Exhibit 99.1
| FOR IMMEDIATE RELEASE | CONTACT: | Maria L. Bouvette | ||
| January 25, 2007 | President and CEO | |||
| (502) 499-4800 |
Porter Bancorp, Inc. Announces Record Earnings for the Year 2006
LOUISVILLE, Ky.—(BUSINESS WIRE)—Porter Bancorp, Inc. (NASDAQ: PBIB), parent company of PBI Bank, with offices in Louisville and throughout central Kentucky, today reported results for the fourth quarter and year ended December 31, 2006. The Company reported net income for the fourth quarter of 2006 of $3.7 million or $0.48 per share compared to $2.3 million or $0.37 per share for the fourth quarter of 2005 on an adjusted pro forma basis. Earnings for the year ended December 31, 2006 were $14.3 million or $2.15 per share compared to $11.4 million or $1.80 per share for the year ended December 31, 2005 on an adjusted pro forma basis. Net income for the fourth quarter and year ended 2005 were adjusted to reflect the Company’s 2005 results as if its acquisition of minority interests in subsidiary banks and the termination of its S corporation status, which were effective on December 31, 2005, were in effect for all of 2005.
Fourth Quarter and Year-to-Date Highlights
| • | Net income increased 26.0% and 59.1% for the year and three months ended December 31, 2006, respectively, over the same periods in the prior year on an adjusted pro forma basis. |
| • | Earnings per share increased 19.4% and 29.7% for the year and three months ended December 31, 2006, respectively, over the same periods in the prior year on an adjusted pro forma basis. |
| • | Return on average assets for the year ended December 31, 2006 was 1.44%, a 19.0% increase from the prior year on an adjusted pro forma basis. Return on average assets for the quarter ended December 31, 2006 was 1.43%, a 50.5% increase over the same period in 2005 on an adjusted pro forma basis. |
| • | The efficiency ratio for the year ended December 31, 2006 improved to 46.68% from 47.96% over the prior year. Our efficiency ratio for the quarter ended December 31, 2006 also improved to 45.32% from 48.42% for the same period in the prior year. |
| • | The Company’s average earning assets increased 4.6% and 4.5% during the year and three months ended December 31, 2006, over the same periods in the prior year. |
| • | The Company experienced annual growth in its loan portfolio of 7.9% and in its deposits of 6.9% during 2006. Additionally, the loan portfolio grew by 4.5% during the fourth quarter. |
| • | The Company refinanced $14.0 million of junior subordinated debentures during the fourth quarter which resulted in a write-off of approximately $280,000 of unamortized debt issuance costs. This is expected to yield annual interest expense savings to offset the write-off. |
Net Interest Income
Net interest income was $9,508,000 for the three months ended December 31, 2006, a decrease of $296,000, or 3.0%, compared with $9,804,000 for the same period in 2005. This decrease was primarily attributable to a decline in net interest margin from 4.21% to 3.90% between periods. Net interest income was $37,241,000 for the year ended December 31, 2006, an increase of $852,000, or 2.3%, compared with $36,389,000 for the same period in 2005. The overall increase in net interest income for the year was attributable to an increase in overall loan volume offset by the reduction in net interest margin reflecting the effect of a flattening yield curve.
As we mentioned last quarter, we continue to experience a flat yield curve. Given our asset/liability management strategies, we have experienced only modest compression of our net interest margin which remained strong at 3.90% and 3.97% for the quarter and year to date, respectively.
During the fourth quarter, we completed the refinancing of junior subordinated debentures in the amount of $14.0 million which resulted in a 193 basis point reduction in interest rate payable. Unamortized debt issuance costs of approximately $280,000 were written off in connection with the refinancing, but expected annual interest expense savings should offset the write-off.
Non-Interest Income
Non-interest income for the fourth quarter of 2006 increased $91,000, or 8.3%, from the fourth quarter of 2005. The increase was primarily attributable to increased revenue from fees received from brokering long-term home loans to the secondary market and title insurance commissions. The increase was partially offset by a decrease in service charges on deposit accounts as a result of changes in product fee structures that the Company believes will make certain products more competitive, thereby increasing product sales over time.
Non-interest income for the year ended December 31, 2006 decreased $237,000, or 4.4%, in comparison to the same period last year. The decrease for the year ended December 31, 2006 was primarily due to decreased income from service charges on deposit accounts and gains on sales of government guaranteed loans, reflecting the cyclical nature of originations and sales of this type of loan. These decreases in non-interest income were partially offset by increased income from gains on sales of loans originated for sale and fees received from brokering long-term home loans to the secondary market through the Bank’s mortgage division, which we acquired in January 2006.
