account changing business factors and market conditions, as well as potential value impairment in cases where our appraisal date predates a likely change in market conditions. These deductions range from 10% for routine real estate to 30% for real estate that is determined (1) to have a thin trading market or (2) to be for unique use. This is in addition to estimated discounts for cost to sell of ten percent.

Financial assets measured at fair value on a recurring basis at June 30, 2013 and December 31, 2012 are summarized below:

			Fair Value Measurements at June 30, 2013 Using
			(in thousands)
Description	Carrying Value		Quoted Prices In Active  Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available-for-sale securities
U.S. Government and federal agency	$	26,303	$	—	$	26,303	$	—
Agency mortgage-backed: residential		70,569		—		70,569		—
State and municipal		55,299		—		55,299		—
Corporate bonds		23,863		—		23,863		—
Other debt securities		631		—		—		631
Equity securities		277		277		—		—
Total	$	176,942	$	277	$	176,034	$	631

			Fair Value Measurements at December 31, 2012 Using
			(in thousands)
Description	Carrying Value		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available-for-sale securities
U.S. Government and federal agency	$	6,133	$	—	$	6,133	$	—
Agency mortgage-backed: residential		95,182		—		95,182		—
State and municipal		54,733		—		54,733		—
Corporate bonds		19,964		—		19,964		—
Other debt securities		618		—		—		618
Equity securities		1,846		1,846		—		—
Total	$	178,476	$	1,846	$	176,012	$	618

There were no transfers between Level 1 and Level 2 during 2013 or 2012.

The table below presents a reconciliation of all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the periods ended June 30, 2013 and 2012:

	State and  Municipal Securities					Other  Debt Securities
	2013		2012			2013		2012
	(in thousands)
Balances of recurring Level 3 assets at January 1	$	—	$	1,173		$	618	$	606
Total gain (loss) for the period:
Included in other comprehensive income (loss)		—		—			13		—
Sales		—		(1,173	)		—		—
Balance of recurring Level 3 assets at June 30	$	—	$	—		$	631	$	606

Level 3 state and municipal securities valuations are supported by analysis prepared by an independent third party. Their approach to determining fair value involves using recently executed transactions for similar securities and market quotations for similar securities. As securities of this type are not rated by the rating agencies and trading volumes are thin, it was determined that these were valued using Level 3 inputs. We sold our Level 3 municipal securities in the second quarter of 2012 and had no securities of this nature at June 30, 2013.

Our other debt security valuation is determined internally by calculating discounted cash flows using the security’s coupon rate of 6.5% and an estimated current market rate of 9.5% based upon the current yield curve plus spreads that adjust for volatility, credit risk, and optionality. We also consider the issuer(s) publicly filed financial information as well as assumptions regarding the likelihood of deferrals and defaults.

Financial assets measured at fair value on a non-recurring basis are summarized below:

			Fair Value Measurements at June 30, 2013 Using
			(in thousands)
Description	Carrying Value		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans:
Commercial	$	3,162	$	—	$	—	$	3,162
Commercial real estate:
Construction		21,936		—		—		21,936
Farmland		5,292		—		—		5,292
Other		74,541		—		—		74,541
Residential real estate:
Multi-family		12,526		—		—		12,526
1-4 Family		27,028		—		—		27,028
Consumer		90		—		—		90
Other		505		—		—		505
Other real estate owned, net:
Commercial real estate:
Construction		20,270		—		—		20,270
Farmland		725		—		—		725
Other		18,369		—		—		18,369
Residential real estate:
Multi-family		457		—		—		457
1-4 Family		7,209		—		—		7,209

			Fair Value Measurements at December 31, 2012 Using
			(in thousands)
Description	Carrying Value		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans:
Commercial	$	3,799	$	—	$	—	$	3,799
Commercial real estate:
Construction		23,912		—		—		23,912
Farmland		5,722		—		—		5,722
Other		72,793		—		—		72,793
Residential real estate:
Multi-family		13,263		—		—		13,263
1-4 Family		25,094		—		—		25,094
Consumer		74		—		—		74
Agriculture		5		—		—		5
Other		513		—		—		513
Other real estate owned, net:
Commercial real estate:
Construction		22,323		—		—		22,323
Farmland		602		—		—		602
Other		15,175		—		—		15,175
Residential real estate:
Multi-family		195		—		—		195
1-4 Family		5,376		—		—		5,376

Impaired loans, which are measured for impairment using the fair value of the collateral for collateral dependent loans, had a carrying amount of $155.3 million at June 30, 2013 with a valuation allowance of $10.2 million. This resulted in no additional provision for loan losses for the six months ended June 30, 2013. At December 31, 2012, impaired loans had a carrying amount of $166.2 million, with a valuation allowance of $21.0 million.

Other real estate owned, which is measured at the lower of carrying or fair value less estimated costs to sell, had a net carrying amount of $47.0 million as of June 30, 2013, compared with $43.7 million at December 31, 2012. Fair value write-downs of $1.3 million were recorded on other real estate owned for the six months ended June 30, 2013.

The following table presents qualitative information about level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at June 30, 2013:

	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Range (Weighted Average)
	(in thousands)
Impaired loans – Commercial	$	3,162	Market value approach	Adjustment for receivables and inventory discounts	16% - 32% (24%)
Impaired loans – Commercial real estate	$	101,769	Sales comparison approach	Adjustment for differences between the comparable sales	0% - 69% (19%)
Impaired loans – Residential real estate	$	39,554	Sales comparison approach	Adjustment for differences between the comparable sales	0% - 50% (15%)
Other real estate owned –Commercial real estate	$	39,364	Sales comparison approach Income approach	Adjustment for differences between the comparable sales Discount or capitalization rate	3% - 56% (24%) 7% - 16% (11%)
Other real estate owned – Residential real estate	$	7,666	Sales comparison approach	Adjustment for differences between the comparable sales	4% - 31% (12%)

The following table presents qualitative information about level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at December 31, 2012:

	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Range (Weighted Average)
	(in thousands)
Impaired loans – Commercial	$	3,799	Market value approach	Adjustment for receivables and inventory discounts	16% - 32% (24%)
Impaired loans – Commercial real estate	$	89,461	Sales comparison approach	Adjustment for differences between the comparable sales	0% - 69% (19%)
Impaired loans – Residential real estate	$	38,357	Sales comparison approach	Adjustment for differences between the comparable sales	0% - 38% (15%)
Other real estate owned – Commercial real estate	$	38,100	Sales comparison approach Income approach	Adjustment for differences between the comparable sales Discount or capitalization rate	3% - 50% (18%) 9% - 16% (12%)
Other real estate owned – Residential real estate	$	5,571	Sales comparison approach	Adjustment for differences between the comparable sales	0% - 30% (9%)

Carrying amount and estimated fair values of financial instruments were as follows for the periods indicated:

