Limestone Bancorp (LMST) 8-K Porter Bancorp, Inc. Announces Third Quarter 2010 Results

Exhibit 99.1

Porter Bancorp, Inc. Announces Third Quarter 2010 Results

LOUISVILLE, Ky.--(BUSINESS WIRE)--October 26, 2010--Porter Bancorp, Inc. (NASDAQ: PBIB), parent company of PBI Bank, with 18 full-service banking offices in Kentucky, today reported results for the third quarter and nine months ended September 30, 2010.

The Company reported net income of $2.4 million for the third quarter of 2010 compared with net income of $4.5 million for the third quarter of 2009. Net income available to common shareholders was $1.8 million, or $0.16 per fully diluted common share, for the third quarter of 2010, compared with net income of $4.1 million, or $0.46 per fully diluted common share, for the third quarter of 2009. Net income for the nine months ended September 30, 2010 was $4.5 million compared with $10.8 million for the first nine months of 2009. Net income available to common shareholders for the nine months ended September 30, 2010 was $3.0 million, or $0.31 per fully diluted common share, compared with $9.4 million, or $1.08 per fully diluted common share, for comparable period of 2009.

“Porter Bancorp reported growth in net interest income, net interest margin and non-interest income compared with the third quarter of last year,” stated Maria L. Bouvette, President and CEO of Porter Bancorp. “The growth in our core business remains below our historical returns due to the continued weakness in the economy and the associated higher costs of non-performing loans, foreclosed properties and provision for loan losses.

“Our focus remains on strengthening our balance sheet by reducing problem loans and building our capital base,” noted Ms. Bouvette. “Total non-performing loans are down 46% since December 31, 2009, to $45.8 million, the lowest level in the past year and our third consecutive quarterly decline in non-performing loans. We continue to move non-performing loans through the system of collection or foreclosure to minimize our potential losses, which is reflected in the higher balance of OREO since last year. We strengthened our allowance for loan losses to $29.4 million or 2.21% of total loans.

“We also strengthened our capital position this year with capital raises totaling $32 million. At the end of the third quarter, our total risk-based capital ratio rose to 16.35%, well above the 10.0% requirement for a well-capitalized institution, the highest regulatory rating. We believe the new capital will provide a solid base to support our continued growth as the economy recovers,” continued Ms. Bouvette.

Third Quarter Results

• Net income was $2.4 million for the three months ended September 30, 2010, compared with $4.5 million for the third quarter of 2009. Earnings per fully diluted common share were $0.16 in the third quarter of 2010 compared with $0.46 per share in the third quarter of 2009.
• Net interest margin increased 14 basis points to 3.73% in the third quarter of 2010 compared with 3.59% in the third quarter of 2009. The increase in margin since last year benefited from a lower average cost of funds.
• We recorded a gain on sale of securities totaling $2.2 million during the third quarter. We made a strategic decision to liquidate our portfolio of private label mortgage backed securities during the quarter which totaled approximately $23 million.
• Average loans decreased 2.5% to $1.34 billion in the third quarter of 2010 compared with $1.37 billion in the third quarter of 2009. Net loans decreased 4.8% to $1.30 billion in the third quarter of 2010, compared with $1.37 billion at September 30, 2009.
• Deposits increased 0.8% to $1.39 billion compared with $1.38 billion at September 30, 2009.
• Total assets increased 3.0% to $1.78 billion compared with $1.73 billion at September 30, 2009.
• Efficiency ratio was 60.9% in the third quarter of 2010, compared with 47.1% in the prior year third quarter. Our efficiency ratio increased due to an increase in non-interest expense.
• Non-performing loans decreased $2.9 million, or 5.9%, during the third quarter to $45.8 million at September 30, 2010, compared with $48.7 million at June 30, 2010. The decrease was primarily attributable to non-performing loans moving through the collection, foreclosure and disposition process.
• Non-performing assets increased $2.3 million, or 2.0%, during the third quarter to $119.5 million at September 30, 2010. The increase was primarily attributable to non-performing loans moving through the collection, foreclosure and disposition process.
• Shareholders’ equity rose to $202.6 million at the end of the third quarter. The increase was primarily attributable to an additional $5 million capital raise that closed during the third quarter. The proceeds from the offering and third quarter net income resulted in improved capital ratios, including 11.71% tier 1 leverage ratio and 14.44% tier 1 risk-based capital ratio as of September 30, 2010.

Net Interest Income

Net interest income increased 1.4% to $14.6 million for the three months ended September 30, 2010, an increase of $202,000, compared with $14.4 million for the same period in 2009. Net interest income rose 11.0% to $43.5 million for the nine months ended September 30, 2010, an increase of $4.3 million, compared with $39.2 million for the same period in 2009. The increase in net interest income was primarily attributable to an increase in net interest margin compared with 2009.

