Porter Bancorp, Inc. Announces Continued Growth in Third Quarter Income, Loans and Deposits

Earnings for the nine months ended September 30, 2008, increased to $11.7 million, or $1.49 per fully diluted share, compared with $10.6 million, or $1.40 per fully diluted share, for the same period of 2007.

"Our record net income benefited from continued growth in earning assets, higher net interest income and growth in non-interest income since the third quarter of last year," stated Maria L. Bouvette, President and CEO of Porter Bancorp, Inc. "Our improved results reflected the expansion of our markets and the contribution from acquisitions completed over the past year. We also benefited from the strength and quality of the Kentucky markets we serve and their resiliency in light of the softening national economy."

Third Quarter Highlights

-- Net income increased 24.3% to $4.1 million for the three months ended September 30, 2008, compared with the same quarter of 2007. Earnings per diluted share increased 18.2% to $0.52 for the three months ended September 30, 2008, compared to the third quarter of 2007.

-- Net interest income increased 15.8% to $12.4 million for the three months ended September 30, 2008, compared with the same quarter of 2007.

-- Loans grew 24.9% to $1.3 billion compared with $1.1 billion at September 30, 2007.

-- Deposits increased 21.5% to $1.3 billion compared with $1.05 billion at September 30, 2007. Core customer non-interest bearing deposit accounts increased 23.3% to $87.6 million from $71 million at September30,2007.

-- Total assets increased 27.2% to $1.6 billion since the third quarter of 2007, fueled by strong loan growth and the acquisitions of Kentucky Trust Bank and Paramount Bank.

-- Efficiency ratio improved on a linked quarter basis to 47.5% for the three months ended September 30, 2008.

-- Net interest margin improved four basis points on a linked quarter basis to 3.33% in the third quarter of 2008.

-- Capital was strengthened with the sale of a $9 million subordinated capital note by our bank subsidiary, PBI Bank, on July 1, 2008. The capital note, which qualifies as Tier 2 capital, will provide funding for continued asset growth and maintain the bank's strong capital position without being dilutive to common shareholders of Porter Bancorp.

"Porter Bancorp's performance in the third quarter highlights our continued focus on asset quality, growing earnings and protecting our capital base," continued Ms. Bouvette. "Earnings have benefited from organic growth across our markets and the contributions from the acquisitions of Kentucky Trust Bank and Paramount Bank since last year. Our capital position was improved further this year with the issuance of a subordinated capital note in July. We believe Porter Bancorp is in excellent position to weather the softening economy as a result of these factors."

PBI Bank was classified as a 'well-capitalized' bank at the end of the third quarter. Total risk-based capital was 11.5% for the holding company and 11.1% for the bank compared with regulatory requirements of 10.0% for a well-capitalized bank and minimum regulatory requirements of 8.0%. Tier 1 risk-based capital was 9.6% for the holding company and 9.2% for the bank, both measures significantly above the requirement of 6.0% for a well-capitalized bank and minimum regulatory requirements of 4.0%.

"We remain confident of our continuing ability to manage our risks during this difficult credit cycle. Our focus is on minimizing losses by quickly resolving credit issues as soon as they are identified," continued Ms. Bouvette. "We believe our 1.39% ratio of allowance of loan losses to total loans and coverage ratio of 120.89% for allowance for loan losses to non-performing loans provides a solid measure of protection for Porter Bancorp."

Net Interest Income

Net interest income increased 15.8% to $12.4 million for the three months ended September 30, 2008, an increase of $1.7 million, compared with $10.7 million for the same period in 2007. Net interest income rose to $35.7 million for the nine months ended September 30, 2008, an increase of $5.1 million, or 16.8%, compared with $30.6million for the same period in 2007. This increase was attributable to the organic growth in our loan portfolio and the Kentucky Trust Bank and Paramount Bank acquisitions, offset somewhat by lower net interest margin compared with the same period in 2007. Average earning assets rose 25.6% to $1.5 billion for the three months ended September 30, 2008, compared with the $1.2 billion for the three months ended September 30, 2007.

