LMST Limestone Bancorp Inc

Limestone Bancorp, Inc. (NASDAQ: LMST) (“the Company”), parent company of Limestone Bank (“the Bank”), today reported unaudited results for the first quarter of 2019. Net income for the first quarter of 2019 was $2.8 million, or $0.38 per basic and diluted common share, compared to net income of $1.9 million, or $0.31 per basic and diluted share, for the first quarter of 2018.

Net income before taxes and income tax expense was $3.0 million and $123,000, respectively for the first quarter of 2019, compared with $2.3 million and $329,000, respectively for the first quarter of 2018. Income tax expense for the first quarter of 2019 benefitted $341,000, or $0.05 per basic and diluted common share, from the establishment of a net deferred tax asset related to a change in Kentucky tax law enacted during the first quarter of 2019. The new law eliminates the Kentucky bank franchise tax, which is assessed at a rate of 1.1% of average capital, and implements a state income tax for the Bank at a statutory rate of 5%. The new Kentucky income tax will go into effect on January 1, 2021.

Net Interest Income – Net interest income was $9.0 million for the first quarter of 2019, compared to $8.7 million for the fourth quarter of 2018, and $8.2 million for the first quarter of 2018. Average loans increased to $766.5 million for the first quarter of 2019, compared to $765.5 million for the fourth quarter of 2018, and $724.2 million for the first quarter of 2018. Net interest margin was 3.61% for the first quarter of 2019, 3.46% for the fourth quarter of 2018, and 3.63% for the first quarter of 2018.

The yield on earning assets increased to 4.90% in the first quarter of 2019, compared to 4.66% in the fourth quarter of 2018, and 4.45% in the first quarter of 2018. Loan fee income can meaningfully impact net interest income, loan yields, and net interest margin. The amount of loan fee income included in total interest income was $546,000, $166,000, and $97,000 for the quarters ended March 31, 2019, December 31, 2018, and March 31, 2018, respectively. This represents 22 basis points, six basis points, and five basis points of yield on earning assets and net interest margin for the quarters ended March 31, 2019, December 31, 2018, and March 31, 2018, respectively. The cost of interest bearing liabilities was 1.57% for the first quarter of 2019, compared to 1.46% in the fourth quarter of 2018, and 0.96% in the first quarter of 2018.

Provision and Allowance for Loan Losses – The allowance for loan losses to total loans was 1.10% at March 31, 2019, compared to 1.16% at December 31, 2018, and 1.17% at March 31, 2018. Net loan charge-offs were $194,000 for the first quarter of 2019, compared to net loan recoveries of $324,000 for the first quarter of 2018. Based upon historically strong trends in asset quality and management’s assessment of risk in the loan portfolio, no provision for loan losses was recorded in the first quarter of 2019 or 2018.

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 $6.2 million, or 0.57% of total assets at March 31, 2019, compared with $6.4 million, or 0.60% of total assets at December 31, 2018, and $9.7 million, or 0.97% of total assets at March 31, 2018. Non-performing loans decreased to $2.8 million, or 0.36% of total loans at March 31, 2019, compared with $2.9 million, or 0.38% of total loans at December 31, 2018, and from $5.3 million, or 0.73% of total loans at March 31, 2018.

OREO at March 31, 2019, decreased to $3.3 million, compared with $3.5 million at December 31, 2018, and $4.4 million at March 31, 2018. Fair value write-downs arising from changing marketing strategies totaled $150,000 for the first quarter of 2019, compared to $60,000 for the first quarter of 2018.

Non-interest Income and Expense – Non-interest income was $1.3 million for the first quarter of 2019 and the first quarter of 2018. Non-interest expense increased $112,000, or 1.6% to $7.3 million for the first quarter of 2019, compared with $7.2 million for the first quarter of 2018. The increase from the first quarter of 2019 was primarily due to an increase in salaries and employee benefits of $127,000.

