Press Release

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

Company Release - 1/23/2019 4:05 PM ET

LOUISVILLE, Ky.--(BUSINESS WIRE)-- 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.

 
LIMESTONE BANCORP, INC.
Unaudited Financial Information

(in thousands, except share and per share data)

 
      Three     Three     Twelve     Twelve
Months Months Months Months
Ended Ended Ended Ended
12/31/18 12/31/17 12/31/18 12/31/17

 

 

Income Statement Data
Interest income $ 11,741 $ 9,717 $ 43,461 $ 37,522
Interest expense   3,037   1,716     9,790     6,405  
Net interest income 8,704 8,001 33,671 31,117
Provision (negative provision) for loan losses     (800 )   (500 )   (800 )
Net interest income after provision 8,704 8,801 34,171 31,917
 
Service charges on deposit accounts 588 636 2,355 2,253
Bank card interchange fees 573 403 1,831 1,521
Bank owned life insurance income 100 103 437 412
Gain (loss) on sales and calls of securities, net 293 (6 ) 288
Other   411   207     1,162     930  
Non-interest income 1,672 1,642 5,779 5,404
 
Salaries & employee benefits 3,923 3,657 15,489 15,090
Occupancy and equipment 915 919 3,586 3,420
Professional fees 201 202 814 978
Marketing expense 247 218 1,114 1,098
FDIC insurance 118 357 557 1,412
Data processing expense 280 325 1,192 1,256
State franchise and deposit tax 272 281 1,118 956
Deposit account related expense 170 250 823 896
Other real estate owned expense 278 1,881 868 1,973
Litigation and loan collection expense 83 58 245 179
Other   835   924     3,320     3,509  
Non-interest expense 7,322 9,072 29,126 30,767
 
Income before income taxes 3,054 1,371 10,824 6,554
Income tax expense (benefit)   614   (31,899 )   2,030     (31,899 )
Net income   2,440   33,270   8,794     38,453  
 
Weighted average shares – Basic 7,457,206 6,259,864 7,159,723 6,249,059
Weighted average shares – Diluted 7,457,206 6,259,864 7,159,723 6,249,059
 
Basic earnings per common share $ 0.33 $ 5.31 $ 1.23 $ 6.15
Diluted earnings per common share $ 0.33 $ 5.31 $ 1.23 $ 6.15
Cash dividends declared per common share $ 0.00 $ 0.00 $ 0.00 $ 0.00
 

 
LIMESTONE BANCORP, INC.
Unaudited Financial Information

(in thousands, except share and per share data)

 
      Three     Three     Twelve     Twelve
Months Months Months Months
Ended Ended Ended Ended
12/31/18 12/31/17 12/31/18 12/31/17

 

 

Average Balance Sheet Data
Assets $ 1,066,216 $ 960,269 $ 1,026,310 $ 947,961
Loans 765,542 695,646 743,352 667,474
Earning assets 1,001,093 916,561 957,454 904,069
Deposits 895,377 862,625 860,825 864,278
Long-term debt and advances 75,339 50,335 75,154 38,057
Interest bearing liabilities 824,300 774,507 799,032 773,247
Stockholders’ equity 89,836 41,397 84,860 37,851
 
 
Performance Ratios
Return on average assets 0.91 % 13.75 % 0.86 % 4.06 %
Return on average equity 10.78 318.85 10.36 101.59

Yield on average earning assets (tax equivalent)

4.66 4.24 4.55 4.18
Cost of interest bearing liabilities 1.46 0.88 1.23 0.83
Net interest margin (tax equivalent) 3.46 3.50 3.53 3.48
Efficiency ratio 70.57 97.03 73.82 84.91
 
Loan Charge-off Data
Loans charged-off $ (133 ) $ (226 ) $ (616 ) $ (901 )
Recoveries   379     201     1,794     936  
Net recoveries (charge-offs) $ 246   $ (25 ) $ 1,178   $ 35  
 
Nonaccrual Loan Activity
Nonaccrual loans at beginning of period $ 2,692 $ 5,769 $ 5,457 $ 9,216
Net principal pay-downs (1,124 ) (488 ) (3,594 ) (4,952 )
Charge-offs (28 ) (137 ) (293 ) (665 )
Loans foreclosed and transferred to OREO (730 ) (270 )
Loans returned to accrual status (77 ) (199 )
Loans placed on nonaccrual during the period   451     313     1,228     2,327  
Nonaccrual loans at end of period $ 1,991   $ 5,457   $ 1,991   $ 5,457  
 
Troubled Debt Restructurings (TDRs)
Accruing $ 910 $ 1,217 $ 910 $ 1,217
Nonaccrual       1,829         1,829  
Total $ 910   $ 3,046   $ 910   $ 3,046  
 
Other Real Estate Owned (OREO) Activity
OREO at beginning of period $ 3,750 $ 6,330 $ 4,409 $ 6,821
Real estate acquired 730 270
Valuation adjustment write-downs (265 ) (1,865 ) (850 ) (1,963 )
Proceeds from sales of properties (55 ) (876 ) (793 )
Gain (loss) on sales, net       (1 )   72     74  
OREO at end of period $ 3,485   $ 4,409   $ 3,485   $ 4,409  
 