			Fair Value Measurements at June 30, 2013 Using
	Carrying Amount		Level 1		Level 2		Level 3		Total
	(in thousands)
Financial assets
Cash and cash equivalents	$	64,266	$	58,585	$	5,681	$	—	$	64,266
Securities available for sale		176,942		277		176,034		631		176,942
Federal Home Loan Bank stock		10,072		N/A		N/A		N/A		N/A
Mortgage loans held for sale		133		—		133		—		133
Loans, net		737,226		—		—		752,688		752,688
Accrued interest receivable		4,184		—		1,227		2,957		4,184
Financial liabilities
Deposits	$	980,836	$	103,748	$	878,837	$	—	$	982,585
Securities sold under agreements to repurchase		3,292		—		3,292		—		3,292
Federal Home Loan Bank advances		5,016		—		5,019		—		5,019
Subordinated capital notes		6,525		—		—		6,195		6,195
Junior subordinated debentures		25,000		—		—		13,913		13,913
Accrued interest payable		2,277		—		1,042		1,235		2,277

			Fair Value Measurements at December 31, 2012 Using
	Carrying Amount		Level 1		Level 2		Level 3		Total
	(in thousands)
Financial assets
Cash and cash equivalents	$	49,572	$	41,938	$	7,634	$	—	$	49,572
Securities available for sale		178,476		1,846		176,012		618		178,476
Federal Home Loan Bank stock		10,072		N/A		N/A		N/A		N/A
Mortgage loans held for sale		507		—		507		—		507
Loans, net		842,412		—		—		853,996		853,996
Accrued interest receivable		5,138		—		1,150		3,988		5,138
Financial liabilities
Deposits	$	1,065,059	$	114,310	$	955,216	$	—	$	1,069,526
Securities sold under agreements to repurchase		2,634		—		2,634		—		2,634
Federal Home Loan Bank advances		5,604		—		5,607		—		5,607
Subordinated capital notes		6,975		—		—		6,599		6,599
Junior subordinated debentures		25,000		—		—		13,821		13,821
Accrued interest payable		2,104		—		1,173		931		2,104

The methods and assumptions, not previously presented, used to estimate fair values are described as follows:

(a) Cash and Cash Equivalents

The carrying amounts of cash and short-term instruments approximate fair values and are classified as either Level 1 or Level 2. Noninterest bearing deposits are Level 1 whereas interest bearing due from bank accounts and fed funds sold are Level 2.

(b) FHLB Stock

It is not practical to determine the fair value of FHLB stock due to restrictions placed on its transferability.

(c) Loans, Net

Fair values of loans, excluding loans held for sale, are estimated as follows: For variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values resulting in a Level 3 classification. Fair values for other loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality resulting in a Level 3 classification. Impaired loans are valued at the lower of cost or fair value as described previously. The methods utilized to estimate the fair value of loans do not necessarily represent an exit price.

(d) Mortgage Loans Held for Sale

The fair value of loans held for sale is estimated based upon binding contracts and quotes from third party investors resulting in a Level 2 classification.

(e) Deposits

The fair values disclosed for non-interest bearing deposits are, by definition, equal to the amount payable on demand at the reporting date resulting in a Level 1 classification. The carrying amounts of variable rate interest bearing deposits approximate their fair values at the reporting date resulting in a Level 2 classification. Fair values for fixed rate interest bearing deposits are estimated using a discounted cash flows calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits resulting in a Level 2 classification.

(f) Securities Sold Under Agreements to Repurchase

The carrying amounts of borrowings under repurchase agreements approximate their fair values resulting in a Level 2 classification.

(g) Other Borrowings

The fair values of the Company’s FHLB advances are estimated using discounted cash flow analyses based on the current borrowing rates resulting in a Level 2 classification.

The fair values of the Company’s subordinated capital notes and junior subordinated debentures are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 3 classification.

(h) Accrued Interest Receivable/Payable

The carrying amounts of accrued interest approximate fair value resulting in a Level 2 or Level 3 classification based on the level of the asset or liability with which the accrual is associated.

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Capital Requirements and Restrictions on Retained Earnings - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013 PBI Bank	Dec. 31, 2012 PBI Bank	Jun. 30, 2013 Consent order	Oct. 31, 2012 Consent order	Jun. 24, 2011 Consent order	Jun. 30, 2013 Consent order Construction and development loans	Dec. 31, 2012 Consent order Construction and development loans	Jun. 24, 2011 Consent order Construction and development loans	Jun. 30, 2013 Consent order Non-owner occupied commercial real estate loans	Dec. 31, 2012 Consent order Non-owner occupied commercial real estate loans	Jun. 24, 2011 Consent order Non-owner occupied commercial real estate loans
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Tier I leverage ratio, regulatory minimum	4.00%	9.00%			9.00%	9.00%	9.00%
Total risk-based capital, regulatory minimum	8.00%	12.00%			12.00%	12.00%	12.00%
Minimum substandard asset subject to risk position reduction							$ 1
Maximum concentration of loans to total risk based capital								70.00%	82.00%	75.00%	325.00%	362.00%	250.00%
Maximum asset growth rate, quarterly							5.00%
Maximum asset growth rate, annually							10.00%
Tier 1 leverage ratio			6.08%	5.37%
Total risk-based capital			10.60%	9.82%

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Loans

6 Months Ended

Jun. 30, 2013

Loans

Note 4 – Loans

Loans were as follows:

	June 30, 2013			December 31, 2012
	(in thousands)
Commercial	$	51,079		$	52,567
Commercial Real Estate:
Construction		57,951			70,284
Farmland		72,312			80,825
Other		256,859			322,687
Residential Real Estate:
Multi-family		47,253			50,986
1-4 Family		247,248			278,273
Consumer		16,746			20,383
Agriculture		24,613			22,317
Other		724			770
Subtotal		774,785			899,092
Less: Allowance for loan losses		(37,559	)		(56,680	)
Loans, net	$	737,226		$	842,412

The following table presents the activity in the allowance for loan losses by portfolio segment for the three months ended June 30, 2013 and 2012:

	Commercial			Commercial Real Estate			Residential Real  Estate			Consumer			Agriculture			Other		Total
	(in thousands)
June 30, 2013:
Beginning balance	$	4,990		$	22,169		$	11,540		$	716		$	410		$	14	$	39,839
Provision for loan losses		(805	)		321			360			(7	)		127			4		—
Loans charged off		(132	)		(1,866	)		(1,137	)		(203	)		(66	)		—		(3,404	)
Recoveries		595			398			27			88			16			—		1,124
Ending balance	$	4,648		$	21,022		$	10,790		$	594		$	487		$	18	$	37,559
June 30, 2012:
Beginning balance	$	4,082		$	32,982		$	15,720		$	812		$	345		$	12	$	53,953
Provision for loan losses		(78	)		1,003			2,696			97			282			—		4,000
Loans charged off		(210	)		(2,944	)		(2,862	)		(135	)		(287	)		—		(6,438	)
Recoveries		17			8			33			18			3			—		79
Ending balance	$	3,811		$	31,049		$	15,587		$	792		$	343		$	12	$	51,594

The following table presents the activity in the allowance for loan losses by portfolio segment for the six months ended June 30, 2013 and 2012:

