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, 2014

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.

13,104,853 shares of Common Stock, no par value, were outstanding at July 31, 2014.

INDEX

		Page
PART I –	FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS		3
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		35
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		53
ITEM 4.	CONTROLS AND PROCEDURES		53
PART II –	OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS		54
ITEM 1A.	RISK FACTORS		54
ITEM 2.	UNREGISTERED SALES ON EQUITY SECURITIES AND USE OF PROCEEDS		54
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES		54
ITEM 4.	MINE SAFETY DISCLOSURES		54
ITEM 5.	OTHER INFORMATION		54
ITEM 6.	EXHIBITS		54

2

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, 2014 and December 31, 2013

Unaudited Consolidated Statements of Operations for the three and six months ended June 30, 2014 and 2013

Unaudited Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2014 and 2013

Unaudited Consolidated Statement of Changes in Stockholders’ Equity for the six months ended June 30, 2014

Unaudited Consolidated Statements of Cash Flows for the six months ended June 30, 2014 and 2013

Notes to Unaudited Consolidated Financial Statements

3

PORTER BANCORP, INC.

Unaudited Consolidated Balance Sheets

(dollars in thousands except share data)

	June 30, 2014			December 31, 2013
Assets
Cash and due from financial institutions	$	101,078		$	109,407
Federal funds sold		1,188			1,727
Cash and cash equivalents		102,266			111,134
Securities available for sale		180,723			163,344
Securities held to maturity (fair value of $44,853 and $42,947, respectively)		43,488			43,612
Mortgage loans held for sale		280			149
Loans, net of allowance of $24,026 and $28,124, respectively		619,004			681,202
Premises and equipment		19,788			19,983
Other real estate owned		62,935			30,892
Federal Home Loan Bank stock		7,323			10,072
Bank owned life insurance		9,039			8,911
Accrued interest receivable and other assets		7,181			6,822
Total assets	$	1,052,027		$	1,076,121
Liabilities and Stockholders’ Equity
Deposits
Non-interest bearing	$	109,956		$	107,486
Interest bearing		840,859			880,219
Total deposits		950,815			987,705
Repurchase agreements		2,451			2,470
Federal Home Loan Bank advances		14,134			4,492
Accrued interest payable and other liabilities		16,453			14,673
Subordinated capital note		5,400			5,850
Junior subordinated debentures		25,000			25,000
Total liabilities		1,014,253			1,040,190
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, 2014 and December 31, 2013		35,000			35,000
Series C – 317,042 issued and outstanding;
Liquidation preference of $3.6 million at June 30, 2014 and December 31, 2013		3,283			3,283
Total preferred stockholders’ equity		38,283			38,283
Common stock, no par, 86,000,000 shares authorized, 13,104,853 and 12,840,999 shares issued and outstanding, respectively		112,236			112,236
Additional paid-in capital		21,170			20,887
Retained deficit		(132,000	)		(130,182	)
Accumulated other comprehensive loss		(1,915	)		(5,293	)
Total common stockholders’ deficit		(509	)		(2,352	)
Total stockholders’ equity		37,774			35,931
Total liabilities and stockholders’ equity	$	1,052,027		$	1,076,121

See accompanying notes to unaudited consolidated financial statements.

4

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,
	2014			2013			2014			2013
Interest income
Loans, including fees	$	8,572		$	9,954		$	16,893		$	19,987
Taxable securities		1,215			848			2,388			1,715
Tax exempt securities		235			231			476			452
Fed funds sold and other		144			135			306			272
		10,166			11,168			20,063			22,426
Interest expense
Deposits		2,319			2,560			4,680			5,264
Federal Home Loan Bank advances		32			41			65			84
Subordinated capital note		47			56			97			114
Junior subordinated debentures		153			157			305			311
Federal funds purchased and other		1			2			2			3
		2,552			2,816			5,149			5,776
Net interest income		7,614			8,352			14,914			16,650
Provision for loan losses		—			—			—			450
Net interest income after provision for loan losses		7,614			8,352			14,914			16,200
Non-interest income
Service charges on deposit accounts		487			506			955			999
Income from fiduciary activities		—			—			—			517
Bank card interchange fees		205			196			366			368
Other real estate owned rental income		18			230			25			342
Net gain on sales of securities		2			703			46			703
Income from bank owned life insurance		62			305			138			384
Other		175			208			334			482
		949			2,148			1,864			3,795
Non-interest expense
Salaries and employee benefits		3,949			3,999			7,690			8,138
Occupancy and equipment		896			913			1,788			1,844
Loan collection expense		389			2,407			928			3,442
Other real estate owned expense		774			1,657			1,436			2,448
FDIC Insurance		571			650			1,111			1,289
State franchise tax		405			537			830			1,074
Professional fees		764			499			1,322			905
Communications		165			179			400			354
Insurance expense		153			160			302			311
Postage and delivery		94			102			204			215
Other		784			706			1,435			1,353
		8,944			11,809			17,446			21,373
Loss before income taxes		(381	)		(1,309	)		(668	)		(1,378	)
Income tax benefit		(424	)		—			(424	)		—
Net income (loss)		43			(1,309	)		(244	)		(1,378	)
Less:
Dividends on preferred stock		789			437			1,574			875
Accretion on Series A preferred stock		—			45			—			90
Earnings allocated to participating securities		(74	)		(110	)		(173	)		(131	)
Net loss attributable to common shareholders	$	(672	)	$	(1,681	)	$	(1,645	)	$	(2,212	)
Basic and diluted loss per common share	$	(0.06	)	$	(0.14	)	$	(0.14	)	$	(0.19	)

See accompanying notes to unaudited consolidated financial statements.

5

PORTER BANCORP, INC.

Unaudited Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Net income (loss)	$	43		$	(1,309	)	$	(244	)	$	(1,378	)
Other comprehensive income (loss):
Unrealized gain (loss) on securities:
Unrealized gain (loss) arising during the period		2,411			(7,066	)		4,000			(7,114	)
Reclassification of amount realized through sales		2			703			46			703
Net unrealized gain/(loss) recognized in comprehensive income		2,413			(6,363	)		4,046			(6,411	)
Tax effect		(424	)		—			(424	)		—
Other comprehensive income (loss)		1,989			(6,363	)		3,622			(6,411	)
Comprehensive income (loss)	$	2,032		$	(7,672	)	$	3,378		$	(7,789	)

See accompanying notes to unaudited consolidated financial statements.

6

PORTER BANCORP, INC.

Unaudited Consolidated Statement of Changes in Stockholders’ Equity

For Six Months Ended June 30, 2014

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

																			Accumulated Other Comprehensive Loss
	Shares							Amount						Additional Paid-In Capital
	Common			Series A Preferred		Series C Preferred		Common		Series A Preferred		Series C Preferred				Retained Deficit						Total
Balances, January 1, 2014		12,840,999			35,000		317,042	$	112,236	$	35,000	$	3,283	$	20,887	$	(130,182	)	$	(5,293	)	$	35,931
Issuance of unvested stock		288,888			—		—		—		—		—		—		—			—			—
Forfeited unvested stock		(25,034	)		—		—		—		—		—		—		—			—			—
Stock-based compensation expense		—			—		—		—		—		—		283		—			—			283
Net loss		—			—		—		—		—		—		—		(244	)		—			(244	)
Net change in accumulated other comprehensive loss, net of taxes		—			—		—		—		—		—		—		—			3,378			3,378
Dividends accrued on Series A preferred stock		—			—		—		—		—		—		—		(1,574	)		—			(1,574	)
Balances, June 30, 2014		13,104,853			35,000		317,042	$	112,236	$	35,000	$	3,283	$	21,170	$	(132,000	)	$	(1,915	)	$	37,774

See accompanying notes to unaudited consolidated financial statements.

7

PORTER BANCORP, INC.

Unaudited Consolidated Statements of Cash Flows

For Six Months Ended June 30, 2014 and 2013

(dollars in thousands)

	2014			2013
Cash flows from operating activities
Net loss	$	(244	)	$	(1,378	)
Adjustments to reconcile net loss to net cash from operating activities
Depreciation and amortization		852			1,042
Provision for loan losses		—			450
Net amortization on securities		773			1,185
Stock-based compensation expense		283			226
Tax benefit from OCI components		(424	)		—
Net gain on loans originated for sale		(34	)		(66	)
Loans originated for sale		(1,574	)		(2,095	)
Proceeds from sales of loans originated for sale		1,477			2,524
Net gain on sales of investment securities		(46	)		(703	)
Net (gain) loss on sales of other real estate owned		(54	)		359
Net write-down of other real estate owned		650			1,284
Earnings on bank owned life insurance, net of premium expense		(128	)		(374	)
Net change in accrued interest receivable and other assets		(588	)		1,095
Net change in accrued interest payable and other liabilities		205			1,666
Net cash from operating activities		1,148			5,215
Cash flows from investing activities
Purchases of available for sale securities		(21,990	)		(24,929	)
Sales and calls of available for sale securities		1,004			1,908
Maturities and prepayments of available for sale securities		6,804			17,661
Proceeds from sale of other real estate owned		4,281			10,538
Proceeds from mandatory redemption of Federal Home Loan Bank stock		2,749			—
Loan originations and payments, net		25,137			89,045
Purchases of premises and equipment, net		(284	)		(141	)
Net cash from investing activities		17,701			94,082
Cash flows from financing activities
Net change in deposits		(36,890	)		(84,223	)
Net change in repurchase agreements		(19	)		658
Advances from Federal Home Loan Bank		10,000			—
Repayment of Federal Home Loan Bank advances		(358	)		(588	)
Repayment of subordinated capital note		(450	)		(450	)
Net cash from financing activities		(27,717	)		(84,603	)
Net change in cash and cash equivalents		(8,868	)		14,694
Beginning cash and cash equivalents		111,134			49,572
Ending cash and cash equivalents	$	102,266		$	64,266
Supplemental cash flow information:
Interest paid	$	4,872		$	5,603
Income taxes paid (refunded)		—			—
Supplemental non-cash disclosure:
Transfer from loans to other real estate	$	36,920		$	15,555
Financed sales of other real estate owned		—			15

See accompanying notes to unaudited consolidated financial statements.

8

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 the six months ended June 30, 2014 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, 2013 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 (loss) or stockholders’ equity.

Adoption of New Accounting Standards – In May 2014, FASB issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606). The ASU creates a new topic, Topic 606, to provide guidance on revenue recognition for entities that enter into contracts with customers to transfer goods or services or enter into contracts for the transfer of nonfinancial assets. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Additional disclosures are required to provide quantitative and qualitative information regarding the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The new guidance is effective for annual reporting periods, and interim reporting periods within those annual periods, beginning after December 15, 2016. Early adoption is not permitted. Management is currently evaluating the impact of the adoption of this guidance on the Company’s financial statements.

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 create substantial doubt about the Company’s ability to continue as a going concern.

During the first six months of 2014, we reported net loss attributable to common shareholders of $1.6 million, compared with net loss attributable to common shareholders of $2.2 million for the first six months of 2013. The improvement in 2014 compared to 2013 is primarily attributable to reductions in non-interest expense, specifically loan collection expenses and OREO expenses.

At June 30, 2014, we continued to be involved in various legal proceedings in which we dispute the material factual allegations. After conferring with our legal advisors, we believe we have meritorious grounds on which to prevail. If we do not prevail, the ultimate outcome of any one of these matters could have a material adverse effect on our financial condition, results of operations, or cash flows. These matters are more fully described in Note 13 – “Contingencies”.

For the year ended December 31, 2013, we reported a net loss to common shareholders of $3.4 million, compared to a net loss to common shareholders of $33.4 million for the year ended December 31, 2012. This loss coupled with the comprehensive loss for the year reduced shareholders equity to $35.9 million, from $47.2 million at the end of 2012. This reduction was attributable primarily to OREO expense of $4.5 million resulting from fair value write-downs driven by new appraisals and reduced marketing prices, net loss on sales, and ongoing operating expense, along with $4.7 million in loan collection expenses. The reduction was also attributable to a reduction in the fair value of securities of $8.4 million, net, as well as the accrual of dividends and accretion to preferred shareholders of $2.1 million. 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.

In 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. If we cannot pay all unpaid deferred distributions on our trust preferred securities for more than twenty consecutive quarters, we will be in default, and the holders of our trust preferred securities would become entitled to payment of the full amount of outstanding principal plus accrued and unpaid interest. At June 30, 2014, cumulative accrued and unpaid interest on our junior subordinated notes totaled $1.9 million. Future cash dividends on our common stock are subject to the prior payment of all deferred distributions on our trust preferred securities.

9

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, 2014, 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.

• Continuing to operate the Company and Bank in a safe and sound manner. This strategy may require us to reduce our lending concentrations, remediate non-performing loans, reduce the size of our balance sheet, and reduce other noninterest expense through the disposition of OREO.

• Management succession and adding resources to the management team. John T. Taylor became CEO of PBI Bank in 2012 and CEO of the Company in 2013. In addition, we appointed new executives to lead key functions of our banking operations. John R. Davis became Chief Credit Officer of PBI Bank in 2012, with responsibility for establishing and executing credit quality policies and overseeing credit administration for the organization. We have also augmented our staffing in the commercial lending area, led by Joe C. Seiler.

• 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.

• 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 $643.0 million at June 30, 2014.

• Our Consent Order calls for us to reduce our construction and development loans to not more than 75% of total risk-based capital. We have now been in compliance for nine quarters. Construction and development loans totaled $32.8 million, or 39% of total risk-based capital, at June 30, 2014, down from $43.3 million, or 52% of total risk-based capital, at December 31, 2013.

• 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. We were also in compliance with this concentration limit at June 30, 2014. These loans totaled $199.8 million, or 241% of total risk-based capital, at June 30, 2014 and $237.0 million, or 284% of total risk-based capital, at December 31, 2013.

• We have reduced the construction loan portfolio from $199.5 million at December 31, 2010 to $32.8 million at June 30, 2014. Our non-owner occupied commercial real estate loans declined from $293.3 million at December 31, 2010 to $123.5 million at June 30, 2014.

• 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 since 2010. The Bank acquired $20.6 million, $33.5 million, $41.9 million, and $90.8 million during 2013, 2012, 2011, and 2010, respectively. For the six months ended June 30, 2014, we acquired $36.9 million of OREO.

10

• We have incurred significant losses in disposing of this real estate. We incurred losses totaling $2.6 million, $9.3 million, $42.8 million, and $13.9 million in 2013, 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 months ended June 30, 2014, we incurred OREO losses totaling $596,000 comprised of $650,000 in fair value write-downs from declining values as evidenced by new appraisals and reduced marketing prices in connection with our sales strategies, offset by $54,000 in net gain on sales of OREO.

• To ensure we maximize the value we receive upon the sale of OREO, we continually evaluate sales opportunities. Proceeds from the sale of OREO totaled $4.3 million during the six months ended June 30, 2014 and $30.8 million, $22.5 million, $26.0 million and $25.0 million during the years ended December 31, 2013, 2012, 2011, and 2010, respectively.

• At December 31, 2013, the OREO portfolio consisted of 62% construction, development, and land assets. At June 30, 2014, this concentration decreased to 35%; however, the balance increased from $19.2 million to $21.8 million. Commercial real estate represents 35% of the OREO portfolio at June 30, 2014 compared with 19% at December 31, 2013. 1-4 family residential properties represent 18% of the OREO portfolio at June 30, 2014 compared with 16% at December 31, 2013, and multi-family properties represent 10% of the OREO portfolio at June 30, 2014, compared to 1% at December 31, 2013.

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.

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, 2014
Available for sale
U.S. Government and federal agency	$	30,231	$	324	$	(948	)	$	29,607
Agency mortgage-backed: residential		118,104		1,434		(701	)		118,837
State and municipal		11,830		738		(9	)		12,559
Corporate bonds		18,043		1,142		(116	)		19,069
Other debt securities		572		79		—			651
Total available for sale	$	178,780	$	3,717	$	(1,774	)	$	180,723
Held to maturity
State and municipal	$	43,488	$	1,373	$	(8	)	$	44,853
Total held to maturity	$	43,488	$	1,373	$	(8	)	$	44,853
December 31, 2013
Available for sale
U.S. Government and federal agency	$	31,026	$	284	$	(1,444	)	$	29,866
Agency mortgage-backed: residential		102,435		458		(1,950	)		100,943
State and municipal		12,965		608		(28	)		13,545
Corporate bonds		18,002		769		(610	)		18,161
Other debt securities		572		60		—			632
Total debt securities		165,000		2,179		(4,032	)		163,147
Equity		135		62		—			197
Total available for sale	$	165,135	$	2,241	$	(4,032	)	$	163,344
Held to maturity
State and municipal	$	43,612	$	3	$	(668	)	$	42,947
Total held to maturity	$	43,612	$	3	$	(668	)	$	42,947

11

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
	(in thousands)				(in thousands)
Proceeds	$	675	$	1,908	$	1,004	$	1,908
Gross gains		2		704		46		704
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, 2014
	Amortized Cost		Fair Value
	(in thousands)
Maturity
Available for sale
Within one year	$	15,616	$	15,948
One to five years		12,930		13,953
Five to ten years		31,558		31,334
Beyond ten years		572		651
Agency mortgage-backed: residential		118,104		118,837
Total	$	178,780	$	180,723
Held to maturity
One to five years	$	5,649	$	5,755
Five to ten years		33,716		34,822
Beyond ten years		4,123		4,276
Total	$	43,488	$	44,853

Securities pledged at June 30, 2014 and December 31, 2013 had carrying values of approximately $66.4 million and $84.2 million, respectively, and were pledged to secure public deposits and repurchase agreements.

12

Securities with unrealized losses at June 30, 2014 and December 31, 2013, aggregated by investment category and length of time the 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, 2014
Available for sale
U.S. Government and federal agency	$	—	$	—		$	18,929	$	(948	)	$	18,929	$	(948	)
Agency mortgage-backed: residential		9,861		(33	)		32,822		(668	)		42,683		(701	)
State and municipal		—		—			476		(9	)		476		(9	)
Corporate bonds		2,388		(41	)		1,710		(75	)		4,098		(116	)
Total temporarily impaired	$	12,249	$	(74	)	$	53,937	$	(1,700	)	$	66,186	$	(1,774	)
Held to maturity
State and municipal	$	1,111	$	(8	)	$	—	$	—		$	1,111	$	(8	)
Total temporarily impaired	$	1,111	$	(8	)	$	—	$	—		$	1,111	$	(8	)
December 31, 2013
Available for sale
U.S. Government and federal agency	$	24,129	$	(1,444	)	$	—	$	—		$	24,129	$	(1,444	)
Agency mortgage-backed: residential		58,257		(1,672	)		10,344		(278	)		68,601		(1,950	)
State and municipal		458		(28	)		—		—			458		(28	)
Corporate bonds		11,313		(610	)		—		—			11,313		(610	)
Total temporarily impaired	$	94,157	$	(3,754	)	$	10,344	$	(278	)	$	104,501	$	(4,032	)
Held to maturity
State and municipal	$	39,743	$	(654	)	$	1,031	$	(14	)	$	40,774	$	(668	)
Total temporarily impaired	$	39,743	$	(654	)	$	1,031	$	(14	)	$	40,774	$	(668	)

The Company evaluates securities for other than temporary impairment (OTTI) on a quarterly basis. 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. As of June 30, 2014, management does not believe securities within our portfolio with unrealized losses should be classified as other than temporarily impaired.

Note 4 – Loans

Loans were as follows:

	June 30, 2014			December 31, 2013
	(in thousands)
Commercial	$	65,031		$	52,878
Commercial Real Estate:
Construction		32,778			43,326
Farmland		64,880			71,189
Nonfarm nonresidential		190,909			232,026
Residential Real Estate:
Multi-family		43,496			46,858
1-4 Family		205,116			228,505
Consumer		12,669			14,365
Agriculture		27,477			19,199
Other		674			980
Subtotal		643,030			709,326
Less: Allowance for loan losses		(24,026	)		(28,124	)
Loans, net	$	619,004		$	681,202

13

The following table presents the activity in the allowance for loan losses by portfolio segment for the three months ended June 30, 2014 and 2013:

	Commercial			Commercial Real Estate			Residential Real Estate			Consumer			Agriculture			Other			Total
	(in thousands)
June 30, 2014:
Beginning balance	$	3,608		$	13,929		$	7,071		$	383		$	415		$	9		$	25,415
Provision for loan losses		(329	)		(226	)		560			(28	)		38			(15	)		—
Loans charged off		(308	)		(1,701	)		(1,048	)		(51	)		(21	)		(1	)		(3,130	)
Recoveries		144			1,250			290			35			3			19			1,741
Ending balance	$	3,115		$	13,252		$	6,873		$	339		$	435		$	12		$	24,026
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

The following table presents the activity in the allowance for loan losses by portfolio segment for the six months ended June 30, 2014 and 2013:

	Commercial			Commercial Real Estate			Residential Real Estate			Consumer			Agriculture			Other			Total
	(in thousands)
June 30, 2014:
Beginning balance	$	3,221		$	16,414		$	7,762		$	416		$	305		$	6		$	28,124
Provision for loan losses		116			(1,353	)		1,094			(9	)		151			1			—
Loans charged off		(454	)		(3,175	)		(2,356	)		(179	)		(30	)		(18	)		(6,212	)
Recoveries		232			1,366			373			111			9			23			2,114
Ending balance	$	3,115		$	13,252		$	6,873		$	339		$	435		$	12		$	24,026
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

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, 2014:

	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	$	150	$	1,350	$	252	$	1	$	—	$	—	$	1,753
Collectively evaluated for impairment		2,965		11,902		6,621		338		435		12		22,273
Total ending allowance balance	$	3,115	$	13,252	$	6,873	$	339	$	435	$	12	$	24,026
Loans:
Loans individually evaluated for impairment	$	2,150	$	50,678	$	26,449	$	62	$	229	$	174	$	79,742
Loans collectively evaluated for impairment		62,881		237,889		222,163		12,607		27,248		500		563,288
Total ending loans balance	$	65,031	$	288,567	$	248,612	$	12,669	$	27,477	$	674	$	643,030

14

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, 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	$	290	$	2,345	$	827	$	9	$	—	$	—	$	3,471
Collectively evaluated for impairment		2,931		14,069		6,935		407		305		6		24,653
Total ending allowance balance	$	3,221	$	16,414	$	7,762	$	416	$	305	$	6	$	28,124
Loans:
Loans individually evaluated for impairment	$	4,995	$	94,330	$	49,512	$	93	$	322	$	631	$	149,883
Loans collectively evaluated for impairment		47,883		252,211		225,851		14,272		18,877		349		559,443
Total ending loans balance	$	52,878	$	346,541	$	275,363	$	14,365	$	19,199	$	980	$	709,326

Impaired Loans

Impaired loans include restructured loans and 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, 2014:

							Three Months Ended June 30, 2014				Six Months Ended June 30, 2014
	Unpaid Principal Balance		Recorded Investment		Allowance For Loan Losses Allocated		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Cash Basis Income Recognized
	(in thousands)
With No Related Allowance Recorded:
Commercial	$	1,288	$	812	$	—	$	1,142	$	54	$	1,272	$	55	$	55
Commercial real estate:
Construction		100		21		—		11		—		20		—		—
Farmland		2,856		2,323		—		2,673		31		3,082		48		48
Nonfarm nonresidential		4,367		1,117		—		1,144		127		1,231		127		127
Residential real estate:
Multi-family		86		86		—		89		—		190		—		—
1-4 Family		9,460		7,578		—		7,980		11		8,681		180		180
Consumer		19		19		—		10		—		9		—		—
Agriculture		242		229		—		264		—		283		3		3
Other		68		68		—		74		2		54		9		9
With An Allowance Recorded:
Commercial		1,434		1,338		150		2,332		2		2,709		20		—
Commercial real estate:
Construction		4,944		4,486		85		6,142		8		7,183		17		—
Farmland		5,630		3,728		—		3,730		—		3,899		—		—
Nonfarm nonresidential		49,553		39,003		1,265		55,061		211		61,870		502		—
Residential real estate:																—
Multi-family		4,281		4,281		88		4,535		39		7,062		76		—
1-4 Family		16,471		14,504		164		15,613		139		19,382		275		—
Consumer		43		43		1		44		—		58		1		—
Agriculture		—		—		—		—		—		—		—		—
Other		351		106		—		106		—		276		—		—
Total	$	101,193	$	79,742	$	1,753	$	100,950	$	624	$	117,261	$	1,313	$	422

15

The following table presents loans individually evaluated for impairment by class of loan as of December 31, 2013:

	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	$	2,131	$	1,533	$	—	$	1,622	$	30	$	30
Commercial real estate:
Construction		64		38		—		467		164		164
Farmland		4,074		3,898		—		4,259		268		268
Nonfarm nonresidential		1,568		1,404		—		1,724		367		366
Residential real estate:
Multi-family		444		392		—		541		3		3
1-4 Family		11,011		10,083		—		11,533		115		116
Consumer		9		9		—		21		—		—
Agriculture		401		322		—		213		—		—
Other		14		13		—		10		11		11
With An Allowance Recorded:
Commercial		3,734		3,462		290		3,905		99		—
Commercial real estate:
Construction		10,409		9,264		218		20,173		88		—
Farmland		6,117		4,238		65		5,579		37		—
Nonfarm nonresidential		94,508		75,488		2,062		77,726		1,324		—
Residential real estate:
Multi-family		13,883		12,117		393		13,121		208		—
1-4 Family		31,327		26,920		434		27,755		557		—
Consumer		84		84		9		134		3		—
Agriculture		—		—		—		2		—		—
Other		861		618		—		539		17		—
Total	$	180,639	$	149,883	$	3,471	$	169,324	$	3,291	$	958

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 borrower.

16

The following table presents the types of TDR loan modifications by portfolio segment outstanding as of June 30, 2014 and December 31, 2013:

	TDRs Performing to Modified Terms		TDRs Not Performing to Modified Terms		Total TDRs
	(in thousands)
June 30, 2014
Commercial
Rate reduction	$	20	$	—	$	20
Principal deferral		—		869		869
Commercial Real Estate:
Construction
Rate reduction		272		3,409		3,681
Principal deferral		355		—		355
Farmland
Principal deferral		—		2,365		2,365
Nonfarm nonresidential
Rate reduction		16,569		11,208		27,777
Principal deferral		680		—		680
Interest only payments		—		649		649
Residential Real Estate:
Multi-family
Rate reduction		4,280		—		4,280
1-4 Family
Rate reduction		10,170		—		10,170
Consumer
Rate reduction		43		—		43
Total TDRs	$	32,389	$	18,500	$	50,889

	TDRs Performing to Modified Terms		TDRs Not Performing to Modified Terms		Total TDRs
	(in thousands)
December 31, 2013
Commercial
Rate reduction	$	1,933	$	—	$	1,933
Principal deferral		—		869		869
Commercial Real Estate:
Construction
Rate reduction		275		6,345		6,620
Principal deferral		499		—		499
Farmland
Rate reduction		150		—		150
Principal deferral		—		2,365		2,365
Nonfarm nonresidential
Rate reduction		22,457		21,235		43,692
Principal deferral		691		—		691
Interest only payments		2,439		1,489		3,928
Residential Real Estate:
Multi-family
Rate reduction		4,354		6,655		11,009
Interest only payments		641		—		641
1-4 Family
Rate reduction		10,312		7,958		18,270
Consumer
Rate reduction		84		—		84
Other
Rate reduction		511		—		511
Total TDRs	$	44,346	$	46,916	$	91,262

17

At June 30, 2014 and December 31, 2013, 64% and 49%, respectively, of the Company’s TDRs were performing according to their modified terms. The Company allocated $1.6 million and $2.9 million in reserves to borrowers whose loan terms have been modified in TDRs as of June 30, 2014, and December 31, 2013, respectively. The Company has committed to lend additional amounts totaling $262,000 and $261,000 as of June 30, 2014 and December 31, 2013, respectively, to borrowers with outstanding loans classified as TDRs.

Management periodically reviews renewals/modifications of previously identified TDRs, for which there was no principal forgiveness, to consider if it is appropriate to remove the TDR classification. If the borrower is no longer experiencing financial difficulty and the renewal/modification did not contain a concessionary interest rate or other concessionary terms, management considers the potential removal of the TDR classification. If deemed appropriate, the TDR classification is removed as the borrower has complied with the terms of the loan at the date of renewal/modification and there was a reasonable expectation that the borrower would continue to comply with the terms of the loan subsequent to the date of the renewal/modification. In this instance, the TDR was originally considered a restructuring in a prior year as a result of a modification with an interest rate that was not commensurate with the risk of the underlying loan. Additionally, TDR classification can be removed in circumstances in which the Company performs a non-concessionary re-modification of the loan at terms that were considered to be at market for loans with comparable risk. Management expects the borrower will continue to perform under the re-modified terms based on the borrower’s past history of performance.

As of June 30, 2014, the TDR classification was removed from two loans that met the requirements as discussed above. These two loans totaled $7.3 million at December 31, 2013. These loans are no longer evaluated individually for impairment.

No TDR loan modifications occurred during the three or six months ended June 30, 2014. 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:

	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

As of June 30, 2013, 100% of the Company’s TDRs that occurred during the three months ended June 30, 2013, were performing according to their modified terms. The Company allocated $49,000 in reserves to customers whose loan terms have been modified during the three months ended June 30, 2013. For modifications occurring during the three month period ended June 30, 2013, 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:

	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
Nonfarm nonresidential
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

18

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.