Non-Interest Expense
Non-interest expense for the quarter ended December 31, 2006 of $4.8 million represented an 8.2% decrease from $5.3 million for the fourth quarter of 2005. The decrease in non-interest expense for the quarter was primarily due to reduced professional fees resulting from the company’s reorganization in late 2005 and reduced employee benefit costs resulting from a change in the Company’s group health benefit plan effective on July 1, 2006 and an increase in deferred direct loan origination costs. This decrease was partially offset by the write-off of unamortized debt issuance costs.
Non-interest expense for the year ended December 31, 2006 of $19.8 million represented a 1.3% decrease from $20.0 million for the same period last year. The primary factors impacting non-interest expense for the year ended December 31, 2006 were additional employee compensation expenses relating to planned growth in our lending staff; decreased group benefit plan costs; decreased professional fees resulting from our reorganization in 2005; and increased advertising costs in connection with branding our Bank’s new name, PBI Bank. In addition, the Company implemented Statement of Financial Accounting Standards No. 123(R) during the first quarter of 2006 resulting in the recognition of $51,000 and $157,000 in non-cash compensation expense in the fourth quarter of 2006 and year ended December 31, 2006, respectively. No such expense was recorded in the comparative periods of 2005.
Balance Sheet Review
Total assets increased 6.0% to $1.05 billion at December 31, 2006 from $991.5 million at December 31, 2005. The Company’s loan portfolio increased 7.9% to $854.4 million from $792.0 million at December 31, 2005 primarily due to in-house loan origination efforts of our lending staff. Deposits at December 31, 2006 increased 6.9% to $861.9 million from $806.6 million at December 31, 2005 primarily due to an increase in both time deposits and transactional accounts from promotional efforts throughout the period.
Total assets increased $51.3 million during the quarter. Net loans increased $36.8 million and federal funds sold and interest bearing deposits increased $17.6 million. This asset growth was funded by growth in money market deposit accounts of $20.6 million and certificates of deposit accounts of $38.5 million.
Asset Quality
Nonperforming loans at December 31, 2006 were $8.9 million, or 1.05% of total loans, compared to $7.0 million, or 0.89% of total loans at December 31, 2005, and $10.0 million, or 1.22% of total loans at September 30, 2006. The decrease of $1.1 million in nonperforming loans from September 30, 2006 to December 31, 2006 is primarily attributable to the collection in full of a commercial real estate loan by collateral disposition.
Foreclosed properties at December 31, 2006 were $2.4 million compared to $1.8 million at December 31, 2005 and $2.1 million at September 30, 2006. The increase in foreclosed properties reflects the normal progression of troubled assets through the workout phase, repossession and ultimately disposition.
Our loan loss reserve as a percentage of total loans at December 31, 2006 decreased to 1.50% from 1.54% at December 31, 2005 and 1.55% at September 30, 2006. Provision for loan losses decreased $1,501,000 to $376,000 for the three months ended December 31, 2006 and decreased $2,240,000 to $1,405,000 for the year ended December 31, 2006 compared to the same periods ended December 31, 2005. Net loan charge-offs for the year ended December 31, 2006 were $770,000 or 0.09% of total loans compared to $2.5 million or 0.32% for the year ended December 31, 2005. Net loan charge-offs for the quarter ended December 31, 2006 were $199,000 compared to $2.1 million for the quarter ended December 31, 2005 and $232,000 for the quarter ended September 30, 2006. In connection with our reorganization and consolidation of our loan review processes during 2005, we conducted a thorough review of our loan portfolio resulting in a significant and unusual increase in loan loss provisions and charge-offs. We assess the adequacy of our loan loss reserve each quarter and make the appropriate provision for loan losses based on that assessment.
PBIB-G
Forward-Looking Statements
Statements in this press release relating to Porter Bancorp’s plans, objectives, expectations or future performance are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management’s current expectations. Porter Bancorp’s actual results in future periods may differ materially from those currently expected due to various risks and uncertainties, including those discussed in the “Risk Factors” section of the Company’s Form S-1 Registration Statement (Reg. No. 333-133198) and subsequent periodic reports filed with the Securities and Exchange Commission. The forward-looking statements in this press release are made as of the date of the release and Porter Bancorp does not assume any responsibility to update these statements.