	Commercial			Commercial Real Estate			Residential Real  Estate			Consumer			Agriculture			Other			Total
	(in thousands)
June 30, 2013:
Beginning balance	$	4,402		$	34,768		$	16,235		$	857		$	403		$	15		$	56,680
Provision for loan losses		633			(124	)		(90	)		79			(51	)		3			450
Loans charged off		(1,108	)		(14,178	)		(5,476	)		(521	)		(83	)		—			(21,366	)
Recoveries		721			556			121			179			218			—			1,795
Ending balance	$	4,648		$	21,022		$	10,790		$	594		$	487		$	18		$	37,559
June 30, 2012:
Beginning balance	$	4,207		$	33,024		$	14,217		$	792		$	325		$	14		$	52,579
Provision for loan losses		11			1,775			5,202			321			443			(2	)		7,750
Loans charged off		(466	)		(3,863	)		(3,891	)		(372	)		(428	)		—			(9,020	)
Recoveries		59			113			59			51			3			—			285
Ending balance	$	3,811		$	31,049		$	15,587		$	792		$	343		$	12		$	51,594

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on the impairment method as of June 30, 2013:

	Commercial		Commercial Real Estate		Residential Real  Estate		Consumer		Agriculture		Other		Total
	(in thousands)
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	1,388	$	7,597	$	1,171	$	21	$	—	$	13	$	10,190
Collectively evaluated for impairment		3,260		13,425		9,619		573		487		5		27,369
Total ending allowance balance	$	4,648	$	21,022	$	10,790	$	594	$	487	$	18	$	37,559
Loans:
Loans individually evaluated for impairment	$	6,448	$	115,387	$	52,359	$	110	$	199	$	535	$	175,038
Loans collectively evaluated for impairment		44,631		271,735		242,142		16,636		24,414		189		599,747
Total ending loans balance	$	51,079	$	387,122	$	294,501	$	16,746	$	24,613	$	724	$	774,785

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on the impairment method as of December 31, 2012:

	Commercial		Commercial Real Estate		Residential Real  Estate		Consumer		Agriculture		Other		Total
	(in thousands)
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	263	$	16,046	$	4,641	$	68	$	5	$	11	$	21,034
Collectively evaluated for impairment		4,139		18,722		11,594		789		398		4		35,646
Total ending allowance balance	$	4,402	$	34,768	$	16,235	$	857	$	403	$	15	$	56,680
Loans:
Loans individually evaluated for impairment	$	5,296	$	125,922	$	56,799	$	212	$	55	$	524	$	188,808
Loans collectively evaluated for impairment		47,271		347,874		272,460		20,171		22,262		246		710,284
Total ending loans balance	$	52,567	$	473,796	$	329,259	$	20,383	$	22,317	$	770	$	899,092

Impaired Loans

Impaired loans include restructured loans and commercial, construction, agriculture and commercial real estate loans on nonaccrual or classified as doubtful, whereby collection of the total amount is improbable, or loss, whereby all or a portion of the loan has been written off or a specific allowance for loss has been provided.

The following table presents information related to loans individually evaluated for impairment by class of loans as of and for the three and six months ended June 30, 2013:

					Allowance For Loan Losses Allocated		Three Months Ended June 30, 2013				Six Months Ended June 30, 2013
	Unpaid Principal Balance		Recorded Investment				Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Cash Basis Income Recognized
					(in thousands)
With No Related Allowance Recorded:
Commercial	$	2,230	$	1,898	$	—	$	1,892	$	—	$	1,673	$	—	$	—
Commercial real estate:
Construction		281		191		—		496		6		700		11		11
Farmland		4,369		4,302		—		4,187		105		4,274		172		172
Other		1,737		1,526		—		1,671		253		1,745		257		257
Residential real estate:
Multi-family		637		637		—		638		—		640		—		—
1-4 Family		11,392		10,997		—		12,174		38		12,502		57		57
Consumer		1		1		—		8		—		28		—		—
Agriculture		278		199		—		185		—		138		—		—
Other		17		17		—		8		—		6		—		—
With An Allowance Recorded:
Commercial		5,072		4,550		1,388		4,165		31		4,131		61		—
Commercial real estate:
Construction		23,669		22,347		411		23,414		34		24,094		68		—
Farmland		7,914		5,545		253		5,797		11		6,017		22		—
Other		96,076		81,475		6,933		79,407		352		81,792		682		—
Residential real estate:
Multi-family		14,646		12,937		411		13,046		51		13,666		107		—
1-4 Family		30,342		27,788		760		28,492		115		28,359		218		—
Consumer		178		110		21		155		1		150		1		—
Agriculture		—		—		—		—		—		4		—		—
Other		518		518		13		520		4		521		8		—
Total	$	199,357	$	175,038	$	10,190	$	176,255	$	1,001	$	180,440	$	1,664	$	497

The following table presents loans individually evaluated for impairment by class of loan as of December 31, 2012:

	Unpaid Principal Balance		Recorded Investment		Allowance For Loan Losses Allocated		Average Recorded Investment		Interest Income Recognized		Cash Basis Income Recognized
	(in thousands)
With No Related Allowance Recorded:
Commercial	$	1,460	$	1,234	$	—	$	1,637	$	5	$	4
Commercial real estate:
Construction		1,155		1,109		—		1,745		2		2
Farmland		4,448		4,448		—		4,706		57		57
Other		2,134		1,892		—		3,436		3		3
Residential real estate:
Multi-family		643		643		—		910		—		—
1-4 Family		13,539		13,158		—		11,291		56		56
Consumer		70		70		—		219		8		5
Agriculture		45		45		—		366		2		—
Other		—		—		—		—		—		—
With An Allowance Recorded:
Commercial		4,108		4,062		263		3,964		169		27
Commercial real estate:
Construction		26,645		25,455		1,543		19,514		348		5
Farmland		8,557		6,456		734		5,794		43		2
Other		97,699		86,562		13,769		83,087		2,011		185
Residential real estate:
Multi-family		14,906		14,906		1,643		11,187		468		—
1-4 Family		31,021		28,092		2,998		27,404		787		9
Consumer		142		142		68		29		—		—
Agriculture		10		10		5		6		—		—
Other		524		524		11		533		17		—
Total	$	207,106	$	188,808	$	21,034	$	175,828	$	3,976	$	355

Troubled Debt Restructuring

A troubled debt restructuring (TDR) occurs when the Company has agreed to a loan modification in the form of a concession for a borrower who is experiencing financial difficulty. The majority of the Company’s TDRs involve a reduction in interest rate, a deferral of principal for a stated period of time, or an interest only period. All TDRs are considered impaired and the Company has allocated reserves for these loans to reflect the present value of the concessionary terms granted to the customer.