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, 2014, and December 31, 2013:

	Nonaccrual				Loans Past Due 90 Days And Over Still Accruing
	June 30, 2014		December 31, 2013		June 30, 2014		December 31, 2013
	(in thousands)
Commercial	$	1,984	$	2,886	$	—	$	—
Commercial Real Estate:
Construction		3,880		8,528		—		—
Farmland		6,051		7,844		—		—
Nonfarm nonresidential		20,039		48,447		—		—
Residential Real Estate:
Multi-family		86		7,513		—		—
1-4 Family		11,912		26,098		—		230
Consumer		20		9		—		2
Agriculture		229		322		—		—
Other		174		120		—		—
Total	$	44,375	$	101,767	$	—	$	232

The following table presents the aging of the recorded investment in past due loans as of June 30, 2014 and December 31, 2013:

	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, 2014
Commercial	$	430	$	18	$	—	$	1,984	$	2,432
Commercial Real Estate:
Construction		—		—		—		3,880		3,880
Farmland		200		—		—		6,051		6,251
Nonfarm nonresidential		550		336		—		20,039		20,925
Residential Real Estate:
Multi-family		—		—		—		86		86
1-4 Family		1,744		593		—		11,912		14,249
Consumer		101		44		—		20		165
Agriculture		32		—		—		229		261
Other		—		—		—		174		174
Total	$	3,057	$	991	$	—	$	44,375	$	48,423

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, 2013
Commercial	$	156	$	123	$	—	$	2,886	$	3,165
Commercial Real Estate:
Construction		261		—		—		8,528		8,789
Farmland		484		41		—		7,844		8,369
Nonfarm nonresidential		4,375		—		—		48,447		52,822
Residential Real Estate:
Multi-family		1,181		—		—		7,513		8,694
1-4 Family		4,059		577		230		26,098		30,964
Consumer		145		34		2		9		190
Agriculture		35		—		—		322		357
Other		—		—		—		120		120
Total	$	10,696	$	775	$	232	$	101,767	$	113,470

Credit Quality Indicators

We categorize all 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. Additionally, 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. 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 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, 2014, and December 31, 2013, 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, 2014
Commercial	$	54,255	$	2,859	$	—	$	7,917	$	—	$	65,031
Commercial Real Estate:
Construction		21,105		6,190		—		5,483		—		32,778
Farmland		46,688		8,687		230		9,275		—		64,880
Nonfarm nonresidential		108,184		33,632		1,211		47,882		—		190,909
Residential Real Estate:
Multi-family		30,124		7,850		—		5,522		—		43,496
1-4 Family		136,468		30,384		1,780		36,484		—		205,116
Consumer		11,523		612		2		532		—		12,669
Agriculture		26,007		994		—		476		—		27,477
Other		499		—		—		175		—		674
Total	$	434,853	$	91,208	$	3,223	$	113,746	$	—	$	643,030

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	Pass		Watch		Special Mention		Substandard		Doubtful		Total
	(in thousands)
December 31, 2013
Commercial	$	35,438	$	8,517	$	329	$	8,594	$	—	$	52,878
Commercial Real Estate:
Construction		16,706		10,771		2,277		13,572		—		43,326
Farmland		46,909		9,121		1,735		13,424		—		71,189
Nonfarm nonresidential		93,327		51,522		734		86,443		—		232,026
Residential Real Estate:
Multi-family		16,506		17,320		—		13,032		—		46,858
1-4 Family		130,833		43,785		784		53,103		—		228,505
Consumer		12,718		968		6		673		—		14,365
Agriculture		16,742		1,802		—		655		—		19,199
Other		350		510		—		120		—		980
Total	$	369,529	$	144,316	$	5,865	$	189,616	$	—	$	709,326

During the first quarter of 2014, management instituted a new risk category within its pass classification. The purpose was to better identify certain loans where the borrower’s sustained satisfactory repayment history was deemed a more relevant predictor of future loss than certain underwriting criteria at origination. The establishment of this new pass risk category helps to ensure the watch risk category remains transitory and event driven in nature. A total of $24.2 million in commercial, $8.5 million in residential, and $2.2 million in agriculture loans were reclassified from watch to the new pass risk category during the first quarter.

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. Costs incurred in order to perfect the lien prior to foreclosure may be capitalized if the fair value less the cost to sell exceeds the balance of the loan at the time of transfer to OREO. Examples of eligible costs to be capitalized are payments of delinquent property taxes to clear tax liens or payments to contractors and subcontractors to clear mechanics’ liens. 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 or have staff in our centralized appraisal department evaluate the latest in-file appraisal in connection with the transfer to other real estate owned. We typically obtain updated appraisals within five quarters of 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, 2014			December 31, 2013
	(in thousands)
Commercial Real Estate:
Construction, land development, and other land	$	21,827		$	19,199
Farmland		1,349			695
Nonfarm nonresidential		21,956			6,064
Residential Real Estate:
Multi-family		6,335			248
1-4 Family		11,667			4,916
		63,134			31,122
Valuation allowance		(199	)		(230	)
	$	62,935		$	30,892

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	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2014			2013			2014			2013
	(in thousands)						(in thousands)
OREO Valuation Allowance Activity:
Beginning balance	$	208		$	928		$	230		$	1,154
Provision to allowance		400			977			650			1,284
Write-downs		(409	)		(1,158	)		(681	)		(1,691	)
Ending balance	$	199		$	747		$	199		$	747

Net activity relating to other real estate owned during the six months ended June 30, 2014 and 2013 is as follows:

	2014			2013
	(in thousands)
OREO Activity
OREO as of January 1	$	30,892		$	43,671
Real estate acquired		36,920			15,555
Valuation adjustment writedowns		(650	)		(1,284	)
Gain/(Loss) on sale		54			(359	)
Proceeds from sale of properties		(4,281	)		(10,553	)
OREO as of June 30	$	62,935		$	47,030

Expenses related to other real estate owned include:

	Three Months Ended June 30,					Six Months Ended June 30,
	2014			2013		2014			2013
	(in thousands)					(in thousands)
Net (gain) loss on sales	$	(54	)	$	162	$	(54	)	$	359
Provision to allowance		400			977		650			1,284
Operating expense		428			518		840			805
Total	$	774		$	1,657	$	1,436		$	2,448

Note 6 – Deposits

The following table shows deposits by category:

	June 30, 2014		December 31, 2013
	(in thousands)
Non-interest bearing	$	109,956	$	107,486
Interest checking		76,625		84,626
Money market		95,946		79,349
Savings		37,178		36,292
Certificates of deposit		631,110		679,952
Total	$	950,815	$	987,705

Time deposits of $100,000 or more were $278.3 million and $295.0 million at June 30, 2014 and December 31, 2013, respectively.

Scheduled maturities of total time deposits at June 30, 2014 are as follows (in thousands):

Year 1	$	473,490
Year 2		121,978
Year 3		12,177
Year 4		7,910
Year 5		15,553
Thereafter		2
	$	631,110

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Note 7 – Advances from the Federal Home Loan Bank

Advances from the Federal Home Loan Bank were as follows:

	June 30, 2014		December 31, 2013
	(in thousands)
Monthly amortizing advances with fixed rates from 0.00% to 5.25% and maturities ranging from 2014 through 2033, averaging 2.89% for 2014	$	14,134	$	4,492

Each advance is payable based upon the 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. At June 30, 2014, our additional borrowing capacity with the FHLB was $10.6 million. The availability of our borrowing capacity could be affected by our financial condition 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 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.

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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 our appraisal date predates a likely change in market conditions. These deductions range from 10% for routine real estate collateral to 25% for real estate that is determined (1) to have a thin trading market or (2) to be specialized collateral. This is in addition to estimated discounts for cost to sell of six to ten percent.

We also apply discounts to the expected fair value of collateral for impaired loans where the likely resolution involves litigation or 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 or have staff in our centralized appraisal department evaluate the latest in-file appraisal 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 the fair value of the underlying collateral based on our internal evaluation of the property, review of the most recent appraisal, and discussions with the currently engaged appraiser. We generally obtain updated appraisals within five quarters of 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 collateral to 25% for real estate that is determined (1) to have a thin trading market or (2) to be specialized collateral. This is in addition to estimated discounts for cost to sell of six to ten percent.

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Financial assets measured at fair value on a recurring basis at June 30, 2014 and December 31, 2013 are summarized below:

			Fair Value Measurements at June 30, 2014 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	$	29,607	$	—	$	29,607	$	—
Agency mortgage-backed: residential		118,837		—		118,837		—
State and municipal		12,559		—		12,559		—
Corporate bonds		19,069		—		19,069		—
Other debt securities		651		—		—		651
Total	$	180,723	$	—	$	180,072	$	651

			Fair Value Measurements at December 31, 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	$	29,866	$	—	$	29,866	$	—
Agency mortgage-backed: residential		100,943		—		100,943		—
State and municipal		13,545		—		13,545		—
Corporate bonds		18,161		—		18,161		—
Other debt securities		632		—		—		632
Equity securities		197		197		—		—
Total	$	163,344	$	197	$	162,515	$	632

There were no transfers between Level 1 and Level 2 during 2014 or 2013.

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, 2014 and 2013:

	Other Debt Securities
	2014		2013
	(in thousands)
Balances of recurring Level 3 assets at January 1	$	632	$	618
Total gain (loss) for the period:
Included in other comprehensive income (loss)		19		13
Balance of recurring Level 3 assets at June 30	$	651	$	631

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 8.25% 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.

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

			Fair Value Measurements at June 30, 2014 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	$	1,188	$	—	$	—	$	1,188
Commercial real estate:
Construction		4,401		—		—		4,401
Farmland		3,728		—		—		3,728
Nonfarm nonresidential		37,738		—		—		37,738
Residential real estate:
Multi-family		4,193		—		—		4,193
1-4 Family		14,340		—		—		14,340
Consumer		42		—		—		42
Other		106		—		—		106
Other real estate owned, net:
Commercial real estate:
Construction		21,758		—		—		21,758
Farmland		1,344		—		—		1,344
Nonfarm nonresidential		21,887		—		—		21,887
Residential real estate:
Multi-family		6,316		—		—		6,316
1-4 Family		11,630		—		—		11,630

			Fair Value Measurements at December 31, 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	$	3,172	$	—	$	—	$	3,172
Commercial real estate:
Construction		9,046		—		—		9,046
Farmland		4,173		—		—		4,173
Nonfarm nonresidential		73,426		—		—		73,426
Residential real estate:
Multi-family		11,724		—		—		11,724
1-4 Family		26,486		—		—		26,486
Consumer		75		—		—		75
Agriculture		—		—		—		—
Other		618		—		—		618
Other real estate owned, net:
Commercial real estate:
Construction		19,057		—		—		19,057
Farmland		690		—		—		690
Nonfarm nonresidential		6,019		—		—		6,019
Residential real estate:
Multi-family		246		—		—		246
1-4 Family		4,880		—		—		4,880

Impaired loans, which are measured for impairment using the fair value of the collateral for collateral dependent loans, had a carrying amount of $67.5 million at June 30, 2014 with a valuation allowance of $1.8 million. This resulted in no additional provision for loan losses for the six months ended June 30, 2014. At December 31, 2013, impaired loans had a carrying amount of $132.2 million, with a valuation allowance of $3.5 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 $62.9 million as of June 30, 2014, compared with $30.9 million at December 31, 2013. Fair value write-downs of $650,000 were recorded on other real estate owned for the six months ended June 30, 2014.

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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, 2014:

	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Range (Weighted Average)
	(in thousands)
Impaired loans – Commercial	$	1,188	Market value approach	Adjustment for receivables and inventory discounts		16% – 32%(24%)
Impaired loans – Commercial real estate	$	45,867	Sales comparison approach	Adjustment for differences between the comparable sales		0% – 62%(18%)
Impaired loans – Residential real estate	$	18,533	Sales comparison approach	Adjustment for differences between the comparable sales		0% – 68%(17%)
Other real estate owned – Commercial real estate	$	44,989	Sales comparison approach Income approach	Adjustment for differences between the comparable sales Discount or capitalization rate		3% – 45%(17%) 8% – 16%(14%)
Other real estate owned – Residential real estate	$	17,946	Sales comparison approach	Adjustment for differences between the comparable sales		2% – 54%(11%)

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, 2013:

	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Range (Weighted Average)
	(in thousands)
Impaired loans – Commercial	$	3,172	Market value approach	Adjustment for receivables and inventory discounts		16% –32%(24%)
Impaired loans – Commercial real estate	$	86,645	Sales comparison approach	Adjustment for differences between the comparable sales		0% – 69%(20%)
Impaired loans – Residential real estate	$	38,210	Sales comparison approach	Adjustment for differences between the comparable sales		0% – 68%(15%)
Other real estate owned – Commercial real estate	$	25,766	Sales comparison approach Income approach	Adjustment for differences between the comparable sales Discount or capitalization rate		3% – 51%(22%) 7% – 16%(11%)
Other real estate owned – Residential real estate	$	5,126	Sales comparison approach	Adjustment for differences between the comparable sales		2% – 54%(11%)

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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, 2014 Using
	Carrying Amount		Level 1		Level 2		Level 3		Total
	(in thousands)
Financial assets
Cash and cash equivalents	$	102,266	$	78,906	$	23,360	$	—	$	102,266
Securities available for sale		180,723		—		180,072		651		180,723
Securities held to maturity		43,488		—		44,853		—		44,853
Federal Home Loan Bank stock		7,323		N/A		N/A		N/A		N/A
Mortgage loans held for sale		280		—		280		—		280
Loans, net		619,004		—		—		632,722		632,722
Accrued interest receivable		3,461		—		1,365		2,096		3,461
Financial liabilities
Deposits	$	950,815	$	109,956	$	837,997	$	—	$	947,953
Securities sold under agreements to repurchase		2,451		—		2,451		—		2,451
Federal Home Loan Bank advances		14,134		—		14,138		—		14,138
Subordinated capital notes		5,400		—		—		5,177		5,177
Junior subordinated debentures		25,000		—		—		13,841		13,841
Accrued interest payable		2,813		—		1,014		1,799		2,813

			Fair Value Measurements at December 31, 2013 Using
	Carrying Amount		Level 1		Level 2		Level 3		Total
	(in thousands)
Financial assets
Cash and cash equivalents	$	111,134	$	106,885	$	4,249	$	—	$	111,134
Securities available for sale		163,344		197		162,515		632		163,344
Securities held to maturity		43,612		—		42,947		—		42,947
Federal Home Loan Bank stock		10,072		N/A		N/A		N/A		N/A
Mortgage loans held for sale		149		—		149		—		149
Loans, net		681,202		—		—		695,999		695,999
Accrued interest receivable		3,891		—		1,343		2,548		3,891
Financial liabilities
Deposits	$	987,705	$	107,486	$	879,707	$	—	$	987,193
Securities sold under agreements to repurchase		2,470		—		2,470		—		2,470
Federal Home Loan Bank advances		4,492		—		4,495		—		4,495
Subordinated capital notes		5,850		—		—		5,586		5,586
Junior subordinated debentures		25,000		—		—		13,526		13,526
Accrued interest payable		2,535		—		1,042		1,493		2,535

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. Non-interest 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.

28

(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, 2014			December 31, 2013
	(in thousands)
Deferred tax assets:
Net operating loss carry-forward	$	25,943		$	25,460
Allowance for loan losses		8,409			9,843
Other real estate owned write-down		9,537			9,478
Alternative minimum tax credit carry-forward		692			692
Net assets from acquisitions		656			644
Other than temporary impairment on securities		46			89
Net unrealized loss on securities		—			1,067
New market tax credit carry-forward		208			208
Nonaccrual loan interest		878			911
Amortization of non-compete agreements		15			16
Other		1,719			1,640
		48,103			50,048
Deferred tax liabilities:
FHLB stock dividends		928			1,276
Fixed assets		291			333
Net unrealized gain on securities		263			—
Originated mortgage servicing rights		63			75
Other		548			570
		2,093			2,254
Net deferred tax assets before valuation allowance		46,010			47,794
Valuation allowance		(46,010	)		(47,794	)
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 $40.1 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, 2014. Our deferred tax assets and the related valuation allowance are analyzed and adjusted on a quarterly basis.

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The calculation for the income tax provision or benefit generally does not consider the tax effects of changes in other comprehensive income, or OCI, which is a component of stockholders’ equity on the balance sheet. However, an exception is provided in certain circumstances, such as when there is a full valuation allowance against net deferred tax assets, there is a loss from continuing operations and there is income in other components of the financial statements. In such a case, pre-tax income from other categories, such as changes in OCI, must be considered in determining a tax benefit to be allocated to the loss from continuing operations. For the quarter ended June 30, 2014, this resulted in $424,000 of income tax benefit allocated to continuing operations. The June 30, 2014 tax benefit is entirely due to gains in other comprehensive income that are presented in current operations in accordance with applicable accounting standards.

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, 2014 or the year ended December 31, 2013 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 2010.

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, shareholders approved an amendment to the plan to increase the number of shares authorized for issuance by 800,000 shares. In May 2014, shareholders approved an amendment to the Plan to increase the number of shares authorized for issuance by 300,000 shares. The 2006 Plan now permits the issuance of up to 1,563,050 shares of the Company’s common stock upon the exercise of stock options or upon the grant of stock awards. As of June 30, 2014, the Company had granted 898,011 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 three to ten years. The Company has 527,799 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 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. In May 2014, the Plan was further amended to increase the number of shares issuable to 700,000 shares. Unvested shares are granted automatically under the plan at fair market value on the date of grant and vest on December 31 in the year of grant. To date, the Company has issued 181,819 unvested shares, net of forfeitures and vesting, to non-employee directors. At June 30, 2014, 271,211 shares remain available for issuance under this plan.

The fair value of the 2014 unvested shares issued to employees was $113,000, or $0.93 per weighted-average share. The fair value of the 2014 unvested shares issued to directors was $150,000, or $0.90 per weighted-average share. The Company recorded $283,000 and $226,000 of stock-based compensation during the first six months of 2014 and 2013, 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, 2014					Twelve Months Ended December 31, 2013
	Shares			Weighted Average Grant Price		Shares			Weighted Average Grant Price
Outstanding, beginning		787,426		$	1.56		153,316		$	5.92
Granted		122,220			0.93		693,214			1.18
Vested		(11,121	)		11.72		(22,113	)		12.19
Forfeited		(514	)		21.06		(36,991	)		6.22
Outstanding, ending		898,011		$	1.34		787,426		$	1.56

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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, 2014					Twelve Months Ended December 31, 2013
	Shares			Weighted Average Grant Price		Shares			Weighted Average Grant Price
Outstanding, beginning		47,428		$	1.69		80,078		$	1.77
Granted		166,668			0.90		182,355			0.85
Vested		(7,757	)		1.74		(215,005	)		1.01
Forfeited		(24,520	)		1.69		—			—
Outstanding, ending		181,819		$	0.96		47,428		$	1.69

Unrecognized stock based compensation expense related to unvested shares for the remainder of 2014 and beyond is estimated as follows (in thousands):

July 2014 – December 2014	$	397
2015		420
2016		275
2017		51
2018 & thereafter		—

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,
	2014			2013			2014			2013
	(in thousands, except share and per share data)
Net income (loss)	$	43		$	(1,309	)	$	(244	)	$	(1,378	)
Less:
Preferred stock dividends		789			437			1,574			875
Accretion of Series A preferred stock discount		—			45			—			90
Earnings allocated to unvested shares		(55	)		(62	)		(128	)		(69	)
Earnings allocated to Series C preferred		(19	)		(48	)		(45	)		(62	)
Net loss attributable to common shareholders, basic and diluted	$	(672	)	$	(1,681	)	$	(1,645	)	$	(2,212	)
Basic
Weighted average common shares including unvested common shares outstanding		13,293,226			12,528,932			13,256,911			12,501,854
Less: Weighted average unvested common shares		979,211			434,250			931,092			367,297
Less: Weighted average Series C preferred		332,894			332,894			332,894			332,894
Weighted average common shares outstanding		11,981,121			11,761,788			11,992,925			11,801,663
Basic loss per common share	$	(0.06	)	$	(0.14	)	$	(0.14	)	$	(0.19	)
Diluted
Add: Dilutive effects of assumed exercises of common and Preferred Series C stock warrants		—			—			—			—
Weighted average common shares and potential common shares		11,981,121			11,761,788			11,992,925			11,801,663
Diluted loss per common share	$	(0.06	)	$	(0.14	)	$	(0.14	)	$	(0.19	)

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The Company had no outstanding stock options at June 30, 2014 or 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, 2014 and 2013 but was not included in the diluted EPS computation as inclusion would have been anti-dilutive. Additionally, warrants for the purchase of 1,449,459 shares of non-voting common stock at an exercise price of $10.95 per share were outstanding at June 30, 2014 and 2013, 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 initiate 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 requires 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 unless the board of directors adopts prior to the extension a detailed statement giving reasons why the extension is in the best interest of the bank, 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, 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 cannot be considered well-capitalized while under the Consent Order. 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 have not been directed by the FDIC to implement such a plan.

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. As of June 30, 2014, the capital ratios required by the Consent Order were not met.

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The following table shows the ratios and amounts 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 (dollars in thousands):

	Actual					For Capital Adequacy Purposes
	Amount		Ratio			Amount		Ratio
As of June 30, 2014:
Total risk-based capital (to risk- weighted assets)
Consolidated	$	78,104		11.07	%	$	56,454		8.00	%
Bank		83,012		11.79			56,350		8.00
Tier I capital (to risk-weighted assets)
Consolidated		51,593		7.31			28,227		4.00
Bank		68,619		9.74			28,175		4.00
Tier I capital (to average assets)
Consolidated		51,593		4.89			42,233		4.00
Bank		68,619		6.51			42,154		4.00

	Actual					For Capital Adequacy Purposes
	Amount		Ratio			Amount		Ratio
As of December 31, 2013:
Total risk-based capital (to risk- weighted assets)
Consolidated	$	80,203		11.03	%	$	58,178		8.00	%
Bank		83,055		11.44			58,064		8.00
Tier I capital (to risk-weighted assets)
Consolidated		53,371		7.34			29,089		4.00
Bank		67,897		9.35			29,032		4.00
Tier I capital (to average assets)
Consolidated		53,371		4.95			43,156		4.00
Bank		67,897		6.28			43,221		4.00

The Consent Order requires the Bank to achieve the minimum capital ratios presented below:

	Actual as of June 30, 2014					Ratio Required by Consent Order
	Amount		Ratio			Amount		Ratio
Total capital to risk-weighted assets	$	83,012		11.79	%	$	84,526		12.00	%
Tier I capital to average assets		68,619		6.51			94,847		9.00

At June 30, 2014, PBI Bank’s Tier 1 leverage ratio was 6.51%, and its total risk-based capital ratio was 11.79%, both of which are below the minimum capital ratios required by the Consent Order. 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.

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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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 $1.9 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. 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 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 on which it is moving forward to appeal. 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 accrual 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. 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. 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). The complaint alleges violation of the Kentucky Securities Act and negligent misrepresentation against all named defendants, and breach of contract against Porter Bancorp alone. 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 September 13, 2013, defendants filed a motion to dismiss all claims in the complaint for pleading failures and for failure to state a claim upon which relief may be granted. On March 25, 2014, the judge ruled that SBAV had failed to state a claim against PBI Bank and dismissed PBI Bank from the case. The claims against Porter Bancorp, the Estate of J. Chester Porter and Ms. Bouvette remain and have proceeded to discovery. On April 21, 2014, Porter Bancorp filed a third-party complaint for contribution against SBAV’s investment adviser, the Clinton Group, Inc., alleging that, to the extent the Court finds SBAV to have suffered a recoverable loss, the Clinton Group’s failure to exercise due care and negligence in conducting due diligence contributed to that loss. We dispute the material factual allegations made in SBAV’s complaint and intend to defend against SBAV’s claims vigorously.

Thomas E. Perez, Secretary of the United States Department of Labor (DOL) v. PBI Bank, Inc. On December 26, 2013, the United States Department of Labor (“DOL”) filed a lawsuit against PBI Bank in U.S. District Court for the Northern District of Indiana. Thomas E. Perez, Secretary of the United States Department of Labor v. PBI Bank, Inc. (Civ. Action 3:13-CV-1400-PPS). The complaint alleges that in 2007 PBI Bank, in the capacity of trustee for the Miller’s Health System’s Inc. Employee Stock Ownership Plan, authorized the alleged imprudent and disloyal purchase of the stock of Miller’s Health Systems, Inc. (“Miller’s Health”) in 2007 for $40 million, a price allegedly far in excess of the stock’s fair market value. The suit also alleges, among other things, that PBI Bank approved 100% seller financing for the transaction at an excessive rate of interest. On March 31, 2014, PBI Bank filed its answer, disputing the material factual allegations of the complaint. On April 10, 2014, PBI Bank filed a third-party complaint against Miller’s Health seeking to enforce its indemnity rights, as well as third party claims for contribution against named directors and officers of Miller’s Health. On May 19, 2014, PBI Bank filed a motion to dismiss the complaint on the basis of a statute of limitations defense. The parties have submitted briefs on both motions to dismiss and await a ruling. We dispute the material factual allegations made in the complaint and intend to defend against DOL’s claims vigorously.

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AIT Laboratories Employee Stock Ownership Plan. The Department of Labor has audited certain transactions between certain former shareholders of AIT Holding Company and the AIT Laboratories Employee Stock Ownership Plan. PBI Bank served as trustee of the AIT ESOP in June 2009 when the AIT ESOP purchased all the stock of AIT Holding Company for $90 million, an amount the DOL alleges was well in excess of the stock’s then-fair market value. On July 24, 2014, the DOL notified the former AIT Holding Company shareholders and PBI Bank that unless an agreement is reached to settle the matter, DOL intended to file a lawsuit against them no later than August 31, 2014. We dispute the material factual allegations that have been made by DOL and intend to vigorously defend against any claims.

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.

• While we believe our provision for legal contingencies is adequate, the outcome of legal proceedings is difficult to predict and we may settle legal claims or be subject to judgments for amounts that exceed our estimates.

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, 2013 Annual Report on Form 10-K.

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 they are reasonable. We caution you however, forward looking statements relying upon such assumptions or bases almost always vary from actual results, and the differences between those statements 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 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 community bank with a wide range of commercial and personal banking products.

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The Company reported a net income of $43,000 and net loss of $244,000 for the three and six months ended June 30, 2014, compared with net loss of $1.3 million and $1.4 million for the same periods of 2013. After deductions for dividends on preferred stock and loss allocated to participating securities, net loss attributable to common shareholders was $672,000 and $1.6 million, respectively, for the three and six months ended June 30, 2014, compared with net loss to common shareholders of $1.7 million and $2.2 million for the three and six months ended June 30, 2013.

Basic and diluted loss per common share were ($0.06) and ($0.14) for the three and six months ended June 30, 2014 compared with basic and diluted loss per common share of ($0.14) and ($0.19) for the three and six months ended June 30, 2013.

The following significant events occurred during the six months ended June 30, 2014:

• Net interest margin decreased 11 basis points to 3.04% in the first six months of 2014 compared with 3.15% in the first six months of 2013. The decrease in margin between periods was primarily due to a reduction in interest earning assets coupled with lower rates on those assets. Average loans decreased 18.1% to $687.9 million in the first six months of 2014 compared with $839.5 million in the first six months of 2013. Net loans decreased 16.0% to $619.0 million at June 30, 2014, compared with $737.2 million at June 30, 2013.

• No provision for loan losses was recorded in the second quarter of 2014 or 2013, or in the first six months of 2014, compared to a provision of $450,000 for the six months ended June 30, 2013. The decrease was primarily attributable to the reduction in the loan portfolio size, declining historical loss rates, a stabilization in loan risk grade classification, and more stable collateral values for collateral dependent loans. Net charge-offs of $1.4 million were recognized for the second quarter of 2014 and net charge-offs for the six months ended June 30, 2014 were $4.1 million, compared to $2.3 million and $19.6 million for the three and six months ended June 30, 2013, respectively.

• We continued to execute on our strategy to reduce our commercial real estate and construction and development loans. At June 30, 2014, we were compliant with the terms of our Consent Order with respect to both our level of non-owner occupied commercial real estate loans as well as our level of construction and development loans. Construction and development loans totaled $32.8 million, or 39% of total risk-based capital, at June 30, 2014 compared with $43.3 million, or 52% of total risk-based capital, at December 31, 2013. Non-owner occupied commercial real estate loans, construction and development loans, and multi-family residential real estate loans as a group totaled $199.8 million, or 241% of total risk-based capital, at June 30, 2014 compared with $237.0 million, or 284% of total risk-based capital, at December 31, 2013.

• 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 3.7% to $950.8 million at June 30, 2014 compared with $987.7 million at December 31, 2013. Certificate of deposit balances declined $48.8 million during the first six months of 2014 to $631.1 million at June 30, 2014, from $680.0 million at December 31, 2013. Demand deposits increased 2.3% during the first six months of 2014 compared with December 31, 2013.

• Non-performing loans decreased $57.6 million to $44.4 million at June 30, 2014, compared with $102.0 million at December 31, 2013. The decrease in non-performing loans was due to the migration of non-performing loans to the OREO portfolio, as well as $22.4 million in paydowns. Net charge-offs were $4.1 million for the six months ended June 30, 2014. The charge-offs resulted primarily from charging off specific reserves for loans deemed to be collateral dependent.

• Loans past due 30-59 days decreased from $10.7 million at December 31, 2013 to $3.1 million at June 30, 2014 and loans past due 60-89 days increased from $775,000 at December 31, 2013 to $991,000 at June 30, 2014. Total loans past due and nonaccrual loans decreased to $48.4 million at June 30, 2014 from $113.5 million at December 31, 2013.

• Foreclosed properties were $62.9 million at June 30, 2014, compared with $30.9 million at December 31, 2013, and $47.0 million at June 30, 2013. During the first six months of 2014, the Company acquired $36.9 million and sold $4.3 million of other real estate owned (“OREO”). In addition, we recorded fair value write-downs of $650,000 during the first six months of 2014 reflecting declines in appraisal valuations and changes in pricing strategies. Our ratio of non-performing assets to total assets decreased to 10.20% at June 30, 2014, compared with 12.35% at December 31, 2013, and 14.86% at June 30, 2013.

• Long-term interest rates declined from December 31, 2013 to June 30, 2014 resulting in a decrease in the net unrealized loss in our available for sale securities portfolio between period ends and a similar increase in the shareholders equity component, accumulated other comprehensive loss.

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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 Company (“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 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, 2014, 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:

• 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 this evaluation and to assist in evaluating our options for increasing capital and redeeming our Series A Preferred Stock.

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

• Management succession and adding resources to the management team. John T. Taylor became CEO of PBI Bank in 2012 and CEO of the Company in 2013. In addition, we appointed new executives to lead key functions of our banking operations. John R. Davis became Chief Credit Officer of PBI Bank in 2012, with responsibility for establishing and executing credit quality policies and overseeing credit administration for the organization. We have also augmented our staffing in the commercial lending area, now led by Joe C. Seiler.

• Evaluating and implementing improvements to 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.

• 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 $643.0 million at June 30, 2014.

• We have reduced our construction and development loans to less than 75% of total risk-based capital at June 30, 2014, and have now been in compliance with the Consent Order for nine quarters.

• We have reduced our non-owner occupied commercial real estate loans, construction and development loans, and multi-family residential real estate loans to less than 250% of total risk-based capital at June 30, 2014, and we are now in compliance with the Consent Order. These loans represented 241% of total risk-based capital at June 30, 2014, down from 284% at December 31, 2013.

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

• Our acquisition of real estate assets through the loan remediation process slowed during 2013, as we acquired $20.6 million of OREO in 2013 compared with $33.5 million during 2012. We acquired $36.9 million in the first six months of 2014. Additionally, nonaccrual loans totaled $44.4 million at June 30, 2014, 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 $596,000 during the first six months of 2014, comprised of $650,000 in fair value write-downs to reflect declines in appraisal valuations and changes in our pricing strategies, offset by $54,000 in net gain on sales of OREO.

• We continually evaluate opportunities to maximize the value we receive from the sale of OREO. We pursue multiple sales channels with focus primarily on internal marketing and the use of brokers.

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.

