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Limestone Bancorp Reports 2018 Net Income of $8.8 Million, or $1.23 Per Share

January 23, 2019

LOUISVILLE, Ky.--(BUSINESS WIRE)--Jan 23, 2019--Limestone Bancorp, Inc. (NASDAQ: LMST) (“the Company”), parent company of Limestone Bank (“the Bank”), today reported unaudited results for the fourth quarter of 2018. Net income for the fourth quarter of 2018 was $2.4 million, or $0.33 per basic and diluted common share, compared with $33.3 million, or $5.31 per basic and diluted share, for the fourth quarter of 2017. Net income for the year ended December 31, 2018, was $8.8 million, or $1.23 per basic and diluted common share, compared with $38.5 million, or $6.15 per basic and diluted common share, for the year ended December 31, 2017.

Net income before taxes was $10.8 million for the year ended December 31, 2018, compared with $6.6 million for the year ended December 31, 2017. Income tax expense was $2.0 million for 2018 and income tax benefit was $31.9 million for 2017 due to the reversal of the Company’s deferred tax asset valuation allowance and the change in federal corporate tax rates in connection with the enactment of the Tax Cuts and Jobs Act of 2017.

Net Interest Income – Net interest income was $8.7 million for the fourth quarter of 2018, compared to $8.4 million in the third quarter of 2018, and $8.0 million in the fourth quarter of 2017. Average loans increased to $765.5 million for the fourth quarter of 2018, compared with $748.4 million in the third quarter of 2018, and $695.6 million for the fourth quarter of 2017. Net interest margin was relatively stable at 3.46% for the fourth quarter of 2018, compared to 3.45% for the third quarter of 2018, and 3.50% for the fourth quarter of 2017.

The yield on earning assets increased to 4.66% for the fourth quarter of 2018, compared to 4.56% for the third quarter of 2018, and 4.24% for the fourth quarter of 2017. The cost of interest bearing liabilities was 1.46% for the fourth quarter of 2018, compared to 1.32% for the third quarter of 2018, and 0.88% for the fourth quarter of 2017.

Net interest income increased to $33.7 million for the year ended December 31, 2018, compared with $31.1 million for 2017. Average loans increased to $743.4 million for 2018, compared with $667.5 million for 2017. Net interest margin increased to 3.53% for 2018, compared with 3.48% for 2017. The yield on earning assets increased to 4.55% for the year ended December 31, 2018, compared to 4.18% for 2017 and cost of interest bearing liabilities was 1.23% for 2018, compared to 0.83% for 2017.

Provision and Allowance for Loan Losses – Because of improvement in asset quality, the level of net loan recoveries during the period, and management’s assessment of risk in the loan portfolio, a negative provision for loan losses of $500,000 was recorded for the year ended December 31, 2018, compared to a negative provision for loan losses of $800,000 for 2017. No provision was recorded in the fourth quarter of 2018, compared to a negative provision of $800,000 in the fourth quarter of 2017.

The allowance for loan losses to total loans was 1.16% at December 31, 2018, compared to 1.14% at September 30, 2018, and 1.15% at December 31, 2017. Net loan recoveries were $1.2 million for 2018, compared to net loan recoveries of $35,000 for 2017.

Non-performing Assets – Non-performing assets, which include loans on nonaccrual, accruing troubled debt restructurings, loans past due 90 days and still accruing, and other real estate owned (“OREO”), decreased to $6.4 million, or 0.60% of total assets at December 31, 2018, compared with $7.4 million, or 0.70% of total assets at September 30, 2018, and $11.1 million, or 1.14% of total assets, at December 31, 2017. Non-performing loans decreased to $2.9 million, or 0.38% of total loans at December 31, 2018, compared with $3.6 million, or 0.48% of total loans at September 30, 2018, and $6.7 million, or 0.94% of total loans, at December 31, 2017. The decrease from the previous year was primarily driven by $3.6 million in principal payments received on nonaccrual loans, $730,000 of nonaccrual loans migrating to OREO, and $293,000 of charge-offs offset by $1.2 million in loans placed on nonaccrual during 2018.

OREO at December 31, 2018, decreased to $3.5 million, compared with $3.8 million at September 30, 2018, and $4.4 million at December 31, 2017. During the year, the Company sold $876,000 in OREO and acquired $730,000 in new OREO properties. Fair value write-downs arising from changing marketing strategies and new appraisals totaled $850,000 for 2018, compared to $2.0 million for 2017.

Non-interest Income and Expense – Non-interest income increased $375,000 to $5.8 million for the year ended December 31, 2018, compared with $5.4 million for the year ended December 31, 2017. The increase between years was primarily attributable to a $310,000 increase in bank card interchange fees, a $232,000 increase in other non-interest income, and a $102,000 increase in service charges on deposit accounts, partially offset by a reduction in the gain on sales of securities of $294,000.

The $232,000 net increase in other non-interest income for 2018 includes a $150,000 third quarter gain on sale of the Bank’s secondary market residential mortgage servicing rights portfolio, as well as a $632,000 fourth quarter gain on sale of a subdivided lot at the Company’s headquarters, partially offset by a $392,000 fourth quarter impairment charge associated with the transfer of the Bank’s data processing center to Premises Held for Sale.