Net interest margin increased 14 basis points to 3.73% in the third quarter of 2010 from our margin of 3.59% in the prior year third quarter due primarily to lower cost of funds. The yield on earning assets declined 49 basis points from the 2009 third quarter while rates paid on interest-bearing liabilities declined 74 basis points. Net interest margin increased 2 basis points to 3.73% from our margin of 3.71% in the second quarter of 2010 due primarily to a lower average cost of funds. Both yield on earning assets and cost of interest-bearing liabilities decreased 12 basis points from the second quarter of 2010.

“Our net interest margin rose to its highest level since the first quarter of 2007, highlighting our focus on improving our core earnings,” continued Ms. Bouvette.

Average earning assets declined 2.3% to $1.56 billion for the three months ended September 30, 2010, compared with $1.60 billion for the three months ended September 30, 2009. The decline in average earning assets was due primarily to lower average loans resulting from a slowdown in new loan originations and loans moved to other real estate owned (OREO).

Average deposits increased 2.1% to $1.40 billion, up from $1.37 billion for the three months ended September 30, 2009.

Non-Interest Income

Non-interest income for the third quarter of 2010 increased 93.1%, or $1.9 million, to $3.9 million compared with $2.0 million in the third quarter of 2009. The increase in non-interest income was due primarily to $2.2 million in net gains on sales of securities.

Non-Interest Expense

Non-interest expense for the third quarter of 2010 increased from the prior year’s third quarter due primarily to increased OREO expense. FDIC insurance expense increased 36.6% to $855,000 in the third quarter of 2010 compared to $626,000 in the third quarter of 2009. State franchise tax expense increased 20.7% to $543,000 in the third quarter of 2010 compared with $450,000 in the third quarter of 2009. OREO expense increased to $2.2 million in the third quarter of 2010 compared with $353,000 in the third quarter of 2009, due primarily to increased losses on sales of OREO, OREO write-downs, and OREO maintenance costs.

Balance Sheet Review

Total assets rose 3.0%, or $51.4 million, to $1.78 billion at September 30, 2010, from $1.73 billion at September 30, 2009. The Company’s loan portfolio decreased 4.2%, or $58.7 million, to $1.33 billion from $1.39 billion at September 30, 2009, due primarily to efforts to move troubled loans through the collection, foreclosure, and disposition process. Deposits at September 30, 2010 increased 0.8% to $1.39 billion from $1.38 billion at September 30, 2009, due primarily to growth in interest checking and demand deposits.

Asset Quality

Non-performing loans decreased to $45.8 million, or 3.45% of total loans, at September 30, 2010, compared with $48.7 million, or 3.64% of total loans, at June 30, 2010. Non-performing loans were up $19.6 million from $26.3 million, or 1.89% of total loans, at September 30, 2009, due primarily to troubled loans working their way through the collection, foreclosure and disposition process. As a result, foreclosed properties at September 30, 2010, rose to $73.6 million compared with $68.5 million at June 30, 2010, and $12.9 million at September 30, 2009. Our ratio of non-performing assets to total assets increased slightly during the quarter to 6.71% at September 30, 2010, compared with 6.66% at June 30, 2010.

Our loan loss reserve as a percentage of total loans increased to 2.21% at September 30, 2010, compared with 1.58% at September 30, 2009. Net loan charge-offs for the third quarter of 2010 were $2.4 million, or 0.18% of average loans for the quarter.

Our provision for loan losses was $5.0 million in the third quarter of 2010, compared with $6.6 million in the second quarter of 2010, and $2.0 million in the prior year third quarter.

“We believe Porter Bancorp is positioned well to grow our earnings as the economy improves,” continued Ms. Bouvette. “We have strengthened our capital position, improved our margins and been proactive in aligning our loan portfolio values with the current economic conditions in our markets. We have also increased our reserve for loan losses to the highest level in years and believe these steps will be an important part in restoring our earnings momentum in the future.”