 
LIMESTONE BANCORP, INC.
Unaudited Financial Information

(in thousands, except share and per share data)

                     
Three Three Three Three Three
Months Months Months Months Months
Ended Ended Ended Ended Ended
12/31/18 9/30/18 6/30/18 3/31/18 12/31/17
 
Income Statement Data
Interest income $ 11,741 $ 11,120 $ 10,585 $ 10,015 $ 9,717
Interest expense   3,037   2,708     2,211     1,834   1,716  
Net interest income 8,704 8,412 8,374 8,181 8,001
Provision (negative provision) for loan losses     (350 )   (150 )     (800 )
Net interest income after provision 8,704 8,762 8,524 8,181 8,801
 
Service charges on deposit accounts 588 608 591 568 636
Bank card interchange fees 573 411 446 401 403
Bank owned life insurance income 100 100 138 99 103
Gain (loss) on sales and calls of securities, net (6 ) 293
Other   411   390     178     183   207  
Non-interest income 1,672 1,509 1,347 1,251 1,642
 
Salaries & employee benefits 3,923 3,893 3,885 3,788 3,657
Occupancy and equipment 915 896 880 895 919
Professional fees 201 186 222 205 202
Marketing expense 247 259 308 300 218
FDIC insurance 118 118 139 182 357
Data processing expense 280 281 307 324 325
State franchise and deposit tax 272 282 282 282 281
Deposit account related expense 170 213 221 219 250
Other real estate owned expense 278 271 237 82 1,881
Litigation and loan collection expense 83 61 48 53 58
Other   835   770     876     839   924  
Non-interest expense 7,322 7,230 7,405 7,169 9,072
 
Income before income taxes 3,054 3,041 2,466 2,263 1,371
Income tax expense (benefit)   614   604     483     329   (31,899 )
Net income $ 2,440 $ 2,437   $ 1,983   $ 1,934 $ 33,270  
 
Weighted average shares – Basic 7,457,206 7,455,316 7,424,742 6,285,420 6,259,864
Weighted average shares – Diluted 7,457,206 7,455,316 7,424,742 6,285,420 6,259,864
 
Basic earnings per common share $ 0.33 $ 0.33 $ 0.27 $ 0.31 $ 5.31
Diluted earnings per common share $ 0.33 $ 0.33 $ 0.27 $ 0.31 $ 5.31
Cash dividends declared per common share $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
 

 
LIMESTONE BANCORP, INC.
Unaudited Financial Information
(in thousands, except share and per share data)
     
As of
12/31/18     9/30/18     6/30/18     3/31/18     12/31/17
 
Assets
Loans $ 765,244 $ 757,051 $ 749,234 $ 729,432 $ 712,115
Allowance for loan losses   (8,880 )   (8,634 )   (8,580 )   (8,526 )   (8,202 )
Net loans 756,364 748,417 740,654 720,906 703,913
Loans held for sale 70
Securities available for sale 201,192 184,870 178,896 160,812 152,720
Federal funds sold & interest bearing deposits 28,398 31,761 33,534 30,073 25,966
Cash and due from financial institutions 6,963 5,770 7,013 7,610 8,137
Premises and equipment 14,655 17,027 16,813 16,789 16,789
Premises held for sale 1,050
Bank owned life insurance 15,646 15,551 15,456 15,323 15,229
FHLB Stock 7,233 7,233 7,323 7,323 7,323
Other real estate owned 3,485 3,750 4,510 4,385 4,409
Deferred taxes, net 29,282 30,230 30,623 30,997 31,313
Accrued interest receivable and other assets   5,424     5,882     5,699     5,886     4,932  
Total Assets $ 1,069,692   $ 1,050,491   $ 1,040,521   $ 1,000,104   $ 970,801  
 
Liabilities and Equity
Certificates of deposit $ 450,886 $ 457,239 $ 435,454 $ 431,921 $ 424,235
Interest checking 94,269 87,407 88,955 92,048 99,383
Money market 171,924 159,499 150,048 150,974 151,388
Savings   34,534     34,320     35,220     35,984     34,632  
Total interest bearing deposits 751,613 738,465 709,677 710,927 709,638
Demand deposits   142,618     135,561     136,553     135,984     137,386  
Total deposits 894,231 874,026 846,230 846,911 847,024
FHLB advances 46,549 51,591 71,630 26,752 11,797
Junior subordinated debentures 21,000 21,000 21,000 23,025 23,250
Senior debt 10,000 10,000 10,000 10,000 10,000
Accrued interest payable and other liabilities   5,815     5,662     5,262     5,186     6,057  
Total liabilities 977,595 962,279 954,122 911,874 898,128
 
Preferred stockholders’ equity 2,771 2,771
Common stockholders’ equity   92,097     88,212     86,399     85,459     69,902  
Total stockholders’ equity   92,097     88,212     86,399     88,230     72,673  
Total Liabilities and Stockholders’ Equity $ 1,069,692   $ 1,050,491   $ 1,040,521   $ 1,000,104   $ 970,801  
 