Additional Information
Unaudited supplemental financial information for the fourth quarter and twelve months ending December 31, 2006 follows.
PORTER BANCORP, INC. AND SUBSIDIARY
Unaudited Financial Information
(in thousands, except share and per share data)
| Three Months Ended 12/31/06 | Three Months Ended 9/30/06 | Three Months Ended 12/31/05 | Twelve Months Ended 12/31/06 | Twelve Months Ended 12/31/05 | ||||||||||||||
Income Statement Data | ||||||||||||||||||
Interest income | $ | 19,365 | $ | 18,564 | $ | 17,137 | $ | 72,863 | $ | 62,054 | ||||||||
Interest expense | 9,857 | 9,285 | 7,333 | 35,622 | 25,665 | |||||||||||||
Net interest income | 9,508 | 9,279 | 9,804 | 37,241 | 36,389 | |||||||||||||
Provision for loan losses | 376 | 276 | 1,877 | 1,405 | 3,645 | |||||||||||||
Service charges on deposit accounts | 574 | 615 | 711 | 2,537 | 2,827 | |||||||||||||
Gains on sales of government guaranteed loans, net | — | 53 | — | 152 | 628 | |||||||||||||
Gains on sales of loans originated for sale | — | 44 | — | 284 | — | |||||||||||||
Gains on sales of other assets, net | (28 | ) | 14 | (1 | ) | 4 | 46 | |||||||||||
Gains on sales of investment securities, net | — | 23 | (38 | ) | 50 | 19 | ||||||||||||
Other | 637 | 568 | 420 | 2,169 | 1,913 | |||||||||||||
Non-interest income | 1,183 | 1,317 | 1,092 | 5,196 | 5,433 | |||||||||||||
Salaries & employee benefits | 2,798 | 2,749 | 2,926 | 11,432 | 11,489 | |||||||||||||
Occupancy and equipment | 502 | 612 | 578 | 2,474 | 2,692 | |||||||||||||
Franchise tax | 267 | 267 | 239 | 1,074 | 993 | |||||||||||||
Communications expense | 107 | 121 | 120 | 511 | 527 | |||||||||||||
Advertising | 178 | 148 | 158 | 645 | 363 | |||||||||||||
Write-off of unamortized debt issue costs | 280 | — | — | 280 | — | |||||||||||||
Other | 713 | 756 | 1,255 | 3,369 | 3,983 | |||||||||||||
Non-interest expense | 4,845 | 4,653 | 5,276 | 19,785 | 20,047 | |||||||||||||
Income before minority interest | 5,470 | 5,667 | 3,743 | 21,247 | 18,130 | |||||||||||||
Minority interest in net income of consolidated subsidiaries | — | — | 318 | — | 1,314 | |||||||||||||
Income before income taxes | 5,470 | 5,667 | 3,425 | 21,247 | 16,816 | |||||||||||||
Income tax expense | 1,773 | 1,858 | (626 | ) | 6,908 | 2,201 | ||||||||||||
Net income | $ | 3,697 | $ | 3,809 | $ | 4,051 | $ | 14,339 | $ | 14,615 | ||||||||
| �� | ||||||||||||||||||
Weighted average shares (basic & diluted) | 7,582,447 | 6,454,730 | 5,873,270 | 6,678,337 | 5,869,496 | |||||||||||||
Basic and diluted earnings per share | $ | 0.48 | $ | 0.59 | $ | 0.69 | $ | 2.15 | $ | 2.49 | ||||||||
Cash dividends declared per share | $ | 0.20 | $ | 0.20 | $ | 0.60 | $ | 0.80 | $ | 1.68 | ||||||||
Pro Forma Data (1) | ||||||||||||||||||
Net income: | ||||||||||||||||||
As reported | $ | 3,697 | $ | 3,809 | $ | 4,051 | $ | 14,339 | $ | 14,615 | ||||||||
Adjustments: | ||||||||||||||||||
Add back minority interests (2) | — | — | 318 | — | 1,314 | |||||||||||||
Additional taxes (3) | — | — | (1,898 | ) | — | (3,963 | ) | |||||||||||
Acquisition funding (4) | — | — | (147 | ) | — | (587 | ) | |||||||||||
Adjusted net income | $ | 3,697 | $ | 3,809 | $ | 2,324 | $ | 14,339 | $ | 11,379 | ||||||||
Weighted Average Shares Outstanding | ||||||||||||||||||
As reported and as adjusted for stock split | 7,582,447 | 6,454,730 | 5,873,270 | 6,678,337 | 5,869,496 | |||||||||||||
Shares issued in the Ascencia transaction | — | — | 459,177 | — | 462,951 | |||||||||||||