37

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, 2013. Management has discussed the development, selection, and application of our critical accounting policies with our Audit Committee. During the first six months of 2014, 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, 2014, compared with the same period of 2013:

	For the Three Months Ended June 30,						Change from Prior Period
	2014			2013			Amount			Percent
	(dollars in thousands)
Gross interest income	$	10,166		$	11,168		$	(1,002	)		(9.0	)%
Gross interest expense		2,552			2,816			(264	)		(9.4	)
Net interest income		7,614			8,352			(738	)		(8.8	)
Provision for loan losses		—			—			—			—
Non-interest income		949			2,148			(1,199	)		(55.8	)
Non-interest expense		8,944			11,809			(2,865	)		(24.3	)
Net loss before taxes		(381	)		(1,309	)		928			(70.9	)
Income tax benefit		(424	)		—			(424	)		100.0
Net income (loss)		43			(1,309	)		1,352			(103.3	)

Net loss before taxes for the three months ended June 30, 2014 totaled $381,000, compared with a net loss before taxes of $1.3 million for the comparable period of 2013. A tax benefit was recognized in the second quarter of 2014 due to gains in other comprehensive income that are presented in current operations. The calculation for the income tax provision or benefit generally does not consider the tax effects of changes in other comprehensive income, or OCI, which is a component of stockholders’ equity on the balance sheet. However, an exception is provided in certain circumstances, such as when there is a full valuation allowance against net deferred tax assets, there is a loss from continuing operations and there is income in other components of the financial statements. In such a case, pre-tax income from other categories, such as changes in OCI, must be considered in determining a tax benefit to be allocated to the loss from continuing operations. For the quarter ended June 30, 2014, this resulted in $424,000 of income tax benefit allocated to continuing operations. The June 30, 2014 tax benefit is entirely due to gains in other comprehensive income that are presented in current operations in accordance with applicable accounting standards. Net income after recognition of the tax benefit was $43,000 for the second quarter. Net interest income decreased $738,000 from the 2013 second quarter as a result of 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 $948,000 and $1.5 million of interest lost on nonaccrual loans in the second quarters of 2014 and 2013, respectively. Non-interest income decreased by $1.2 million to $949,000 from $2.1 million in the second quarter of 2013, primarily due to decreases in gains on sales of securities and OREO income. Non-interest expense also decreased during the period from $11.8 million to $8.9 million for the three months ended June 30, 2013 and 2014, respectively. This decrease was primarily due to decreases in OREO expenses of $883,000 and loan collection expenses of $2.0 million. OREO expense may be elevated in future periods based on the transfer of $35.4 million from loans to OREO during the current quarter as we work to sell these properties.

The following table summarizes components of income and expense and the change in those components for the six months ended June 30, 2014, compared with the same period of 2013:

	For the Six Months Ended June 30,						Change from Prior Period
	2014			2013			Amount			Percent
	(dollars in thousands)
Gross interest income	$	20,063		$	22,426		$	(2,363	)		(10.5	)%
Gross interest expense		5,149			5,776			(627	)		(10.9	)
Net interest income		14,914			16,650			(1,736	)		(10.4	)
Provision for loan losses		—			450			(450	)		(100.0	)
Non-interest income		1,864			3,795			(1,931	)		(50.9	)
Non-interest expense		17,446			21,373			(3,927	)		(18.4	)
Net loss before taxes		(668	)		(1,378	)		710			(51.5	)
Income tax benefit		(424	)		—			(424	)		100.0
Net loss		(244	)		(1,378	)		1,134			(82.3	)

38

Net loss before taxes for the six months ended June 30, 2014 totaled $668,000, compared with a net loss before taxes of $1.4 million for the comparable period of 2013. After the tax benefit recorded in the second quarter as noted above, net loss for the first six months 2014 was $244,000. Provision for loan losses expense decreased $450,000 for the first six months of 2014 compared with the same period in 2013. This decrease in provision expense is primarily attributable to the substantial reduction in the loan portfolio size, declining historical loss rates, the lower pace of loans migrating downward in risk grade classification, and more stable collateral values for collateral dependent loans. Net charge-offs were $4.1 million for the six months ended June 30, 2014, compared to $19.6 million for the same period in 2013. The charge-offs for both periods were primarily the result of charging-off specific reserves for loans deemed to be collateral dependent. Net interest income decreased $1.7 million from the first six months of 2013 as a result of 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 $2.1 million and $3.0 million of interest lost on nonaccrual loans in the first six months of 2014 and 2013, respectively. Non-interest income decreased by $1.9 million to $1.9 million from $3.8 million for the first six months of 2013, primarily due to decreases in net gains on sales of securities, OREO income, and income from fiduciary activities. Non-interest expense also decreased during the period from $21.4 million to $17.4 million for the six months ended June 30, 2013 and 2014, respectively. This decrease was primarily due to decreases in OREO expenses of $1.0 million and loan collection expenses of $2.5 million.

Net Interest Income – Our net interest income was $7.6 million for the three months ended June 30, 2014, a decrease of $738,000, or 8.8%, compared with $8.4 million for the same period in 2013. Net interest spread and margin were 3.01% and 3.13%, respectively, for the second quarter of 2014, compared with 3.11% and 3.24%, respectively, for the second quarter of 2013. Net average non-accrual loans were $66.7 million and $115.4 million for the second quarters of 2014 and 2013, respectively. Net interest income was $14.9 million for the six months ended June 30, 2014, a decrease of $1.7 million, or 10.4%, compared with $16.7 million for the same period of 2013. Net interest spread and margin were 2.93% and 3.04%, respectively, for the first six months of 2014, compared with 3.02% and 3.15%, respectively, for the first six months of 2013. Net average non-accrual loans were $79.0 million and $112.3 million in the first six months of 2014 and 2013, respectively.

Average loans receivable declined approximately $129.3 million for the quarter ended June 30, 2014 compared with the second quarter of 2013. This resulted in a decline in interest revenue of approximately $1.4 million for the quarter ended June 30, 2014 compared with the prior year period. Average loans receivable declined approximately $151.7 million for the six months ended June 30, 2014 compared with the first six months of 2013. This resulted in a decline in interest revenue of approximately $3.1 million for the six months ended June 30, 2014 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. Declines in interest revenue for both periods were offset by the collection of previously charged-off accrued uncollected interest and late charges of approximately $240,000.

Net interest margin decreased 11 basis points from our margin of 3.24% in the prior year second quarter. The yield on earning assets declined 15 basis points from the second quarter of 2013, compared with a five basis point decline in rates paid on interest-bearing liabilities. This resulted in a net $738,000 reduction in net interest income. Net interest margin for the first six months of 2014 decreased 11 basis points from our margin of 3.15% in the first half of 2013 due primarily to lower average earning assets relative to average interest bearing liabilities. The yield on earning assets declined 15 basis points from the first six months of 2013, compared with a six basis point decline in rates paid on interest-bearing liabilities.

Net interest margin for the second quarter of 2014 increased 17 basis points from our margin of 2.96% in the first quarter of 2014, due primarily to higher yield on loans and the collection of previously charged-off accrued uncollected interest and late charges of approximately $240,000, countered by lower average loan receivables and lower yield on investment securities. Average loan receivables declined $20.5 million from the first quarter of 2014, 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 soft loan demand. Yield on loans was positively affected by a decrease in foregone interest on non-accrual loans. Interest foregone on non-accrual loans totaled $948,000 in the second quarter of 2014, compared with $1.2 million in the first quarter of 2014, and $1.5 million in the second quarter of 2013. The decrease in yield on investment securities was the result of our investment into lower-yielding securities at current market rates. Yield on average earning assets for the second quarter of 2014 increased 17 basis points from 3.99% in the first quarter of 2014, compared with a one basis point decrease in rates paid on interest-bearing liabilities from 1.16% in the first quarter of 2014.

39

Average Balance Sheets

The following table presents the average balance sheets for the three month periods ended June 30, 2014 and 2013, 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,
	2014								2013
	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)	$	677,643		$	8,572		5.07	%	$	806,941		$	9,954		4.95	%
Securities
Taxable		181,706			1,215		2.68			145,909			833		2.29
Tax-exempt (3)		30,549			235		4.75			29,896			231		4.77
FHLB stock		7,323			89		4.87			10,072			105		4.18
Other equity securities		—			—		—			1,305			15		4.61
Federal funds sold and other		94,195			55		0.23			56,392			30		0.21
Total interest-earning assets		991,416			10,166		4.16	%		1,050,515			11,168		4.31	%
Less: Allowance for loan losses		(25,314	)							(39,255	)
Non-interest earning assets		90,786								93,547
Total assets	$	1,056,888							$	1,104,807
LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing liabilities:
Certificates of deposit and other time deposits	$	642,881		$	2,133		1.33	%	$	714,091		$	2,400		1.35	%
NOW and money market deposits		176,192			163		0.37			146,477			129		0.35
Savings accounts		37,277			23		0.25			41,090			31		0.30
Repurchase agreements		2,199			1		0.18			2,749			2		0.29
FHLB advances		4,751			32		2.70			5,128			41		3.21
Junior subordinated debentures		30,621			200		2.62			31,524			213		2.71
Total interest-bearing liabilities		893,921			2,552		1.15	%		941,059			2,816		1.20	%
Non-interest-bearing liabilities:
Non-interest-bearing deposits		109,814								106,444
Other liabilities		15,463								10,400
Total liabilities		1,019,198								1,057,903
Stockholders’ equity		37,690								46,904
Total liabilities and stockholders’ equity	$	1,056,888							$	1,104,807
Net interest income				$	7,614							$	8,352
Net interest spread							3.01	%							3.11	%
Net interest margin							3.13	%							3.24	%

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

(2) Calculations include non-accruing loans averaging $66.7 million and $115.4 million, respectively, in average loan amounts outstanding.

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

40

The following table presents the average balance sheets for the six month periods ended June 30, 2014 and 2013, 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,
	2014								2013
	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)	$	687,857		$	16,893		4.95	%	$	839,542		$	19,987		4.80	%
Securities
Taxable		179,654			2,388		2.68			145,542			1,685		2.33
Tax-exempt (3)		30,816			476		4.79			29,187			452		4.80
FHLB stock		8,204			191		4.69			10,072			213		4.26
Other equity securities		43			—		—			1,332			30		4.54
Federal funds sold and other		98,644			115		0.24			55,149			59		0.22
Total interest-earning assets		1,005,218			20,063		4.08	%		1,080,824			22,426		4.23	%
Less: Allowance for loan losses		(26,567	)							(47,253	)
Non-interest earning assets		86,540								94,611
Total assets	$	1,065,191							$	1,128,182
LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing liabilities:
Certificates of deposit and other time deposits	$	656,500		$	4,324		1.33	%	$	731,863		$	4,937		1.36	%
NOW and money market deposits		171,335			310		0.36			149,981			262		0.35
Savings accounts		37,091			46		0.25			40,742			65		0.32
Repurchase agreements		2,277			2		0.18			2,658			3		0.23
FHLB advances		4,569			65		2.87			5,275			84		3.21
Junior subordinated debentures		30,734			402		2.64			31,634			425		2.71
Total interest-bearing liabilities		902,506			5,149		1.15	%		962,153			5,776		1.21	%
Non-interest-bearing liabilities:
Non-interest-bearing deposits		110,191								108,281
Other liabilities		15,151								10,424
Total liabilities		1,027,848								1,080,858
Stockholders’ equity		37,343								47,324
Total liabilities and stockholders’ equity	$	1,065,191							$	1,128,182
Net interest income				$	14,914							$	16,650
Net interest spread							2.93	%							3.02	%
Net interest margin							3.04	%							3.15	%

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

(2) Calculations include non-accruing loans averaging $79.0 million and $112.3 million, respectively, in average loan amounts outstanding.

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

41

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, 2014 vs. 2013									Six Months Ended June 30 2014 vs. 2013
	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	$	248		$	(1,630	)	$	(1,382	)	$	614		$	(3,708	)	$	(3,094	)
Securities		148			238			386			258			469			727
FHLB stock		16			(32	)		(16	)		20			(42	)		(22	)
Other equity securities		—			(15	)		(15	)		(15	)		(15	)		(30	)
Federal funds sold and other		3			22			25			5			51			56
Total increase (decrease) in interest income		415			(1,417	)		(1,002	)		882			(3,245	)		(2,363	)
Interest-bearing liabilities:
Certificates of deposit and other time deposits		(31	)		(236	)		(267	)		(115	)		(498	)		(613	)
NOW and money market accounts		7			27			34			9			39			48
Savings accounts		(5	)		(3	)		(8	)		(13	)		(6	)		(19	)
Federal funds purchased and repurchase agreements		(1	)		—			(1	)		(1	)		—			(1	)
FHLB advances		(6	)		(3	)		(9	)		(9	)		(10	)		(19	)
Junior subordinated debentures		(7	)		(6	)		(13	)		(11	)		(12	)		(23	)
Total increase (decrease) in interest expense		(43	)		(221	)		(264	)		(140	)		(487	)		(627	)
Increase (decrease) in net interest income	$	458		$	(1,196	)	$	(738	)	$	1,022		$	(2,758	)	$	(1,736	)

Non-Interest Income – The following table presents the major categories of non-interest income for the three and six months ended June 30, 2014 and 2013:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2014		2013		2014		2013
	(dollars in thousands)
Service charges on deposit accounts	$	487	$	506	$	955	$	999
Income from fiduciary activities		—		—		—		517
Bank card interchange fees		205		196		366		368
Other real estate owned rental income		18		230		25		342
Gains on sales of investment securities, net		2		703		46		703
Income from bank owned life insurance		62		305		138		384
Other		175		208		334		482
Total non-interest income	$	949	$	2,148	$	1,864	$	3,795

Non-interest income for the second quarter ended June 30, 2014 decreased by $1.2 million, or 55.8%, compared with the second quarter of 2013. For the six months ended June 30, 2014, non-interest income decreased by $1.9 million, or 50.9% to $1.9 million compared with $3.8 million for the same period of 2013.

The decrease in non-interest income between the three month comparative periods was primarily due to a $701,000 reduction in gains on sales of investment securities, as well as decreases in 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 $657,000 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. Other real estate owned income and income from bank owned life insurance also declined during the period.

42

Non-interest Expense – The following table presents the major categories of non-interest expense for the six months ended June 30, 2014 and 2013:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2014		2013		2014		2013
	(dollars in thousands)
Salary and employee benefits	$	3,949	$	3,999	$	7,690	$	8,138
Occupancy and equipment		896		913		1,788		1,844
Other real estate owned expense		774		1,657		1,436		2,448
Professional fees		764		499		1,322		905
FDIC insurance		571		650		1,111		1,289
Loan collection expense		389		2,407		928		3,442
State franchise tax		405		537		830		1,074
Communications		165		179		400		354
Insurance expense		153		160		302		311
Postage and delivery		94		102		204		215
Other		784		706		1,435		1,353
Total non-interest expense	$	8,944	$	11,809	$	17,446	$	21,373

Non-interest expense for the second quarter ended June 30, 2014 decreased $2.9 million, or 24.3%, compared with the second quarter of 2013. For the six months ended June 30, 2014, non-interest expense decreased $3.9 million, or 18.4% to $17.4 million compared with $21.4 million for the first six months of 2013. The decreases in non-interest expense for the second quarter and six months ended June 30, 2014 were primarily attributable to reduced loan collection and OREO expenses for both periods.

Income Tax Expense – No income tax expense was recorded for the first six months of 2014; an income tax benefit of $424,000 was recorded for the quarter ended June 30, 2014. Our June 30, 2014 tax benefit is entirely due to gains in other comprehensive income that are presented in current operations in accordance with applicable accounting standards. The income tax effect on net loss before taxes for the six months ended June 30, 2014, increased our deferred tax assets and related valuation allowance by $415,000. See discussion in the results of operations above.

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,
	2014			2013			2014			2013
	(dollars in thousands)
Federal statutory rate times financial statement income	$	(130	)	$	(458	)	$	(230	)	$	(482	)
Effect of:
Valuation allowance		227			554			415			677
Tax-exempt income		(80	)		(79	)		(162	)		(158	)
Tax benefit from OCI components		(424	)		—			(424	)		—
Non-taxable life insurance income		(22	)		(26	)		(48	)		(52	)
Other, net		5			9			25			15
Total	$	(424	)	$	—		$	(424	)	$	—

Analysis of Financial Condition

Total assets decreased $24.1 million, or 2.2%, to $1.052 billion at June 30, 2014, from $1.076 billion at December 31, 2013. This decrease was primarily attributable to a decrease of $62.2 million in net loans, partially offset by increases of $32.0 million in other real estate owned and $17.4 million in investment securities. 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 OREO was due to the continued remediation of problem loans.

Loans Receivable – Loans receivable decreased $66.3 million, or 9.3%, during the six months ended June 30, 2014 to $643.0 million. The decline in loans receivable was attributable to net charge-offs of $4.1 million, transfers to OREO of $35.4 million, and loan payoffs outpacing loan funding by approximately $26.8 million.

43

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 1-4 family residential real estate, there is no concentration of loans in any industry exceeding 10% of total loans, with the exception of loans for retail facilities (included in nonfarm nonresidential commercial real estate below). Those loans totaled $70.6 million at June 30, 2014 and $98.5 million at December 31, 2013.

	As of June 30, 2014					As of December 31, 2013
	Amount		Percent			Amount		Percent
	(dollars in thousands)
Commercial	$	65,031		10.12	%	$	52,878		7.45	%
Commercial Real Estate
Construction		32,778		5.10			43,326		6.11
Farmland		64,880		10.09			71,189		10.04
Nonfarm nonresidential		190,909		29.69			232,026		32.71
Residential Real Estate
Multi-family		43,496		6.76			46,858		6.61
1-4 Family		205,116		31.90			228,505		32.21
Consumer		12,669		1.97			14,365		2.03
Agriculture		27,477		4.27			19,199		2.71
Other		674		0.10			980		0.13
Total loans	$	643,030		100.00	%	$	709,326		100.00	%

Loan Portfolio by Risk Category – The following table presents a summary of the loan portfolio at the dates indicated, by risk category.

	June 30, 2014		March 31, 2014		December 31, 2013		September 30, 2013
	(in thousands)
Pass	$	434,853	$	415,144	$	369,529	$	364,720
Watch		91,208		104,171		144,316		159,387
Special Mention		3,223		4,069		5,865		9,249
Substandard		113,746		159,207		189,616		200,594
Doubtful		—		—		—		290
Total	$	643,030	$	682,591	$	709,326	$	734,240

Our loans receivable have decreased $66.3 million, or 9.3%, during the six months ended June 30, 2014. All loan risk categories have decreased since December 31, 2013, with the exception of pass loans. The pass category increased approximately $65.3 million, the watch category declined approximately $53.1 million, the special mention category declined approximately $2.6 million, and the substandard category declined approximately $75.9 million. During the first quarter of 2014, management instituted a new risk category within its pass classification. The purpose was to better identify certain loans where the borrower’s sustained satisfactory repayment history was deemed a more relevant predictor of future loss than certain underwriting criteria at origination. The establishment of this new pass risk category helps to ensure the watch risk category remains transitory and event driven in nature. A total of $24.2 million in commercial, $8.5 million in residential, and $2.2 million in agriculture loans were reclassified from watch to the new pass risk category during the first quarter of 2014.

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Loan Delinquency – The following table presents a summary of loan delinquencies at the dates indicated.

	June 30, 2014		March 31, 2014		December 31, 2013		September 30, 2013
	(in thousands)
Past Due Loans:
30-59 Days	$	3,057	$	5,667	$	10,696	$	10,018
60-89 Days		991		1,232		775		7,582
90 Days and Over		—		—		232		—
Total Loans Past Due 30-90+ Days		4,048		6,899		11,703		17,600
Nonaccrual Loans		44,375		77,344		101,767		106,922
Total Past Due and Nonaccrual Loans	$	48,423	$	84,243	$	113,470	$	124,522

During the six months ended June 30, 2014, nonaccrual loans decreased by $57.4 million to $44.4 million. This decrease was due primarily to $22.4 million in paydowns and $35.4 million transferred to OREO, offset by $9.1 million in loans moved to nonaccrual status. During the six months ended June 30, 2014, loans past due 30-59 days decreased from $10.7 million at December 31, 2013 to $3.1 million at June 30, 2014. Loans past due 60-89 days increased from $775,000 at December 31, 2013 to $991,000 at June 30, 2014. This represents a $7.4 million decrease from December 31, 2013 to June 30, 2014, in loans past due 30-89 days. 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.

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, 2014 and December 31, 2013.

	June 30, 2014			December 31, 2013
	(dollars in thousands)
Loans past due 90 days or more still on accrual	$	—		$	232
Nonaccrual loans		44,375			101,767
Total non-performing loans		44,375			101,999
Real estate acquired through foreclosure		62,935			30,892
Other repossessed assets		—			—
Total non-performing assets	$	107,310		$	132,891
Non-performing loans to total loans		6.90	%		14.38	%
Non-performing assets to total assets		10.20	%		12.35	%
Allowance for non-performing loans	$	1,454		$	2,285
Allowance for non-performing loans to non-performing loans		3.28	%		2.24	%

Nonperforming loans at June 30, 2014, were $44.4 million, or 6.9% of total loans, compared with $112.3 million, or 14.49% of total loans, at June 30, 2013, and $102.0 million, or 14.38% of total loans at December 31, 2013. Net loan charge-offs in the first six months of 2014 totaled $4.1 million compared to $19.6 million for the first six months of 2013, and were primarily the result of charging off specific reserves for loans deemed to be collateral dependent, in accordance with regulatory guidance.

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 borrower. If the loan is considered collateral dependent, it is reported net of allocated reserves, at the fair value of the collateral less cost to sell.

We do not have a formal loan modification program. Rather, we work with individual borrowers 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 borrower is unable to make contractual payments, we review the particular circumstances of the borrower’s situation and negotiate a revised payment stream. In other words, we identify performing borrowers 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 borrower a reasonable period of time to remedy the issue causing cash flow constraints within their business so they can return to performing status over time.

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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 borrower fails to perform under the modified terms, we place the loan(s) on nonaccrual status and begin the process of working with the borrower to liquidate the underlying collateral to satisfy the debt.

At June 30, 2014, we had 67 restructured loans totaling $50.9 million with borrowers who experienced deterioration in financial condition compared with 98 loans totaling $91.3 million at December 31, 2013. In general, these loans were granted interest rate reductions to provide cash flow relief to borrowers experiencing cash flow difficulties. Of these loans, five loans totaling approximately $4.3 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 $889,000 of commercial loans. At June 30, 2014, $32.4 million of our restructured loans were accruing and $18.5 million were on nonaccrual compared with $44.3 million and $46.9 million, respectively, at December 31, 2013. There were no new TDRs during the first six months of 2014, compared to $4.2 million during the first six months of 2013.

The following table sets forth information with respect to TDRs, non-performing loans, real estate acquired through foreclosure, and other repossessed assets.

	June 30, 2014			December 31, 2013
	(dollars in thousands)
Total non-performing loans	$	44,375		$	101,999
TDRs on accrual		32,389			44,346
Total non-performing loans and TDRs on accrual	$	76,764		$	146,345
Real estate acquired through foreclosure		62,935			30,892
Other repossessed assets		—			—
Total non-performing assets and TDRs on accrual	$	139,699		$	177,237
Total non-performing loans and TDRs on accrual to total loans		11.94	%		20.63	%
Total non-performing assets and TDRs on accrual to total assets		13.26	%		16.47	%

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 borrower’s loan to a market rate as the result of a market decline in rates.

Management periodically reviews renewals/modifications of previously identified TDRs for which there was no principal forgiveness, to consider if it is appropriate to remove the TDR classification. If the borrower is no longer experiencing financial difficulty and the renewal/modification did not contain a concessionary interest rate or other concessionary terms, management considers the potential removal of the TDR classification. If deemed appropriate, the TDR classification is removed as the borrower has complied with the terms of the loan at the date of renewal/modification and there was a reasonable expectation that the borrower would continue to comply with the terms of the loan after the date of the renewal/modification. In this instance, the TDR was originally considered a restructuring in a prior year as a result of a modification with an interest rate that was not commensurate with the risk of the underlying loan. Additionally, TDR classification can be removed in circumstances in which the Company performs a non-concessionary re-modification of the loan at terms that were considered to be at market for loans with comparable risk. Management expects the borrower will continue to perform under the re-modified terms based on the borrower’s past history of performance.

At June 30, 2014 and December 31, 2013, TDRs totaled $50.9 million and $91.3 million, respectively. During the six months ended June 30, 2014, TDRs were reduced as a result of $15.9 million in payments along with the transfer of $17.2 million to OREO. In addition, the TDR classification was removed from two loans that met the requirements discussed above. These two loans totaled $7.3 million at December 31, 2013. These loans are no longer evaluated individually for impairment.

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If the borrower fails to perform, we place the loan on nonaccrual status and seek to liquidate the underlying collateral for these loans. Our nonaccrual policy for restructured loans is identical to our nonaccrual policy for all loans. Our policy calls for a loan to be reported as nonaccrual 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. Upon determination that a loan is collateral dependent, the loan is charged down to the fair value of collateral less estimated costs to sell.

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

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 consideration 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.

An analysis of changes in the allowance for loan losses and selected ratios for the three and six month periods ended June 30, 2014 and 2013, and for the year ended December 31, 2013 follows:

	Three Months Ended June 30,						Six Months Ended June 30,						Year Ended December 31, 2013
	2014			2013			2014			2013
	(in thousands)
Balance at beginning of period	$	25,415		$	39,839		$	28,124		$	56,680		$	56,680
Loans charged-off:
Real estate		2,749			3,003			5,531			19,654			28,879
Commercial		308			132			454			1,108			2,828
Consumer		51			203			179			521			773
Agriculture		21			66			30			83			128
Other		1			—			18			—			—
Total charge-offs		3,130			3,404			6,212			21,366			32,608
Recoveries
Real estate		1,540			425			1,739			677			1,622
Commercial		144			595			232			721			1,212
Consumer		35			88			111			179			266
Agriculture		3			16			9			218			252
Other		19			—			23			—			—
Total recoveries		1,741			1,124			2,114			1,795			3,352
Net charge-offs		1,389			2,280			4,098			19,571			29,256
Provision for loan losses		—			—			—			450			700
Balance at end of period	$	24,026		$	37,559		$	24,026		$	37,559		$	28,124
Allowance for loan losses to period-end loans		3.74	%		4.85	%		3.74	%		4.85	%		3.96	%
Net charge-offs to average loans (annualized)		0.82	%		1.13	%		1.20	%		4.70	%		3.71	%
Allowance for loan losses to non-performing loans		54.14	%		33.46	%		54.14	%		33.46	%		27.57	%
Allowance for loan losses for loans individually evaluated for impairment	$	1,753		$	10,190		$	1,753		$	10,190		$	3,471
Loans individually evaluated for impairment		79,742			175,038			79,742			175,038			149,883
Allowance for loan losses to loans individually evaluated for impairment		2.20	%		5.82	%		2.20	%		5.82	%		2.32	%
Allowance for loan losses for loans collectively evaluated for impairment	$	22,273		$	27,369		$	22,273		$	27,369		$	24,653
Loans collectively evaluated for impairment		563,288			599,747			563,288			599,747			559,443
Allowance for loan losses to loans collectively evaluated for impairment		3.95	%		4.56	%		3.95	%		4.56	%		4.41	%

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Our loan loss reserve, as a percentage of total loans at June 30, 2014, decreased to 3.74% from 4.85% at June 30, 2013, and from 3.96% at December 31, 2013. The change in our loan loss reserve as a percentage of total loans between periods is attributable to the fluctuation in historical loss experience, qualitative factors, fewer loans migrating downward in risk grade classifications, charge-off levels, and provision expense. Our allowance for loan losses to non-performing loans was 54.14% at June 30, 2014, compared with 27.57% at December 31, 2013, and 33.46% at June 30, 2013. Net charge-offs in the first six months of 2014 totaled $4.1 million of which $3.6 million were the result of charging off the allowance for individually evaluated loans deemed to be collateral dependent during the period. This resulted in the decline in our allowance for loan losses for loans individually evaluated for impairment and our allowance for loan losses to non-performing loans to current levels.

The following table sets forth the net charge-offs (recoveries) for the periods indicated:

	Six Months Ended June 30, 2014			Year Ended December 31, 2013			Year Ended December 31, 2012
	(in thousands)
Commercial	$	222		$	1,616		$	3,655
Commercial Real Estate		1,809			20,045			21,531
Residential Real Estate		1,983			7,212			8,866
Consumer		68			507			1,005
Agriculture		21			(124	)		1,092
Other		(5	)		—			—
Total net charge-offs	$	4,098		$	29,256		$	36,149

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 3.28% at June 30, 2014 compared with 2.24% at December 31, 2013, and 6.56% at June 30, 2013. The increase in this ratio from December 31, 2013 to June 30, 2014 was primarily attributable to the significant decrease in non-performing loans as well as a reduction in net charge-offs related to specific reserves for loans deemed to be collateral dependent during the period.

The following table presents the unpaid principal balance, recorded investment and allocated allowance related to loans individually evaluated for impairment in the commercial real estate and residential real estate portfolios as of June 30, 2014 and December 31, 2013.

	June 30, 2014						December 31, 2013
	Commercial Real Estate			Residential Real Estate			Commercial Real Estate			Residential Real Estate
	(in thousands)
Unpaid principal balance	$	67,450		$	30,298		$	116,740		$	56,665
Prior charge-offs		(16,772	)		(3,849	)		(22,410	)		(7,153	)
Recorded investment		50,678			26,449			94,330			49,512
Allocated allowance		(1,350	)		(252	)		(2,345	)		(827	)
Recorded investment, less allocated allowance	$	49,328		$	26,197		$	91,985		$	48,685
Recorded investment, less allocated allowance/ Unpaid principal balance		73.13	%		86.46	%		78.79	%		85.92	%

Based on previous charge-offs, our current recorded investment in the commercial real estate and residential real estate segments is significantly below the unpaid principal balance for these loans. The recorded investment and allocated allowance were 73.13% and 86.46% of the unpaid principal balance in the commercial real estate and residential real estate segments of the portfolio, respectively, at June 30, 2014.

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The following table illustrates recent trends in loans collectively evaluated for impairment and the related allowance for loan losses by portfolio segment:

	June 30, 2014							March 31, 2014							December 31, 2013							September 30, 2013
	Loans		Allowance		% of Total			Loans		Allowance		% to Total			Loans		Allowance		% to Total			Loans		Allowance		% to Total
Commercial	$	62,881	$	2,965		4.72	%	$	56,889	$	3,156		5.55	%	$	47,883	$	2,931		6.12	%	$	46,346	$	3,206		6.92	%
Commercial real estate		237,889		11,902		5.00			244,228		12,383		5.07			252,211		14,069		5.58			262,295		13,681		5.22
Residential real estate:		222,163		6,621		2.98			219,456		6,620		3.02			225,851		6,935		3.07			231,070		9,147		3.96
Consumer		12,607		338		2.68			13,585		379		2.79			14,272		407		2.85			15,561		532		3.42
Agriculture		27,248		435		1.60			26,049		415		1.59			18,877		305		1.62			23,337		421		1.80
Other		500		12		2.40			226		9		3.98			349		6		1.72			214		5		2.34
Total	$	563,288	$	22,273		3.95	%	$	560,433	$	22,962		4.10	%	$	559,443	$	24,653		4.41	%	$	578,823	$	26,992		4.66	%

Our allowance for loan losses for loans collectively evaluated for impairment declined to 3.95% at June 30, 2014 from 4.56% at June 30, 2013 and 4.41% at December 31, 2013. This decline was driven primarily by an improving loan risk category classification mix and volume as well as improving historical loss trends which are key factors for estimating general reserves. Other factors include the consideration of growth, composition and diversification of our loan portfolio, current delinquency levels, the results of recent regulatory communications and general economic conditions.

Provision for Loan Losses – No provision for loan losses was recorded in the second quarter of 2014 or 2013, or in the first six months of 2014, compared to $450,000 for the six months ended June 30, 2013. The decrease was primarily attributable to the reduction in the loan portfolio size, declining historical loss rates, a stabilization in loan risk grade classification, and more stable collateral values for collateral dependent loans. All loan risk categories have decreased since December 31, 2013, with the exception of pass loans. The pass category increased approximately $65.3 million, the watch category declined approximately $53.1 million, the special mention category declined approximately $2.6 million, and the substandard category declined approximately $75.9 million. During the first quarter of 2014, management instituted a new risk category within its pass classification. The purpose was to better identify certain loans where the borrower’s sustained satisfactory repayment history was deemed a more relevant predictor of future loss than certain underwriting criteria at origination. The establishment of this new pass risk category helps to ensure the watch risk category remains transitory and event driven in nature. A total of $24.2 million in commercial, $8.5 million in residential, and $2.2 million in agriculture loans were reclassified from watch to the new pass risk category during the first quarter. We consider the size and volume of our portfolio as well as the credit quality of our loan portfolio based upon risk category classification when determining the loan loss provision for each period and the allowance for loan losses at period end.