Capital – At March 31, 2019, the Bank’s Tier 1 leverage ratio was 9.88%, compared with 9.60% at December 31, 2018, and its Total risk-based capital ratio was 13.01% at March 31, 2019, compared with 12.88% at December 31, 2018. At March 31, 2019, the Company’s Tier 1 leverage ratio was 9.30%, compared with 9.00% at December 31, 2018, and its Total risk-based capital ratio was 12.32%, compared with 12.23% at December 31, 2018. At March 31, 2019, the Company’s Common equity Tier 1 risk-based capital ratio was 9.57%, compared with 9.44% at December 31, 2018.

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, 2018.

Additional Information

Unaudited supplemental financial information for the first quarter ending March 31, 2019, follows.

     

LIMESTONE BANCORP, INC.Unaudited Financial Information(in thousands, except share and per share data)

          Three Months Ended 3/31/19     3/31/18

 

 

Income Statement Data Interest income $ 12,186 $ 10,015 Interest expense   3,227   1,834 Net interest income 8,959 8,181 Provision (negative provision) for loan losses   —   — Net interest income after provision 8,959 8,181   Service charges on deposit accounts 496 568 Bank card interchange fees 508 401 Bank owned life insurance income 99 99 Gain (loss) on sales and calls of securities, net — — Other   181   183 Non-interest income 1,284 1,251   Salaries & employee benefits 3,915 3,788 Occupancy and equipment 898 895 Professional fees 165 205 Marketing expense 227 300 FDIC insurance 108 182 Data processing expense 313 324 State franchise and deposit tax 315 282 Deposit account related expense 281 219 Other real estate owned expense 166 82 Litigation and loan collection expense 46 53 Other   847   839 Non-interest expense 7,281 7,169   Income before income taxes 2,962 2,263 Income tax expense   123   329 Net income 2,839 1,934

 

 

  Weighted average shares – Basic 7,469,912 6,285,420 Weighted average shares – Diluted 7,469,912 6,285,420   Basic earnings per common share $ 0.38 $ 0.31 Diluted earnings per common share $ 0.38 $ 0.31 Cash dividends declared per common share $ 0.00 $ 0.00

     