Net interest margin improved four basis points from our margin of 3.29% in the second quarter of 2008 due primarily to lower funding costs. During the third quarter of 2008, our margin improved as our deposits continued to reprice at lower rates relative to the repricing of our loan portfolio. Since the third quarter of last year, net interest margin for the third quarter of 2008 declined 27 basis points to 3.33%. We are currently asset sensitive, and as a result, we expect a slight decline in our net interest margin in the fourth quarter of this year based on the 50 basis point rate reduction by the Federal Reserve on October 8, 2008. If interest rates remain stable, we expect continued margin expansion in 2009 based upon our expectation of continued downward liability repricing with limited repricing of assets.

Non-Interest Income

Non-interest income for the third quarter of 2008 increased 31.4%, or $412,000, over the third quarter of 2007. Non-interest income was $5.3 million in the first nine months of 2008 compared with $3.8 million for the same period of 2007. The growth in non-interest income since last year was primarily attributable to higher service charges on deposit accounts and income from fiduciary activities. Porter acquired its trust operation from Kentucky Trust Bank on October 1, 2007, which has accounted for the addition of income from fiduciary activities since that time. Income from fiduciary activities added $261,000 and $845,000 to non-interest income in the third quarter and first nine months of 2008, respectively. Non-interest income included a $101,000 loss on the sale of securities in the third quarter of 2008 compared with a gain of $42,000 in the same quarter of 2007.

Non-Interest Expense

Non-interest expense increased 22.3% to $6.8 million compared with the third quarter of 2007. Non-interest expense for the nine months ended September 30, 2008, increased 34.2% from the nine months ended September 30, 2007. The growth in non-interest expense was due primarily to costs related to the acquisitions of Kentucky Trust Bank and Paramount Bank, increased salaries and benefits for existing employees and higher occupancy and equipment expense to support the six additional offices. Expenses also increased because FDIC insurance premiums rose significantly due to amendments made by the FDIC in 2007 to its risk-based deposit premium assessment system. Non-interest expense declined 3.9%, or $278,000, on a linked quarter basis due to our continued focus on expense controls. Our efficiency ratio increased to 50.8% for the first nine months of 2008 compared with 45.5% for the same period in 2007, but improved on a linked-quarter basis to 47.5% for the three months ended September 30, 2008.

Balance Sheet Review

Total assets increased 27.2%, or $341 million, to $1.6 billion at September 30, 2008, from $1.3 billion at September30, 2007. The Company's loan portfolio increased 24.9%, or $267 million, to $1.3 billion from $1.1billion at September 30, 2007, primarily due to in-house loan origination efforts and the contributions from the acquisitions of Kentucky Trust Bank and Paramount Bank. Average loans increased $24.9 million on a linked quarter basis due to the continued growth in the loan portfolio; however, net loans at the end of the quarter were down $1.3 million on a linked quarter basis primarily due to a large payoff late in the third quarter.

Deposits at September 30, 2008, increased 21.5% to $1.3 billion from $1.05 billion at September 30, 2007, primarily due to an increase in both time deposits and transactional accounts from promotional efforts throughout the period, and the Kentucky Trust Bank and Paramount Bank acquisitions.

Asset Quality

"We have experienced an increase in non-performing assets since last year as a result of the economic slowdown," continued Ms. Bouvette. "Our nonperforming loans at September 30, 2008, were $15.4 million, or 1.15% of total loans, compared with $12.9 million, or 0.96% of total loans at June 30, 2008, and $8.4 million, or 0.78% of total loans at September 30, 2007. Foreclosed properties at September 30, 2008, were $7.5 million compared with $6.9million at September 30, 2007, and $6.6 million at June 30, 2008. Additionally, our ratio of non-performing assets to total assets increased during the quarter to 1.44% at September 30, 2008, compared with 1.24% at June30,2008."