Foreclosed Properties – Foreclosed properties at June 30, 2014 were $62.9 million compared with $47.0 million at June 30, 2013 and $30.9 million at December 31, 2013. See Footnote 5, “Other Real Estate Owned,” to the financial statements. During the first six months of 2014, we acquired $36.9 million of OREO properties, and sold properties totaling approximately $4.3 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 or have staff in our centralized appraisal department evaluate the latest in-file appraisal 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 gain (loss) on sales, write-downs, and operating expenses for OREO totaled $1.4 million for the six months ended June 30, 2014, compared with $2.4 million for the same period of 2013. During the six months ended June 30, 2014, fair value write-downs of $650,000 were recorded to reflect declining values evidenced by new appraisals and our reduction of marketing prices in connection with our sales strategies compared with $1.3 million for the six months ended June 30, 2013.

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Liabilities – Total liabilities at June 30, 2014 were $1.014 billion compared with $1.040 billion at December 31, 2013, a decrease of $25.9 million, or 2.5%. This decrease was primarily attributable to a decrease in deposits of $36.9 million, or 3.7%, to $950.8 million at June 30, 2014 from $987.7 million at December 31, 2013. Certificate of deposit balances declined $48.8 million during the first six months of 2014 to $631.1 million at June 30, 2014 from $680.0 million at December 31, 2013. The decrease in deposits follows management’s strategy to match liability funding levels with lower loan balances.

Federal Home Loan Bank advances increased by $9.6 million to $14.1 million at June 30, 2014, from $4.5 million at December 31, 2013. 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, 2014					For the Year Ended December 31, 2013
	Average Balance		Average Rate			Average Balance		Average Rate
	(dollars in thousands)
Demand	$	110,191				$	106,153
Interest checking		81,869		0.17	%		84,917		0.23	%
Money market		89,466		0.55			69,842		0.50
Savings		37,091		0.25			39,158		0.29
Certificates of deposit		656,500		1.33			703,982		1.35
Total deposits	$	975,117		0.97	%	$	1,004,052		1.01	%

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, 2014					For the Year Ended December 31, 2013
	Average Balance		Average Rate			Average Balance		Average Rate
	(dollars in thousands)
Less than $100,000	$	369,364		1.26	%	$	405,758		1.28	%
$100,000 or more		287,136		1.41	%		298,224		1.44	%
Total	$	656,500		1.33	%	$	703,982		1.35	%

The following table shows at June 30, 2014 the amount of our time deposits of $100,000 or more by time remaining until maturity (in thousands):

Maturity Period
Three months or less	$	52,523
Three months through six months		66,571
Six months through twelve months		85,148
Over twelve months		74,060
Total	$	278,302

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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 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 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, and other wholesale funding. Our available for sale investment portfolio totaled $180.7 million at June 30, 2014 and within that portfolio, $66.2 million of our securities currently have an unrealized loss of $1.8 million.

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, 2014, our additional borrowing capacity with the FHLB was $10.6 million. Any new advances are limited to a one year maturity or less.

We also have federal funds borrowing lines from 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 $2.2 million at June 30, 2014. 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, 2014, totaling $2.2 million, are needed for the ongoing cash operating expenses of the parent company which have been reduced and are expected to be approximately $400,000 for rest of 2014. We have elected to defer payments on our Series A preferred stock and on our trust preferred securities.

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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, 2014, cumulative accrued and unpaid dividends on this stock totaled $5.9 million. As a result of our dividend deferral, 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 will continue to accrue deferred dividends, which will be 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, 2014, cumulative accrued and unpaid interest on our junior subordinated notes totaled $1.9 million.

Stockholders’ equity increased $1.8 million to $37.8 million at June 30, 2014, compared with $35.9 million at December 31, 2013. The increase was due a decrease in unrealized loss on available for sale securities, offset by the current year net loss and further reduced by dividends declared (accrued and unpaid) on cumulative preferred stock.

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:

										June 30, 2014						December 31, 2013
	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			7.31	%		9.74	%		7.34	%		9.35	%
Total risk-based capital		8.0			10.0			12.0	%		11.07			11.79			11.03			11.44
Tier 1 leverage ratio		4.0			5.0			9.0			4.89			6.51			4.95			6.28

At June 30, 2014, PBI Bank’s Tier 1 leverage ratio was 6.51%, and its total risk-based capital ratio was 11.79%, both of which are below the minimum capital ratios 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.

52

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Company’s interest sensitivity profile was asset sensitive at June 30, 2014, and December 31, 2013. Given a 100 basis point increase in interest rates sustained for one year, base net interest income would decrease by an estimated 1.40% at June 30, 2014, compared with an increase of 2.45% at December 31, 2013, 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 decrease by an estimated 2.68% at June 30, 2014, compared with an increase of 4.85% at December 31, 2013, 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, 2014, as calculated using the static shock model approach:

	Change in Future Net Interest Income
	Dollar Change			Percentage Change
	(dollars in thousands)
+ 200 basis points	$	(765	)		(2.68	)%
+ 100 basis points		(401	)		(1.40	)

We did not run a model simulation for declining interest rates as of June 30, 2014 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, 2014, 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.

53

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

We refer you to the detailed cautionary statements and discussion of risks that affect our Company and its business in “Item 1A – Risk Factors” of our December 31, 2013 Annual Report on Form 10-K. There have been no material changes from the risk factors previously discussed in those reports.

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

Not applicable.

Item 6. Exhibits

(a) Exhibits

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

Exhibit Number	Description of Exhibit
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.
101	The following financial statements from the Company’s Quarterly Report on Form 10Q for the quarter ended June 30, 2014, 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.

54

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, 2014	By:	/s/ John T. Taylor
		John T. Taylor
		Chief Executive Officer
August 8, 2014	By:	/s/ Phillip W. Barnhouse
		Phillip W. Barnhouse
		Chief Financial Officer and Chief Accounting Officer

55

EX-31.1

Exhibit 31.1

Porter Bancorp, Inc.

Rule 13a-14(a) Certification

of Chief Executive Officer

I, John T. Taylor, Chief Executive 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, 2014	/s/ John T. Taylor
	John T. Taylor
	Chief Executive Officer

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, 2014	/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, 2014, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John T. Taylor, Chief Executive 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, 2014	By:	/s/ John T. Taylor
		John T. Taylor
		Chief Executive Officer

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, 2014, 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, 2014	By:	/s/ Phillip W. Barnhouse
		Phillip W. Barnhouse
		Chief Financial Officer

XML

Loans (Detail) (USD $)	Jun. 30, 2014	Dec. 31, 2013	Dec. 31, 2010
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	$ 643,030,000	$ 709,326,000	$ 1,300,000,000
Less: Allowance for loan losses	(24,026,000)	(28,124,000)
Loans, net	619,004,000	681,202,000
Commercial
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	65,031,000	52,878,000
Less: Allowance for loan losses	(3,115,000)	(3,221,000)
Commercial Real Estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	288,567,000	346,541,000
Less: Allowance for loan losses	(13,252,000)	(16,414,000)
Commercial Real Estate | Construction
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	32,778,000	43,326,000	199,500,000
Commercial Real Estate | Farmland
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	64,880,000	71,189,000
Commercial Real Estate | Nonfarm nonresidential
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	190,909,000	232,026,000
Residential Real Estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	248,612,000	275,363,000
Less: Allowance for loan losses	(6,873,000)	(7,762,000)
Residential Real Estate | Multi-Family
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	43,496,000	46,858,000
Residential Real Estate | 1-4 Family
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	205,116,000	228,505,000
Consumer
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	12,669,000	14,365,000
Less: Allowance for loan losses	(339,000)	(416,000)
Agriculture
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	27,477,000	19,199,000
Less: Allowance for loan losses	(435,000)	(305,000)
Other
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	674,000	980,000
Less: Allowance for loan losses	$ (12,000)	$ (6,000)

XML

Scheduled Maturities of Total Time Deposits (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014
Deposit Liabilities [Line Items]
Year 1	$ 473,490
Year 2	121,978
Year 3	12,177
Year 4	7,910
Year 5	15,553
Thereafter	2
Time Deposits, Total	$ 631,110

XML

Major Categories of Other Real Estate Owned (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012
Real Estate Properties [Line Items]
Other Real Estate Owned, Gross	$ 63,134		$ 31,122
Valuation allowance	(199)	(208)	(230)	(747)	(928)	(1,154)
Other real estate owned	62,935		30,892	47,030		43,671
Commercial Real Estate | Construction, Land Development and Other Land
Real Estate Properties [Line Items]
Other Real Estate Owned, Gross	21,827		19,199
Commercial Real Estate | Farmland
Real Estate Properties [Line Items]
Other Real Estate Owned, Gross	1,349		695
Commercial Real Estate | Nonfarm nonresidential
Real Estate Properties [Line Items]
Other Real Estate Owned, Gross	21,956		6,064
Residential Real Estate | Multi-Family
Real Estate Properties [Line Items]
Other Real Estate Owned, Gross	6,335		248
Residential Real Estate | 1-4 Family
Real Estate Properties [Line Items]
Other Real Estate Owned, Gross	$ 11,667		$ 4,916

XML

Earnings (Loss) per Share - Additional Information (Detail) (USD $)	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
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	$ 10.95	$ 10.95
Warrant
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	1,449,459	1,449,459

XML

Advances from Federal Home Loan Bank (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
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 2014 through 2033, averaging 2.89% for 2014	$ 14,134	$ 4,492

XML

Aging of Recorded Investment in Past Due Loans (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 - 59 Days Past Due	$ 3,057	$ 10,696
60 - 89 Days Past Due	991	775
90 Days And Over Past Due		232
Nonaccrual	44,375	101,767
Total Past Due And Nonaccrual	48,423	113,470
Commercial
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 - 59 Days Past Due	430	156
60 - 89 Days Past Due	18	123
Nonaccrual	1,984	2,886
Total Past Due And Nonaccrual	2,432	3,165
Commercial Real Estate | Construction
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 - 59 Days Past Due		261
Nonaccrual	3,880	8,528
Total Past Due And Nonaccrual	3,880	8,789
Commercial Real Estate | Farmland
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 - 59 Days Past Due	200	484
60 - 89 Days Past Due		41
Nonaccrual	6,051	7,844
Total Past Due And Nonaccrual	6,251	8,369
Commercial Real Estate | Nonfarm nonresidential
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 - 59 Days Past Due	550	4,375
60 - 89 Days Past Due	336
Nonaccrual	20,039	48,447
Total Past Due And Nonaccrual	20,925	52,822
Residential Real Estate | Multi-Family
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 - 59 Days Past Due		1,181
Nonaccrual	86	7,513
Total Past Due And Nonaccrual	86	8,694
Residential Real Estate | 1-4 Family
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 - 59 Days Past Due	1,744	4,059
60 - 89 Days Past Due	593	577
90 Days And Over Past Due		230
Nonaccrual	11,912	26,098
Total Past Due And Nonaccrual	14,249	30,964
Consumer
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 - 59 Days Past Due	101	145
60 - 89 Days Past Due	44	34
90 Days And Over Past Due		2
Nonaccrual	20	9
Total Past Due And Nonaccrual	165	190
Agriculture
Financing Receivable, Recorded Investment, Past Due [Line Items]
30 - 59 Days Past Due	32	35
Nonaccrual	229	322
Total Past Due And Nonaccrual	261	357
Other
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual	174	120
Total Past Due And Nonaccrual	$ 174	$ 120

XML

Going Concern Considerations and Future Plans - Additional Information (Detail) (USD $)	3 Months Ended		6 Months Ended		12 Months Ended				6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010	Jun. 30, 2014 Sales Strategy Change	Jun. 30, 2014 Commercial Real Estate	Dec. 31, 2013 Commercial Real Estate	Jun. 30, 2014 Commercial Real Estate Other real estate owned, net	Dec. 31, 2013 Commercial Real Estate Other real estate owned, net	Jun. 30, 2014 Real estate construction Other real estate owned, net	Dec. 31, 2013 Real estate construction Other real estate owned, net	Jun. 30, 2014 Junior subordinated debentures	Jun. 30, 2014 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, 2014 Construction Commercial Real Estate	Dec. 31, 2013 Construction Commercial Real Estate	Dec. 31, 2010 Construction Commercial Real Estate	Jun. 30, 2014 1-4 Family Other real estate owned, net	Dec. 31, 2013 1-4 Family Other real estate owned, net	Jun. 30, 2014 Multi-Family Other real estate owned, net	Dec. 31, 2013 Multi-Family Other real estate owned, net	Oct. 31, 2012 Consent order	Jun. 24, 2011 Consent order	Jun. 30, 2014 Consent order Construction and development loans	Dec. 31, 2013 Consent order Construction and development loans	Jun. 24, 2011 Consent order Construction and development loans	Jun. 30, 2014 Consent order Non-owner occupied commercial real estate loans	Dec. 31, 2013 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	$ (672,000)	$ (1,681,000)	$ (1,645,000)	$ (2,212,000)	$ (3,400,000)	$ (33,400,000)
Reduction in shareholders equity					35,900,000	47,200,000
Other real estate owned expense	774,000	1,657,000	1,436,000	2,448,000	4,500,000
Loan collection expenses	389,000	2,407,000	928,000	3,442,000	4,700,000
Reduction in fair value of securities					8,400,000
Accrual of dividends and accretion to preferred shareholders					2,100,000
Cumulative accrued and unpaid interest	16,453,000		16,453,000		14,673,000											1,900,000
Tier I leverage ratio, regulatory minimum	4.00%		4.00%		4.00%																					9.00%	9.00%
Total risk-based capital, regulatory minimum	8.00%		8.00%		8.00%																					12.00%	12.00%
Gross loans	643,030,000		643,030,000		709,326,000			1,300,000,000		288,567,000	346,541,000						123,500,000	293,300,000	32,778,000	43,326,000	199,500,000
Maximum concentration of loans to total risk based capital																												75.00%	75.00%	75.00%	250.00%	250.00%	250.00%
Concentration of loans to total risk based capital																												39.00%	52.00%		241.00%	284.00%
Maximum risk based capital loans	28,227,000		28,227,000		29,089,000																							32,800,000	43,300,000		199,800,000	237,000,000
OREO acquired during the period			36,900,000		20,600,000	33,500,000	41,900,000	90,800,000
Fair value adjustments and loss on sale of OREO					2,600,000	9,300,000	42,800,000	13,900,000	596,000
Net write-down of other real estate owned			650,000	1,284,000					650,000
Gain (loss) on sale of OREO	54,000	(162,000)	54,000	(359,000)					54,000
Proceeds from sale of OREO			4,300,000		30,800,000	22,500,000	26,000,000	25,000,000
Percentage of OREO portfolio												35.00%	19.00%	35.00%	62.00%							18.00%	16.00%	10.00%	1.00%
Construction, development and other land assets														$ 21,800,000	$ 19,200,000

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Consent Order to Achieve the Minimum Capital Ratios (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Reconciliation of Stockholders' Equity to Regulatory Capital [Line Items]
Total capital to risk-weighted assets	$ 78,104	$ 80,203
Total capital to risk-weighted assets	11.07%	11.03%
Tier I capital to average assets	4.89%	4.95%
PBI Bank
Reconciliation of Stockholders' Equity to Regulatory Capital [Line Items]
Total capital to risk-weighted assets	83,012
Tier I capital to average assets	68,619
Total capital to risk-weighted assets	11.79%
Tier I capital to average assets	6.51%	6.28%
Total capital to risk-weighted assets	84,526
Tier I capital to average assets	$ 94,847
Total capital to risk-weighted assets	12.00%
Tier I capital to average assets	9.00%
PBI Bank | Tier I
Reconciliation of Stockholders' Equity to Regulatory Capital [Line Items]
Tier I capital to average assets	6.51%

XML

Advances from the Federal Home Loan Bank - Additional Information (Detail) (Federal Home Loan Bank Advances, USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2014
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Additional borrowing capacity with the Federal Home Loan Bank	$ 10.6
Maximum
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
New advances maturity period	1 year

XML

Capital Requirements and Restrictions on Retained Earnings - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013	Jun. 30, 2014 PBI Bank	Dec. 31, 2013 PBI Bank	Oct. 31, 2012 Consent order	Jun. 24, 2011 Consent order	Jun. 30, 2014 Consent order Construction and development loans	Dec. 31, 2013 Consent order Construction and development loans	Jun. 24, 2011 Consent order Construction and development loans	Jun. 30, 2014 Consent order Non-owner occupied commercial real estate loans	Dec. 31, 2013 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%	4.00%	4.00%	4.00%	9.00%	9.00%
Total risk-based capital, regulatory minimum	8.00%	8.00%			12.00%	12.00%
Minimum substandard asset subject to risk position reduction						$ 1
Maximum concentration of loans to total risk based capital							75.00%	75.00%	75.00%	250.00%	250.00%	250.00%
Maximum asset growth rate, quarterly						5.00%
Maximum asset growth rate, annually						10.00%
Tier 1 leverage ratio	4.89%	4.95%	6.51%	6.28%
Total risk-based capital	11.07%	11.03%	11.79%

XML

Deposits (Tables)

6 Months Ended

Jun. 30, 2014

Scheduled of Deposits by Category

The following table shows deposits by category:

	June 30, 2014		December 31, 2013
	(in thousands)
Non-interest bearing	$	109,956	$	107,486
Interest checking		76,625		84,626
Money market		95,946		79,349
Savings		37,178		36,292
Certificates of deposit		631,110		679,952
Total	$	950,815	$	987,705

Scheduled Maturities of Total Time Deposits

Scheduled maturities of total time deposits at June 30, 2014 are as follows (in thousands):

Year 1	$	473,490
Year 2		121,978
Year 3		12,177
Year 4		7,910
Year 5		15,553
Thereafter		2
	$	631,110

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Net Activity Relating to Other Real Estate Owned Activity (Detail) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Real Estate Properties [Line Items]
OREO as of January 1			$ 30,892,000	$ 43,671,000
Real estate acquired			36,920,000	15,555,000
Valuation adjustment	(400,000)	(977,000)	(650,000)	(1,284,000)
Gain/(Loss) on sale	54,000	(162,000)	54,000	(359,000)
Proceeds from sale of properties			(4,281,000)	(10,553,000)
OREO as of June 30	62,935,000	47,030,000	62,935,000	47,030,000
Writedowns
Real Estate Properties [Line Items]
Valuation adjustment			$ (650,000)	$ (1,284,000)

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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, 2014	Jun. 30, 2014	Dec. 31, 2013
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	$ 101,193	$ 101,193	$ 180,639
Recorded Investment	79,742	79,742	149,883
Allowance For Loan Losses Allocated	1,753	1,753	3,471
Average Recorded Investment	100,950	117,261	169,324
Interest Income Recognized	624	1,313	3,291
Cash Basis Income Recognized		422	958
Commercial
Financing Receivable, Impaired [Line Items]
Recorded Investment	2,150	2,150	4,995
Commercial Real Estate
Financing Receivable, Impaired [Line Items]
Recorded Investment	50,678	50,678	94,330
Residential Real Estate
Financing Receivable, Impaired [Line Items]
Recorded Investment	26,449	26,449	49,512
Consumer
Financing Receivable, Impaired [Line Items]
Recorded Investment	62	62	93
Agriculture
Financing Receivable, Impaired [Line Items]
Recorded Investment	229	229	322
Other
Financing Receivable, Impaired [Line Items]
Recorded Investment	174	174	631
Impaired Financing Receivables with No Related Allowance | Commercial
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	1,288	1,288	2,131
Recorded Investment	812	812	1,533
Average Recorded Investment	1,142	1,272	1,622
Interest Income Recognized	54	55	30
Cash Basis Income Recognized		55	30
Impaired Financing Receivables with No Related Allowance | Commercial Real Estate | Construction
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	100	100	64
Recorded Investment	21	21	38
Average Recorded Investment	11	20	467
Interest Income Recognized			164
Cash Basis Income Recognized			164
Impaired Financing Receivables with No Related Allowance | Commercial Real Estate | Farmland
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	2,856	2,856	4,074
Recorded Investment	2,323	2,323	3,898
Average Recorded Investment	2,673	3,082	4,259
Interest Income Recognized	31	48	268
Cash Basis Income Recognized		48	268
Impaired Financing Receivables with No Related Allowance | Commercial Real Estate | Nonfarm nonresidential
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	4,367	4,367	1,568
Recorded Investment	1,117	1,117	1,404
Average Recorded Investment	1,144	1,231	1,724
Interest Income Recognized	127	127	367
Cash Basis Income Recognized		127	366
Impaired Financing Receivables with No Related Allowance | Residential Real Estate | Multi-Family
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	86	86	444
Recorded Investment	86	86	392
Average Recorded Investment	89	190	541
Interest Income Recognized			3
Cash Basis Income Recognized			3
Impaired Financing Receivables with No Related Allowance | Residential Real Estate | 1-4 Family
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	9,460	9,460	11,011
Recorded Investment	7,578	7,578	10,083
Average Recorded Investment	7,980	8,681	11,533
Interest Income Recognized	11	180	115
Cash Basis Income Recognized		180	116
Impaired Financing Receivables with No Related Allowance | Consumer
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	19	19	9
Recorded Investment	19	19	9
Average Recorded Investment	10	9	21
Impaired Financing Receivables with No Related Allowance | Agriculture
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	242	242	401
Recorded Investment	229	229	322
Average Recorded Investment	264	283	213
Interest Income Recognized		3
Cash Basis Income Recognized		3
Impaired Financing Receivables with No Related Allowance | Other
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	68	68	14
Recorded Investment	68	68	13
Average Recorded Investment	74	54	10
Interest Income Recognized	2	9	11
Cash Basis Income Recognized		9	11
Impaired Financing Receivables with An Allowance Recorded | Commercial
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	1,434	1,434	3,734
Recorded Investment	1,338	1,338	3,462
Allowance For Loan Losses Allocated	150	150	290
Average Recorded Investment	2,332	2,709	3,905
Interest Income Recognized	2	20	99
Impaired Financing Receivables with An Allowance Recorded | Commercial Real Estate | Construction
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	4,944	4,944	10,409
Recorded Investment	4,486	4,486	9,264
Allowance For Loan Losses Allocated	85	85	218
Average Recorded Investment	6,142	7,183	20,173
Interest Income Recognized	8	17	88
Impaired Financing Receivables with An Allowance Recorded | Commercial Real Estate | Farmland
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	5,630	5,630	6,117
Recorded Investment	3,728	3,728	4,238
Allowance For Loan Losses Allocated			65
Average Recorded Investment	3,730	3,899	5,579
Interest Income Recognized			37
Impaired Financing Receivables with An Allowance Recorded | Commercial Real Estate | Nonfarm nonresidential
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	49,553	49,553	94,508
Recorded Investment	39,003	39,003	75,488
Allowance For Loan Losses Allocated	1,265	1,265	2,062
Average Recorded Investment	55,061	61,870	77,726
Interest Income Recognized	211	502	1,324
Impaired Financing Receivables with An Allowance Recorded | Residential Real Estate | Multi-Family
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	4,281	4,281	13,883
Recorded Investment	4,281	4,281	12,117
Allowance For Loan Losses Allocated	88	88	393
Average Recorded Investment	4,535	7,062	13,121
Interest Income Recognized	39	76	208
Impaired Financing Receivables with An Allowance Recorded | Residential Real Estate | 1-4 Family
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	16,471	16,471	31,327
Recorded Investment	14,504	14,504	26,920
Allowance For Loan Losses Allocated	164	164	434
Average Recorded Investment	15,613	19,382	27,755
Interest Income Recognized	139	275	557
Impaired Financing Receivables with An Allowance Recorded | Consumer
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	43	43	84
Recorded Investment	43	43	84
Allowance For Loan Losses Allocated	1	1	9
Average Recorded Investment	44	58	134
Interest Income Recognized		1	3
Impaired Financing Receivables with An Allowance Recorded | Agriculture
Financing Receivable, Impaired [Line Items]
Average Recorded Investment			2
Impaired Financing Receivables with An Allowance Recorded | Other
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	351	351	861
Recorded Investment	106	106	618
Average Recorded Investment	106	276	539
Interest Income Recognized			$ 17

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Securities - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Schedule of Available-for-sale Securities [Line Items]
Securities pledged, carrying values	$ 66.4	$ 84.2

XML

Scheduled of Deposits by Category (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Deposits [Line Items]
Non-interest bearing	$ 109,956	$ 107,486
Interest checking	76,625	84,626
Money market	95,946	79,349
Savings	37,178	36,292
Certificates of deposit	631,110	679,952
Total deposits	$ 950,815	$ 987,705

XML

Summary of Unvested Share Activity for Non-Employee Directors (Detail) (Unvested Shares, Non Employee Director, USD $)	6 Months Ended	12 Months Ended
	Jun. 30, 2014	Dec. 31, 2013
Unvested Shares | Non Employee Director
Shares
Outstanding, beginning	47,428	80,078
Granted	166,668	182,355
Vested	(7,757)	(215,005)
Forfeited	(24,520)
Outstanding, ending	181,819	47,428
Weighted Average Exercise Price
Outstanding, beginning	$ 1.69	$ 1.77
Granted	$ 0.90	$ 0.85
Vested	$ 1.74	$ 1.01
Forfeited	$ 1.69
Outstanding, ending	$ 0.96	$ 1.69

XML

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, 2014	Dec. 31, 2013
Impaired Loans | Commercial
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value	$ 1,188	$ 3,172
Valuation Technique(s)	Market value approach
Unobservable Input(s)	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	45,867	86,645
Valuation Technique(s)	Sales comparison approach
Unobservable Input(s)	Adjustment for differences between the comparable sales
Impaired loans - Residential real estate, Adjustment for differences between the comparable sales	18.00%	20.00%
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	62.00%	69.00%
Impaired Loans | Residential Real Estate
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value	18,533	38,210
Valuation Technique(s)	Sales comparison approach
Unobservable Input(s)	Adjustment for differences between the comparable sales
Impaired loans - Residential real estate, Adjustment for differences between the comparable sales	17.00%	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	68.00%	68.00%
Other real estate owned, net | Commercial Real Estate
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value	44,989
Valuation Technique(s)	Sales comparison approach
Unobservable Input(s)	Adjustment for differences between the comparable sales
Impaired loans - Commercial, Capitalization rate	14.00%	11.00%
Impaired loans - Residential real estate, Adjustment for differences between the comparable sales	17.00%	22.00%
Other real estate owned, net | Commercial Real Estate | Income Approach Valuation Technique
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value		25,766
Valuation Technique(s)	Income comparison approach
Unobservable Input(s)	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	8.00%	7.00%
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	45.00%	51.00%
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	11.00%	11.00%
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	2.00%	2.00%
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	54.00%	54.00%
Other real estate owned, net | Residential Mortgage
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value	$ 17,946	$ 5,126
Valuation Technique(s)	Sales comparison approach
Unobservable Input(s)	Adjustment for differences between the comparable sales

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Risk Category of Loans by Class of Loans (Detail) (USD $)	Jun. 30, 2014	Dec. 31, 2013	Dec. 31, 2010
Financing Receivable, Recorded Investment [Line Items]
Gross loans	$ 643,030,000	$ 709,326,000	$ 1,300,000,000
Commercial
Financing Receivable, Recorded Investment [Line Items]
Gross loans	65,031,000	52,878,000
Commercial Real Estate
Financing Receivable, Recorded Investment [Line Items]
Gross loans	288,567,000	346,541,000
Commercial Real Estate | Construction
Financing Receivable, Recorded Investment [Line Items]
Gross loans	32,778,000	43,326,000	199,500,000
Commercial Real Estate | Farmland
Financing Receivable, Recorded Investment [Line Items]
Gross loans	64,880,000	71,189,000
Commercial Real Estate | Nonfarm nonresidential
Financing Receivable, Recorded Investment [Line Items]
Gross loans	190,909,000	232,026,000
Residential Real Estate
Financing Receivable, Recorded Investment [Line Items]
Gross loans	248,612,000	275,363,000
Residential Real Estate | Multi-Family
Financing Receivable, Recorded Investment [Line Items]
Gross loans	43,496,000	46,858,000
Residential Real Estate | 1-4 Family
Financing Receivable, Recorded Investment [Line Items]
Gross loans	205,116,000	228,505,000
Consumer
Financing Receivable, Recorded Investment [Line Items]
Gross loans	12,669,000	14,365,000
Agriculture
Financing Receivable, Recorded Investment [Line Items]
Gross loans	27,477,000	19,199,000
Other
Financing Receivable, Recorded Investment [Line Items]
Gross loans	674,000	980,000
Pass
Financing Receivable, Recorded Investment [Line Items]
Gross loans	434,853,000	369,529,000
Pass | Commercial
Financing Receivable, Recorded Investment [Line Items]
Gross loans	54,255,000	35,438,000
Pass | Commercial Real Estate | Construction
Financing Receivable, Recorded Investment [Line Items]
Gross loans	21,105,000	16,706,000
Pass | Commercial Real Estate | Farmland
Financing Receivable, Recorded Investment [Line Items]
Gross loans	46,688,000	46,909,000
Pass | Commercial Real Estate | Nonfarm nonresidential
Financing Receivable, Recorded Investment [Line Items]
Gross loans	108,184,000	93,327,000
Pass | Residential Real Estate | Multi-Family
Financing Receivable, Recorded Investment [Line Items]
Gross loans	30,124,000	16,506,000
Pass | Residential Real Estate | 1-4 Family
Financing Receivable, Recorded Investment [Line Items]
Gross loans	136,468,000	130,833,000
Pass | Consumer
Financing Receivable, Recorded Investment [Line Items]
Gross loans	11,523,000	12,718,000
Pass | Agriculture
Financing Receivable, Recorded Investment [Line Items]
Gross loans	26,007,000	16,742,000
Pass | Other
Financing Receivable, Recorded Investment [Line Items]
Gross loans	499,000	350,000
Watch
Financing Receivable, Recorded Investment [Line Items]
Gross loans	91,208,000	144,316,000
Watch | Commercial
Financing Receivable, Recorded Investment [Line Items]
Gross loans	2,859,000	8,517,000
Watch | Commercial Real Estate | Construction
Financing Receivable, Recorded Investment [Line Items]
Gross loans	6,190,000	10,771,000
Watch | Commercial Real Estate | Farmland
Financing Receivable, Recorded Investment [Line Items]
Gross loans	8,687,000	9,121,000
Watch | Commercial Real Estate | Nonfarm nonresidential
Financing Receivable, Recorded Investment [Line Items]
Gross loans	33,632,000	51,522,000
Watch | Residential Real Estate | Multi-Family
Financing Receivable, Recorded Investment [Line Items]
Gross loans	7,850,000	17,320,000
Watch | Residential Real Estate | 1-4 Family
Financing Receivable, Recorded Investment [Line Items]
Gross loans	30,384,000	43,785,000
Watch | Consumer
Financing Receivable, Recorded Investment [Line Items]
Gross loans	612,000	968,000
Watch | Agriculture
Financing Receivable, Recorded Investment [Line Items]
Gross loans	994,000	1,802,000
Watch | Other
Financing Receivable, Recorded Investment [Line Items]
Gross loans		510,000
Special Mention
Financing Receivable, Recorded Investment [Line Items]
Gross loans	3,223,000	5,865,000
Special Mention | Commercial
Financing Receivable, Recorded Investment [Line Items]
Gross loans		329,000
Special Mention | Commercial Real Estate | Construction
Financing Receivable, Recorded Investment [Line Items]
Gross loans		2,277,000
Special Mention | Commercial Real Estate | Farmland
Financing Receivable, Recorded Investment [Line Items]
Gross loans	230,000	1,735,000
Special Mention | Commercial Real Estate | Nonfarm nonresidential
Financing Receivable, Recorded Investment [Line Items]
Gross loans	1,211,000	734,000
Special Mention | Residential Real Estate | 1-4 Family
Financing Receivable, Recorded Investment [Line Items]
Gross loans	1,780,000	784,000
Special Mention | Consumer
Financing Receivable, Recorded Investment [Line Items]
Gross loans	2,000	6,000
Substandard
Financing Receivable, Recorded Investment [Line Items]
Gross loans	113,746,000	189,616,000
Substandard | Commercial
Financing Receivable, Recorded Investment [Line Items]
Gross loans	7,917,000	8,594,000
Substandard | Commercial Real Estate | Construction
Financing Receivable, Recorded Investment [Line Items]
Gross loans	5,483,000	13,572,000
Substandard | Commercial Real Estate | Farmland
Financing Receivable, Recorded Investment [Line Items]
Gross loans	9,275,000	13,424,000
Substandard | Commercial Real Estate | Nonfarm nonresidential
Financing Receivable, Recorded Investment [Line Items]
Gross loans	47,882,000	86,443,000
Substandard | Residential Real Estate | Multi-Family
Financing Receivable, Recorded Investment [Line Items]
Gross loans	5,522,000	13,032,000
Substandard | Residential Real Estate | 1-4 Family
Financing Receivable, Recorded Investment [Line Items]
Gross loans	36,484,000	53,103,000
Substandard | Consumer
Financing Receivable, Recorded Investment [Line Items]
Gross loans	532,000	673,000
Substandard | Agriculture
Financing Receivable, Recorded Investment [Line Items]
Gross loans	476,000	655,000
Substandard | Other
Financing Receivable, Recorded Investment [Line Items]
Gross loans	$ 175,000	$ 120,000

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Going Concern Considerations and Future Plans

6 Months Ended

Jun. 30, 2014

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 create substantial doubt about the Company’s ability to continue as a going concern.