The following table presents the types of TDR loan modifications by portfolio segment outstanding as of June 30, 2013 and December 31, 2012:

	TDRs Performing to Modified Terms		TDRs Not Performing to Modified Terms		Total TDRs
	(in thousands)
June 30, 2013
Commercial
Rate reduction	$	1,981	$	—	$	1,981
Principal deferral		881		—		881
Interest only payments		—		238		238
Commercial Real Estate:
Construction
Rate reduction		3,409		3,353		6,762
Principal deferral		499		—		499
Farmland
Rate reduction		150		—		150
Principal deferral		712		2,438		3,150
Other
Rate reduction		29,526		20,463		49,989
Principal deferral		1,182		—		1,182
Interest only payments		2,458		1,489		3,947
Residential Real Estate:
Multi-family
Rate reduction		4,694		6,836		11,530
Interest only payments		647		—		647
1-4 Family
Rate reduction		8,217		11,693		19,910
Consumer
Rate reduction		53		—		53
Other
Rate reduction		518		—		518
Total TDRs	$	54,927	$	46,510	$	101,437

	TDRs Performing to Modified Terms		TDRs Not Performing  to Modified Terms		Total TDRs
	(in thousands)
December 31, 2012
Commercial
Rate reduction	$	1,972	$	—	$	1,972
Principal deferral		887		—		887
Interest only payments		—		958		958
Commercial Real Estate:
Construction
Rate reduction		4,834		4,459		9,293
Farmland
Rate reduction		150		—		150
Principal deferral		725		2,438		3,163
Other
Rate reduction		36,515		22,631		59,146
Principal deferral		1,195		—		1,195
Interest only payments		2,466		2,107		4,573
Residential Real Estate:
Multi-family
Rate reduction		13,087		—		13,087
Interest only payments		652		—		652
1-4 Family
Rate reduction		14,323		7,871		22,194
Consumer
Rate reduction		14		—		14
Other
Rate reduction		524		—		524
Total TDRs	$	77,344	$	40,464	$	117,808

At June 30, 2013, and December 31, 2012, 54% and 66%, respectively, of the Company’s TDRs were performing according to their modified terms. The Company allocated $5.2 million and $15.1 million in reserves to customers whose loan terms have been modified in TDRs as of June 30, 2013, and December 31, 2012, respectively. The Company has committed to lend additional amounts totaling $262,000 and $259,000 as of June 30, 2013, and December 31, 2012, respectively, to customers with outstanding loans that are classified as TDRs.

The following tables present a summary of the types of TDR loan modifications by portfolio type that occurred during the three months ended June 30, 2013 and 2012:

	TDRs Performing to Modified Terms		TDRs Not Performing to Modified Terms		Total TDRs
	(in thousands)
June 30, 2013
Commercial Real Estate:
Construction
Principal deferral	$	499	$	—	$	499
Total TDRs	$	499	$	—	$	499

	TDRs Performing to Modified Terms		TDRs Not Performing to Modified Terms		Total TDRs
	(in thousands)
June 30, 2012
Commercial Real Estate:
Construction
Interest only payments	$	152	$	—	$	152
Other
Rate reduction		8,152		—		8,152
Principal deferral		1,196		—		1,196
Interest only payments		2,462		—		2,462
Residential Real Estate:
1-4 Family
Rate reduction		3,086		—		3,086
Principal deferral		—		573		573
Total TDRs	$	15,048	$	573	$	15,621

As of June 30, 2013 and 2012, 100% and 96%, respectively, of the Company’s TDRs that occurred during the three months ended June 30, 2013 and 2012, were performing according to their modified terms. The Company allocated $49,000 and $1.3 million in reserves to customers whose loan terms have been modified during the three months ended June 30, 2013 and 2012, respectively. For modifications occurring during the three month period ended June 30, 2013 and 2012, the post-modification balances approximate the pre-modification balances.

The following tables present a summary of the types of TDR loan modifications by portfolio type that occurred during the six months ended June 30, 2013 and 2012:

	TDRs Performing to Modified Terms		TDRs Not Performing to Modified Terms		Total TDRs
	(in thousands)
June 30, 2013
Commercial:
Rate reduction	$	45	$	—	$	45
Commercial Real Estate:
Construction
Rate reduction		—		1,291		1,291
Principal deferral		499		—		499
Other
Rate reduction		1,399		—		1,399
Residential Real Estate:
1-4 Family
Rate reduction		897		—		897
Consumer:
Rate reduction		40		—		40
Total TDRs	$	2,880	$	1,291	$	4,171

	TDRs Performing to Modified Terms		TDRs Not Performing to Modified Terms		Total TDRs
	(in thousands)
June 30, 2012
Commercial:
Interest only payments	$	—	$	1,019	$	1,019
Commercial Real Estate:
Construction
Interest only payments		152		—		152
Other
Rate reduction		11,302		—		11,302
Principal deferral		1,196		—		1,196
Interest only payments		2,462		2,174		4,636
Residential Real Estate:
Multi-family
Rate reduction		8,386		—		8,386
1-4 Family
Rate reduction		8,470		—		8,470
Principal deferral		—		573		573
Total TDRs	$	31,968	$	3,766	$	35,734

As of June 30, 2013 and 2012, 69% and 89%, respectively, of the Company’s TDRs that occurred during the six months ended June 30, 2013 and 2012, were performing according to their modified terms. The Company allocated $230,000 and $2.6 million in reserves to customers whose loan terms have been modified during the six months ended June 30, 2013 and 2012, respectively. For modifications occurring during the six month period ended June 30, 2013 and 2012, the post-modification balances approximate the pre-modification balances.

During the first six months of 2013, approximately $1.5 million TDRs defaulted on their restructured loan and the default occurred within the 12 month period following the loan modification. These defaults were construction and development loans. A default is considered to have occurred once the TDR is past due 90 days or more or it has been placed on nonaccrual. During the first six months of 2012, approximately $7.9 million TDRs defaulted on their restructured loan and the default occurred within the 12 month period following the loan modification. These defaults consisted of $6.3 million in commercial real estate loans, $1.0 million in commercial loans, and $622,000 in 1-4 family residential real estate loans. A default is considered to have occurred once the TDR is past due 90 days or more or it has been placed on nonaccrual.

Nonperforming Loans

Nonperforming loans include impaired loans not on accrual and smaller balance homogeneous loans, such as residential mortgage and consumer loans, that are collectively evaluated for impairment.