In December 2018, the Bank completed a core system conversion, which Management believes will provide opportunities for work flow efficiencies and improvements in customer experience. In connection with the completion of the core systems conversion, Management approved the closure of its central data processing facility. Support services personnel will be relocated from the bank-owned data processing facility to other nearby facilities in 2019. In December 2018, the data processing facility was transferred to Premises Held For Sale at fair value, as determined by an independent third party appraisal, less estimated cost to sell. The transfer to held for sale resulted in the $392,000 impairment charge noted above, which is included in other non-interest income. Upon sale of the facility, Management expects to realize annual occupancy expense savings of approximately $200,000.

Non-interest income increased $30,000 to $1.7 million for the fourth quarter of 2018, compared with $1.6 million for the fourth quarter of 2017. The increase was due primarily to a $204,000 increase in other non-interest income as described in the paragraph above and a $170,000 increase in bank card interchange fees, partially offset by a reduction in net gain on sale of securities of $293,000 as compared to 2017.

Non-interest expense decreased $1.6 million to $29.1 million for the year ended December 31, 2018, compared with $30.8 million for the year ended December 31, 2017. The decrease in non-interest expense was due primarily to a $1.1 million decrease in OREO expense and a $855,000 decrease in FDIC insurance attributable to the Bank’s improved risk profile, partially offset by a $399,000 increase in salaries and employee benefits.

Non-interest expense decreased $1.8 million to $7.3 million for the fourth quarter of 2018, compared with $9.1 million for the fourth quarter of 2017. The decrease from the fourth quarter of 2017 was primarily due to a decrease in OREO expense of $1.6 million as well as a decrease in FDIC insurance expense of $239,000 attributable to the Bank’s improved risk profile. This decrease was partially offset by an increase in salaries and employee benefits of $266,000.

Capital – At December 31, 2018, the Bank’s Tier 1 leverage ratio was 9.60%, compared with 8.70% at December 31, 2017, and its Total risk-based capital ratio was 12.88% at December 31, 2018, compared with 11.61% at December 31, 2017. At December 31, 2018, the Company’s Tier I leverage ratio was 9.00%, compared with 7.11% at December 31, 2017, and its Total risk-based capital ratio was 12.23%, compared with 10.55% at December 31, 2017. At December 31, 2018, the Company’s Common equity Tier I risk-based capital ratio was 9.44%, compared with 6.92% at December 31, 2017.

About Limestone Bancorp, Inc.

Limestone Bancorp, Inc. (NASDAQ: LMST) is a Louisville, Kentucky-based bank holding company which operates banking centers in 12 counties through its wholly-owned subsidiary Limestone Bank. The Bank’s markets include metropolitan Louisville in Jefferson County and the surrounding counties of Henry and Bullitt, and extend south along the Interstate 65 corridor. The Bank serves southern and south central Kentucky from banking centers in Butler, Green, Hart, Edmonson, Barren, Warren, Ohio and Daviess counties. The Bank also has a banking center in Lexington, Kentucky, the second largest city in the state. Limestone Bank is a traditional community bank with a wide range of personal and business banking products and services.

Forward-Looking Statements

Statements in this press release relating to Limestone Bancorp’s plans, objectives, expectations or future performance are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The words “believe,” “may,” “should,” “anticipate,” “estimate,” “expect,” “intend,” “objective,” “possible,” “seek,” “plan,” “strive” or similar words, or negatives of these words, identify forward-looking statements that involve risks and uncertainties. Although the Company’s management believes the assumptions underlying the forward-looking statements contained herein are reasonable, any of these assumptions could be inaccurate. Therefore, there can be no assurance the forward-looking statements included herein will prove to be accurate. Factors that could cause actual results to differ from those discussed in forward-looking statements include, but are not limited to: economic conditions both generally and more specifically in the markets in which the Company and its subsidiaries operate; competition for the Company’s customers from other providers of financial services; government legislation and regulation, which change from time to time and over which the Company has no control; changes in interest rates; material unforeseen changes in liquidity, results of operations, or financial condition of the Company’s customers; and other risks detailed in the Company’s filings with the Securities and Exchange Commission, all of which are difficult to predict and many of which are beyond the control of the Company. See Risk Factors outlined in the Company’s Form 10-K for the year ended December 31, 2017.

Additional Information

Unaudited supplemental financial information for the quarter and year ending December 31, 2018, follows.

Non-GAAP Financial Measures Reconciliation

The efficiency ratio is a non-GAAP measure of expense control relative to revenue from net interest income and fee income. The efficiency ratio is calculated by dividing total non-interest expenses as determined under GAAP by net interest income and total non-interest income, but excluding net gains on the sale of securities from the calculation. Management believes this provides a reasonable measure of primary banking expenses relative to primary banking revenue.

View source version on businesswire.com:https://www.businesswire.com/news/home/20190123005664/en/

CONTACT: John T. Taylor

Chief Executive Officer

(502) 499-4800

KEYWORD: UNITED STATES NORTH AMERICA KENTUCKY

INDUSTRY KEYWORD: PROFESSIONAL SERVICES BANKING FINANCE

SOURCE: Limestone Bancorp, Inc.

Copyright Business Wire 2019.

PUB: 01/23/2019 04:05 PM/DISC: 01/23/2019 04:05 PM

http://www.businesswire.com/news/home/20190123005664/en

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