During the first six months of 2014, we reported net loss attributable to common shareholders of $1.6 million, compared with net loss attributable to common shareholders of $2.2 million for the first six months of 2013. The improvement in 2014 compared to 2013 is primarily attributable to reductions in non-interest expense, specifically loan collection expenses and OREO expenses.

At June 30, 2014, we continued to be involved in various legal proceedings in which we dispute the material factual allegations. After conferring with our legal advisors, we believe we have meritorious grounds on which to prevail. If we do not prevail, the ultimate outcome of any one of these matters could have a material adverse effect on our financial condition, results of operations, or cash flows. These matters are more fully described in Note 13 – “Contingencies”.

For the year ended December 31, 2013, we reported a net loss to common shareholders of $3.4 million, compared to a net loss to common shareholders of $33.4 million for the year ended December 31, 2012. This loss coupled with the comprehensive loss for the year reduced shareholders equity to $35.9 million, from $47.2 million at the end of 2012. This reduction was attributable primarily to OREO expense of $4.5 million resulting from fair value write-downs driven by new appraisals and reduced marketing prices, net loss on sales, and ongoing operating expense, along with $4.7 million in loan collection expenses. The reduction was also attributable to a reduction in the fair value of securities of $8.4 million, net, as well as the accrual of dividends and accretion to preferred shareholders of $2.1 million. 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.

In 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. If we cannot pay all unpaid deferred distributions on our trust preferred securities for more than twenty consecutive quarters, we will be in default, and the holders of our trust preferred securities would become entitled to payment of the full amount of outstanding principal plus accrued and unpaid interest. At June 30, 2014, cumulative accrued and unpaid interest on our junior subordinated notes totaled $1.9 million. Future cash dividends on our common stock are subject to the prior payment of all deferred distributions on our trust preferred securities.

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, 2014, 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.

• Continuing to operate the Company and Bank in a safe and sound manner. This strategy may require us to reduce our lending concentrations, remediate non-performing loans, reduce the size of our balance sheet, and reduce other noninterest expense through the disposition of OREO.

• Management succession and adding resources to the management team. John T. Taylor became CEO of PBI Bank in 2012 and CEO of the Company in 2013. In addition, we appointed new executives to lead key functions of our banking operations. John R. Davis became Chief Credit Officer of PBI Bank in 2012, with responsibility for establishing and executing credit quality policies and overseeing credit administration for the organization. We have also augmented our staffing in the commercial lending area, led by Joe C. Seiler.

• 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.

• 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 $643.0 million at June 30, 2014.

• Our Consent Order calls for us to reduce our construction and development loans to not more than 75% of total risk-based capital. We have now been in compliance for nine quarters. Construction and development loans totaled $32.8 million, or 39% of total risk-based capital, at June 30, 2014, down from $43.3 million, or 52% of total risk-based capital, at December 31, 2013.

• 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. We were also in compliance with this concentration limit at June 30, 2014. These loans totaled $199.8 million, or 241% of total risk-based capital, at June 30, 2014 and $237.0 million, or 284% of total risk-based capital, at December 31, 2013.

• We have reduced the construction loan portfolio from $199.5 million at December 31, 2010 to $32.8 million at June 30, 2014. Our non-owner occupied commercial real estate loans declined from $293.3 million at December 31, 2010 to $123.5 million at June 30, 2014.

• 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 since 2010. The Bank acquired $20.6 million, $33.5 million, $41.9 million, and $90.8 million during 2013, 2012, 2011, and 2010, respectively. For the six months ended June 30, 2014, we acquired $36.9 million of OREO.

• We have incurred significant losses in disposing of this real estate. We incurred losses totaling $2.6 million, $9.3 million, $42.8 million, and $13.9 million in 2013, 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 months ended June 30, 2014, we incurred OREO losses totaling $596,000 comprised of $650,000 in fair value write-downs from declining values as evidenced by new appraisals and reduced marketing prices in connection with our sales strategies, offset by $54,000 in net gain on sales of OREO.

• To ensure we maximize the value we receive upon the sale of OREO, we continually evaluate sales opportunities. Proceeds from the sale of OREO totaled $4.3 million during the six months ended June 30, 2014 and $30.8 million, $22.5 million, $26.0 million and $25.0 million during the years ended December 31, 2013, 2012, 2011, and 2010, respectively.

• At December 31, 2013, the OREO portfolio consisted of 62% construction, development, and land assets. At June 30, 2014, this concentration decreased to 35%; however, the balance increased from $19.2 million to $21.8 million. Commercial real estate represents 35% of the OREO portfolio at June 30, 2014 compared with 19% at December 31, 2013. 1-4 family residential properties represent 18% of the OREO portfolio at June 30, 2014 compared with 16% at December 31, 2013, and multi-family properties represent 10% of the OREO portfolio at June 30, 2014, compared to 1% at December 31, 2013.

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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Carrying Amount and Estimated Fair Values of Financial Instruments (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Financial assets
Securities available for sale	$ 180,723	$ 163,344
Securities held to maturity	44,853	42,947
Quoted Prices In Active Markets for Identical Assets (Level 1)
Financial assets
Cash and cash equivalents	78,906	106,885
Securities available for sale		197
Financial liabilities
Deposits	109,956	107,486
Significant Other Observable Inputs (Level 2)
Financial assets
Cash and cash equivalents	23,360	4,249
Securities available for sale	180,072	162,515
Securities held to maturity	44,853	42,947
Mortgage loans held for sale	280	149
Accrued interest receivable	1,365	1,343
Financial liabilities
Deposits	837,997	879,707
Securities sold under agreements to repurchase	2,451	2,470
Federal Home Loan Bank advances	14,138	4,495
Accrued interest payable	1,014	1,042
Significant Unobservable Inputs (Level 3)
Financial assets
Securities available for sale	651	632
Loans, net	632,722	695,999
Accrued interest receivable	2,096	2,548
Financial liabilities
Accrued interest payable	1,799	1,493
Subordinated capital notes | Significant Unobservable Inputs (Level 3)
Financial liabilities
Subordinated capital notes	5,177	5,586
Junior subordinated debentures | Significant Unobservable Inputs (Level 3)
Financial liabilities
Subordinated capital notes	13,841	13,526
Carrying Amount
Financial assets
Cash and cash equivalents	102,266	111,134
Securities available for sale	180,723	163,344
Securities held to maturity	43,488	43,612
Federal Home Loan Bank stock	7,323	10,072
Mortgage loans held for sale	280	149
Loans, net	619,004	681,202
Accrued interest receivable	3,461	3,891
Financial liabilities
Deposits	950,815	987,705
Securities sold under agreements to repurchase	2,451	2,470
Federal Home Loan Bank advances	14,134	4,492
Accrued interest payable	2,813	2,535
Carrying Amount | Subordinated capital notes
Financial liabilities
Subordinated capital notes	5,400	5,850
Carrying Amount | Junior subordinated debentures
Financial liabilities
Subordinated capital notes	25,000	25,000
Fair Value
Financial assets
Cash and cash equivalents	102,266	111,134
Securities available for sale	180,723	163,344
Securities held to maturity	44,853	42,947
Mortgage loans held for sale	280	149
Loans, net	632,722	695,999
Accrued interest receivable	3,461	3,891
Financial liabilities
Deposits	947,953	987,193
Securities sold under agreements to repurchase	2,451	2,470
Federal Home Loan Bank advances	14,138	4,495
Accrued interest payable	2,813	2,535
Fair Value | Subordinated capital notes
Financial liabilities
Subordinated capital notes	5,177	5,586
Fair Value | Junior subordinated debentures
Financial liabilities
Subordinated capital notes	$ 13,841	$ 13,526

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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, 2013	Jun. 30, 2014	Dec. 31, 2013
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring			$ 50,889	$ 91,262
TDR Loan Modifications during 12 months	499	4,171
Commercial | Rate Reduction
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring			20	1,933
TDR Loan Modifications during 12 months		45
Commercial | Principal Deferral
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring			869	869
Commercial | Interest Only Payments
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring				6,620
Commercial Real Estate | Construction | Rate Reduction
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring			3,681	499
TDR Loan Modifications during 12 months		1,291
Commercial Real Estate | Construction | Principal Deferral
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring			355
TDR Loan Modifications during 12 months	499	499
Commercial Real Estate | Farmland | Rate Reduction
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring				150
Commercial Real Estate | Farmland | Principal Deferral
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring			2,365	2,365
Commercial Real Estate | Nonfarm nonresidential | Rate Reduction
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring			27,777	43,692
Commercial Real Estate | Nonfarm nonresidential | Principal Deferral
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring			680	691
Commercial Real Estate | Nonfarm nonresidential | Interest Only Payments
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring			649	3,928
Commercial Real Estate | Other | Rate Reduction
Financing Receivable, Modifications [Line Items]
TDR Loan Modifications during 12 months		1,399
Residential Real Estate | Multi-Family | Rate Reduction
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring			4,280	11,009
Residential Real Estate | Multi-Family | Interest Only Payments
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring				641
Residential Real Estate | 1-4 Family | Rate Reduction
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring			10,170	18,270
TDR Loan Modifications during 12 months		897
Consumer | Rate Reduction
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring			43	84
TDR Loan Modifications during 12 months		40
Other | Rate Reduction
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring				511
TDRs Performing to Modified Terms
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring			32,389	44,346
TDR Loan Modifications during 12 months	499	2,880
TDRs Performing to Modified Terms | Commercial | Rate Reduction
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring			20	1,933
TDR Loan Modifications during 12 months		45
TDRs Performing to Modified Terms | Commercial | Interest Only Payments
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring				275
TDRs Performing to Modified Terms | Commercial Real Estate | Construction | Rate Reduction
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring			272	499
TDRs Performing to Modified Terms | Commercial Real Estate | Construction | Principal Deferral
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring			355
TDR Loan Modifications during 12 months	499	499
TDRs Performing to Modified Terms | Commercial Real Estate | Farmland | Rate Reduction
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring				150
TDRs Performing to Modified Terms | Commercial Real Estate | Nonfarm nonresidential | Rate Reduction
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring			16,569	22,457
TDRs Performing to Modified Terms | Commercial Real Estate | Nonfarm nonresidential | Principal Deferral
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring			680	691
TDRs Performing to Modified Terms | Commercial Real Estate | Nonfarm nonresidential | Interest Only Payments
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring				2,439
TDRs Performing to Modified Terms | Commercial Real Estate | Other | Rate Reduction
Financing Receivable, Modifications [Line Items]
TDR Loan Modifications during 12 months		1,399
TDRs Performing to Modified Terms | Residential Real Estate | Multi-Family | Rate Reduction
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring			4,280	4,354
TDRs Performing to Modified Terms | Residential Real Estate | Multi-Family | Interest Only Payments
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring				641
TDRs Performing to Modified Terms | Residential Real Estate | 1-4 Family | Rate Reduction
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring			10,170	10,312
TDR Loan Modifications during 12 months		897
TDRs Performing to Modified Terms | Consumer | Rate Reduction
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring			43	84
TDR Loan Modifications during 12 months		40
TDRs Performing to Modified Terms | Other | Rate Reduction
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring				511
TDRs Not Performing to Modified Terms
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring			18,500	46,916
TDR Loan Modifications during 12 months		1,291
TDRs Not Performing to Modified Terms | Commercial | Principal Deferral
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring			869	869
TDRs Not Performing to Modified Terms | Commercial | Interest Only Payments
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring				6,345
TDRs Not Performing to Modified Terms | Commercial Real Estate | Construction | Rate Reduction
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring			3,409
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			2,365	2,365
TDRs Not Performing to Modified Terms | Commercial Real Estate | Nonfarm nonresidential | Rate Reduction
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring			11,208	21,235
TDRs Not Performing to Modified Terms | Commercial Real Estate | Nonfarm nonresidential | Interest Only Payments
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring			649	1,489
TDRs Not Performing to Modified Terms | Residential Real Estate | Multi-Family | Rate Reduction
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring				6,655
TDRs Not Performing to Modified Terms | Residential Real Estate | 1-4 Family | Rate Reduction
Financing Receivable, Modifications [Line Items]
Troubled Debt Restructuring				$ 7,958

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Stock Plans and Stock Based Compensation (Tables)

6 Months Ended

Jun. 30, 2014

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, 2014					Twelve Months Ended December 31, 2013
	Shares			Weighted Average Grant Price		Shares			Weighted Average Grant Price
Outstanding, beginning		787,426		$	1.56		153,316		$	5.92
Granted		122,220			0.93		693,214			1.18
Vested		(11,121	)		11.72		(22,113	)		12.19
Forfeited		(514	)		21.06		(36,991	)		6.22
Outstanding, ending		898,011		$	1.34		787,426		$	1.56

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, 2014					Twelve Months Ended December 31, 2013
	Shares			Weighted Average Grant Price		Shares			Weighted Average Grant Price
Outstanding, beginning		47,428		$	1.69		80,078		$	1.77
Granted		166,668			0.90		182,355			0.85
Vested		(7,757	)		1.74		(215,005	)		1.01
Forfeited		(24,520	)		1.69		—			—
Outstanding, ending		181,819		$	0.96		47,428		$	1.69

Unrecognized Stock Based Compensation Expense Related to Unvested Shares

Unrecognized stock based compensation expense related to unvested shares for the remainder of 2014 and beyond is estimated as follows (in thousands):

July 2014 – December 2014	$	397
2015		420
2016		275
2017		51
2018 & thereafter		—

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Income Taxes (Tables)

6 Months Ended

Jun. 30, 2014

Deferred Tax Assets and Liabilities

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

	June 30, 2014			December 31, 2013
	(in thousands)
Deferred tax assets:
Net operating loss carry-forward	$	25,943		$	25,460
Allowance for loan losses		8,409			9,843
Other real estate owned write-down		9,537			9,478
Alternative minimum tax credit carry-forward		692			692
Net assets from acquisitions		656			644
Other than temporary impairment on securities		46			89
Net unrealized loss on securities		—			1,067
New market tax credit carry-forward		208			208
Nonaccrual loan interest		878			911
Amortization of non-compete agreements		15			16
Other		1,719			1,640
		48,103			50,048
Deferred tax liabilities:
FHLB stock dividends		928			1,276
Fixed assets		291			333
Net unrealized gain on securities		263			—
Originated mortgage servicing rights		63			75
Other		548			570
		2,093			2,254
Net deferred tax assets before valuation allowance		46,010			47,794
Valuation allowance		(46,010	)		(47,794	)
Net deferred tax asset	$	—		$	—

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Advances from Federal Home Loan Bank (Parenthetical) (Detail)	6 Months Ended
	Jun. 30, 2014
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	2.89%
Advances from federal home loan bank, maturities from	2014
Advances from federal home loan bank, maturities through	2033

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Loans - Additional Information (Detail) (USD $)	6 Months Ended									6 Months Ended
	Jun. 30, 2013	Jun. 30, 2014	Dec. 31, 2013	Dec. 31, 2010	Jun. 30, 2014 Pass	Dec. 31, 2013 Pass	Jun. 30, 2014 Troubled Debt Restructurings Term Modification One	Dec. 31, 2013 Troubled Debt Restructurings Term Modification One	Jun. 30, 2013 Troubled Debt Restructurings Term Modification One	Jun. 30, 2013 Construction	Jun. 30, 2014 Commercial	Dec. 31, 2013 Commercial	Jun. 30, 2014 Commercial Pass	Dec. 31, 2013 Commercial Pass	Mar. 31, 2014 Commercial Reclassifications Pass	Jun. 30, 2014 Residential Real Estate	Dec. 31, 2013 Residential Real Estate	Mar. 31, 2014 Residential Real Estate Reclassifications Pass	Jun. 30, 2014 Agriculture	Dec. 31, 2013 Agriculture	Jun. 30, 2014 Agriculture Pass	Dec. 31, 2013 Agriculture Pass	Mar. 31, 2014 Agriculture Reclassifications Pass
Accounts, Notes, Loans and Financing Receivable [Line Items]
Percentage of Company's TDRs that were performing according to modified terms							64.00%	49.00%	100.00%
Reserves to borrowers whose loan terms have been modified in TDRs outstanding							$ 1,600,000	$ 2,900,000	$ 49,000,000
Commitment to lend additional amount to borrowers with outstanding loans classified as TDRs							262,000	261,000
Loans outstanding			7,300,000
TDRs defaulted on restructured loan amount										1,500,000
Past due period over which a default is considered to have occurred	90 days
Minimum outstanding loan balance for credit risk analysis		500,000
Gross loans		$ 643,030,000	$ 709,326,000	$ 1,300,000,000	$ 434,853,000	$ 369,529,000					$ 65,031,000	$ 52,878,000	$ 54,255,000	$ 35,438,000	$ 24,200,000	$ 248,612,000	$ 275,363,000	$ 8,500,000	$ 27,477,000	$ 19,199,000	$ 26,007,000	$ 16,742,000	$ 2,200,000

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Earnings (Loss) per Share (Tables)

6 Months Ended

Jun. 30, 2014

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,
	2014			2013			2014			2013
	(in thousands, except share and per share data)
Net income (loss)	$	43		$	(1,309	)	$	(244	)	$	(1,378	)
Less:
Preferred stock dividends		789			437			1,574			875
Accretion of Series A preferred stock discount		—			45			—			90
Earnings allocated to unvested shares		(55	)		(62	)		(128	)		(69	)
Earnings allocated to Series C preferred		(19	)		(48	)		(45	)		(62	)
Net loss attributable to common shareholders, basic and diluted	$	(672	)	$	(1,681	)	$	(1,645	)	$	(2,212	)
Basic
Weighted average common shares including unvested common shares outstanding		13,293,226			12,528,932			13,256,911			12,501,854
Less: Weighted average unvested common shares		979,211			434,250			931,092			367,297
Less: Weighted average Series C preferred		332,894			332,894			332,894			332,894
Weighted average common shares outstanding		11,981,121			11,761,788			11,992,925			11,801,663
Basic loss per common share	$	(0.06	)	$	(0.14	)	$	(0.14	)	$	(0.19	)
Diluted
Add: Dilutive effects of assumed exercises of common and Preferred Series C stock warrants		—			—			—			—
Weighted average common shares and potential common shares		11,981,121			11,761,788			11,992,925			11,801,663
Diluted loss per common share	$	(0.06	)	$	(0.14	)	$	(0.14	)	$	(0.19	)

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Capital Requirements and Restrictions on Retained Earnings (Tables)

6 Months Ended

Jun. 30, 2014

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

The following table shows the ratios and amounts 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 (dollars in thousands):

	Actual					For Capital Adequacy Purposes
	Amount		Ratio			Amount		Ratio
As of June 30, 2014:
Total risk-based capital (to risk- weighted assets)
Consolidated	$	78,104		11.07	%	$	56,454		8.00	%
Bank		83,012		11.79			56,350		8.00
Tier I capital (to risk-weighted assets)
Consolidated		51,593		7.31			28,227		4.00
Bank		68,619		9.74			28,175		4.00
Tier I capital (to average assets)
Consolidated		51,593		4.89			42,233		4.00
Bank		68,619		6.51			42,154		4.00

	Actual					For Capital Adequacy Purposes
	Amount		Ratio			Amount		Ratio
As of December 31, 2013:
Total risk-based capital (to risk- weighted assets)
Consolidated	$	80,203		11.03	%	$	58,178		8.00	%
Bank		83,055		11.44			58,064		8.00
Tier I capital (to risk-weighted assets)
Consolidated		53,371		7.34			29,089		4.00
Bank		67,897		9.35			29,032		4.00
Tier I capital (to average assets)
Consolidated		53,371		4.95			43,156		4.00
Bank		67,897		6.28			43,221		4.00

Consent Order to Achieve the Minimum Capital Ratios

The Consent Order requires the Bank to achieve the minimum capital ratios presented below:

	Actual as of June 30, 2014					Ratio Required by Consent Order
	Amount		Ratio			Amount		Ratio
Total capital to risk-weighted assets	$	83,012		11.79	%	$	84,526		12.00	%
Tier I capital to average assets		68,619		6.51			94,847		9.00

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Basis of Presentation and Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2014

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 the six months ended June 30, 2014 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, 2013 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 (loss) or stockholders’ equity.

Adoption of New Accounting Standards – In May 2014, FASB issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606). The ASU creates a new topic, Topic 606, to provide guidance on revenue recognition for entities that enter into contracts with customers to transfer goods or services or enter into contracts for the transfer of nonfinancial assets. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Additional disclosures are required to provide quantitative and qualitative information regarding the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The new guidance is effective for annual reporting periods, and interim reporting periods within those annual periods, beginning after December 15, 2016. Early adoption is not permitted. Management is currently evaluating the impact of the adoption of this guidance on the Company’s financial statements.

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Basis of Presentation and Summary of Significant Accounting Policies - Additional Information (Detail)	Jun. 30, 2014
Organization, Consolidation and Presentation of Financial Statements Disclosure [Line Items]
Ownership Interest in PBI Bank	100.00%

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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
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	$ 25,415	$ 39,839	$ 28,124	$ 56,680
Provision for loan losses				450
Loans charged off	(3,130)	(3,404)	(6,212)	(21,366)
Recoveries	1,741	1,124	2,114	1,795
Ending balance	24,026	37,559	24,026	37,559
Commercial
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	3,608	4,990	3,221	4,402
Provision for loan losses	(329)	(805)	116	633
Loans charged off	(308)	(132)	(454)	(1,108)
Recoveries	144	595	232	721
Ending balance	3,115	4,648	3,115	4,648
Commercial Real Estate
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	13,929	22,169	16,414	34,768
Provision for loan losses	(226)	321	(1,353)	(124)
Loans charged off	(1,701)	(1,866)	(3,175)	(14,178)
Recoveries	1,250	398	1,366	556
Ending balance	13,252	21,022	13,252	21,022
Residential Real Estate
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	7,071	11,540	7,762	16,235
Provision for loan losses	560	360	1,094	(90)
Loans charged off	(1,048)	(1,137)	(2,356)	(5,476)
Recoveries	290	27	373	121
Ending balance	6,873	10,790	6,873	10,790
Consumer
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	383	716	416	857
Provision for loan losses	(28)	(7)	(9)	79
Loans charged off	(51)	(203)	(179)	(521)
Recoveries	35	88	111	179
Ending balance	339	594	339	594
Agriculture
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	415	410	305	403
Provision for loan losses	38	127	151	(51)
Loans charged off	(21)	(66)	(30)	(83)
Recoveries	3	16	9	218
Ending balance	435	487	435	487
Other
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	9	14	6	15
Provision for loan losses	(15)	4	1	3
Loans charged off	(1)		(18)
Recoveries	19		23
Ending balance	$ 12	$ 18	$ 12	$ 18

XML

Deposits - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Deposit Liabilities [Line Items]
Time deposits of $100,000 or more	$ 278.3	$ 295.0

XML

Ratios and Amounts of Tier One Capital and Total Capital to Risk-Adjusted Assets and Leverage Ratios (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Total risk-based capital to risk-weighted assets, actual amount	$ 78,104	$ 80,203
Tier I capital to risk-weighted assets, actual amount	51,593	53,371
Tier I capital to average assets, actual amount	51,593	53,371
Total risk-based capital to risk-weighted assets, actual ratio	11.07%	11.03%
Tier I capital to risk-weighted assets, actual ratio	7.31%	7.34%
Tier I capital to average assets, actual ratio	4.89%	4.95%
Total risk-based capital to risk-weighted assets, for capital adequacy purposes, amount	56,454	58,178
Tier I capital to risk-weighted assets, for capital adequacy purposes, amount	28,227	29,089
Tier I capital to average assets, for capital adequacy purposes, amount	42,233	43,156
Total risk-based capital to risk-weighted assets, for capital adequacy purposes, ratio	8.00%	8.00%
Tier I capital to risk-weighted assets, for capital adequacy purposes, ratio	4.00%	4.00%
Tier I capital to average assets, for capital adequacy purposes, ratio	4.00%	4.00%
Porter Bancorp and PBI Bank
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Total risk-based capital to risk-weighted assets, actual amount	83,012	83,055
Total risk-based capital to risk-weighted assets, actual ratio	11.79%	11.44%
Total risk-based capital to risk-weighted assets, for capital adequacy purposes, amount	56,350	58,064
Total risk-based capital to risk-weighted assets, for capital adequacy purposes, ratio	8.00%	8.00%
Porter Bancorp
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Tier I capital to risk-weighted assets, actual amount	68,619	67,897
Tier I capital to risk-weighted assets, actual ratio	9.74%	9.35%
Tier I capital to risk-weighted assets, for capital adequacy purposes, amount	28,175	29,032
Tier I capital to risk-weighted assets, for capital adequacy purposes, ratio	4.00%	4.00%
PBI Bank
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Total risk-based capital to risk-weighted assets, actual amount	83,012
Tier I capital to average assets, actual amount	68,619	67,897
Total risk-based capital to risk-weighted assets, actual ratio	11.79%
Tier I capital to average assets, actual ratio	6.51%	6.28%
Tier I capital to average assets, for capital adequacy purposes, amount	$ 42,154	$ 43,221
Tier I capital to average assets, for capital adequacy purposes, ratio	4.00%	4.00%

XML

Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Assets
Cash and due from financial institutions	$ 101,078	$ 109,407
Federal funds sold	1,188	1,727
Cash and cash equivalents	102,266	111,134
Securities available for sale	180,723	163,344
Securities held to maturity (fair value of $44,853 and $42,947, respectively)	43,488	43,612
Mortgage loans held for sale	280	149
Loans, net of allowance of $24,026 and $28,124, respectively	619,004	681,202
Premises and equipment	19,788	19,983
Other real estate owned	62,935	30,892
Federal Home Loan Bank stock	7,323	10,072
Bank owned life insurance	9,039	8,911
Accrued interest receivable and other assets	7,181	6,822
Total assets	1,052,027	1,076,121
Deposits
Non-interest bearing	109,956	107,486
Interest bearing	840,859	880,219
Total deposits	950,815	987,705
Repurchase agreements	2,451	2,470
Federal Home Loan Bank advances	14,134	4,492
Accrued interest payable and other liabilities	16,453	14,673
Subordinated capital note	5,400	5,850
Junior subordinated debentures	25,000	25,000
Total liabilities	1,014,253	1,040,190
Stockholders' equity
Total preferred stockholders' equity	38,283	38,283
Common stock, no par, 86,000,000 shares authorized, 13,104,853 and 12,840,999 shares issued and outstanding, respectively	112,236	112,236
Additional paid-in capital	21,170	20,887
Retained deficit	(132,000)	(130,182)
Accumulated other comprehensive loss	(1,915)	(5,293)
Total common stockholders' deficit	(509)	(2,352)
Total stockholders' equity	37,774	35,931
Total liabilities and stockholders' equity	1,052,027	1,076,121
Preferred stock Series A
Stockholders' equity
Preferred stock	35,000	35,000
Total stockholders' equity	35,000	35,000
Preferred stock Series C
Stockholders' equity
Preferred stock	3,283	3,283
Total stockholders' equity	$ 3,283	$ 3,283

XML

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, 2014	Dec. 31, 2013
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual	$ 44,375	$ 101,767
Loans Past Due 90 Day And Over Still Accruing		232
Commercial
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual	1,984	2,886
Commercial Real Estate | Construction
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual	3,880	8,528
Commercial Real Estate | Farmland
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual	6,051	7,844
Commercial Real Estate | Nonfarm nonresidential
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual	20,039	48,447
Residential Real Estate | Multi-Family
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual	86	7,513
Residential Real Estate | 1-4 Family
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual	11,912	26,098
Loans Past Due 90 Day And Over Still Accruing		230
Consumer
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual	20	9
Loans Past Due 90 Day And Over Still Accruing		2
Agriculture
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual	229	322
Other
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual	$ 174	$ 120

XML

Consolidated Statement of Changes in Stockholders' Equity (USD $) In Thousands, except Share data	Total	Series A Preferred Stock	Series C Preferred Stock	Common Stock	Additional Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive Income (Loss)
Beginning Balances at Dec. 31, 2013	$ 35,931	$ 35,000	$ 3,283	$ 112,236	$ 20,887	$ (130,182)	$ (5,293)
Beginning Balances (in shares) at Dec. 31, 2013		35,000	317,042	12,840,999
Issuance of unvested stock				288,888
Forfeited unvested stock (in shares)				(25,034)
Forfeited unvested stock
Stock-based compensation expense	283				283
Net loss	(244)					(244)
Net change in accumulated other comprehensive loss, net of taxes	3,378						3,378
Dividends accrued on Series A preferred stock	(1,574)					(1,574)
Ending Balances at Jun. 30, 2014	$ 37,774	$ 35,000	$ 3,283	$ 112,236	$ 21,170	$ (132,000)	$ (1,915)
Ending Balances (in shares) at Jun. 30, 2014		35,000	317,042	13,104,853