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 3/31/19 12/31/18 9/30/18 6/30/18 3/31/18   Income Statement Data Interest income $ 12,186 $ 11,741 $ 11,120 $ 10,585 $ 10,015 Interest expense   3,227   3,037   2,708   2,211   1,834 Net interest income 8,959 8,704 8,412 8,374 8,181 Provision (negative provision) for loan losses   —   —   (350 )   (150 )   — Net interest income after provision 8,959 8,704 8,762 8,524 8,181   Service charges on deposit accounts 496 588 608 591 568 Bank card interchange fees 508 573 411 446 401 Bank owned life insurance income 99 100 100 138 99 Gain (loss) on sales and calls of securities, net — — — (6 ) — Other   181   411   390   178   183 Non-interest income 1,284 1,672 1,509 1,347 1,251   Salaries & employee benefits 3,915 3,923 3,893 3,885 3,788 Occupancy and equipment 898 915 896 880 895 Professional fees 165 201 186 222 205 Marketing expense 227 247 259 308 300 FDIC insurance 108 118 118 139 182 Data processing expense 313 280 281 307 324 State franchise and deposit tax 315 272 282 282 282 Deposit account related expense 281 170 213 221 219 Other real estate owned expense 166 278 271 237 82 Litigation and loan collection expense 46 83 61 48 53 Other   847   835   770   876   839 Non-interest expense 7,281 7,322 7,230 7,405 7,169   Income before income taxes 2,962 3,054 3,041 2,466 2,263 Income tax expense   123   614   604   483   329 Net income $ 2,839 $ 2,440 $ 2,437 $ 1,983 $ 1,934   Weighted average shares – Basic 7,469,912 7,457,206 7,455,316 7,424,742 6,285,420 Weighted average shares – Diluted 7,469,912 7,457,206 7,455,316 7,424,742 6,285,420   Basic earnings per common share $ 0.38 $ 0.33 $ 0.33 $ 0.27 $ 0.31 Diluted earnings per common share $ 0.38 $ 0.33 $ 0.33 $ 0.27 $ 0.31 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 3/31/19     12/31/18     9/30/18     6/30/18     3/31/18   Assets Loans $ 786,585 $ 765,244 $ 757,051 $ 749,234 $ 729,432 Allowance for loan losses   (8,686 )   (8,880 )   (8,634 )   (8,580 )   (8,526 ) Net loans 777,899 756,364 748,417 740,654 720,906 Securities available for sale 206,411 201,192 184,870 178,896 160,812 Federal funds sold & interest bearing deposits 24,029 28,398 31,761 33,534 30,073 Cash and due from financial institutions 6,461 6,963 5,770 7,013 7,610 Premises and equipment 14,926 14,655 17,027 16,813 16,789 Premises held for sale 1,050 1,050 — — — Bank owned life insurance 15,739 15,646 15,551 15,456 15,323 FHLB Stock 6,813 7,233 7,233 7,323 7,323 Other real estate owned 3,335 3,485 3,750 4,510 4,385 Deferred taxes, net 28,568 29,282 30,230 30,623 30,997 Accrued interest receivable and other assets   6,092     5,424     5,882     5,699     5,886   Total Assets $ 1,091,323   $ 1,069,692   $ 1,050,491   $ 1,040,521   $ 1,000,104     Liabilities and Equity Certificates of deposit $ 465,369 $ 450,886 $ 457,239 $ 435,454 $ 431,921 Interest checking 96,537 94,269 87,407 88,955 92,048 Money market 166,430 171,924 159,499 150,048 150,974 Savings   34,066     34,534     34,320     35,220     35,984   Total interest bearing deposits 762,402 751,613 738,465 709,677 710,927 Demand deposits   146,440     142,618     135,561     136,553     135,984   Total deposits 908,842 894,231 874,026 846,230 846,911 FHLB advances 51,511 46,549 51,591 71,630 26,752 Junior subordinated debentures 21,000 21,000 21,000 21,000 23,025 Senior debt 10,000 10,000 10,000 10,000 10,000 Accrued interest payable and other liabilities   3,651     5,815     5,662     5,262     5,186   Total liabilities 995,004 977,595 962,279 954,122 911,874   Preferred stockholders’ equity — — — — 2,771 Common stockholders’ equity   96,319     92,097     88,212     86,399     85,459   Total stockholders’ equity   96,319     92,097     88,212     86,399     88,230   Total Liabilities and Stockholders’ Equity $ 1,091,323   $ 1,069,692   $ 1,050,491   $ 1,040,521   $ 1,000,104     Ending shares outstanding 7,460,614 7,462,720 7,456,590 7,454,993 7,409,864 Book value per common share $ 12.91 $ 12.34 $ 11.83 $ 11.59 $ 11.53 Tangible book value per common share 12.91 12.34 11.83 11.59 11.53

     

LIMESTONE BANCORP, INC.Unaudited Financial Information(in thousands, except share and per share data)