The following table presents the recorded investment in nonaccrual and loans past due 90 days and still on accrual by class of loan as of June 30, 2013, and December 31, 2012:

	Nonaccrual				Loans Past Due 90 Days And Over Still Accruing
	June 30, 2013		December 31, 2012		June 30, 2013		December 31, 2012
	(in thousands)
Commercial	$	3,333	$	2,437	$	—	$	36
Commercial Real Estate:
Construction		18,630		7,808		—		—
Farmland		8,985		10,030		—		—
Other		43,979		46,036		—		—
Residential Real Estate:
Multi-family		8,020		1,516		—		—
1-4 Family		28,964		26,501		66		50
Consumer		58		135		5		—
Agriculture		199		54		—		—
Other		17		—		—		—
Total	$	112,185	$	94,517	$	71	$	86

The following table presents the aging of the recorded investment in past due loans as of June 30, 2013 and December 31, 2012:

	30 – 59 Days Past Due		60 – 89 Days Past Due		90 Days And  Over Past Due		Nonaccrual		Total Past Due And Nonaccrual
	(in thousands)
June 30, 2013
Commercial	$	1,165	$	133	$	—	$	3,333	$	4,631
Commercial Real Estate:
Construction		—		—		—		18,630		18,630
Farmland		841		389		—		8,985		10,215
Other		2,338		1,805		—		43,979		48,122
Residential Real Estate:
Multi-family		1,191		—		—		8,020		9,211
1-4 Family		2,797		585		66		28,964		32,412
Consumer		194		37		5		58		294
Agriculture		74		30		—		199		303
Other		—		—		—		17		17
Total	$	8,600	$	2,979	$	71	$	112,185	$	123,835

	30 – 59 Days Past Due		60 – 89 Days Past Due		90 Days And  Over Past Due		Nonaccrual		Total Past Due And Nonaccrual
	(in thousands)
December 31, 2012
Commercial	$	1,279	$	90	$	36	$	2,437	$	3,842
Commercial Real Estate:
Construction		10,510		5,815		—		7,808		24,133
Farmland		922		58		—		10,030		11,010
Other		5,138		13,037		—		46,036		64,211
Residential Real Estate:
Multi-family		8,762		—		—		1,516		10,278
1-4 Family		11,145		1,221		50		26,501		38,917
Consumer		310		75		—		135		520
Agriculture		153		7		—		54		214
Other		—		—		—		—		—
Total	$	38,219	$	20,303	$	86	$	94,517	$	153,125

Credit Quality Indicators – We categorize loans into risk categories at origination based upon original underwriting. Thereafter, we categorize loans into risk categories based on relevant information about the ability of borrowers to service their debt such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. Loans are analyzed individually by classifying the loans as to credit risk. This analysis includes loans with an outstanding balance greater than $500,000 and non-homogeneous loans, such as commercial and commercial real estate loans. This analysis is performed on a quarterly basis. We do not have any non-rated loans. The following definitions are used for risk ratings:

Watch – Loans classified as watch are those loans which have experienced a potentially adverse development which necessitates increased monitoring.

Special Mention – Loans classified as special mention do not have all of the characteristics of substandard or doubtful loans. They have one or more deficiencies which warrant special attention and which corrective action, such as accelerated collection practices, may remedy.

Substandard – Loans classified as substandard are those loans with clear and defined weaknesses such as a highly leveraged position, unfavorable financial ratios, uncertain repayment sources or poor financial condition which may jeopardize the repayment of the debt as contractually agreed. They are characterized by the distinct possibility that we will sustain some losses if the deficiencies are not corrected.

Doubtful – Loans classified as doubtful are those loans which have characteristics similar to substandard loans but with an increased risk that collection or liquidation in full is highly questionable and improbable.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be “Pass” rated loans. As of June 30, 2013, and December 31, 2012, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

	Pass		Watch		Special Mention		Substandard		Doubtful		Total
	(in thousands)
June 30, 2013
Commercial	$	31,050	$	8,304	$	1,322	$	10,355	$	48	$	51,079
Commercial Real Estate:
Construction		19,551		11,532		2,568		24,300		—		57,951
Farmland		43,327		13,006		1,361		14,618		—		72,312
Other		91,608		61,788		9,772		93,437		254		256,859
Residential Real Estate:
Multi-family		15,725		15,940		—		15,588		—		47,253
1-4 Family		138,728		47,358		2,809		58,353		—		247,248
Consumer		14,952		1,104		13		677		—		16,746
Agriculture		21,605		1,415		915		678		—		24,613
Other		189		518		—		17		—		724
Total	$	376,735	$	160,965	$	18,760	$	218,023	$	302	$	774,785

	Pass		Watch		Special Mention		Substandard		Doubtful		Total
	(in thousands)
December 31, 2012
Commercial	$	27,085	$	10,153	$	6,495	$	8,772	$	62	$	52,567
Commercial Real Estate:
Construction		26,085		21,713		3,647		18,839		—		70,284
Farmland		47,017		13,461		3,532		16,815		—		80,825
Other		122,603		66,223		14,955		118,635		271		322,687
Residential Real Estate:
Multi-family		18,387		14,637		—		17,962		—		50,986
1-4 Family		159,975		47,030		5,167		66,101		—		278,273
Consumer		17,232		2,211		35		842		63		20,383
Agriculture		19,256		1,467		869		725		—		22,317
Other		246		524		—		—		—		770
Total	$	437,886	$	177,419	$	34,700	$	248,691	$	396	$	899,092

XML

Consolidated Statement of Changes in Stockholders' Equity (Parenthetical)	6 Months Ended
	Jun. 30, 2013
Dividends on Series A preferred stock, per share	5.00%

XML

Expenses Related to Other Real Estate Owned (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Dec. 31, 2012
Real Estate Properties [Line Items]
Net loss on sales	$ 162	$ 546	$ 359	$ 948
Provision to allowance	977	350	1,284	830
Operating expense	518	309	805	684
Total	$ 1,657	$ 1,205	$ 2,448	$ 2,462	$ 10,500

XML

Aging of Recorded Investment in Past Due Loans (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 - 59 Days Past Due	$ 8,600	$ 38,219
60 - 89 Days Past Due	2,979	20,303
90 Days And Over Past Due	71	86
Non-accrual	112,185	94,517
Total Past Due And Non-accrual	123,835	153,125
Commercial
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 - 59 Days Past Due	1,165	1,279
60 - 89 Days Past Due	133	90
90 Days And Over Past Due		36
Non-accrual	3,333	2,437
Total Past Due And Non-accrual	4,631	3,842
Commercial Real Estate | Construction
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 - 59 Days Past Due		10,510
60 - 89 Days Past Due		5,815
Non-accrual	18,630	7,808
Total Past Due And Non-accrual	18,630	24,133
Commercial Real Estate | Farmland
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 - 59 Days Past Due	841	922
60 - 89 Days Past Due	389	58
Non-accrual	8,985	10,030
Total Past Due And Non-accrual	10,215	11,010
Commercial Real Estate | Other
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 - 59 Days Past Due	2,338	5,138
60 - 89 Days Past Due	1,805	13,037
Non-accrual	43,979	46,036
Total Past Due And Non-accrual	48,122	64,211
Residential Real Estate | Multi-Family
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 - 59 Days Past Due	1,191	8,762
Non-accrual	8,020	1,516
Total Past Due And Non-accrual	9,211	10,278
Residential Real Estate | 1-4 Family
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 - 59 Days Past Due	2,797	11,145
60 - 89 Days Past Due	585	1,221
90 Days And Over Past Due	66	50
Non-accrual	28,964	26,501
Total Past Due And Non-accrual	32,412	38,917
Consumer
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 - 59 Days Past Due	194	310
60 - 89 Days Past Due	37	75
90 Days And Over Past Due	5
Non-accrual	58	135
Total Past Due And Non-accrual	294	520
Agriculture
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 - 59 Days Past Due	74	153
60 - 89 Days Past Due	30	7
Non-accrual	199	54
Total Past Due And Non-accrual	303	214
Other
Financing Receivable, Recorded Investment, Past Due [Line Items]
Non-accrual	17
Total Past Due And Non-accrual	$ 17