Our loan loss reserve as a percentage of total loans at September 30, 2008, increased to 1.39% from 1.35% at June30,2008 and September 30, 2007. Net loan charge-offs for the third quarter of 2008 were $745,000, or 0.06% of average loans for the quarter. Ms. Bouvette stated, "We continue to focus on lending to our traditional customer base in Kentucky and we remain very proactive in managing our credit risks to protect our earnings and capital base."

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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 under "Risk Factors" in the Company's Form 10-K 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 third quarter ending September 30, 2008 follows.

PORTER BANCORP, INC. AND SUBSIDIARY Unaudited Financial Information (in thousands, except share and per share data) Three Three Three Nine Nine Months Months Months Months Months Ended Ended Ended Ended Ended 9/30/08 6/30/08 9/30/07 9/30/08 9/30/07 Income Statement Data Interest income $ 25,106 $ 25,041 $ 23,851 $ 75,821 $ 65,840 Interest expense 12,673 13,069 13,115 40,073 35,240 Net interest income 12,433 11,972 10,736 35,748 30,600 Provision for loan losses 1,250 750 1,500 2,650 2,825 Net interest income after provision 11,183 11,222 9,236 33,098 27,775 Service charges on deposit accounts 876 902 669 2,607 1,852 Income from fiduciary activities 261 331 - 845 - Gains (losses) on sales of securities, net (101 ) (139 ) 42 (146 ) 104 Other 689 694 602 2,025 1,834 Non-interest income 1,725 1,788 1,313 5,331 3,790 Salaries & employee benefits 3,666 3,892 3,115 11,382 9,051 Occupancy and equipment 882 904 673 2,699 1,837 Franchise tax 435 435 326 1,305 976 FDIC insurance 284 242 76 747 127 Professional fees 177 172 149 595 485 Communications expense 181 188 113 530 322 Advertising 100 140 140 401 393 Other real estate owned expense 109 120 232 456 327 Other 935 954 712 2,818 2,078 Non-interest expense 6,769 7,047 5,536 20,933 15,596 Income before income taxes 6,139 5,963 5,013 17,496 15,969 Income tax expense 2,039 1,990 1,714 5,826 5,380 Net income $ 4,100 $ 3,973 $ 3,299 $ 11,670 $ 10,589 Weighted average shares - Basic 7,826,715 7,826,567 7,586,167 7,830,867 7,585,063 Weighted average shares - Diluted 7,828,238 7,826,567 7,586,167 7,831,361 7,585,085 Basic and diluted earnings per share $ 0.52 $ 0.51 $ 0.44 $ 1.49 $ 1.40 Cash dividends declared per share $ 0.21 $ 0.21 $ 0.20 $ 0.63 $ 0.60

PORTER BANCORP, INC. AND SUBSIDIARY Unaudited Financial Information (in thousands, except share and per share data) Three Three Three Nine Nine Months Months Months Months Months Ended Ended Ended Ended Ended 9/30/08 6/30/08 9/30/07 9/30/08 9/30/07 Average Balance Sheet Data Assets $ 1,582,701 $ 1,563,635 $ 1,247,149 $ 1,553,301 $ 1,159,254 Loans 1,351,897 1,326,996 1,039,355 1,316,367 962,822 Earning assets 1,498,361 1,475,812 1,193,227 1,469,511 1,107,504 Deposits 1,255,778 1,242,153 1,028,067 1,239,755 948,315 Long-term debt and advances 178,442 170,419 92,149 165,204 88,954 Interest bearing liabilities 1,353,983 1,334,128 1,056,287 1,325,525 971,571 Stockholders' equity 128,080 126,211 113,350 126,112 112,097 Performance Ratios Return on average assets 1.03 % 1.02 % 1.05 % 1.00 % 1.22 % Return on average equity 12.73 12.66 11.55 12.36 12.63 Yield on average earning assets (tax equivalent) 6.70 6.85 7.96 6.92 7.98 Cost of interest bearing liabilities 3.72 3.93 4.93 4.04 4.85 Net interest margin (tax equivalent) 3.33 3.29 3.60 3.28 3.73 Efficiency ratio 47.47 50.70 46.08 50.78 45.49 Loan Charge-off Data Loans charged-off $ (782 ) $ (798 ) $ (519 ) $ (1,999 ) $ (1,345 ) Recoveries 37 114 40 225 188 Net charge-offs $ (745 ) $ (684 ) $ (479 ) $ (1,774 ) $ (1,157 )