Adjusted shares outstanding | 7,582,447 | 6,454,730 | 6,332,447 | 6,678,337 | 6,332,447 | |||||||||||||
Basic and diluted earnings per share | $ | 0.48 | $ | 0.59 | $ | 0.37 | $ | 2.15 | $ | 1.80 | ||||||||
| (1) | The pro forma adjustments present the Company’s 2005 results as if its acquisition of minority interests in subsidiary banks and the termination of its S corporation status, which were effective on December 31, 2005, were in effect for all of 2005. |
| (2) | This adjustment reflects the minority interests in subsidiaries acquired in a corporate reorganization on December 31, 2005. |
| (3) | This adjustment represents a tax rate of 34% applied to reported pre-tax income less reported tax expense to reflect the conversion from Subchapter S corporation to C corporation status effective December 31, 2005. |
| (4) | Acquisition funding for the reorganization includes $9,500 in senior notes at an annual 6% interest rate and $5,313 in cash at an assumed annual 6% interest rate, net of tax at a 34% tax rate. |
PORTER BANCORP, INC. AND SUBSIDIARY
Unaudited Financial Information
(in thousands, except share and per share data)
| Three Months Ended 12/31/06 | Three Months Ended 9/30/06 | Three Months Ended 12/31/05 | Twelve Months Ended 12/31/06 | Twelve Months Ended 12/31/05 | ||||||||||||||||
Average Balance Sheet Data | ||||||||||||||||||||
Assets | $ | 1,024,526 | $ | 988,265 | $ | 973,042 | $ | 995,018 | $ | 942,733 | ||||||||||
Adjustment for cash paid in reorganization | — | — | (5,313 | ) | — | (5,313 | ) | |||||||||||||
Assets – pro forma (1) | 1,024,526 | 988,265 | 967,729 | 995,018 | 937,420 | |||||||||||||||
Loans | 835,265 | 811,838 | 803,997 | 814,202 | 776,207 | |||||||||||||||
Earning assets | 974,539 | 940,831 | 932,796 | 946,328 | 904,487 | |||||||||||||||
Deposits | 830,746 | 797,908 | 789,890 | 810,419 | 771,677 | |||||||||||||||
Long-term debt and advances | 79,514 | 101,477 | 89,116 | 90,176 | 79,442 | |||||||||||||||
Interest bearing liabilities | 847,865 | 837,381 | 823,454 | 839,633 | 795,534 | |||||||||||||||
Stockholders’ equity | 105,633 | 78,410 | 70,213 | 83,428 | 68,922 | |||||||||||||||
Adjustment for effect of pro forma | — | — | (864 | ) | — | (1,618 | ) | |||||||||||||
Stockholders’ equity – pro forma (1) | 105,633 | 78,410 | 69,349 | 83,428 | 67,304 | |||||||||||||||
Performance Ratios | ||||||||||||||||||||
Return on average assets | 1.43 | % | 1.53 | % | 1.65 | % | 1.44 | % | 1.55 | % | ||||||||||
Return on average assets – pro forma (1) | — | — | 0.95 | — | 1.21 | |||||||||||||||
Return on average equity | 13.89 | 19.27 | 22.89 | 17.19 | 21.21 | |||||||||||||||
Return on average equity – pro forma (1) | — | — | 13.30 | — | 16.91 | |||||||||||||||
Yield on average earning assets (tax equivalent) | 7.92 | 7.83 | 7.33 | 7.74 | 6.90 | |||||||||||||||
Cost of interest bearing liabilities | 4.61 | 4.40 | 3.53 | 4.24 | 3.23 | |||||||||||||||
Net interest margin (tax equivalent) | 3.90 | 3.95 | 4.21 | 3.97 | 4.06 | |||||||||||||||
Efficiency ratio | 45.32 | 43.91 | 48.42 | 46.68 | 47.96 | |||||||||||||||
Loan Charge-off Data | ||||||||||||||||||||
Loans charged-off | $ | (262 | ) | $ | (281 | ) | $ | (2,204 | ) | $ | (1,036 | ) | $ | (3,084 | ) | |||||
Recoveries | 63 | 49 | 90 | 266 | 568 | |||||||||||||||
Net charge-offs | $ | (199 | ) | $ | (232 | ) | $ | (2,114 | ) | $ | (770 | ) | $ | (2,516 | ) | |||||