XML

Financial Assets Measured at Fair Value on Recurring and Non Recurring Basis (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	$ 180,723	$ 163,344
Debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities		163,147
Equity
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities		197
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	29,607	29,866
Agency mortgage-backed: residential | Debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	118,837	100,943
State and municipal | Debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	12,559	13,545
Corporate bonds | Debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	19,069	18,161
Other | Debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	651	632
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		197
Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	180,072	162,515
Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	651	632
Loans fair value	632,722	695,999
Fair Value, Measurements, Nonrecurring | 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	21,758	19,057
Fair Value, Measurements, Nonrecurring | 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	1,344	690
Fair Value, Measurements, Nonrecurring | Other real estate owned, net | Commercial Real Estate | Nonfarm nonresidential
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other Real Estate Owned	21,887	6,019
Fair Value, Measurements, Nonrecurring | 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	6,316	246
Fair Value, Measurements, Nonrecurring | 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	11,630	4,880
Fair Value, Measurements, Nonrecurring | Impaired Loans | Commercial
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans fair value	1,188	3,172
Fair Value, Measurements, Nonrecurring | Impaired Loans | Commercial Real Estate | Construction
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans fair value	4,401	9,046
Fair Value, Measurements, Nonrecurring | Impaired Loans | Commercial Real Estate | Farmland
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans fair value	3,728	4,173
Fair Value, Measurements, Nonrecurring | Impaired Loans | Commercial Real Estate | Nonfarm nonresidential
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans fair value	37,738	73,426
Fair Value, Measurements, Nonrecurring | Impaired Loans | Residential Real Estate | Multi-Family
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans fair value	4,193	11,724
Fair Value, Measurements, Nonrecurring | Impaired Loans | Residential Real Estate | 1-4 Family
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans fair value	14,340	26,486
Fair Value, Measurements, Nonrecurring | Impaired Loans | Consumer
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans fair value	42	75
Fair Value, Measurements, Nonrecurring | Impaired Loans | Other | Other
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans fair value	106	618
Fair Value, Measurements, Nonrecurring | 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	21,758	19,057
Fair Value, Measurements, Nonrecurring | 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	1,344	690
Fair Value, Measurements, Nonrecurring | Significant Unobservable Inputs (Level 3) | Other real estate owned, net | Commercial Real Estate | Nonfarm nonresidential
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other Real Estate Owned	21,887	6,019
Fair Value, Measurements, Nonrecurring | 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	6,316	246
Fair Value, Measurements, Nonrecurring | 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	11,630	4,880
Fair Value, Measurements, Nonrecurring | Significant Unobservable Inputs (Level 3) | Impaired Loans | Commercial
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans fair value	1,188	3,172
Fair Value, Measurements, Nonrecurring | 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	4,401	9,046
Fair Value, Measurements, Nonrecurring | 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	3,728	4,173
Fair Value, Measurements, Nonrecurring | Significant Unobservable Inputs (Level 3) | Impaired Loans | Commercial Real Estate | Nonfarm nonresidential
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans fair value	37,738	73,426
Fair Value, Measurements, Nonrecurring | 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	4,193	11,724
Fair Value, Measurements, Nonrecurring | 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	14,340	26,486
Fair Value, Measurements, Nonrecurring | Significant Unobservable Inputs (Level 3) | Impaired Loans | Consumer
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans fair value	42	75
Fair Value, Measurements, Nonrecurring | Significant Unobservable Inputs (Level 3) | Impaired Loans | Other | Other
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans fair value	106	618
Fair Value, Measurements, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	180,723	163,344
Fair Value, Measurements, Recurring | Equity
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities		197
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	29,607	29,866
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	118,837	100,943
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	12,559	13,545
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	19,069	18,161
Fair Value, Measurements, Recurring | Other | Debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	651	632
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		197
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		197
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	180,072	162,515
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	29,607	29,866
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	118,837	100,943
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	12,559	13,545
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	19,069	18,161
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	651	632
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	$ 651	$ 632

XML

Sales and Calls of Available for Sale Securities (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Gain (Loss) on Investments [Line Items]
Proceeds	$ 675	$ 1,908	$ 1,004	$ 1,908
Gross gains	2	704	46	704
Gross losses		$ 1		$ 1

XML

Stock Plans and Stock Based Compensation - Additional Information (Detail) (USD $)	6 Months Ended			12 Months Ended	6 Months Ended				6 Months Ended					6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014 Unvested Shares Non Employee Director	Dec. 31, 2013 Unvested Shares Non Employee Director	Jun. 30, 2014 Unvested Shares Employee	Jun. 30, 2014 Unvested Shares Director	Jun. 30, 2014 2006 Non-Employee Directors Stock Ownership Incentive Plan	May 16, 2012 2006 Non-Employee Directors Stock Ownership Incentive Plan	Jun. 30, 2014 2006 Non-Employee Directors Stock Ownership Incentive Plan Unvested Shares Non Employee Director	May 31, 2014 2006 Non-Employee Directors Stock Ownership Incentive Plan Amendment	May 15, 2006 2006 Non-Employee Directors Stock Ownership Incentive Plan Amendment	Jun. 30, 2014 2006 Stock Incentive Plan	Feb. 23, 2006 2006 Stock Incentive Plan	Jun. 30, 2014 2006 Stock Incentive Plan Unvested Shares	Jun. 30, 2014 2006 Stock Incentive Plan Unvested Shares Minimum	Jun. 30, 2014 2006 Stock Incentive Plan Unvested Shares Maximum	May 31, 2014 2006 Stock Incentive Plan Amendment	May 31, 2013 2006 Stock Incentive Plan Amendment
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares authorized								400,000		700,000	100,000		1,563,050				300,000	800,000
Unvested shares granted			166,668	182,355					181,819					898,011
Shares remaining available for issue							271,211					527,799
Award vesting period															3 years	10 years
Restricted shares award, fair market value							$ 25,000
Fair value of unvested shares issued					113,000	150,000
Fair value of unvested shares issued per weighted-average share			$ 0.90	$ 0.85	$ 0.93	$ 0.90
Stock-based compensation	$ 283,000	$ 226,000

XML

Securities (Tables)

6 Months Ended

Jun. 30, 2014

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, 2014
Available for sale
U.S. Government and federal agency	$	30,231	$	324	$	(948	)	$	29,607
Agency mortgage-backed: residential		118,104		1,434		(701	)		118,837
State and municipal		11,830		738		(9	)		12,559
Corporate bonds		18,043		1,142		(116	)		19,069
Other debt securities		572		79		—			651
Total available for sale	$	178,780	$	3,717	$	(1,774	)	$	180,723
Held to maturity
State and municipal	$	43,488	$	1,373	$	(8	)	$	44,853
Total held to maturity	$	43,488	$	1,373	$	(8	)	$	44,853
December 31, 2013
Available for sale
U.S. Government and federal agency	$	31,026	$	284	$	(1,444	)	$	29,866
Agency mortgage-backed: residential		102,435		458		(1,950	)		100,943
State and municipal		12,965		608		(28	)		13,545
Corporate bonds		18,002		769		(610	)		18,161
Other debt securities		572		60		—			632
Total debt securities		165,000		2,179		(4,032	)		163,147
Equity		135		62		—			197
Total available for sale	$	165,135	$	2,241	$	(4,032	)	$	163,344
Held to maturity
State and municipal	$	43,612	$	3	$	(668	)	$	42,947
Total held to maturity	$	43,612	$	3	$	(668	)	$	42,947

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,
	2014		2013		2014		2013
	(in thousands)				(in thousands)
Proceeds	$	675	$	1,908	$	1,004	$	1,908
Gross gains		2		704		46		704
Gross losses		—		1		—		1

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

	June 30, 2014
	Amortized Cost		Fair Value
	(in thousands)
Maturity
Available for sale
Within one year	$	15,616	$	15,948
One to five years		12,930		13,953
Five to ten years		31,558		31,334
Beyond ten years		572		651
Agency mortgage-backed: residential		118,104		118,837
Total	$	178,780	$	180,723
Held to maturity
One to five years	$	5,649	$	5,755
Five to ten years		33,716		34,822
Beyond ten years		4,123		4,276
Total	$	43,488	$	44,853

Securities with Unrealized Losses

Securities with unrealized losses at June 30, 2014 and December 31, 2013, aggregated by investment category and length of time the 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, 2014
Available for sale
U.S. Government and federal agency	$	—	$	—		$	18,929	$	(948	)	$	18,929	$	(948	)
Agency mortgage-backed: residential		9,861		(33	)		32,822		(668	)		42,683		(701	)
State and municipal		—		—			476		(9	)		476		(9	)
Corporate bonds		2,388		(41	)		1,710		(75	)		4,098		(116	)
Total temporarily impaired	$	12,249	$	(74	)	$	53,937	$	(1,700	)	$	66,186	$	(1,774	)
Held to maturity
State and municipal	$	1,111	$	(8	)	$	—	$	—		$	1,111	$	(8	)
Total temporarily impaired	$	1,111	$	(8	)	$	—	$	—		$	1,111	$	(8	)
December 31, 2013
Available for sale
U.S. Government and federal agency	$	24,129	$	(1,444	)	$	—	$	—		$	24,129	$	(1,444	)
Agency mortgage-backed: residential		58,257		(1,672	)		10,344		(278	)		68,601		(1,950	)
State and municipal		458		(28	)		—		—			458		(28	)
Corporate bonds		11,313		(610	)		—		—			11,313		(610	)
Total temporarily impaired	$	94,157	$	(3,754	)	$	10,344	$	(278	)	$	104,501	$	(4,032	)
Held to maturity
State and municipal	$	39,743	$	(654	)	$	1,031	$	(14	)	$	40,774	$	(668	)
Total temporarily impaired	$	39,743	$	(654	)	$	1,031	$	(14	)	$	40,774	$	(668	)

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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, 2014	Dec. 31, 2013
Available for sale, amortized Cost
Available for sale, within one year	$ 15,616
Available for sale, one to five years	12,930
Available for sale, five to ten years	31,558
Available for sale, beyond ten years	572
Available for sale, agency mortgage-backed: residential	118,104
Total	178,780
Held to maturity, amortized Cost
Held to maturity, one to five years	5,649
Five to ten years	33,716
Beyond ten years	4,123
Total	43,488	43,612
Available for sale, fair value
Available for sale, within one year	15,948
Available for sale, one to five years	13,953
Available for sale, five to ten years	31,334
Available for sale, beyond ten years	651
Available for sale, agency mortgage-backed: residential	118,837
Total	180,723
Held to maturity, fair value
Held to maturity, one to five years	5,755
Five to ten years	34,822
Beyond ten years	4,276
Held to maturity, Fair Value	$ 44,853	$ 42,947

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Other Real Estate Owned (Tables)

6 Months Ended

Jun. 30, 2014

Major Categories of Other Real Estate Owned

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

	June 30, 2014			December 31, 2013
	(in thousands)
Commercial Real Estate:
Construction, land development, and other land	$	21,827		$	19,199
Farmland		1,349			695
Nonfarm nonresidential		21,956			6,064
Residential Real Estate:
Multi-family		6,335			248
1-4 Family		11,667			4,916
		63,134			31,122
Valuation allowance		(199	)		(230	)
	$	62,935		$	30,892

Other Real Estate Owned Valuation Allowance Activity

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2014			2013			2014			2013
	(in thousands)						(in thousands)
OREO Valuation Allowance Activity:
Beginning balance	$	208		$	928		$	230		$	1,154
Provision to allowance		400			977			650			1,284
Write-downs		(409	)		(1,158	)		(681	)		(1,691	)
Ending balance	$	199		$	747		$	199		$	747

Net activity relating to other real estate owned during the six months ended June 30, 2014 and 2013 is as follows:

	2014			2013
	(in thousands)
OREO Activity
OREO as of January 1	$	30,892		$	43,671
Real estate acquired		36,920			15,555
Valuation adjustment writedowns		(650	)		(1,284	)
Gain/(Loss) on sale		54			(359	)
Proceeds from sale of properties		(4,281	)		(10,553	)
OREO as of June 30	$	62,935		$	47,030

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,
	2014			2013		2014			2013
	(in thousands)					(in thousands)
Net (gain) loss on sales	$	(54	)	$	162	$	(54	)	$	359
Provision to allowance		400			977		650			1,284
Operating expense		428			518		840			805
Total	$	774		$	1,657	$	1,436		$	2,448

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Unrecognized Stock Based Compensation Expense Related to Unvested Shares (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
July 2014 - December 2014	$ 397
2015	420
2016	275
2017	51
2018 & thereafter

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Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Cash flows from operating activities
Net loss	$ (244)	$ (1,378)
Adjustments to reconcile net loss to net cash from operating activities
Depreciation and amortization	852	1,042
Provision for loan losses		450
Net amortization on securities	773	1,185
Stock-based compensation expense	283	226
Tax benefit from OCI components	(424)
Net gain on loans originated for sale	(34)	(66)
Loans originated for sale	(1,574)	(2,095)
Proceeds from sales of loans originated for sale	1,477	2,524
Net gain on sales of investment securities	(46)	(703)
Net (gain) loss on sales of other real estate owned	(54)	359
Net write-down of other real estate owned	650	1,284
Earnings on bank owned life insurance, net of premium expense	(128)	(374)
Net change in accrued interest receivable and other assets	(588)	1,095
Net change in accrued interest payable and other liabilities	205	1,666
Net cash from operating activities	1,148	5,215
Cash flows from investing activities
Purchases of available for sale securities	(21,990)	(24,929)
Sales and calls of available for sale securities	1,004	1,908
Maturities and prepayments of available for sale securities	6,804	17,661
Proceeds from sale of other real estate owned	4,281	10,538
Proceeds from mandatory redemption of Federal Home Loan Bank stock	2,749
Loan originations and payments, net	25,137	89,045
Purchases of premises and equipment, net	(284)	(141)
Net cash from investing activities	17,701	94,082
Cash flows from financing activities
Net change in deposits	(36,890)	(84,223)
Net change in repurchase agreements	(19)	658
Advances from Federal Home Loan Bank	10,000
Repayment of Federal Home Loan Bank advances	(358)	(588)
Repayment of subordinated capital note	(450)	(450)
Net cash from financing activities	(27,717)	(84,603)
Net change in cash and cash equivalents	(8,868)	14,694
Beginning cash and cash equivalents	111,134	49,572
Ending cash and cash equivalents	102,266	64,266
Supplemental cash flow information:
Interest paid	4,872	5,603
Income taxes paid (refunded)
Supplemental non-cash disclosure:
Transfer from loans to other real estate	36,920	15,555
Financed sales of other real estate owned		$ 15

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Consolidated Balance Sheets (Parenthetical) (USD $)	Jun. 30, 2014	Dec. 31, 2013
Securities held to maturity, fair value	$ 44,853,000	$ 42,947,000
Loans, allowance	24,026,000	28,124,000
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	13,104,853	12,840,999
Common stock, shares outstanding	13,104,853	12,840,999
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	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	$ 3,600,000

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Stock Plans and Stock Based Compensation

6 Months Ended

Jun. 30, 2014

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, shareholders approved an amendment to the plan to increase the number of shares authorized for issuance by 800,000 shares. In May 2014, shareholders approved an amendment to the Plan to increase the number of shares authorized for issuance by 300,000 shares. The 2006 Plan now permits the issuance of up to 1,563,050 shares of the Company’s common stock upon the exercise of stock options or upon the grant of stock awards. As of June 30, 2014, the Company had granted 898,011 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 three to ten years. The Company has 527,799 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 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. In May 2014, the Plan was further amended to increase the number of shares issuable to 700,000 shares. Unvested shares are granted automatically under the plan at fair market value on the date of grant and vest on December 31 in the year of grant. To date, the Company has issued 181,819 unvested shares, net of forfeitures and vesting, to non-employee directors. At June 30, 2014, 271,211 shares remain available for issuance under this plan.

The fair value of the 2014 unvested shares issued to employees was $113,000, or $0.93 per weighted-average share. The fair value of the 2014 unvested shares issued to directors was $150,000, or $0.90 per weighted-average share. The Company recorded $283,000 and $226,000 of stock-based compensation during the first six months of 2014 and 2013, 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, 2014					Twelve Months Ended December 31, 2013
	Shares			Weighted Average Grant Price		Shares			Weighted Average Grant Price
Outstanding, beginning		787,426		$	1.56		153,316		$	5.92
Granted		122,220			0.93		693,214			1.18
Vested		(11,121	)		11.72		(22,113	)		12.19
Forfeited		(514	)		21.06		(36,991	)		6.22
Outstanding, ending		898,011		$	1.34		787,426		$	1.56

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, 2014					Twelve Months Ended December 31, 2013
	Shares			Weighted Average Grant Price		Shares			Weighted Average Grant Price
Outstanding, beginning		47,428		$	1.69		80,078		$	1.77
Granted		166,668			0.90		182,355			0.85
Vested		(7,757	)		1.74		(215,005	)		1.01
Forfeited		(24,520	)		1.69		—			—
Outstanding, ending		181,819		$	0.96		47,428		$	1.69

Unrecognized stock based compensation expense related to unvested shares for the remainder of 2014 and beyond is estimated as follows (in thousands):

July 2014 – December 2014	$	397
2015		420
2016		275
2017		51
2018 & thereafter		—

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Document and Entity Information	6 Months Ended
	Jun. 30, 2014	Jul. 31, 2014
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2014
Document Fiscal Year Focus	2014
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		13,104,853

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Earnings (Loss) per Share

6 Months Ended

Jun. 30, 2014

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,
	2014			2013			2014			2013
	(in thousands, except share and per share data)
Net income (loss)	$	43		$	(1,309	)	$	(244	)	$	(1,378	)
Less:
Preferred stock dividends		789			437			1,574			875
Accretion of Series A preferred stock discount		—			45			—			90
Earnings allocated to unvested shares		(55	)		(62	)		(128	)		(69	)
Earnings allocated to Series C preferred		(19	)		(48	)		(45	)		(62	)
Net loss attributable to common shareholders, basic and diluted	$	(672	)	$	(1,681	)	$	(1,645	)	$	(2,212	)
Basic
Weighted average common shares including unvested common shares outstanding		13,293,226			12,528,932			13,256,911			12,501,854
Less: Weighted average unvested common shares		979,211			434,250			931,092			367,297
Less: Weighted average Series C preferred		332,894			332,894			332,894			332,894
Weighted average common shares outstanding		11,981,121			11,761,788			11,992,925			11,801,663
Basic loss per common share	$	(0.06	)	$	(0.14	)	$	(0.14	)	$	(0.19	)
Diluted
Add: Dilutive effects of assumed exercises of common and Preferred Series C stock warrants		—			—			—			—
Weighted average common shares and potential common shares		11,981,121			11,761,788			11,992,925			11,801,663
Diluted loss per common share	$	(0.06	)	$	(0.14	)	$	(0.14	)	$	(0.19	)

The Company had no outstanding stock options at June 30, 2014 or 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, 2014 and 2013 but was not included in the diluted EPS computation as inclusion would have been anti-dilutive. Additionally, warrants for the purchase of 1,449,459 shares of non-voting common stock at an exercise price of $10.95 per share were outstanding at June 30, 2014 and 2013, but were not included in the diluted EPS computation as inclusion would have been anti-dilutive.

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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, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Interest income
Loans, including fees	$ 8,572	$ 9,954	$ 16,893	$ 19,987
Taxable securities	1,215	848	2,388	1,715
Tax exempt securities	235	231	476	452
Fed funds sold and other	144	135	306	272
Interest and Dividend Income, Operating, Total	10,166	11,168	20,063	22,426
Interest expense
Deposits	2,319	2,560	4,680	5,264
Federal Home Loan Bank advances	32	41	65	84
Subordinated capital note	47	56	97	114
Junior subordinated debentures	153	157	305	311
Federal funds purchased and other	1	2	2	3
Interest Expense, Total	2,552	2,816	5,149	5,776
Net interest income	7,614	8,352	14,914	16,650
Provision for loan losses				450
Net interest income after provision for loan losses	7,614	8,352	14,914	16,200
Non-interest income
Service charges on deposit accounts	487	506	955	999
Income from fiduciary activities				517
Bank card interchange fees	205	196	366	368
Other real estate owned rental income	18	230	25	342
Net gain on sales of securities	2	703	46	703
Income from bank owned life insurance	62	305	138	384
Other	175	208	334	482
Noninterest Income, Total	949	2,148	1,864	3,795
Non-interest expense
Salaries and employee benefits	3,949	3,999	7,690	8,138
Occupancy and equipment	896	913	1,788	1,844
Loan collection expense	389	2,407	928	3,442
Other real estate owned expense	774	1,657	1,436	2,448
FDIC Insurance	571	650	1,111	1,289
State franchise tax	405	537	830	1,074
Professional fees	764	499	1,322	905
Communications	165	179	400	354
Insurance expense	153	160	302	311
Postage and delivery	94	102	204	215
Other	784	706	1,435	1,353
Noninterest Expense, Total	8,944	11,809	17,446	21,373
Loss before income taxes	(381)	(1,309)	(668)	(1,378)
Income tax benefit	(424)		(424)
Net income (loss)	43	(1,309)	(244)	(1,378)
Less:
Dividends on preferred stock	789	437	1,574	875
Accretion on Series A preferred stock		45		90
Earnings allocated to participating securities	(74)	(110)	(173)	(131)
Net loss attributable to common shareholders	$ (672)	$ (1,681)	$ (1,645)	$ (2,212)
Basic and diluted loss per common share	$ (0.06)	$ (0.14)	$ (0.14)	$ (0.19)

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Other Real Estate Owned

6 Months Ended

Jun. 30, 2014

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. Costs incurred in order to perfect the lien prior to foreclosure may be capitalized if the fair value less the cost to sell exceeds the balance of the loan at the time of transfer to OREO. Examples of eligible costs to be capitalized are payments of delinquent property taxes to clear tax liens or payments to contractors and subcontractors to clear mechanics’ liens. 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 or have staff in our centralized appraisal department evaluate the latest in-file appraisal in connection with the transfer to other real estate owned. We typically obtain updated appraisals within five quarters of 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, 2014			December 31, 2013
	(in thousands)
Commercial Real Estate:
Construction, land development, and other land	$	21,827		$	19,199
Farmland		1,349			695
Nonfarm nonresidential		21,956			6,064
Residential Real Estate:
Multi-family		6,335			248
1-4 Family		11,667			4,916
		63,134			31,122
Valuation allowance		(199	)		(230	)
	$	62,935		$	30,892

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2014			2013			2014			2013
	(in thousands)						(in thousands)
OREO Valuation Allowance Activity:
Beginning balance	$	208		$	928		$	230		$	1,154
Provision to allowance		400			977			650			1,284
Write-downs		(409	)		(1,158	)		(681	)		(1,691	)
Ending balance	$	199		$	747		$	199		$	747

Net activity relating to other real estate owned during the six months ended June 30, 2014 and 2013 is as follows:

	2014			2013
	(in thousands)
OREO Activity
OREO as of January 1	$	30,892		$	43,671
Real estate acquired		36,920			15,555
Valuation adjustment writedowns		(650	)		(1,284	)
Gain/(Loss) on sale		54			(359	)
Proceeds from sale of properties		(4,281	)		(10,553	)
OREO as of June 30	$	62,935		$	47,030

Expenses related to other real estate owned include:

	Three Months Ended June 30,					Six Months Ended June 30,
	2014			2013		2014			2013
	(in thousands)					(in thousands)
Net (gain) loss on sales	$	(54	)	$	162	$	(54	)	$	359
Provision to allowance		400			977		650			1,284
Operating expense		428			518		840			805
Total	$	774		$	1,657	$	1,436		$	2,448

XML

Loans

6 Months Ended

Jun. 30, 2014

Loans

Note 4 – Loans

Loans were as follows:

	June 30, 2014			December 31, 2013
	(in thousands)
Commercial	$	65,031		$	52,878
Commercial Real Estate:
Construction		32,778			43,326
Farmland		64,880			71,189
Nonfarm nonresidential		190,909			232,026
Residential Real Estate:
Multi-family		43,496			46,858
1-4 Family		205,116			228,505
Consumer		12,669			14,365
Agriculture		27,477			19,199
Other		674			980
Subtotal		643,030			709,326
Less: Allowance for loan losses		(24,026	)		(28,124	)
Loans, net	$	619,004		$	681,202

The following table presents the activity in the allowance for loan losses by portfolio segment for the three months ended June 30, 2014 and 2013:

	Commercial			Commercial Real Estate			Residential Real Estate			Consumer			Agriculture			Other			Total
	(in thousands)
June 30, 2014:
Beginning balance	$	3,608		$	13,929		$	7,071		$	383		$	415		$	9		$	25,415
Provision for loan losses		(329	)		(226	)		560			(28	)		38			(15	)		—
Loans charged off		(308	)		(1,701	)		(1,048	)		(51	)		(21	)		(1	)		(3,130	)
Recoveries		144			1,250			290			35			3			19			1,741
Ending balance	$	3,115		$	13,252		$	6,873		$	339		$	435		$	12		$	24,026
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

The following table presents the activity in the allowance for loan losses by portfolio segment for the six months ended June 30, 2014 and 2013:

	Commercial			Commercial Real Estate			Residential Real Estate			Consumer			Agriculture			Other			Total
	(in thousands)
June 30, 2014:
Beginning balance	$	3,221		$	16,414		$	7,762		$	416		$	305		$	6		$	28,124
Provision for loan losses		116			(1,353	)		1,094			(9	)		151			1			—
Loans charged off		(454	)		(3,175	)		(2,356	)		(179	)		(30	)		(18	)		(6,212	)
Recoveries		232			1,366			373			111			9			23			2,114
Ending balance	$	3,115		$	13,252		$	6,873		$	339		$	435		$	12		$	24,026
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

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, 2014:

	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	$	150	$	1,350	$	252	$	1	$	—	$	—	$	1,753
Collectively evaluated for impairment		2,965		11,902		6,621		338		435		12		22,273
Total ending allowance balance	$	3,115	$	13,252	$	6,873	$	339	$	435	$	12	$	24,026
Loans:
Loans individually evaluated for impairment	$	2,150	$	50,678	$	26,449	$	62	$	229	$	174	$	79,742
Loans collectively evaluated for impairment		62,881		237,889		222,163		12,607		27,248		500		563,288
Total ending loans balance	$	65,031	$	288,567	$	248,612	$	12,669	$	27,477	$	674	$	643,030

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, 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	$	290	$	2,345	$	827	$	9	$	—	$	—	$	3,471
Collectively evaluated for impairment		2,931		14,069		6,935		407		305		6		24,653
Total ending allowance balance	$	3,221	$	16,414	$	7,762	$	416	$	305	$	6	$	28,124
Loans:
Loans individually evaluated for impairment	$	4,995	$	94,330	$	49,512	$	93	$	322	$	631	$	149,883
Loans collectively evaluated for impairment		47,883		252,211		225,851		14,272		18,877		349		559,443
Total ending loans balance	$	52,878	$	346,541	$	275,363	$	14,365	$	19,199	$	980	$	709,326

Impaired Loans

Impaired loans include restructured loans and 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, 2014:

							Three Months Ended June 30, 2014				Six Months Ended June 30, 2014
	Unpaid Principal Balance		Recorded Investment		Allowance For Loan Losses Allocated		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Cash Basis Income Recognized
	(in thousands)
With No Related Allowance Recorded:
Commercial	$	1,288	$	812	$	—	$	1,142	$	54	$	1,272	$	55	$	55
Commercial real estate:
Construction		100		21		—		11		—		20		—		—
Farmland		2,856		2,323		—		2,673		31		3,082		48		48
Nonfarm nonresidential		4,367		1,117		—		1,144		127		1,231		127		127
Residential real estate:
Multi-family		86		86		—		89		—		190		—		—
1-4 Family		9,460		7,578		—		7,980		11		8,681		180		180
Consumer		19		19		—		10		—		9		—		—
Agriculture		242		229		—		264		—		283		3		3
Other		68		68		—		74		2		54		9		9
With An Allowance Recorded:
Commercial		1,434		1,338		150		2,332		2		2,709		20		—
Commercial real estate:
Construction		4,944		4,486		85		6,142		8		7,183		17		—
Farmland		5,630		3,728		—		3,730		—		3,899		—		—
Nonfarm nonresidential		49,553		39,003		1,265		55,061		211		61,870		502		—
Residential real estate:																—
Multi-family		4,281		4,281		88		4,535		39		7,062		76		—
1-4 Family		16,471		14,504		164		15,613		139		19,382		275		—
Consumer		43		43		1		44		—		58		1		—
Agriculture		—		—		—		—		—		—		—		—
Other		351		106		—		106		—		276		—		—
Total	$	101,193	$	79,742	$	1,753	$	100,950	$	624	$	117,261	$	1,313	$	422

The following table presents loans individually evaluated for impairment by class of loan as of December 31, 2013:

	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	$	2,131	$	1,533	$	—	$	1,622	$	30	$	30
Commercial real estate:
Construction		64		38		—		467		164		164
Farmland		4,074		3,898		—		4,259		268		268
Nonfarm nonresidential		1,568		1,404		—		1,724		367		366
Residential real estate:
Multi-family		444		392		—		541		3		3
1-4 Family		11,011		10,083		—		11,533		115		116
Consumer		9		9		—		21		—		—
Agriculture		401		322		—		213		—		—
Other		14		13		—		10		11		11
With An Allowance Recorded:
Commercial		3,734		3,462		290		3,905		99		—
Commercial real estate:
Construction		10,409		9,264		218		20,173		88		—
Farmland		6,117		4,238		65		5,579		37		—
Nonfarm nonresidential		94,508		75,488		2,062		77,726		1,324		—
Residential real estate:
Multi-family		13,883		12,117		393		13,121		208		—
1-4 Family		31,327		26,920		434		27,755		557		—
Consumer		84		84		9		134		3		—
Agriculture		—		—		—		2		—		—
Other		861		618		—		539		17		—
Total	$	180,639	$	149,883	$	3,471	$	169,324	$	3,291	$	958

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 borrower.

The following table presents the types of TDR loan modifications by portfolio segment outstanding as of June 30, 2014 and December 31, 2013:

	TDRs Performing to Modified Terms		TDRs Not Performing to Modified Terms		Total TDRs
	(in thousands)
June 30, 2014
Commercial
Rate reduction	$	20	$	—	$	20
Principal deferral		—		869		869
Commercial Real Estate:
Construction
Rate reduction		272		3,409		3,681
Principal deferral		355		—		355
Farmland
Principal deferral		—		2,365		2,365
Nonfarm nonresidential
Rate reduction		16,569		11,208		27,777
Principal deferral		680		—		680
Interest only payments		—		649		649
Residential Real Estate:
Multi-family
Rate reduction		4,280		—		4,280
1-4 Family
Rate reduction		10,170		—		10,170
Consumer
Rate reduction		43		—		43
Total TDRs	$	32,389	$	18,500	$	50,889

	TDRs Performing to Modified Terms		TDRs Not Performing to Modified Terms		Total TDRs
	(in thousands)
December 31, 2013
Commercial
Rate reduction	$	1,933	$	—	$	1,933
Principal deferral		—		869		869
Commercial Real Estate:
Construction
Rate reduction		275		6,345		6,620
Principal deferral		499		—		499
Farmland
Rate reduction		150		—		150
Principal deferral		—		2,365		2,365
Nonfarm nonresidential
Rate reduction		22,457		21,235		43,692
Principal deferral		691		—		691
Interest only payments		2,439		1,489		3,928
Residential Real Estate:
Multi-family
Rate reduction		4,354		6,655		11,009
Interest only payments		641		—		641
1-4 Family
Rate reduction		10,312		7,958		18,270
Consumer
Rate reduction		84		—		84
Other
Rate reduction		511		—		511
Total TDRs	$	44,346	$	46,916	$	91,262

At June 30, 2014 and December 31, 2013, 64% and 49%, respectively, of the Company’s TDRs were performing according to their modified terms. The Company allocated $1.6 million and $2.9 million in reserves to borrowers whose loan terms have been modified in TDRs as of June 30, 2014, and December 31, 2013, respectively. The Company has committed to lend additional amounts totaling $262,000 and $261,000 as of June 30, 2014 and December 31, 2013, respectively, to borrowers with outstanding loans classified as TDRs.