Ending shares outstanding 7,462,720 7,456,590 7,454,993 7,409,864 6,259,864
Book value per common share $ 12.34 $ 11.83 $ 11.59 $ 11.53 $ 11.17
Tangible book value per common share 12.34 11.83 11.59 11.53 11.17
 

 
LIMESTONE BANCORP, INC.
Unaudited Financial Information

(in thousands, except share and per share data)

 
      As of
12/31/18     9/30/18     6/30/18     3/31/18     12/31/17
Quarterly Performance Ratios
Return on average assets 0.91 % 0.93 % 0.79 % 0.79 % 13.75 %
Return on average equity 10.78 11.05 8.97 10.71 318.85
Yield on average earning assets (tax equivalent) 4.66 4.56 4.51 4.45 4.24
Cost of interest bearing liabilities 1.46 1.32 1.13 0.96 0.88
Net interest margin (tax equivalent) 3.46 3.45 3.57 3.63 3.50
Efficiency ratio 70.57 72.88 76.13 76.01 97.03
 
Asset Quality Data
Nonaccrual loans $ 1,991 $ 2,692 $ 3,170 $ 4,370 $ 5,457
Troubled debt restructurings on accrual 910 910 916 922 1,217
Loan 90 days or more past due still on accrual                   1  
Total non-performing loans 2,901 3,602 4,086 5,292 6,675
Real estate acquired through foreclosures 3,485 3,750 4,510 4,385 4,409
Other repossessed assets                    
Total non-performing assets $ 6,386   $ 7,352   $ 8,596   $ 9,677   $ 11,084  
 
Non-performing loans to total loans 0.38 % 0.48 % 0.55 % 0.73 % 0.94 %
Non-performing assets to total assets 0.60 0.70 0.83 0.97 1.14
Allowance for loan losses to non-performing loans 306.10 239.70 209.99 161.11 122.88
 
Allowance for loan losses to total loans 1.16 % 1.14 % 1.15 % 1.17 % 1.15 %
 
Loans by Risk Category
Pass $ 745,604 $ 736,193 $ 720,446 $ 695,507 $ 673,033
Watch 13,164 12,314 19,091 17,938 25,715
Special Mention 113 114 115 162 164
Substandard 6,363 8,430 9,582 15,825 13,203
Doubtful                    
Total $ 765,244 $ 757,051 $ 749,234 $ 729,432 $ 712,115
 
Loans by Past Due Status
Past due loans:
30 – 59 days $ 1,593 $ 1,492 $ 1,134 $ 6,402 $ 1,478
60 – 89 days 331 929 538 472 171
90 days or more 1
Nonaccrual loans   1,991     2,692     3,170     4,370     5,457  
Total past due and nonaccrual loans $ 3,915 $ 5,113 $ 4,842 $ 11,244 $ 7,107
 
Risk-based Capital Ratios - Company
Tier I leverage ratio 9.00 % 8.91 % 8.70 % 9.18 % 7.11 %
Common equity Tier I risk-based capital ratio 9.44 9.21 8.92 8.98 6.92
Tier I risk-based capital ratio 11.08 10.83 10.41 11.03 8.44
Total risk-based capital ratio 12.23 12.07 11.76 12.56 10.55
 
Risk-based Capital Ratios – Limestone Bank
Tier I leverage ratio 9.60 % 9.51 % 9.37 % 9.31 % 8.70 %
Common equity Tier I risk-based capital ratio 11.83 11.56 11.23 11.18 10.35
Tier I risk-based capital ratio 11.83 11.56 11.23 11.18 10.35
Total risk-based capital ratio 12.88 12.60 12.26 12.43 11.61
 
FTE employees 214 215 217 214 217
 

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.

     
Three Months Ended
12/31/18     9/30/18     6/30/18     3/31/18     12/31/17
Efficiency Ratio (in thousands)
 
Net interest income $ 8,704 $ 8,412 $ 8,374 $ 8,181 $ 8,001
Non-interest income 1,672 1,509 1,347 1,251 1,642
Less: Net gain (loss) on securities           (6 )       293  
Revenue used for efficiency ratio   10,376     9,921     9,727     9,432     9,350  
Non-interest expense 7,322 7,230 7,405 7,169 9,072
 
Efficiency ratio 70.57 % 72.88 % 76.13 % 76.01 % 97.03 %
 
     
Twelve Months Ended
12/31/18     12/31/17

Efficiency Ratio

(in thousands)
 
Net interest income $ 33,671 $ 31,117
Non-interest income 5,779 5,404
Less: Net gain (loss) on securities   (6 )   288  
Revenue used for efficiency ratio   39,456     36,233  
Non-interest expense 29,126 30,767
 
Efficiency ratio 73.82 % 84.91 %

John T. Taylor
Chief Executive Officer
(502) 499-4800

Source: Limestone Bancorp, Inc.