          As of 3/31/19     12/31/18     9/30/18     6/30/18     3/31/18 Average Balance Sheet Data Assets $ 1,075,553 $ 1,066,216 $ 1,037,636 $ 1,013,008 $ 987,390 Loans 766,505 765,542 748,444 734,709 724,203 Earning assets 1,009,948 1,001,093 968,876 943,023 915,762 Deposits 900,829 895,377 869,707 842,757 834,695 Long-term debt and advances 76,524 75,339 74,994 76,209 74,063 Interest bearing liabilities 834,637 824,300 810,917 783,123 777,140 Stockholders’ equity 93,491 89,836 87,486 88,701 73,205   Quarterly Performance Ratios Return on average assets 1.07 % 0.91 % 0.93 % 0.79 % 0.79 % Return on average equity 12.32 10.78 11.05 8.97 10.71 Yield on average earning assets (tax equivalent) 4.90 4.66 4.56 4.51 4.45 Cost of interest bearing liabilities 1.57 1.46 1.32 1.13 0.96 Net interest margin (tax equivalent) 3.61 3.46 3.45 3.57 3.63 Efficiency ratio 71.08 70.57 72.88 76.13 76.01   Asset Quality Data Nonaccrual loans $ 1,921 $ 1,991 $ 2,692 $ 3,170 $ 4,370 Troubled debt restructurings on accrual 910 910 910 916 922 Loan 90 days or more past due still on accrual   —     —     —     —     —   Total non-performing loans 2,831 2,901 3,602 4,086 5,292 Real estate acquired through foreclosures 3,335 3,485 3,750 4,510 4,385 Other repossessed assets   —     —     —     —     —   Total non-performing assets $ 6,166   $ 6,386   $ 7,352   $ 8,596   $ 9,677     Non-performing loans to total loans 0.36 % 0.38 % 0.48 % 0.55 % 0.73 % Non-performing assets to total assets 0.57 0.60 0.70 0.83 0.97 Allowance for loan losses to non-performing loans 306.82 306.10 239.70 209.99 161.11   Allowance for loan losses to total loans 1.10 % 1.16 % 1.14 % 1.15 % 1.17 %   Loan Charge-off Data Loans charged off $ (278 ) $ (133 ) $ (143 ) $ (293 ) $ (47 ) Recoveries   84     379     547     497     371   Net recoveries (charge-offs) $ (194 ) $ 246 $ 404 $ 204 $ 324   Loans by Risk Category Pass $ 756,493 $ 745,604 $ 736,193 $ 720,446 $ 695,507 Watch 17,412 13,164 12,314 19,091 17,938 Special Mention — 113 114 115 162 Substandard 12,680 6,363 8,430 9,582 15,825 Doubtful   —     —     —     —     —   Total $ 786,585 $ 765,244 $ 757,051 $ 749,234 $ 729,432   Loans by Past Due Status Past due loans: 30 – 59 days $ 2,001 $ 1,593 $ 1,492 $ 1,134 $ 6,402 60 – 89 days 240 331 929 538 472 90 days or more — — — — — Nonaccrual loans   1,921     1,991     2,692     3,170     4,370   Total past due and nonaccrual loans $ 4,162 $ 3,915 $ 5,113 $ 4,842 $ 11,244

     

LIMESTONE BANCORP, INC.Unaudited Financial Information(in thousands, except share and per share data)

      As of 3/31/19   12/31/18   9/30/18   6/30/18   3/31/18 Risk-based Capital Ratios - Company Tier I leverage ratio 9.30 % 9.00 % 8.91 % 8.70 % 9.18 % Common equity Tier I risk-based capital ratio 9.57 9.44 9.21 8.92 8.98 Tier I risk-based capital ratio 11.29 11.08 10.83 10.41 11.03 Total risk-based capital ratio 12.32 12.23 12.07 11.76 12.56   Risk-based Capital Ratios – Limestone Bank Tier I leverage ratio 9.88 % 9.60 %

9.51

%

9.37 % 9.31 % Common equity Tier I risk-based capital ratio 12.01 11.83 11.56 11.23 11.18 Tier I risk-based capital ratio 12.01 11.83 11.56 11.23 11.18 Total risk-based capital ratio 13.01 12.88 12.60 12.26 12.43   FTE employees 207 214 215 217 214      

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 3/31/19 12/31/18 9/30/18 6/30/18 3/31/18 Efficiency Ratio (in thousands)   Net interest income $ 8,959 $ 8,704 $ 8,412 $ 8,374 $ 8,181 Non-interest income 1,284 1,672 1,509 1,347 1,251 Less: Net gain (loss) on securities   —     —     —     (6 )   —   Revenue used for efficiency ratio   10,243     10,376     9,921     9,727     9,432   Non-interest expense 7,281 7,322 7,230 7,405 7,169   Efficiency ratio 71.08 % 70.57 % 72.88 % 76.13 % 76.01 %      

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John T. TaylorChief Executive Officer(502) 499-4800