Management periodically reviews renewals/modifications of previously identified TDRs, for which there was no principal forgiveness, to consider if it is appropriate to remove the TDR classification. If the borrower is no longer experiencing financial difficulty and the renewal/modification did not contain a concessionary interest rate or other concessionary terms, management considers the potential removal of the TDR classification. If deemed appropriate, the TDR classification is removed as the borrower has complied with the terms of the loan at the date of renewal/modification and there was a reasonable expectation that the borrower would continue to comply with the terms of the loan subsequent to the date of the renewal/modification. In this instance, the TDR was originally considered a restructuring in a prior year as a result of a modification with an interest rate that was not commensurate with the risk of the underlying loan. Additionally, TDR classification can be removed in circumstances in which the Company performs a non-concessionary re-modification of the loan at terms that were considered to be at market for loans with comparable risk. Management expects the borrower will continue to perform under the re-modified terms based on the borrower’s past history of performance.

As of June 30, 2014, the TDR classification was removed from two loans that met the requirements as discussed above. These two loans totaled $7.3 million at December 31, 2013. These loans are no longer evaluated individually for impairment.

No TDR loan modifications occurred during the three or six months ended June 30, 2014. 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:

	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

As of June 30, 2013, 100% of the Company’s TDRs that occurred during the three months ended June 30, 2013, were performing according to their modified terms. The Company allocated $49,000 in reserves to customers whose loan terms have been modified during the three months ended June 30, 2013. For modifications occurring during the three month period ended June 30, 2013, 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:

	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
Nonfarm nonresidential
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

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.

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, 2014, and December 31, 2013:

	Nonaccrual				Loans Past Due 90 Days And Over Still Accruing
	June 30, 2014		December 31, 2013		June 30, 2014		December 31, 2013
	(in thousands)
Commercial	$	1,984	$	2,886	$	—	$	—
Commercial Real Estate:
Construction		3,880		8,528		—		—
Farmland		6,051		7,844		—		—
Nonfarm nonresidential		20,039		48,447		—		—
Residential Real Estate:
Multi-family		86		7,513		—		—
1-4 Family		11,912		26,098		—		230
Consumer		20		9		—		2
Agriculture		229		322		—		—
Other		174		120		—		—
Total	$	44,375	$	101,767	$	—	$	232

The following table presents the aging of the recorded investment in past due loans as of June 30, 2014 and December 31, 2013:

	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, 2014
Commercial	$	430	$	18	$	—	$	1,984	$	2,432
Commercial Real Estate:
Construction		—		—		—		3,880		3,880
Farmland		200		—		—		6,051		6,251
Nonfarm nonresidential		550		336		—		20,039		20,925
Residential Real Estate:
Multi-family		—		—		—		86		86
1-4 Family		1,744		593		—		11,912		14,249
Consumer		101		44		—		20		165
Agriculture		32		—		—		229		261
Other		—		—		—		174		174
Total	$	3,057	$	991	$	—	$	44,375	$	48,423

	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, 2013
Commercial	$	156	$	123	$	—	$	2,886	$	3,165
Commercial Real Estate:
Construction		261		—		—		8,528		8,789
Farmland		484		41		—		7,844		8,369
Nonfarm nonresidential		4,375		—		—		48,447		52,822
Residential Real Estate:
Multi-family		1,181		—		—		7,513		8,694
1-4 Family		4,059		577		230		26,098		30,964
Consumer		145		34		2		9		190
Agriculture		35		—		—		322		357
Other		—		—		—		120		120
Total	$	10,696	$	775	$	232	$	101,767	$	113,470

Credit Quality Indicators

We categorize all 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. Additionally, 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. 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 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, 2014, and December 31, 2013, 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, 2014
Commercial	$	54,255	$	2,859	$	—	$	7,917	$	—	$	65,031
Commercial Real Estate:
Construction		21,105		6,190		—		5,483		—		32,778
Farmland		46,688		8,687		230		9,275		—		64,880
Nonfarm nonresidential		108,184		33,632		1,211		47,882		—		190,909
Residential Real Estate:
Multi-family		30,124		7,850		—		5,522		—		43,496
1-4 Family		136,468		30,384		1,780		36,484		—		205,116
Consumer		11,523		612		2		532		—		12,669
Agriculture		26,007		994		—		476		—		27,477
Other		499		—		—		175		—		674
Total	$	434,853	$	91,208	$	3,223	$	113,746	$	—	$	643,030

	Pass		Watch		Special Mention		Substandard		Doubtful		Total
	(in thousands)
December 31, 2013
Commercial	$	35,438	$	8,517	$	329	$	8,594	$	—	$	52,878
Commercial Real Estate:
Construction		16,706		10,771		2,277		13,572		—		43,326
Farmland		46,909		9,121		1,735		13,424		—		71,189
Nonfarm nonresidential		93,327		51,522		734		86,443		—		232,026
Residential Real Estate:
Multi-family		16,506		17,320		—		13,032		—		46,858
1-4 Family		130,833		43,785		784		53,103		—		228,505
Consumer		12,718		968		6		673		—		14,365
Agriculture		16,742		1,802		—		655		—		19,199
Other		350		510		—		120		—		980
Total	$	369,529	$	144,316	$	5,865	$	189,616	$	—	$	709,326

During the first quarter of 2014, management instituted a new risk category within its pass classification. The purpose was to better identify certain loans where the borrower’s sustained satisfactory repayment history was deemed a more relevant predictor of future loss than certain underwriting criteria at origination. The establishment of this new pass risk category helps to ensure the watch risk category remains transitory and event driven in nature. A total of $24.2 million in commercial, $8.5 million in residential, and $2.2 million in agriculture loans were reclassified from watch to the new pass risk category during the first quarter.

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Loans (Tables)

6 Months Ended

Jun. 30, 2014

Loans

Loans were as follows:

	June 30, 2014			December 31, 2013
	(in thousands)
Commercial	$	65,031		$	52,878
Commercial Real Estate:
Construction		32,778			43,326
Farmland		64,880			71,189
Nonfarm nonresidential		190,909			232,026
Residential Real Estate:
Multi-family		43,496			46,858
1-4 Family		205,116			228,505
Consumer		12,669			14,365
Agriculture		27,477			19,199
Other		674			980
Subtotal		643,030			709,326
Less: Allowance for loan losses		(24,026	)		(28,124	)
Loans, net	$	619,004		$	681,202

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, 2014 and 2013:

	Commercial			Commercial Real Estate			Residential Real Estate			Consumer			Agriculture			Other			Total
	(in thousands)
June 30, 2014:
Beginning balance	$	3,608		$	13,929		$	7,071		$	383		$	415		$	9		$	25,415
Provision for loan losses		(329	)		(226	)		560			(28	)		38			(15	)		—
Loans charged off		(308	)		(1,701	)		(1,048	)		(51	)		(21	)		(1	)		(3,130	)
Recoveries		144			1,250			290			35			3			19			1,741
Ending balance	$	3,115		$	13,252		$	6,873		$	339		$	435		$	12		$	24,026
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

The following table presents the activity in the allowance for loan losses by portfolio segment for the six months ended June 30, 2014 and 2013:

	Commercial			Commercial Real Estate			Residential Real Estate			Consumer			Agriculture			Other			Total
	(in thousands)
June 30, 2014:
Beginning balance	$	3,221		$	16,414		$	7,762		$	416		$	305		$	6		$	28,124
Provision for loan losses		116			(1,353	)		1,094			(9	)		151			1			—
Loans charged off		(454	)		(3,175	)		(2,356	)		(179	)		(30	)		(18	)		(6,212	)
Recoveries		232			1,366			373			111			9			23			2,114
Ending balance	$	3,115		$	13,252		$	6,873		$	339		$	435		$	12		$	24,026
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

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, 2014:

	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	$	150	$	1,350	$	252	$	1	$	—	$	—	$	1,753
Collectively evaluated for impairment		2,965		11,902		6,621		338		435		12		22,273
Total ending allowance balance	$	3,115	$	13,252	$	6,873	$	339	$	435	$	12	$	24,026
Loans:
Loans individually evaluated for impairment	$	2,150	$	50,678	$	26,449	$	62	$	229	$	174	$	79,742
Loans collectively evaluated for impairment		62,881		237,889		222,163		12,607		27,248		500		563,288
Total ending loans balance	$	65,031	$	288,567	$	248,612	$	12,669	$	27,477	$	674	$	643,030

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, 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	$	290	$	2,345	$	827	$	9	$	—	$	—	$	3,471
Collectively evaluated for impairment		2,931		14,069		6,935		407		305		6		24,653
Total ending allowance balance	$	3,221	$	16,414	$	7,762	$	416	$	305	$	6	$	28,124
Loans:
Loans individually evaluated for impairment	$	4,995	$	94,330	$	49,512	$	93	$	322	$	631	$	149,883
Loans collectively evaluated for impairment		47,883		252,211		225,851		14,272		18,877		349		559,443
Total ending loans balance	$	52,878	$	346,541	$	275,363	$	14,365	$	19,199	$	980	$	709,326

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, 2014:

							Three Months Ended June 30, 2014				Six Months Ended June 30, 2014
	Unpaid Principal Balance		Recorded Investment		Allowance For Loan Losses Allocated		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Cash Basis Income Recognized
	(in thousands)
With No Related Allowance Recorded:
Commercial	$	1,288	$	812	$	—	$	1,142	$	54	$	1,272	$	55	$	55
Commercial real estate:
Construction		100		21		—		11		—		20		—		—
Farmland		2,856		2,323		—		2,673		31		3,082		48		48
Nonfarm nonresidential		4,367		1,117		—		1,144		127		1,231		127		127
Residential real estate:
Multi-family		86		86		—		89		—		190		—		—
1-4 Family		9,460		7,578		—		7,980		11		8,681		180		180
Consumer		19		19		—		10		—		9		—		—
Agriculture		242		229		—		264		—		283		3		3
Other		68		68		—		74		2		54		9		9
With An Allowance Recorded:
Commercial		1,434		1,338		150		2,332		2		2,709		20		—
Commercial real estate:
Construction		4,944		4,486		85		6,142		8		7,183		17		—
Farmland		5,630		3,728		—		3,730		—		3,899		—		—
Nonfarm nonresidential		49,553		39,003		1,265		55,061		211		61,870		502		—
Residential real estate:																—
Multi-family		4,281		4,281		88		4,535		39		7,062		76		—
1-4 Family		16,471		14,504		164		15,613		139		19,382		275		—
Consumer		43		43		1		44		—		58		1		—
Agriculture		—		—		—		—		—		—		—		—
Other		351		106		—		106		—		276		—		—
Total	$	101,193	$	79,742	$	1,753	$	100,950	$	624	$	117,261	$	1,313	$	422

The following table presents loans individually evaluated for impairment by class of loan as of December 31, 2013:

	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	$	2,131	$	1,533	$	—	$	1,622	$	30	$	30
Commercial real estate:
Construction		64		38		—		467		164		164
Farmland		4,074		3,898		—		4,259		268		268
Nonfarm nonresidential		1,568		1,404		—		1,724		367		366
Residential real estate:
Multi-family		444		392		—		541		3		3
1-4 Family		11,011		10,083		—		11,533		115		116
Consumer		9		9		—		21		—		—
Agriculture		401		322		—		213		—		—
Other		14		13		—		10		11		11
With An Allowance Recorded:
Commercial		3,734		3,462		290		3,905		99		—
Commercial real estate:
Construction		10,409		9,264		218		20,173		88		—
Farmland		6,117		4,238		65		5,579		37		—
Nonfarm nonresidential		94,508		75,488		2,062		77,726		1,324		—
Residential real estate:
Multi-family		13,883		12,117		393		13,121		208		—
1-4 Family		31,327		26,920		434		27,755		557		—
Consumer		84		84		9		134		3		—
Agriculture		—		—		—		2		—		—
Other		861		618		—		539		17		—
Total	$	180,639	$	149,883	$	3,471	$	169,324	$	3,291	$	958

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, 2014 and December 31, 2013:

	TDRs Performing to Modified Terms		TDRs Not Performing to Modified Terms		Total TDRs
	(in thousands)
June 30, 2014
Commercial
Rate reduction	$	20	$	—	$	20
Principal deferral		—		869		869
Commercial Real Estate:
Construction
Rate reduction		272		3,409		3,681
Principal deferral		355		—		355
Farmland
Principal deferral		—		2,365		2,365
Nonfarm nonresidential
Rate reduction		16,569		11,208		27,777
Principal deferral		680		—		680
Interest only payments		—		649		649
Residential Real Estate:
Multi-family
Rate reduction		4,280		—		4,280
1-4 Family
Rate reduction		10,170		—		10,170
Consumer
Rate reduction		43		—		43
Total TDRs	$	32,389	$	18,500	$	50,889

	TDRs Performing to Modified Terms		TDRs Not Performing to Modified Terms		Total TDRs
	(in thousands)
December 31, 2013
Commercial
Rate reduction	$	1,933	$	—	$	1,933
Principal deferral		—		869		869
Commercial Real Estate:
Construction
Rate reduction		275		6,345		6,620
Principal deferral		499		—		499
Farmland
Rate reduction		150		—		150
Principal deferral		—		2,365		2,365
Nonfarm nonresidential
Rate reduction		22,457		21,235		43,692
Principal deferral		691		—		691
Interest only payments		2,439		1,489		3,928
Residential Real Estate:
Multi-family
Rate reduction		4,354		6,655		11,009
Interest only payments		641		—		641
1-4 Family
Rate reduction		10,312		7,958		18,270
Consumer
Rate reduction		84		—		84
Other
Rate reduction		511		—		511
Total TDRs	$	44,346	$	46,916	$	91,262

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:

	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

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:

	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
Nonfarm nonresidential
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

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, 2014, and December 31, 2013:

	Nonaccrual				Loans Past Due 90 Days And Over Still Accruing
	June 30, 2014		December 31, 2013		June 30, 2014		December 31, 2013
	(in thousands)
Commercial	$	1,984	$	2,886	$	—	$	—
Commercial Real Estate:
Construction		3,880		8,528		—		—
Farmland		6,051		7,844		—		—
Nonfarm nonresidential		20,039		48,447		—		—
Residential Real Estate:
Multi-family		86		7,513		—		—
1-4 Family		11,912		26,098		—		230
Consumer		20		9		—		2
Agriculture		229		322		—		—
Other		174		120		—		—
Total	$	44,375	$	101,767	$	—	$	232

The following table presents the aging of the recorded investment in past due loans as of June 30, 2014 and December 31, 2013:

	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, 2014
Commercial	$	430	$	18	$	—	$	1,984	$	2,432
Commercial Real Estate:
Construction		—		—		—		3,880		3,880
Farmland		200		—		—		6,051		6,251
Nonfarm nonresidential		550		336		—		20,039		20,925
Residential Real Estate:
Multi-family		—		—		—		86		86
1-4 Family		1,744		593		—		11,912		14,249
Consumer		101		44		—		20		165
Agriculture		32		—		—		229		261
Other		—		—		—		174		174
Total	$	3,057	$	991	$	—	$	44,375	$	48,423

	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, 2013
Commercial	$	156	$	123	$	—	$	2,886	$	3,165
Commercial Real Estate:
Construction		261		—		—		8,528		8,789
Farmland		484		41		—		7,844		8,369
Nonfarm nonresidential		4,375		—		—		48,447		52,822
Residential Real Estate:
Multi-family		1,181		—		—		7,513		8,694
1-4 Family		4,059		577		230		26,098		30,964
Consumer		145		34		2		9		190
Agriculture		35		—		—		322		357
Other		—		—		—		120		120
Total	$	10,696	$	775	$	232	$	101,767	$	113,470

Risk Category of Loans by Class of Loans

As of June 30, 2014, and December 31, 2013, 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, 2014
Commercial	$	54,255	$	2,859	$	—	$	7,917	$	—	$	65,031
Commercial Real Estate:
Construction		21,105		6,190		—		5,483		—		32,778
Farmland		46,688		8,687		230		9,275		—		64,880
Nonfarm nonresidential		108,184		33,632		1,211		47,882		—		190,909
Residential Real Estate:
Multi-family		30,124		7,850		—		5,522		—		43,496
1-4 Family		136,468		30,384		1,780		36,484		—		205,116
Consumer		11,523		612		2		532		—		12,669
Agriculture		26,007		994		—		476		—		27,477
Other		499		—		—		175		—		674
Total	$	434,853	$	91,208	$	3,223	$	113,746	$	—	$	643,030

	Pass		Watch		Special Mention		Substandard		Doubtful		Total
	(in thousands)
December 31, 2013
Commercial	$	35,438	$	8,517	$	329	$	8,594	$	—	$	52,878
Commercial Real Estate:
Construction		16,706		10,771		2,277		13,572		—		43,326
Farmland		46,909		9,121		1,735		13,424		—		71,189
Nonfarm nonresidential		93,327		51,522		734		86,443		—		232,026
Residential Real Estate:
Multi-family		16,506		17,320		—		13,032		—		46,858
1-4 Family		130,833		43,785		784		53,103		—		228,505
Consumer		12,718		968		6		673		—		14,365
Agriculture		16,742		1,802		—		655		—		19,199
Other		350		510		—		120		—		980
Total	$	369,529	$	144,316	$	5,865	$	189,616	$	—	$	709,326

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Capital Requirements and Restrictions on Retained Earnings

6 Months Ended

Jun. 30, 2014

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 initiate 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 requires 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 unless the board of directors adopts prior to the extension a detailed statement giving reasons why the extension is in the best interest of the bank, 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, 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 cannot be considered well-capitalized while under the Consent Order. 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 have not been directed by the FDIC to implement such a plan.

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. As of June 30, 2014, the capital ratios required by the Consent Order were not met.

The following table shows the ratios and amounts 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 (dollars in thousands):

	Actual					For Capital Adequacy Purposes
	Amount		Ratio			Amount		Ratio
As of June 30, 2014:
Total risk-based capital (to risk- weighted assets)
Consolidated	$	78,104		11.07	%	$	56,454		8.00	%
Bank		83,012		11.79			56,350		8.00
Tier I capital (to risk-weighted assets)
Consolidated		51,593		7.31			28,227		4.00
Bank		68,619		9.74			28,175		4.00
Tier I capital (to average assets)
Consolidated		51,593		4.89			42,233		4.00
Bank		68,619		6.51			42,154		4.00

	Actual					For Capital Adequacy Purposes
	Amount		Ratio			Amount		Ratio
As of December 31, 2013:
Total risk-based capital (to risk- weighted assets)
Consolidated	$	80,203		11.03	%	$	58,178		8.00	%
Bank		83,055		11.44			58,064		8.00
Tier I capital (to risk-weighted assets)
Consolidated		53,371		7.34			29,089		4.00
Bank		67,897		9.35			29,032		4.00
Tier I capital (to average assets)
Consolidated		53,371		4.95			43,156		4.00
Bank		67,897		6.28			43,221		4.00

The Consent Order requires the Bank to achieve the minimum capital ratios presented below:

	Actual as of June 30, 2014					Ratio Required by Consent Order
	Amount		Ratio			Amount		Ratio
Total capital to risk-weighted assets	$	83,012		11.79	%	$	84,526		12.00	%
Tier I capital to average assets		68,619		6.51			94,847		9.00

At June 30, 2014, PBI Bank’s Tier 1 leverage ratio was 6.51%, and its total risk-based capital ratio was 11.79%, both of which are below the minimum capital ratios required by the Consent Order. 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.

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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Fair Values Measurement

6 Months Ended

Jun. 30, 2014

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 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 our appraisal date predates a likely change in market conditions. These deductions range from 10% for routine real estate collateral to 25% for real estate that is determined (1) to have a thin trading market or (2) to be specialized collateral. This is in addition to estimated discounts for cost to sell of six to ten percent.

We also apply discounts to the expected fair value of collateral for impaired loans where the likely resolution involves litigation or 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 or have staff in our centralized appraisal department evaluate the latest in-file appraisal 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 the fair value of the underlying collateral based on our internal evaluation of the property, review of the most recent appraisal, and discussions with the currently engaged appraiser. We generally obtain updated appraisals within five quarters of 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 collateral to 25% for real estate that is determined (1) to have a thin trading market or (2) to be specialized collateral. This is in addition to estimated discounts for cost to sell of six to ten percent.

Financial assets measured at fair value on a recurring basis at June 30, 2014 and December 31, 2013 are summarized below:

			Fair Value Measurements at June 30, 2014 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	$	29,607	$	—	$	29,607	$	—
Agency mortgage-backed: residential		118,837		—		118,837		—
State and municipal		12,559		—		12,559		—
Corporate bonds		19,069		—		19,069		—
Other debt securities		651		—		—		651
Total	$	180,723	$	—	$	180,072	$	651

			Fair Value Measurements at December 31, 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	$	29,866	$	—	$	29,866	$	—
Agency mortgage-backed: residential		100,943		—		100,943		—
State and municipal		13,545		—		13,545		—
Corporate bonds		18,161		—		18,161		—
Other debt securities		632		—		—		632
Equity securities		197		197		—		—
Total	$	163,344	$	197	$	162,515	$	632

There were no transfers between Level 1 and Level 2 during 2014 or 2013.

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, 2014 and 2013:

	Other Debt Securities
	2014		2013
	(in thousands)
Balances of recurring Level 3 assets at January 1	$	632	$	618
Total gain (loss) for the period:
Included in other comprehensive income (loss)		19		13
Balance of recurring Level 3 assets at June 30	$	651	$	631

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 8.25% 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, 2014 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	$	1,188	$	—	$	—	$	1,188
Commercial real estate:
Construction		4,401		—		—		4,401
Farmland		3,728		—		—		3,728
Nonfarm nonresidential		37,738		—		—		37,738
Residential real estate:
Multi-family		4,193		—		—		4,193
1-4 Family		14,340		—		—		14,340
Consumer		42		—		—		42
Other		106		—		—		106
Other real estate owned, net:
Commercial real estate:
Construction		21,758		—		—		21,758
Farmland		1,344		—		—		1,344
Nonfarm nonresidential		21,887		—		—		21,887
Residential real estate:
Multi-family		6,316		—		—		6,316
1-4 Family		11,630		—		—		11,630

			Fair Value Measurements at December 31, 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	$	3,172	$	—	$	—	$	3,172
Commercial real estate:
Construction		9,046		—		—		9,046
Farmland		4,173		—		—		4,173
Nonfarm nonresidential		73,426		—		—		73,426
Residential real estate:
Multi-family		11,724		—		—		11,724
1-4 Family		26,486		—		—		26,486
Consumer		75		—		—		75
Agriculture		—		—		—		—
Other		618		—		—		618
Other real estate owned, net:
Commercial real estate:
Construction		19,057		—		—		19,057
Farmland		690		—		—		690
Nonfarm nonresidential		6,019		—		—		6,019
Residential real estate:
Multi-family		246		—		—		246
1-4 Family		4,880		—		—		4,880

Impaired loans, which are measured for impairment using the fair value of the collateral for collateral dependent loans, had a carrying amount of $67.5 million at June 30, 2014 with a valuation allowance of $1.8 million. This resulted in no additional provision for loan losses for the six months ended June 30, 2014. At December 31, 2013, impaired loans had a carrying amount of $132.2 million, with a valuation allowance of $3.5 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 $62.9 million as of June 30, 2014, compared with $30.9 million at December 31, 2013. Fair value write-downs of $650,000 were recorded on other real estate owned for the six months ended June 30, 2014.

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, 2014:

	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Range (Weighted Average)
	(in thousands)
Impaired loans – Commercial	$	1,188	Market value approach	Adjustment for receivables and inventory discounts		16% – 32%(24%)
Impaired loans – Commercial real estate	$	45,867	Sales comparison approach	Adjustment for differences between the comparable sales		0% – 62%(18%)
Impaired loans – Residential real estate	$	18,533	Sales comparison approach	Adjustment for differences between the comparable sales		0% – 68%(17%)
Other real estate owned – Commercial real estate	$	44,989	Sales comparison approach Income approach	Adjustment for differences between the comparable sales Discount or capitalization rate		3% – 45%(17%) 8% – 16%(14%)
Other real estate owned – Residential real estate	$	17,946	Sales comparison approach	Adjustment for differences between the comparable sales		2% – 54%(11%)

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, 2013:

	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Range (Weighted Average)
	(in thousands)
Impaired loans – Commercial	$	3,172	Market value approach	Adjustment for receivables and inventory discounts		16% –32%(24%)
Impaired loans – Commercial real estate	$	86,645	Sales comparison approach	Adjustment for differences between the comparable sales		0% – 69%(20%)
Impaired loans – Residential real estate	$	38,210	Sales comparison approach	Adjustment for differences between the comparable sales		0% – 68%(15%)
Other real estate owned – Commercial real estate	$	25,766	Sales comparison approach Income approach	Adjustment for differences between the comparable sales Discount or capitalization rate		3% – 51%(22%) 7% – 16%(11%)
Other real estate owned – Residential real estate	$	5,126	Sales comparison approach	Adjustment for differences between the comparable sales		2% – 54%(11%)

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

			Fair Value Measurements at June 30, 2014 Using
	Carrying Amount		Level 1		Level 2		Level 3		Total
	(in thousands)
Financial assets
Cash and cash equivalents	$	102,266	$	78,906	$	23,360	$	—	$	102,266
Securities available for sale		180,723		—		180,072		651		180,723
Securities held to maturity		43,488		—		44,853		—		44,853
Federal Home Loan Bank stock		7,323		N/A		N/A		N/A		N/A
Mortgage loans held for sale		280		—		280		—		280
Loans, net		619,004		—		—		632,722		632,722
Accrued interest receivable		3,461		—		1,365		2,096		3,461
Financial liabilities
Deposits	$	950,815	$	109,956	$	837,997	$	—	$	947,953
Securities sold under agreements to repurchase		2,451		—		2,451		—		2,451
Federal Home Loan Bank advances		14,134		—		14,138		—		14,138
Subordinated capital notes		5,400		—		—		5,177		5,177
Junior subordinated debentures		25,000		—		—		13,841		13,841
Accrued interest payable		2,813		—		1,014		1,799		2,813

			Fair Value Measurements at December 31, 2013 Using
	Carrying Amount		Level 1		Level 2		Level 3		Total
	(in thousands)
Financial assets
Cash and cash equivalents	$	111,134	$	106,885	$	4,249	$	—	$	111,134
Securities available for sale		163,344		197		162,515		632		163,344
Securities held to maturity		43,612		—		42,947		—		42,947
Federal Home Loan Bank stock		10,072		N/A		N/A		N/A		N/A
Mortgage loans held for sale		149		—		149		—		149
Loans, net		681,202		—		—		695,999		695,999
Accrued interest receivable		3,891		—		1,343		2,548		3,891
Financial liabilities
Deposits	$	987,705	$	107,486	$	879,707	$	—	$	987,193
Securities sold under agreements to repurchase		2,470		—		2,470		—		2,470
Federal Home Loan Bank advances		4,492		—		4,495		—		4,495
Subordinated capital notes		5,850		—		—		5,586		5,586
Junior subordinated debentures		25,000		—		—		13,526		13,526
Accrued interest payable		2,535		—		1,042		1,493		2,535

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. Non-interest 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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Reconciliation of all Assets Measured at Fair Value on Recurring Basis Using Significant Unobservable Inputs Level 3 (Detail) (Other, USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Other
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Balances of recurring Level 3 assets at January 1	$ 632	$ 618
Included in other comprehensive income (loss)	19	13
Balance of recurring Level 3 assets at June 30	$ 651	$ 631

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Deposits

6 Months Ended

Jun. 30, 2014

Deposits

Note 6 – Deposits

The following table shows deposits by category:

	June 30, 2014		December 31, 2013
	(in thousands)
Non-interest bearing	$	109,956	$	107,486
Interest checking		76,625		84,626
Money market		95,946		79,349
Savings		37,178		36,292
Certificates of deposit		631,110		679,952
Total	$	950,815	$	987,705

Time deposits of $100,000 or more were $278.3 million and $295.0 million at June 30, 2014 and December 31, 2013, respectively.

Scheduled maturities of total time deposits at June 30, 2014 are as follows (in thousands):

Year 1	$	473,490
Year 2		121,978
Year 3		12,177
Year 4		7,910
Year 5		15,553
Thereafter		2
	$	631,110

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Advances from the Federal Home Loan Bank

6 Months Ended

Jun. 30, 2014

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, 2014		December 31, 2013
	(in thousands)
Monthly amortizing advances with fixed rates from 0.00% to 5.25% and maturities ranging from 2014 through 2033, averaging 2.89% for 2014	$	14,134	$	4,492

Each advance is payable based upon the 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. At June 30, 2014, our additional borrowing capacity with the FHLB was $10.6 million. The availability of our borrowing capacity could be affected by our financial condition 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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Income Taxes

6 Months Ended

Jun. 30, 2014

Income Taxes

Note 9 – Income Taxes

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

	June 30, 2014			December 31, 2013
	(in thousands)
Deferred tax assets:
Net operating loss carry-forward	$	25,943		$	25,460
Allowance for loan losses		8,409			9,843
Other real estate owned write-down		9,537			9,478
Alternative minimum tax credit carry-forward		692			692
Net assets from acquisitions		656			644
Other than temporary impairment on securities		46			89
Net unrealized loss on securities		—			1,067
New market tax credit carry-forward		208			208
Nonaccrual loan interest		878			911
Amortization of non-compete agreements		15			16
Other		1,719			1,640
		48,103			50,048
Deferred tax liabilities:
FHLB stock dividends		928			1,276
Fixed assets		291			333
Net unrealized gain on securities		263			—
Originated mortgage servicing rights		63			75
Other		548			570
		2,093			2,254
Net deferred tax assets before valuation allowance		46,010			47,794
Valuation allowance		(46,010	)		(47,794	)
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 $40.1 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, 2014. Our deferred tax assets and the related valuation allowance are analyzed and adjusted on a quarterly basis.

The calculation for the income tax provision or benefit generally does not consider the tax effects of changes in other comprehensive income, or OCI, which is a component of stockholders’ equity on the balance sheet. However, an exception is provided in certain circumstances, such as when there is a full valuation allowance against net deferred tax assets, there is a loss from continuing operations and there is income in other components of the financial statements. In such a case, pre-tax income from other categories, such as changes in OCI, must be considered in determining a tax benefit to be allocated to the loss from continuing operations. For the quarter ended June 30, 2014, this resulted in $424,000 of income tax benefit allocated to continuing operations. The June 30, 2014 tax benefit is entirely due to gains in other comprehensive income that are presented in current operations in accordance with applicable accounting standards.