PORTER BANCORP, INC. AND SUBSIDIARY Unaudited Financial Information (in thousands, except share and per share data) As of As of As of As of 9/30/08 6/30/08 12/31/07 9/30/07 Assets Loans $ 1,342,467 $ 1,343,216 $ 1,217,698 $ 1,075,069 Loan loss reserve (18,638 ) (18,133 ) (16,342 ) (14,500 ) Net loans 1,323,829 1,325,083 1,201,356 1,060,569 Securities available for sale 109,799 105,901 128,036 100,723 Federal funds sold & interest bearing deposits 30,172 28,970 19,979 9,224 Cash and due from financial institutions 41,943 31,870 23,608 17,704 Premises and equipment 22,986 22,988 21,279 14,935 Goodwill 23,891 23,877 18,174 12,881 Accrued interest receivable and other assets 43,572 42,861 43,588 39,044 Total Assets $ 1,596,192 $ 1,581,550 $ 1,456,020 $ 1,255,080 Liabilities and Equity Certificates of deposit $ 987,464 $ 960,002 $ 846,568 $ 783,171 Interest checking 80,009 103,719 95,953 54,241 Money market 82,179 71,925 99,839 113,061 Savings 34,684 35,747 28,661 25,267 Total interest bearing deposits 1,184,336 1,171,393 1,071,021 975,740 Demand deposits 87,603 96,536 95,533 71,038 Total deposits 1,271,939 1,267,929 1,166,554 1,046,778 Federal funds purchased & repurchase agreements 10,457 10,753 11,285 11,569 FHLB advances 143,842 145,098 121,767 50,207 Junior subordinated debentures 34,000 25,000 25,000 25,000 Accrued interest payable and other liabilities 8,194 7,322 9,125 7,328 Total liabilities 1,468,432 1,456,102 1,333,731 1,140,882 Stockholders' equity 127,760 125,448 122,289 114,198 Total Liabilities and Stockholders' $ 1,596,192 $ 1,581,550 $ 1,456,020 $ 1,255,080 Equity Ending shares outstanding 7,893,137 7,893,797 7,881,206 7,628,967 Book value per share $ 16.19 $ 15.89 $ 15.52 $ 14.97 Tangible book value per share 12.86 12.53 12.80 13.25 Asset Quality Data Loan 90 days or more past due still on accrual $ 4,997 $ 4,974 $ 2,145 $ 2,829 Non-accrual loans 10,420 7,917 10,524 5,536 Total non-performing loans 15,417 12,891 12,669 8,365 Real estate acquired through foreclosures 7,521 6,625 4,309 6,862 Other repossessed assets 96 57 30 - Total non-performing assets $ 23,034 $ 19,573 $ 17,008 $ 15,227 Non-performing loans to total loans 1.15 % 0.96 % 1.04 % 0.78 % Non-performing assets to total loans 1.72 1.46 1.40 1.42 Non-performing assets to total assets 1.44 1.24 1.17 1.21 Allowance for loan losses to non-performing loans 120.89 140.66 128.99 173.34 Allowance for loan losses to total loans 1.39 1.35 1.34 1.35 Risk-based Capital Ratios Tier I leverage ratio 8.11 % 8.03 % 9.07 % 10.22 % Tier I risk-based capital ratio 9.55 9.34 10.39 11.84 Total risk-based capital ratio 11.49 10.59 11.64 13.09 FTE employees 283 280 273 237

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SOURCE: Porter Bancorp, Inc.

Porter Bancorp, Inc. Maria L. Bouvette, President and CEO, 502-499-4800