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Basis of Presentation and Summary of Significant Accounting Policies - Additional Information (Detail)	Jun. 30, 2013
Organization, Consolidation and Presentation of Financial Statements Disclosure [Line Items]
Ownership Interest in PBI Bank	100.00%

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Income Taxes - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	Dec. 31, 2011
Income Taxes [Line Items]
Available carry-back amount	$ 40

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Fair Values Measurement - Additional Information (Detail) (USD $)	6 Months Ended
	Jun. 30, 2013	Dec. 31, 2012
Fair Value Measurements [Line Items]
Estimated discounts for cost to sell	10.00%
Other debt security valuation, coupon rate	6.50%
Other debt security valuation, estimated current market rate	9.50%
Impaired loans, carrying amount	$ 155,300,000	$ 166,200,000
Impaired loans, valuation allowance	10,190,000	21,034,000
Other real estate owned, net carrying amount	47,000,000	43,700,000
Other real estate owned, write-downs	$ 1,300,000
Other real estate owned, net
Fair Value Measurements [Line Items]
Estimated discounts for cost to sell	10.00%
Other real estate owned, net | Routine Real Estate Collateral
Fair Value Measurements [Line Items]
Internal discount rate used in fair value evaluation	10.00%
Other real estate owned, net | Thin Trading Market or Specialized Collateral
Fair Value Measurements [Line Items]
Internal discount rate used in fair value evaluation	30.00%
Impaired Loans | Routine Real Estate Collateral
Fair Value Measurements [Line Items]
Internal discount rate used in fair value evaluation	10.00%
Impaired Loans | Thin Trading Market or Specialized Collateral
Fair Value Measurements [Line Items]
Internal discount rate used in fair value evaluation	30.00%
Impaired Loans | Minimum
Fair Value Measurements [Line Items]
Internal discount rate used in fair value evaluation	10.00%
Impaired Loans | Maximum
Fair Value Measurements [Line Items]
Internal discount rate used in fair value evaluation	33.00%

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Earnings (Loss) per Share

6 Months Ended

Jun. 30, 2013

Earnings (Loss) per Share

Note 11 – Earnings (Loss) per Share

The factors used in the basic and diluted earnings per share computations follow:

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
	(in thousands, except share and per share data)
Net income (loss)	$	(1,309	)	$	151		$	(1,378	)	$	1,653
Less:
Preferred stock dividends		437			438			875			875
Accretion of Series A preferred stock discount		45			45			90			90
Earnings (loss) allocated to unvested shares		(62	)		(4	)		(69	)		8
Earnings (loss) allocated to Series C preferred		(48	)		(9	)		(62	)		19
Net income (loss) allocated to common shareholders, basic and diluted	$	(1,681	)	$	(319	)	$	(2,212	)	$	661
Basic
Weighted average common shares including unvested common shares outstanding		12,528,932			12,195,232			12,501,854			12,175,850
Less: Weighted average unvested common shares		434,250			129,182			367,297			141,301
Less: Weighted average Series C preferred		332,894			332,894			332,894			332,894
Weighted average common shares outstanding		11,761,788			11,733,156			11,801,663			11,701,655
Basic earnings (loss) per common share	$	(0.14	)	$	(0.03	)	$	(0.19	)	$	0.06
Diluted
Add: Dilutive effects of assumed exercises of common and Preferred Series C stock warrants		—			—			—			—
Weighted average common shares and potential common shares		11,761,788			11,733,156			11,801,663			11,701,655
Diluted earnings (loss) per common share	$	(0.14	)	$	(0.03	)	$	(0.19	)	$	0.06

The Company had no outstanding stock options at June 30, 2013. A warrant for the purchase of 330,561 shares of the Company’s common stock at an exercise price of $15.88 was outstanding at June 30, 2013 and 2012 but was not included in the diluted EPS computation as inclusion would have been anti-dilutive. Finally, warrants for the purchase of 1,380,437 shares of non-voting common stock at an exercise price of $11.50 per share were outstanding at June 30, 2013 and 2012, but were not included in the diluted EPS computation as inclusion would have been anti-dilutive.

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Advances from the Federal Home Loan Bank

6 Months Ended

Jun. 30, 2013

Advances from the Federal Home Loan Bank

Note 7 – Advances from the Federal Home Loan Bank

Advances from the Federal Home Loan Bank were as follows:

	June 30, 2013		December 31, 2012
	(in thousands)
Monthly amortizing advances with fixed rates from 0.00% to 5.25% and maturities ranging from 2013 through 2033, averaging 3.15% for 2013	$	5,016	$	5,604

Each advance is payable per terms on agreement, with a prepayment penalty. The advances are collateralized by first mortgage loans. The borrowing capacity is based on the market value of the underlying pledged loans rather than the unpaid principal balance of the pledged loans. At June 30, 2013, our additional borrowing capacity with the FHLB was $15.5 million. The availability of our borrowing capacity could be affected by our financial position and the FHLB could require additional collateral or, among other things, exercise its right to deny a funding request, at its discretion. Additionally, any new advances are limited to a one year maturity or less.

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Summary of Unvested Share Activity (Detail) (Unvested Shares, Stock Incentive Plan, USD $)	6 Months Ended	12 Months Ended
	Jun. 30, 2013	Dec. 31, 2012
Unvested Shares | Stock Incentive Plan
Shares
Outstanding, beginning	153,316	96,688
Granted	142,663	97,197
Vested	(22,113)	(27,362)
Forfeited	(5,232)	(13,207)
Outstanding, ending	268,634	153,316
Weighted Average Grant Price
Outstanding, beginning	$ 5.92	$ 13.40
Granted	$ 0.78	$ 1.74
Vested	$ 12.19	$ 13.04
Forfeited	$ 14.82	$ 15.22
Outstanding, ending	$ 2.50	$ 5.92

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Basis of Presentation and Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2013

Basis of Presentation

Basis of Presentation – The consolidated financial statements include Porter Bancorp, Inc. (Company or PBI) and its subsidiary, PBI Bank (Bank). The Company owns a 100% interest in the Bank. All significant inter-company transactions and accounts have been eliminated in consolidation.

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, the financial statements do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for six months ended June 30, 2013 are not necessarily indicative of the results that may be expected for the entire year. A description of other significant accounting policies is presented in the notes to the Consolidated Financial Statements for the year ended December 31, 2012 included in the Company’s Annual Report on Form 10-K.

Use of Estimates

Use of Estimates – To prepare financial statements in conformity with U.S. generally accepted accounting principles, management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and future results could differ. The allowance for loan losses, fair values of financial instruments, stock compensation, deferred tax assets, other intangibles, and fair values of other real estate owned are particularly subject to change.

