LOUISVILLE, Ky. (Nov. 1, 2012) — Porter Bancorp Inc., the parent company of PBI Bank, with 18 full-service banking offices in Kentucky, reported unaudited results for the third quarter of 2012 showing a net loss to common shareholders of $26.9 million, or ($2.29) per diluted share.
That compared with net loss to common shareholders of $12.2 million, or ($1.04) per diluted share, for the third quarter of 2011. Net loss to common shareholders for the nine months ended Sept. 30 was $26.4 million, or ($2.25) per diluted common share, compared with net loss to common shareholders of $50.8 million, or ($4.34) per diluted share, for the nine months ended Sept. 30, 2011. The loss for the nine months ended Sept. 30, 2011 includes a non-recurring 100 percent goodwill impairment charge of $23.8 million recorded in the second quarter of 2011.
Financial performance continues to be negatively impacted by the Bank’s high level of nonperforming loans and other real estate owned. Non-performing loans increased to $90.1 million, or 9.47 percent of total loans, at Sept. 30, compared with $81.7 million, or 7.85 percent of total loans, at June 30, 2012. Non-performing assets increased to $139.0 million, or 10.8 percent of total assets, compared with $136.1 million, or 10.2 percent of total assets, at June 30, 2012.
Foreclosed properties at Sept. 30, 2012, decreased to $48.8 million compared with $54.4 million at June 30, 2012, and increased compared with $44.9 million at Sept. 30, 2011. During the third quarter of 2012, the Company acquired $3.4 million of OREO, sold $4.7 million of OREO, and recorded OREO fair value write-downs totaling $4.3 million to reflect new appraisals or marketing prices during the third quarter of 2012.
Provision for loan losses totaled $25.5 million for the third quarter of 2012 compared to $4.0 million in the second quarter of 2012, and $8.0 million in the third quarter of 2011. Provision for loan losses totaled $33.3 million for the nine months ended Sept. 30, 2012, compared to $26.8 million for the nine months ended Sept. 30, 2011.
The increase in the provision for loan losses in the third quarter of 2012 is primarily attributable to collateral value declines for certain larger commercial real estate loans as evidenced by new appraisals received during the third quarter, higher net charge-offs, and a continued decline in credit trends in our loan portfolio. In addition, the third quarter 2012 provision for loan losses was negatively impacted by a strategy change during the quarter related to impaired loans whereby we expect to accelerate the remediation process through litigation or foreclosure. For impaired loans subject to such an expectation, we applied an additional fair value discount to the underlying collateral in our impairment analysis estimates for the third quarter of 2012, due to our experience that resolution of this nature generally results in receiving lower values for real estate collateral in a more aggressive sales environment.
Net loan charge-offs totaled $23.1 million for the third quarter of 2012 compared to $6.4 million in the second quarter of 2012, and $7.2 million in the third quarter of 2011. Net loan charge-offs totaled $31.8 for the nine months ended Sept. 30, 2012, compared to $21.6 million for the nine months ended Sept. 30, 2011.
Our net interest income also continued to decline in the three months and nine months ended Sept. 30 2012, compared with the same periods in 2011, as average earning assets, primarily loans, declined $252.5 million and net interest margin declined 11 basis points between the nine months ended Sept. 30, 2012, and the nine months ended Sept. 30, 2011.
The bank remains focused on executing its strategic plans to address the challenges related to a higher-than-normal level of non-performing loans and OREO, and the continuation of soft market conditions affecting the value and marketability of real estate. As part of the plan, John T. Taylor was hired in July as president and CEO of PBI Bank and president of Porter Bancorp, and John R. Davis joined the credit administration team in August and was subsequently approved by our primary regulators as chief credit officer. Additionally, management remains diligently focused on assessing risk and determining the appropriate strategies to accelerate the reduction of the risk profile of the bank while formulating strategies and executing upon opportunities to increase revenue through improved net interest margin and non-interest income growth. We are also diligently focused on credit cost reduction and non-interest expense reductions as part of our plan to increase the long-term profitability of the bank.
At Sept. 30, 2012, PBI Bank’s Tier 1 leverage ratio was 5.53 percent and its Total risk-based capital ratio was 9.85 percent, which are below the minimums of 9 percent and 12 percent required by the bank’s consent order with its primary regulators. At Sept. 30, 2012, Porter Bancorp’s Tier 1 leverage ratio was 5 percent, compared with 7.56 percent at June 30, 2012, and 6.53 percent at Dec. 31, 2011, and its Total risk-based capital ratio was 10.01 percent compared with 11.94 percent at June 30, 2012, and 11.22 percent at Dec. 31, 2011.
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