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, 2014 or the year ended December 31, 2013 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 2010.

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Income Taxes - Additional Information (Detail) (USD $)	3 Months Ended	6 Months Ended	12 Months Ended
	Jun. 30, 2014	Jun. 30, 2014	Dec. 31, 2013	Dec. 31, 2011
Income Taxes [Line Items]
Available carry-back amount				$ 40,100,000
Income tax benefit	(424,000)	(424,000)
Interest and penalties		$ 0	$ 0

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Summary of Unvested Share Activity (Detail) (Unvested Shares, Stock Incentive Plan, USD $)	6 Months Ended	12 Months Ended
	Jun. 30, 2014	Dec. 31, 2013
Unvested Shares | Stock Incentive Plan
Shares
Outstanding, beginning	787,426	153,316
Granted	122,220	693,214
Vested	(11,121)	(22,113)
Forfeited	(514)	(36,991)
Outstanding, ending	898,011	787,426
Weighted Average Grant Price
Outstanding, beginning	$ 1.56	$ 5.92
Granted	$ 0.93	$ 1.18
Vested	$ 11.72	$ 12.19
Forfeited	$ 21.06	$ 6.22
Outstanding, ending	$ 1.34	$ 1.56

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Deferred Tax Assets and Liabilities (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Deferred tax assets:
Net operating loss carry-forward	$ 25,943	$ 25,460
Allowance for loan losses	8,409	9,843
Other real estate owned write-down	9,537	9,478
Alternative minimum tax credit carry-forward	692	692
Net assets from acquisitions	656	644
Other than temporary impairment on securities	46	89
Net unrealized loss on securities		1,067
New market tax credit carry-forward	208	208
Nonaccrual loan interest	878	911
Amortization of non-compete agreements	15	16
Other	1,719	1,640
Deferred Tax Assets, Gross, Total	48,103	50,048
Deferred tax liabilities:
FHLB stock dividends	928	1,276
Fixed assets	291	333
Net unrealized gain on securities	263
Originated mortgage servicing rights	63	75
Other	548	570
Deferred Tax Liabilities, Net, Total	2,093	2,254
Net deferred tax assets before valuation allowance	46,010	47,794
Valuation allowance	(46,010)	(47,794)
Net deferred tax asset

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Fair Value of Available for Sale Securities, Held to Maturity Securities and Related Gross Unrealized Gains and Losses (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Schedule of Available-for-sale Securities [Line Items]
Available for sale, Amortized Cost	$ 178,780	$ 165,135
Available for sale, Gross Unrealized Gains	3,717	2,241
Available for sale, Gross Unrealized Losses	(1,774)	(4,032)
Available for sale, Fair Value	180,723	163,344
Held to maturity, Amortized Cost	43,488	43,612
Held to maturity, Gross Unrealized Gains	1,373	3
Held to maturity, Gross Unrealized Losses	(8)	(668)
Held to maturity, Fair Value	44,853	42,947
Debt securities
Schedule of Available-for-sale Securities [Line Items]
Available for sale, Amortized Cost		165,000
Available for sale, Gross Unrealized Gains		2,179
Available for sale, Gross Unrealized Losses		(4,032)
Available for sale, Fair Value		163,147
Equity
Schedule of Available-for-sale Securities [Line Items]
Available for sale, Amortized Cost		135
Available for sale, Gross Unrealized Gains		62
Available for sale, Fair Value		197
State and municipal
Schedule of Available-for-sale Securities [Line Items]
Held to maturity, Amortized Cost	43,488	43,612
Held to maturity, Gross Unrealized Gains	1,373	3
Held to maturity, Gross Unrealized Losses	(8)	(668)
Held to maturity, Fair Value	44,853	42,947
State and municipal | Debt securities
Schedule of Available-for-sale Securities [Line Items]
Available for sale, Amortized Cost	11,830	12,965
Available for sale, Gross Unrealized Gains	738	608
Available for sale, Gross Unrealized Losses	(9)	(28)
Available for sale, Fair Value	12,559	13,545
U.S. Government and federal agency | Debt securities
Schedule of Available-for-sale Securities [Line Items]
Available for sale, Amortized Cost	30,231	31,026
Available for sale, Gross Unrealized Gains	324	284
Available for sale, Gross Unrealized Losses	(948)	(1,444)
Available for sale, Fair Value	29,607	29,866
Agency mortgage-backed: residential | Debt securities
Schedule of Available-for-sale Securities [Line Items]
Available for sale, Amortized Cost	118,104	102,435
Available for sale, Gross Unrealized Gains	1,434	458
Available for sale, Gross Unrealized Losses	(701)	(1,950)
Available for sale, Fair Value	118,837	100,943
Corporate bonds | Debt securities
Schedule of Available-for-sale Securities [Line Items]
Available for sale, Amortized Cost	18,043	18,002
Available for sale, Gross Unrealized Gains	1,142	769
Available for sale, Gross Unrealized Losses	(116)	(610)
Available for sale, Fair Value	19,069	18,161
Other | Debt securities
Schedule of Available-for-sale Securities [Line Items]
Available for sale, Amortized Cost	572	572
Available for sale, Gross Unrealized Gains	79	60
Available for sale, Fair Value	$ 651	$ 632

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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, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013
Real Estate Properties [Line Items]
Net (gain) loss on sales	$ (54)	$ 162	$ (54)	$ 359
Provision to allowance	400	977	650	1,284
Operating expense	428	518	840	805
Total	$ 774	$ 1,657	$ 1,436	$ 2,448	$ 4,500

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Basis of Presentation and Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2014

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 the six months ended June 30, 2014 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, 2013 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 (loss) or stockholders’ equity.

Adoption of New Accounting Standards

Adoption of New Accounting Standards – In May 2014, FASB issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606). The ASU creates a new topic, Topic 606, to provide guidance on revenue recognition for entities that enter into contracts with customers to transfer goods or services or enter into contracts for the transfer of nonfinancial assets. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Additional disclosures are required to provide quantitative and qualitative information regarding the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The new guidance is effective for annual reporting periods, and interim reporting periods within those annual periods, beginning after December 15, 2016. Early adoption is not permitted. Management is currently evaluating the impact of the adoption of this guidance on the Company’s financial statements.

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Advances from the Federal Home Loan Bank (Tables)

6 Months Ended

Jun. 30, 2014

Advances from Federal Home Loan Bank

Advances from the Federal Home Loan Bank were as follows:

	June 30, 2014		December 31, 2013
	(in thousands)
Monthly amortizing advances with fixed rates from 0.00% to 5.25% and maturities ranging from 2014 through 2033, averaging 2.89% for 2014	$	14,134	$	4,492

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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, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
OREO Valuation Allowance Activity:
Beginning balance	$ 208	$ 928	$ 230	$ 1,154
Provision to allowance	400	977	650	1,284
Write-downs	(409)	(1,158)	(681)	(1,691)
Ending balance	$ 199	$ 747	$ 199	$ 747

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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, 2014	Dec. 31, 2013	Dec. 31, 2010
Allowance for loan losses:
Individually evaluated for impairment	$ 1,753,000	$ 3,471,000
Collectively evaluated for impairment	22,273,000	24,653,000
Total ending allowance balance	24,026,000	28,124,000
Loans:
Loans individually evaluated for impairment	79,742,000	149,883,000
Loans collectively evaluated for impairment	563,288,000	559,443,000
Total ending loans balance	643,030,000	709,326,000	1,300,000,000
Commercial
Allowance for loan losses:
Individually evaluated for impairment	150,000	290,000
Collectively evaluated for impairment	2,965,000	2,931,000
Total ending allowance balance	3,115,000	3,221,000
Loans:
Loans individually evaluated for impairment	2,150,000	4,995,000
Loans collectively evaluated for impairment	62,881,000	47,883,000
Total ending loans balance	65,031,000	52,878,000
Commercial Real Estate
Allowance for loan losses:
Individually evaluated for impairment	1,350,000	2,345,000
Collectively evaluated for impairment	11,902,000	14,069,000
Total ending allowance balance	13,252,000	16,414,000
Loans:
Loans individually evaluated for impairment	50,678,000	94,330,000
Loans collectively evaluated for impairment	237,889,000	252,211,000
Total ending loans balance	288,567,000	346,541,000
Residential Real Estate
Allowance for loan losses:
Individually evaluated for impairment	252,000	827,000
Collectively evaluated for impairment	6,621,000	6,935,000
Total ending allowance balance	6,873,000	7,762,000
Loans:
Loans individually evaluated for impairment	26,449,000	49,512,000
Loans collectively evaluated for impairment	222,163,000	225,851,000
Total ending loans balance	248,612,000	275,363,000
Consumer
Allowance for loan losses:
Individually evaluated for impairment	1,000	9,000
Collectively evaluated for impairment	338,000	407,000
Total ending allowance balance	339,000	416,000
Loans:
Loans individually evaluated for impairment	62,000	93,000
Loans collectively evaluated for impairment	12,607,000	14,272,000
Total ending loans balance	12,669,000	14,365,000
Agriculture
Allowance for loan losses:
Collectively evaluated for impairment	435,000	305,000
Total ending allowance balance	435,000	305,000
Loans:
Loans individually evaluated for impairment	229,000	322,000
Loans collectively evaluated for impairment	27,248,000	18,877,000
Total ending loans balance	27,477,000	19,199,000
Other
Allowance for loan losses:
Collectively evaluated for impairment	12,000	6,000
Total ending allowance balance	12,000	6,000
Loans:
Loans individually evaluated for impairment	174,000	631,000
Loans collectively evaluated for impairment	500,000	349,000
Total ending loans balance	$ 674,000	$ 980,000

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Consolidated Statements of Comprehensive Income (Loss) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Net income (loss)	$ 43	$ (1,309)	$ (244)	$ (1,378)
Unrealized gain (loss) on securities:
Unrealized gain (loss) arising during the period	2,411	(7,066)	4,000	(7,114)
Reclassification of amount realized through sales	2	703	46	703
Net unrealized gain/(loss) recognized in comprehensive income	2,413	(6,363)	4,046	(6,411)
Tax effect	(424)		(424)
Other comprehensive income (loss)	1,989	(6,363)	3,622	(6,411)
Comprehensive income (loss)	$ 2,032	$ (7,672)	$ 3,378	$ (7,789)

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Securities

6 Months Ended

Jun. 30, 2014

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, 2014
Available for sale
U.S. Government and federal agency	$	30,231	$	324	$	(948	)	$	29,607
Agency mortgage-backed: residential		118,104		1,434		(701	)		118,837
State and municipal		11,830		738		(9	)		12,559
Corporate bonds		18,043		1,142		(116	)		19,069
Other debt securities		572		79		—			651
Total available for sale	$	178,780	$	3,717	$	(1,774	)	$	180,723
Held to maturity
State and municipal	$	43,488	$	1,373	$	(8	)	$	44,853
Total held to maturity	$	43,488	$	1,373	$	(8	)	$	44,853
December 31, 2013
Available for sale
U.S. Government and federal agency	$	31,026	$	284	$	(1,444	)	$	29,866
Agency mortgage-backed: residential		102,435		458		(1,950	)		100,943
State and municipal		12,965		608		(28	)		13,545
Corporate bonds		18,002		769		(610	)		18,161
Other debt securities		572		60		—			632
Total debt securities		165,000		2,179		(4,032	)		163,147
Equity		135		62		—			197
Total available for sale	$	165,135	$	2,241	$	(4,032	)	$	163,344
Held to maturity
State and municipal	$	43,612	$	3	$	(668	)	$	42,947
Total held to maturity	$	43,612	$	3	$	(668	)	$	42,947

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
	(in thousands)				(in thousands)
Proceeds	$	675	$	1,908	$	1,004	$	1,908
Gross gains		2		704		46		704
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, 2014
	Amortized Cost		Fair Value
	(in thousands)
Maturity
Available for sale
Within one year	$	15,616	$	15,948
One to five years		12,930		13,953
Five to ten years		31,558		31,334
Beyond ten years		572		651
Agency mortgage-backed: residential		118,104		118,837
Total	$	178,780	$	180,723
Held to maturity
One to five years	$	5,649	$	5,755
Five to ten years		33,716		34,822
Beyond ten years		4,123		4,276
Total	$	43,488	$	44,853

Securities pledged at June 30, 2014 and December 31, 2013 had carrying values of approximately $66.4 million and $84.2 million, respectively, and were pledged to secure public deposits and repurchase agreements.

Securities with unrealized losses at June 30, 2014 and December 31, 2013, aggregated by investment category and length of time the 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, 2014
Available for sale
U.S. Government and federal agency	$	—	$	—		$	18,929	$	(948	)	$	18,929	$	(948	)
Agency mortgage-backed: residential		9,861		(33	)		32,822		(668	)		42,683		(701	)
State and municipal		—		—			476		(9	)		476		(9	)
Corporate bonds		2,388		(41	)		1,710		(75	)		4,098		(116	)
Total temporarily impaired	$	12,249	$	(74	)	$	53,937	$	(1,700	)	$	66,186	$	(1,774	)
Held to maturity
State and municipal	$	1,111	$	(8	)	$	—	$	—		$	1,111	$	(8	)
Total temporarily impaired	$	1,111	$	(8	)	$	—	$	—		$	1,111	$	(8	)
December 31, 2013
Available for sale
U.S. Government and federal agency	$	24,129	$	(1,444	)	$	—	$	—		$	24,129	$	(1,444	)
Agency mortgage-backed: residential		58,257		(1,672	)		10,344		(278	)		68,601		(1,950	)
State and municipal		458		(28	)		—		—			458		(28	)
Corporate bonds		11,313		(610	)		—		—			11,313		(610	)
Total temporarily impaired	$	94,157	$	(3,754	)	$	10,344	$	(278	)	$	104,501	$	(4,032	)
Held to maturity
State and municipal	$	39,743	$	(654	)	$	1,031	$	(14	)	$	40,774	$	(668	)
Total temporarily impaired	$	39,743	$	(654	)	$	1,031	$	(14	)	$	40,774	$	(668	)

The Company evaluates securities for other than temporary impairment (OTTI) on a quarterly basis. 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. As of June 30, 2014, management does not believe securities within our portfolio with unrealized losses should be classified as other than temporarily impaired.

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Fair Values Measurement - Additional Information (Detail) (USD $)			6 Months Ended
	Jun. 30, 2014	Dec. 31, 2013	Jun. 30, 2014 Other real estate owned, net Routine Real Estate Collateral	Jun. 30, 2014 Other real estate owned, net Thin Trading Market or Specialized Collateral	Jun. 30, 2014 Other real estate owned, net Minimum	Jun. 30, 2014 Other real estate owned, net Maximum	Jun. 30, 2014 Impaired Loans Routine Real Estate Collateral	Jun. 30, 2014 Impaired Loans Thin Trading Market or Specialized Collateral	Jun. 30, 2014 Impaired Loans Minimum	Jun. 30, 2014 Impaired Loans Maximum
Fair Value Measurements [Line Items]
Internal discount rate used in fair value evaluation			10.00%	25.00%			10.00%	25.00%	10.00%	33.00%
Estimated discounts for cost to sell					6.00%	10.00%			6.00%	10.00%
Other debt security valuation, coupon rate	6.50%
Other debt security valuation, estimated current market rate	8.25%
Impaired loans, carrying amount	$ 67,500,000	$ 132,200,000
Impaired loans, valuation allowance	1,753,000	3,471,000
Other real estate owned, net carrying amount	62,900,000	30,900,000
Other real estate owned, write-downs	$ 650,000

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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, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013	Dec. 31, 2012
Schedule of Earnings Per Share, Basic and Diluted, by Common Class [Line Items]
Net income (loss)	$ 43	$ (1,309)	$ (244)	$ (1,378)
Less:
Preferred stock dividends	789	437	1,574	875
Accretion of Series A preferred stock discount		45		90
Earnings allocated to Series C preferred	(74)	(110)	(173)	(131)
Net loss attributable to common shareholders, basic and diluted	(672)	(1,681)	(1,645)	(2,212)	(3,400)	(33,400)
Basic
Weighted average common shares outstanding	11,981,121	11,761,788	11,992,925	11,801,663
Basic loss per common share	$ (0.06)	$ (0.14)	$ (0.14)	$ (0.19)
Diluted
Add: Dilutive effects of assumed exercises of common and Preferred Series C stock warrants
Weighted average common shares and potential common shares	11,981,121	11,761,788	11,992,925	11,801,663
Diluted loss per common share	$ (0.06)	$ (0.14)	$ (0.14)	$ (0.19)
Unvested Shares
Less:
Earnings allocated to Series C preferred	(55)	(62)	(128)	(69)
Basic
Weighted average common shares outstanding	979,211	434,250	931,092	367,297
Preferred Stock Dividends
Less:
Preferred stock dividends	789	437	1,574	875
Preferred Stock Redemption
Less:
Accretion of Series A preferred stock discount		45		90
Series C Preferred Stock
Less:
Earnings allocated to Series C preferred	(19)	(48)	(45)	(62)
Basic
Weighted average common shares outstanding	332,894	332,894	332,894	332,894
Common Stock
Less:
Net loss attributable to common shareholders, basic and diluted	$ (672)	$ (1,681)	$ (1,645)	$ (2,212)
Common Stock and Series C Preferred Stock | Unvested Shares
Basic
Weighted average common shares including unvested common shares outstanding	13,293,226	12,528,932	13,256,911	12,501,854

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Fair Values Measurement (Tables)

6 Months Ended

Jun. 30, 2014

Financial Assets Measured at Fair Value on Recuring and Non Recurring Basis

Financial assets measured at fair value on a recurring basis at June 30, 2014 and December 31, 2013 are summarized below:

			Fair Value Measurements at June 30, 2014 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	$	29,607	$	—	$	29,607	$	—
Agency mortgage-backed: residential		118,837		—		118,837		—
State and municipal		12,559		—		12,559		—
Corporate bonds		19,069		—		19,069		—
Other debt securities		651		—		—		651
Total	$	180,723	$	—	$	180,072	$	651

			Fair Value Measurements at December 31, 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	$	29,866	$	—	$	29,866	$	—
Agency mortgage-backed: residential		100,943		—		100,943		—
State and municipal		13,545		—		13,545		—
Corporate bonds		18,161		—		18,161		—
Other debt securities		632		—		—		632
Equity securities		197		197		—		—
Total	$	163,344	$	197	$	162,515	$	632

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

			Fair Value Measurements at June 30, 2014 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	$	1,188	$	—	$	—	$	1,188
Commercial real estate:
Construction		4,401		—		—		4,401
Farmland		3,728		—		—		3,728
Nonfarm nonresidential		37,738		—		—		37,738
Residential real estate:
Multi-family		4,193		—		—		4,193
1-4 Family		14,340		—		—		14,340
Consumer		42		—		—		42
Other		106		—		—		106
Other real estate owned, net:
Commercial real estate:
Construction		21,758		—		—		21,758
Farmland		1,344		—		—		1,344
Nonfarm nonresidential		21,887		—		—		21,887
Residential real estate:
Multi-family		6,316		—		—		6,316
1-4 Family		11,630		—		—		11,630

			Fair Value Measurements at December 31, 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	$	3,172	$	—	$	—	$	3,172
Commercial real estate:
Construction		9,046		—		—		9,046
Farmland		4,173		—		—		4,173
Nonfarm nonresidential		73,426		—		—		73,426
Residential real estate:
Multi-family		11,724		—		—		11,724
1-4 Family		26,486		—		—		26,486
Consumer		75		—		—		75
Agriculture		—		—		—		—
Other		618		—		—		618
Other real estate owned, net:
Commercial real estate:
Construction		19,057		—		—		19,057
Farmland		690		—		—		690
Nonfarm nonresidential		6,019		—		—		6,019
Residential real estate:
Multi-family		246		—		—		246
1-4 Family		4,880		—		—		4,880

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, 2014 and 2013:

	Other Debt Securities
	2014		2013
	(in thousands)
Balances of recurring Level 3 assets at January 1	$	632	$	618
Total gain (loss) for the period:
Included in other comprehensive income (loss)		19		13
Balance of recurring Level 3 assets at June 30	$	651	$	631

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, 2014:

	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Range (Weighted Average)
	(in thousands)
Impaired loans – Commercial	$	1,188	Market value approach	Adjustment for receivables and inventory discounts		16% – 32%(24%)
Impaired loans – Commercial real estate	$	45,867	Sales comparison approach	Adjustment for differences between the comparable sales		0% – 62%(18%)
Impaired loans – Residential real estate	$	18,533	Sales comparison approach	Adjustment for differences between the comparable sales		0% – 68%(17%)
Other real estate owned – Commercial real estate	$	44,989	Sales comparison approach Income approach	Adjustment for differences between the comparable sales Discount or capitalization rate		3% – 45%(17%) 8% – 16%(14%)
Other real estate owned – Residential real estate	$	17,946	Sales comparison approach	Adjustment for differences between the comparable sales		2% – 54%(11%)

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, 2013:

	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Range (Weighted Average)
	(in thousands)
Impaired loans – Commercial	$	3,172	Market value approach	Adjustment for receivables and inventory discounts		16% –32%(24%)
Impaired loans – Commercial real estate	$	86,645	Sales comparison approach	Adjustment for differences between the comparable sales		0% – 69%(20%)
Impaired loans – Residential real estate	$	38,210	Sales comparison approach	Adjustment for differences between the comparable sales		0% – 68%(15%)
Other real estate owned – Commercial real estate	$	25,766	Sales comparison approach Income approach	Adjustment for differences between the comparable sales Discount or capitalization rate		3% – 51%(22%) 7% – 16%(11%)
Other real estate owned – Residential real estate	$	5,126	Sales comparison approach	Adjustment for differences between the comparable sales		2% – 54%(11%)

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, 2014 Using
	Carrying Amount		Level 1		Level 2		Level 3		Total
	(in thousands)
Financial assets
Cash and cash equivalents	$	102,266	$	78,906	$	23,360	$	—	$	102,266
Securities available for sale		180,723		—		180,072		651		180,723
Securities held to maturity		43,488		—		44,853		—		44,853
Federal Home Loan Bank stock		7,323		N/A		N/A		N/A		N/A
Mortgage loans held for sale		280		—		280		—		280
Loans, net		619,004		—		—		632,722		632,722
Accrued interest receivable		3,461		—		1,365		2,096		3,461
Financial liabilities
Deposits	$	950,815	$	109,956	$	837,997	$	—	$	947,953
Securities sold under agreements to repurchase		2,451		—		2,451		—		2,451
Federal Home Loan Bank advances		14,134		—		14,138		—		14,138
Subordinated capital notes		5,400		—		—		5,177		5,177
Junior subordinated debentures		25,000		—		—		13,841		13,841
Accrued interest payable		2,813		—		1,014		1,799		2,813

			Fair Value Measurements at December 31, 2013 Using
	Carrying Amount		Level 1		Level 2		Level 3		Total
	(in thousands)
Financial assets
Cash and cash equivalents	$	111,134	$	106,885	$	4,249	$	—	$	111,134
Securities available for sale		163,344		197		162,515		632		163,344
Securities held to maturity		43,612		—		42,947		—		42,947
Federal Home Loan Bank stock		10,072		N/A		N/A		N/A		N/A
Mortgage loans held for sale		149		—		149		—		149
Loans, net		681,202		—		—		695,999		695,999
Accrued interest receivable		3,891		—		1,343		2,548		3,891
Financial liabilities
Deposits	$	987,705	$	107,486	$	879,707	$	—	$	987,193
Securities sold under agreements to repurchase		2,470		—		2,470		—		2,470
Federal Home Loan Bank advances		4,492		—		4,495		—		4,495
Subordinated capital notes		5,850		—		—		5,586		5,586
Junior subordinated debentures		25,000		—		—		13,526		13,526
Accrued interest payable		2,535		—		1,042		1,493		2,535

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Contingencies - Additional Information (Detail) (USD $)	1 Months Ended		6 Months Ended	1 Months Ended	12 Months Ended		1 Months Ended
	Dec. 26, 2013	Jun. 30, 2010 Plaintiff	Jun. 30, 2014	Jun. 30, 2009 AIT Laboratories Employee Stock Ownership Plan	Dec. 31, 2012 Minimum	Dec. 31, 2012 Maximum	Jul. 07, 2013 Compensatory Damages	Jul. 07, 2013 Punitive Damages
Commitments and Contingencies Disclosure [Line Items]
Accrued contingent liabilities			$ 1,900,000
Laws affected			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.
Number of Plaintiffs		3
Original release of obligations			26,000,000
Damages awarded to plaintiffs							1,515,000	5,500,000
Loss contingency damage sought by plaintiff					4,500,000	5,000,016
Loss Contingency damage sought by plaintiff, description			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.
Alleged imprudent and disloyal purchase of company stock	40,000,000
Alleged approved seller financing percentage	100.00%
ESOP purchase of all stock of AIT Holding Company				$ 90,000,000

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Securities with Unrealized Losses (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Investments, Unrealized Loss Position [Line Items]
Available for sale Fair value, less than 12 months	$ 12,249	$ 94,157
Available for sale Unrealized loss, less than 12 months	(74)	(3,754)
Available for sale Fair value, 12 months or more	53,937	10,344
Available for sale Unrealized loss, 12 months or more	(1,700)	(278)
Available for sale Fair value, total	66,186	104,501
Available for sale Unrealized loss, total	(1,774)	(4,032)
Held to maturity Fair value, less than 12 months	1,111	39,743
Held to maturity Unrealized loss, less than 12 months	(8)	(654)
Held to maturity Fair value, 12 months or more		1,031
Held to maturity Unrealized loss, 12 months or more		(14)
Held to maturity Fair value, total	1,111	40,774
Held to maturity Unrealized loss, total	(8)	(668)
Held-to-maturity Securities
Investments, Unrealized Loss Position [Line Items]
Held to maturity Unrealized loss, total	(8)
State and municipal
Investments, Unrealized Loss Position [Line Items]
Held to maturity Fair value, less than 12 months	1,111	39,743
Held to maturity Unrealized loss, less than 12 months	(8)	(654)
Held to maturity Fair value, 12 months or more		1,031
Held to maturity Unrealized loss, 12 months or more		(14)
Held to maturity Fair value, total	1,111	40,774
Held to maturity Unrealized loss, total	(8)	(668)
State and municipal | Held-to-maturity Securities
Investments, Unrealized Loss Position [Line Items]
Held to maturity Unrealized loss, total	(8)
Debt securities | Agency mortgage-backed: residential
Investments, Unrealized Loss Position [Line Items]
Available for sale Fair value, less than 12 months	9,861	58,257
Available for sale Unrealized loss, less than 12 months	(33)	(1,672)
Available for sale Fair value, 12 months or more	32,822	10,344
Available for sale Unrealized loss, 12 months or more	(668)	(278)
Available for sale Fair value, total	42,683	68,601
Available for sale Unrealized loss, total	(701)	(1,950)
Debt securities | State and municipal
Investments, Unrealized Loss Position [Line Items]
Available for sale Fair value, less than 12 months		458
Available for sale Unrealized loss, less than 12 months		(28)
Available for sale Fair value, 12 months or more	476
Available for sale Unrealized loss, 12 months or more	(9)
Available for sale Fair value, total	476	458
Available for sale Unrealized loss, total	(9)	(28)
Debt securities | Corporate bonds
Investments, Unrealized Loss Position [Line Items]
Available for sale Fair value, less than 12 months	2,388	11,313
Available for sale Unrealized loss, less than 12 months	(41)	(610)
Available for sale Fair value, 12 months or more	1,710
Available for sale Unrealized loss, 12 months or more	(75)
Available for sale Fair value, total	4,098	11,313
Available for sale Unrealized loss, total	(116)	(610)
Debt securities | U.S. Government and federal agency
Investments, Unrealized Loss Position [Line Items]
Available for sale Fair value, less than 12 months		24,129
Available for sale Unrealized loss, less than 12 months		(1,444)
Available for sale Fair value, 12 months or more	18,929
Available for sale Unrealized loss, 12 months or more	(948)
Available for sale Fair value, total	18,929	24,129
Available for sale Unrealized loss, total	$ (948)	$ (1,444)

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Contingencies

6 Months Ended

Jun. 30, 2014

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 $1.9 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. 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 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 on which it is moving forward to appeal. 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 accrual 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. 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. 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). The complaint alleges violation of the Kentucky Securities Act and negligent misrepresentation against all named defendants, and breach of contract against Porter Bancorp alone. 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 September 13, 2013, defendants filed a motion to dismiss all claims in the complaint for pleading failures and for failure to state a claim upon which relief may be granted. On March 25, 2014, the judge ruled that SBAV had failed to state a claim against PBI Bank and dismissed PBI Bank from the case. The claims against Porter Bancorp, the Estate of J. Chester Porter and Ms. Bouvette remain and have proceeded to discovery. On April 21, 2014, Porter Bancorp filed a third-party complaint for contribution against SBAV’s investment adviser, the Clinton Group, Inc., alleging that, to the extent the Court finds SBAV to have suffered a recoverable loss, the Clinton Group’s failure to exercise due care and negligence in conducting due diligence contributed to that loss. We dispute the material factual allegations made in SBAV’s complaint and intend to defend against SBAV’s claims vigorously.

Thomas E. Perez, Secretary of the United States Department of Labor (DOL) v. PBI Bank, Inc. On December 26, 2013, the United States Department of Labor (“DOL”) filed a lawsuit against PBI Bank in U.S. District Court for the Northern District of Indiana. Thomas E. Perez, Secretary of the United States Department of Labor v. PBI Bank, Inc. (Civ. Action 3:13-CV-1400-PPS). The complaint alleges that in 2007 PBI Bank, in the capacity of trustee for the Miller’s Health System’s Inc. Employee Stock Ownership Plan, authorized the alleged imprudent and disloyal purchase of the stock of Miller’s Health Systems, Inc. (“Miller’s Health”) in 2007 for $40 million, a price allegedly far in excess of the stock’s fair market value. The suit also alleges, among other things, that PBI Bank approved 100% seller financing for the transaction at an excessive rate of interest. On March 31, 2014, PBI Bank filed its answer, disputing the material factual allegations of the complaint. On April 10, 2014, PBI Bank filed a third-party complaint against Miller’s Health seeking to enforce its indemnity rights, as well as third party claims for contribution against named directors and officers of Miller’s Health. On May 19, 2014, PBI Bank filed a motion to dismiss the complaint on the basis of a statute of limitations defense. The parties have submitted briefs on both motions to dismiss and await a ruling. We dispute the material factual allegations made in the complaint and intend to defend against DOL’s claims vigorously.

AIT Laboratories Employee Stock Ownership Plan. The Department of Labor has audited certain transactions between certain former shareholders of AIT Holding Company and the AIT Laboratories Employee Stock Ownership Plan. PBI Bank served as trustee of the AIT ESOP in June 2009 when the AIT ESOP purchased all the stock of AIT Holding Company for $90 million, an amount the DOL alleges was well in excess of the stock’s then-fair market value. On July 24, 2014, the DOL notified the former AIT Holding Company shareholders and PBI Bank that unless an agreement is reached to settle the matter, DOL intended to file a lawsuit against them no later than August 31, 2014. We dispute the material factual allegations that have been made by DOL and intend to vigorously defend against any claims.