Reclassifications

Reclassifications – Some items in the prior year financial statements were reclassified to conform to the current presentation. The reclassifications did not impact net income or stockholders’ equity.

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Capital Requirements and Restrictions on Retained Earnings

6 Months Ended

Jun. 30, 2013

Capital Requirements and Restrictions on Retained Earnings

Note 12 – Capital Requirements and Restrictions on Retained Earnings

Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can result in regulatory action.

On June 24, 2011, PBI Bank entered into a Consent Order with the FDIC and the Kentucky Department of Financial Institutions. The consent order required the Bank to complete a management study, to maintain Tier 1 capital as a percentage of total assets of at least 9% and a total risk based capital ratio of at least 12%, to develop a plan to reduce our risk position in each substandard asset in excess of $1 million, to complete board review of the adequacy of the allowance for loan losses prior to quarterly Call Report submissions, to adopt procedures which strengthen the loan review function and ensure timely and accurate grading of credit relationships, to charge-off all assets classified as loss, to develop a plan to reduce concentrations of construction and development loans to not more than 75% of total risk based capital and non-owner occupied commercial real estate loans to not more than 250% of total risk based capital, to limit asset growth to no more than 5% in any quarter or 10% annually, to not extend additional credit to any borrower classified substandard without specific board authorization, and to not declare or pay any dividend without the prior consent of our regulators. We are also restricted from accepting, renewing, or rolling-over brokered deposits without the prior receipt of a waiver on a case-by-case basis from our regulators.

On September 21, 2011, we entered into a Written Agreement with the Federal Reserve Bank of St. Louis. Pursuant to the Agreement, we made formal commitments to use our financial and management resources to serve as a source of strength for the Bank and to assist the Bank in addressing weaknesses identified by the FDIC and the KDFI, to pay no dividends without prior written approval, to pay no interest or principal on subordinated debentures or trust preferred securities without prior written approval, and to submit an acceptable plan to maintain sufficient capital.

In October 2012, PBI Bank entered into a new consent order with the FDIC and KDFI. The new consent order requires the Bank to maintain a minimum Tier 1 leverage ratio of 9% and a minimum total risk based capital ratio of 12%. The Bank also agreed that if it should be unable to reach the required capital levels, and if directed in writing by the FDIC, then the Bank would within 30 days develop, adopt and implement a written plan to sell or merge itself into another federally insured financial institution or otherwise immediately obtain a sufficient capital investment into the Bank to fully meet the capital requirements. We expect to continue to work with our regulators toward capital ratio compliance as outlined in the written capital plan previously submitted by the Bank. The new consent order also requires the Bank to continue to adhere to the plans implemented in response to the June 2011 consent order, and includes the substantive provisions of the June 2011 consent order.

The following table shows the ratios of Tier 1 capital and total capital to risk-adjusted assets and the leverage ratios for Porter Bancorp, Inc. and PBI Bank at the dates indicated:

										June 30, 2013						December 31, 2012
	Regulatory Minimums			Well-Capitalized Minimums			Minimum Capital Ratios Under Consent Order			Porter Bancorp			PBI Bank			Porter Bancorp			PBI Bank
Tier 1 Capital		4.0	%		6.0	%		N/A			6.88	%		8.47	%		6.46	%		7.71	%
Total risk-based capital		8.0			10.0			12.0	%		10.46			10.60			9.81			9.82
Tier 1 leverage ratio		4.0			5.0			9.0			4.91			6.08			4.50			5.37

At June 30, 2013, PBI Bank’s Tier 1 leverage ratio was 6.08%, which is below the 9% minimum capital ratio required by the Consent Order, and its total risk-based capital ratio was 10.60%, which is below the 12% minimum capital ratio required by the Consent Order. Failure to meet minimum capital requirements could result in additional discretionary actions by regulators that, if undertaken, could have a materially adverse effect on our financial condition.

Kentucky banking laws limit the amount of dividends that may be paid to a holding company by its subsidiary banks without prior approval. These laws limit the amount of dividends that may be paid in any calendar year to current year’s net income, as defined in the laws, combined with the retained net income of the preceding two years, less any dividends declared during those periods. PBI Bank has agreed with its primary regulators to obtain their written consent prior to declaring or paying any future dividends. As a practical matter, PBI Bank cannot pay dividends to Porter Bancorp for the foreseeable future.

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Document and Entity Information	6 Months Ended
	Jun. 30, 2013	Jul. 31, 2013
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2013
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q2
Trading Symbol	PBIB
Entity Registrant Name	PORTER BANCORP, INC.
Entity Central Index Key	0001358356
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		12,301,084

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Contingencies

6 Months Ended

Jun. 30, 2013

Contingencies

Note 13 – Contingencies

In the normal course of operations, we are defendants in various legal proceedings. Litigation is subject to inherent uncertainties and unfavorable rulings could occur. We record contingent liabilities resulting from claims against us when a loss is assessed to be probable and the amount of the loss is reasonably estimable. Assessing probability of loss and estimating probable losses requires analysis of multiple factors, including in some cases judgments about the potential actions of third party claimants and courts. Recorded contingent liabilities are based on the best information available and actual losses in any future period are inherently uncertain. Currently, we have accrued approximately $1.7 million related to ongoing litigation matters for which we believe liability is probable and reasonably estimable. Accruals are not made in cases where liability is not probable or the amount cannot be reasonably estimated. We provide disclosure of matters where we believe liability is reasonably possible and which may be material to our consolidated financial statements.

Signature Point Litigation. As disclosed previously, on June 18, 2010, three real estate development companies filed suit in Kentucky state court against PBI Bank and Managed Assets of Kentucky (“MAKY”). Signature Point Condominiums LLC, et al. v. PBI Bank, et al., Jefferson Circuit Court, Case No 10-CI-04295. On July 16, 2013, a jury in Louisville, Kentucky returned a verdict against PBI Bank, awarding the plaintiffs compensatory damages of $1,515,000 and punitive damages of $5,500,000. The case arose from a settlement in which PBI Bank agreed to release the plaintiffs and guarantors from obligations of more than $26 million related to a real estate project in Louisville. The plaintiffs were granted a right of first refusal to repurchase a tract of land within the project. In exchange, the plaintiffs conveyed the real estate securing the loans to PBI Bank. After plaintiffs declined to exercise their right of first refusal, PBI Bank sold the tract to the third party. Plaintiffs alleged that the Bank had knowledge of the third party offer before the conveyance of the land by the Plaintiffs to the Bank. Plaintiffs asserted claims of fraud, breach of fiduciary duty, breach of the duty of good faith and fair dealing, tortious interference with prospective business advantage and conspiracy to commit fraud, negligence, and conspiracy against PBI Bank.

After conferring with its legal advisors, PBI Bank believes the findings and damages are excessive and contrary to law, and that it has meritorious grounds to seek reconsideration of the verdict and to appeal. PBI Bank intends to file motions to reduce or overturn the award and otherwise for reconsideration of the case. We will continue to defend this matter vigorously. Although we have made provisions in our condensed consolidated financial statements for this self-insured matter, the amount of our legal reserve is less than the original amount of the damages awarded, plus accrued interest. The ultimate outcome of this matter could have a material adverse effect on our financial condition, results of operations or cash flows.

