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Porter Bancorp Inc.'s largest outside shareholder says that the Louisville, Ky., company continues understate its level of problem loans despite its recent claims that its allowance for loan losses is sufficient.
November 30 -
Sometimes a quarterly report includes a noteworthy item that happened after the quarter ended. Porter Bancorp Inc. in Louisville, Ky., had three of them.
November 11
Porter Bancorp Inc. in Louisville, Ky. reported a bigger than expected loss for the fourth quarter and warned investors that the ultimate loss for the quarter could be even larger.
The $1.5 billion-asset company said Thursday that it lost $45.4 million in the quarter, five times more than it lost in the same period year earlier. The company reported a loss of $12.2 million for the third quarter.
On a per-share basis, Porter reported a loss of $3.88, compared to the loss of 21 cents that analysts had expected, according to data from Thomson Reuters.
Porter attributed the large loss to its creation of a valuation allowance for its entire $28.5 million deferred tax asset. Such assets are accumulated through losses and are used to offset further tax bills. Companies, however, must move the asset off the balance sheet when auditors do not expect a return to profitability in the near future.
The loss was also driven by a $27 million provision for loan losses, up 75% from a year earlier. By comparison, the company’s provision for all of 2010 was $30 million.
The outsized loss left PBI Bank, the company’s bank unit, out of compliance with its consent order with regulators. The bank had a leverage ratio of 6.83% and a total risk-based capital ratio of 11.61%. Those ratios would be considered well capitalized by normal standards, but the
Porter added in its press release that Federal Deposit Insurance Corp. and the Kentucky Dept. of Financial Institutions began its annual safety and soundness exam of the bank. That could mean the bank’s nonperforming assets and allowance for loan losses could change between its current reported results and what is ultimately filed in the company’s annual report to the Securities and Exchange Commission.
“The banking regulators spend significant time reviewing our asset valuations and often provide us with valuable insight which influences our decision-making on the carrying value of loans, the allowance for loan losses, real estate owned and other assets,” it said in the press release. “We often receive meaningful input from the regulators in the course of their examination.”
In heavier-than-normal trading, Porter's shares were down 2.3% Thursday afternoon, to $2.10. The company's stock has lost 78% of its value since the start of 2011.
In the press release, Porter said it continued to look for bulk sale opportunities in the fourth quarter, and sold $4.6 million of foreclosed properties in January.
Kevin Fitzsimmons, an analyst at Sandler O'Neill & Partners LP, said in a research note that investors want to see banks shed problem assets through larger bulk sales. He added that the company's "perceived need for additional capital seems to be gaining some urgency."