| (1) | As adjusted on a pro forma basis to present the Company’s 2005 results as if its acquisition of minority interests in subsidiary banks and the termination of its S corporation status, which became effective on December 31, 2005, were in effect for all of 2005. |
| (2) | Pro forma net income adjustments reflect impact of minority interest adjustment, additional income tax expense adjustment, and cost of acquisition funding adjustment computed on an average basis. |
PORTER BANCORP, INC. AND SUBSIDIARY
Unaudited Financial Information
(in thousands, except share and per share data)
As of 12/31/06 | As of 9/30/06 | As of 12/31/05 | ||||||||||
Assets | ||||||||||||
Loans, net of unearned | $ | 854,367 | $ | 817,421 | $ | 791,951 | ||||||
Loan loss reserve | (12,832 | ) | (12,655 | ) | (12,197 | ) | ||||||
Net loans | 841,535 | 804,766 | 779,754 | |||||||||
Securities available for sale | 95,090 | 95,722 | 103,993 | |||||||||
Federal funds sold & interest bearing deposits | 41,975 | 24,416 | 33,673 | |||||||||
Cash and due from financial institutions | 14,288 | 17,038 | 18,808 | |||||||||
Premises and equipment | 13,774 | 13,794 | 14,341 | |||||||||
Goodwill | 12,881 | 12,881 | 12,829 | |||||||||
Accrued interest receivable and other assets | 31,463 | 31,044 | 28,083 | |||||||||
Total Assets | $ | 1,051,006 | $ | 999,661 | $ | 991,481 | ||||||
Liabilities and Equity | ||||||||||||
Certificates of deposit | $ | 656,691 | $ | 618,174 | $ | 619,235 | ||||||
Interest checking | 50,840 | 51,399 | 56,440 | |||||||||
Money market | 61,666 | 41,115 | 44,414 | |||||||||
Savings | 23,479 | 24,196 | 24,111 | |||||||||
Total interest bearing deposits | 792,676 | 734,884 | 744,200 | |||||||||
Demand deposits | 69,180 | 67,534 | 62,379 | |||||||||
Total deposits | 861,856 | 802,418 | 806,579 | |||||||||
Federal funds purchased & repurchase agreements | 1,134 | 1,301 | 4,576 | |||||||||
Notes payable | — | — | 9,600 | |||||||||
FHLB advances | 47,562 | 56,964 | 63,563 | |||||||||
Junior subordinated debentures | 25,000 | 25,000 | 25,000 | |||||||||
Accrued interest payable and other liabilities | 7,108 | 8,172 | 10,287 | |||||||||
Total liabilities | 942,660 | 893,855 | 919,605 | |||||||||
Stockholders’ equity | 108,346 | 105,806 | 71,876 | |||||||||
Total Liabilities and Stockholders’ Equity | $ | 1,051,006 | $ | 999,661 | $ | 991,481 | ||||||
Ending shares outstanding | 7,622,447 | 7,620,497 | 6,332,447 | |||||||||
Asset Quality Data | ||||||||||||
Loan 90 days or more past due still on accrual | $ | 2,010 | $ | 2,356 | $ | 1,969 | ||||||
Non-accrual loans | 6,930 | 7,616 | 5,045 | |||||||||
Total non-performing loans | 8,940 | 9,972 | 7,014 | |||||||||
Real estate acquired through foreclosures | 2,415 | 2,093 | 1,781 | |||||||||
Other repossessed assets | 9 | 9 | 1 | |||||||||
Total non-performing assets | $ | 11,364 | $ | 12,074 | $ | 8,796 | ||||||
Non-performing loans to total loans | 1.05 | % | 1.22 | % | 0.89 | % | ||||||
Non-performing assets to total loans | 1.33 | 1.48 | 1.11 | |||||||||
Allowance for loan losses to non-performing loans | 143.53 | 126.91 | 173.90 | |||||||||
Allowance for loan losses to total loans | 1.50 | 1.55 | 1.54 | |||||||||
Risk-based Capital Ratios | ||||||||||||
Tier I leverage ratio | 11.86 | % | 12.06 | % | 8.82 | % | ||||||
Tier I risk-based capital ratio | 14.32 | 14.73 | 10.88 | |||||||||
Total risk-based capital ratio | 15.57 | 15.99 | 12.13 | |||||||||
FTE employees | 218 | 218 | 195 | |||||||||