SBAV LP Litigation. In 2010, the Company sold common shares, convertible preferred shares and warrants to purchase common shares to accredited investors for $32 million in a private placement. In the placement, SBAV LP, an affiliate of Clinton Group, Inc. (“CGI”) purchased common shares and warrants for $5,000,016.

On July 11, 2011, CGI sent a letter to the Company, which was also attached as an exhibit to a Schedule 13D CGI filed with the Securities and Exchange Commission on the same date. In its letter CGI questioned the Company’s executive leadership team’s ability to properly manage the Bank’s operations, compliance with GAAP, financial disclosures and relationships with regulators, referencing the consent order PBI Bank entered into with the Federal Deposit Insurance Corporation and the Commonwealth of Kentucky Department of Financial Institutions on June 24, 2011. CGI also stated its belief “that it is likely that a number of representations and warranties made when the CGI affiliate entered into an agreement to purchase shares were false,” and demanded that the Company take immediate steps to “redress such breaches and make CGI and the other purchasers whole.”

During the third quarter of 2011, the Company’s Risk Policy and Oversight Committee, comprised of independent directors, undertook an investigation of the allegations raised in the CGI 13D to evaluate their merit and to ascertain the reasonableness of the Bank’s allowance for loan losses and OREO valuations at the time of Clinton’s investment. The Oversight Committee reported its conclusions to the Company’s Board of Directors in October 2011. While recognizing that opportunities for procedural improvements existed in the Bank’s lending and non-performing asset administration, the Oversight Committee concluded that this did not rise to a level that would result in the financial statements, or representations and warranties with respect to the financial statements, being misleading to investors in the 2010 private placement offering of the Company’s stock. The Oversight Committee further concluded that investors were afforded ample opportunity and access to information for their due diligence, including documentation involving asset valuation estimates, on-site management discussions and additional inquiries during visits to the Company headquarters, and access to loan files of their choosing and the appraisals contained therein, and that the Company’s disclosures were adequate in all material respects.

On January 30, 2012, CGI delivered a demand to inspect the Company’s records pursuant to the Kentucky Business Corporation Act. The Company provided records to CGI in accordance with Kentucky law.

On December 17, 2012, SBAV LP filed a lawsuit against Porter Bancorp, PBI Bank, J. Chester Porter and Maria L. Bouvette in New York state court. The proceeding was removed to New York federal district court on January 16, 2013. SBAV LP v. Porter Bancorp, et. al., Civ. Action 1:13 CV-0372 (S.D.N.Y). The complaint alleges violation of the Kentucky Securities Act, negligent misrepresentation and, against defendants Porter Bancorp and Bouvette, breach of contract. The plaintiff seeks damages in an amount in excess of $4,500,000, or the difference between the $5,000,016 purchase price and the value of the securities when sold by the plaintiff, plus interest at the applicable statutory rate, costs and reasonable attorneys’ fees. On July 10, 2013, the New York federal district court granted the defendants’ motion to transfer the case to federal district court in Kentucky. SBAV LP v. Porter Bancorp, et. al.Civ. Action 3:13-CV-710 (W.D.Ky.) We dispute the material factual allegations made in the complaint and intend to defend the plaintiff’s claims vigorously. We have not accrued liability related to this matter as we believe we have meritorious defenses.

Miller Health Systems Inc. Employee Stock Ownership Plan Regulatory Review. Since 2007, PBI Bank has served as trustee for Employee Stock Ownership Plan (ESOP) purchase transactions. These transactions are subject to regular and routine reviews by the United States Department of Labor (DOL) for compliance with ERISA. Failure to fulfill our fiduciary duties under ERISA with respect to any such plan would subject us to certain financial risks such as claims for damages as well as fines and penalties assessable under ERISA.

In 2007, we served as Trustee in the Miller Health Systems, Inc. ESOP transaction. This transaction is under review by the United States Department of Labor (DOL) for compliance with ERISA. The DOL has alleged apparent violations of ERISA in this transaction. While there is no litigation at this time, the ultimate outcome of this matter could have a material adverse effect on our financial condition, results of operations or cash flows. We have not recorded accruals for this matter as we believe we fulfilled our fiduciary duties under ERISA and that liability is not probable nor can the amount be reasonably estimated.

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Reconciliation of all Assets Measured at Fair Value on Recurring Basis Using Significant Unobservable Inputs Level 3 (Detail) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
State and Municipal Securities
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Balances of recurring Level 3 assets at January 1		$ 1,173
Included in other comprehensive income (loss)
Sales		(1,173)
Balance of recurring Level 3 assets at June 30
Other
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Balances of recurring Level 3 assets at January 1	618	606
Included in other comprehensive income (loss)	13
Sales
Balance of recurring Level 3 assets at June 30	$ 631	$ 606

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Financial Assets Measured at Fair Value on Recurring Basis (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	$ 176,942	$ 178,476
Debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	176,665	176,630
Equity
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	277	1,846
U.S. Government and federal agency | Debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	26,303	6,133
Agency mortgage-backed: residential | Debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	70,569	95,182
State and municipal | Debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	55,299	54,733
Corporate bonds | Debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	23,863	19,964
Other | Debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	631	618
Fair Value, Measurements, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	176,942	178,476
Fair Value, Measurements, Recurring | Equity
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	277	1,846
Fair Value, Measurements, Recurring | U.S. Government and federal agency | Debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	26,303	6,133
Fair Value, Measurements, Recurring | Agency mortgage-backed: residential | Debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	70,569	95,182
Fair Value, Measurements, Recurring | State and municipal | Debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	55,299	54,733
Fair Value, Measurements, Recurring | Corporate bonds | Debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	23,863	19,964
Fair Value, Measurements, Recurring | Other | Debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	631	618
Fair Value, Measurements, Recurring | Quoted Prices In Active Markets for Identical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	277	1,846
Fair Value, Measurements, Recurring | Quoted Prices In Active Markets for Identical Assets (Level 1) | Equity
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	277	1,846
Fair Value, Measurements, Recurring | Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	176,034	176,012
Fair Value, Measurements, Recurring | Significant Other Observable Inputs (Level 2) | U.S. Government and federal agency | Debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	26,303	6,133
Fair Value, Measurements, Recurring | Significant Other Observable Inputs (Level 2) | Agency mortgage-backed: residential | Debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	70,569	95,182
Fair Value, Measurements, Recurring | Significant Other Observable Inputs (Level 2) | State and municipal | Debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	55,299	54,733
Fair Value, Measurements, Recurring | Significant Other Observable Inputs (Level 2) | Corporate bonds | Debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	23,863	19,964
Fair Value, Measurements, Recurring | Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	631	618
Fair Value, Measurements, Recurring | Significant Unobservable Inputs (Level 3) | Other | Debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	$ 631	$ 618