PBIB-G PBIB-F

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, 2010 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
	9/30/10		6/30/10			9/30/09		9/30/10			9/30/09
Income Statement Data
Interest income	$	21,340	$	22,126		$	23,802	$	66,092		$	70,949
Interest expense		6,764		7,399			9,428		22,612			31,795
Net interest income		14,576		14,727			14,374		43,480			39,154
Provision for loan losses		5,000		6,600			2,000		14,600			5,200
Net interest income after provision		9,576		8,127			12,374		28,880			33,954
Service charges on deposit accounts		757		793			843		2,270			2,319
Income from fiduciary activities		226		273			227		751			645
Net gain on sales of loans originated for sale		135		184			82		410			323
Net gain on sales of securities		2,175		24			321		2,256			322
Other than temporary impairment on securities		–		(465	)		–		(465	)		–
Other		638		688			563		1,898			1,808
Non-interest income		3,931		1,497			2,036		7,120			5,417
Salaries & employee benefits		3,849		3,931			3,799		11,727			11,490
Occupancy and equipment		1,070		1,015			993		3,107			2,972
FDIC insurance		855		706			626		2,266			1,588
FDIC special insurance assessment		–		–			–		–			781
Franchise tax		543		543			450		1,629			1,350
Other real estate owned expense		2,163		3,854			353		6,395			706
Professional fees		239		292			175		797			606
Postage and delivery		183		198			193		569			561
Communications expense		179		173			183		538			568
Advertising		104		77			121		277			404
Other		764		724			691		2,206			2,062
Non-interest expense		9,949		11,513			7,584		29,511			23,088
Income (loss) before income taxes		3,558		(1,889	)		6,826		6,489			16,283
Income tax expense (benefit)		1,137		(758	)		2,290		1,943			5,441
Net income (loss)		2,421		(1,131	)		4,536		4,546			10,842
Less:
Dividends on preferred stock		498		437			437		1,373			1,312
Accretion on preferred stock		44		44			44		132			132
Earnings allocated to participating securities		88		2			–		81			–
Net income (loss) available to common	$	1,791	$	(1,614	)	$	4,055	$	2,960		$	9,398
Weighted average shares – Basic		10,496,817		8,661,917			8,756,289		9,297,353			8,740,314
Weighted average shares – Diluted		11,028,925		8,664,412			8,756,289		9,506,286			8,740,314
Basic earnings (loss) per common share	$	0.17	$	(0.19	)	$	0.46	$	0.32		$	1.08
Diluted earnings (loss) per common share	$	0.16	$	(0.19	)	$	0.46	$	0.31		$	1.08
Cash dividends declared per common share	$	0.10	$	0.20		$	0.20	$	0.50		$	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
	9/30/10			6/30/10				9/30/09			9/30/10			9/30/09
Average Balance Sheet Data
Assets	$	1,704,043		$	1,737,685			$	1,674,703		$	1,758,168		$	1,701,967
Loans		1,335,357			1,356,883				1,368,970			1,365,322			1,363,150
Earning assets		1,563,599			1,605,387				1,599,943			1,636,839			1,626,887
Deposits		1,402,842			1,455,775				1,373,626			1,467,506			1,367,224
Long-term debt and advances		81,441			84,809				112,425			88,783			148,393
Interest bearing liabilities		1,393,425			1,448,795				1,401,791			1,466,336			1,426,975
Stockholders’ equity		201,126			179,205				168,561			183,478			167,172
Performance Ratios
Return on average assets		0.56	%		(0.26	)	%		1.07	%		0.35	%		0.85	%
Return on average equity		4.78			(2.53	)			10.68			3.31			8.67
Yield on average earning assets (tax equivalent)		5.44			5.56				5.93			5.43			5.86
Cost of interest bearing liabilities		1.93			2.05				2.67			2.06			2.98
Net interest margin (tax equivalent)		3.73			3.71				3.59			3.58			3.25
Efficiency ratio		60.92			69.08				47.14			60.46			52.18
Loan Charge-off Data
Loans charged-off	$	(2,514	)	$	(6,403	)		$	(829	)	$	(11,823	)	$	(3,112	)
Recoveries		70			96				47			223			218
Net charge-offs	$	(2,444	)	$	(6,307	)		$	(782	)	$	(11,600	)	$	(2,894	)

PORTER BANCORP, INC. AND SUBSIDIARY
Unaudited Financial Information
(in thousands, except share and per share data)
		As of		As of			As of			As of
		9/30/10		6/30/10			12/31/09			9/30/09
Assets
Loans	$	1,328,695		$	1,337,508		$	1,413,252		$	1,387,359
Loan loss reserve		(29,392	)		(26,836	)		(26,392	)		(21,958	)
Net loans		1,299,303			1,310,672			1,386,860			1,365,401
Securities available for sale		150,569			175,738			168,721			175,160
Federal funds sold & interest bearing deposits		120,591			103,139			157,091			74,232
Cash and due from financial institutions		46,279			12,263			15,082			17,610
Premises and equipment		22,708			22,954			23,610			23,756
Other real estate owned		73,645			68,450			14,548			12,934
Goodwill		23,794			23,794			23,794			23,794
Accrued interest receivable and other assets		43,290			43,647			45,384			35,875
Total Assets	$	1,780,179		$	1,760,657		$	1,835,090		$	1,728,762
Liabilities and Equity
Certificates of deposit	$	1,093,032		$	1,113,564		$	1,238,189		$	1,099,402
Interest checking		80,153			78,429			77,108			72,472
Money market		78,232			81,637			84,160			80,471
Savings		35,222			36,312			33,376			33,450
Total interest bearing deposits		1,286,639			1,309,942			1,432,833			1,285,795
Demand deposits		103,424			104,384			97,263			92,861
Total deposits		1,390,063			1,414,326			1,530,096			1,378,656
Federal funds purchased & repurchase agreements		34,083			11,810			11,517			11,296
FHLB advances		110,763			96,695			82,980			125,284
Junior subordinated debentures		33,775			34,000			34,000			34,000
Accrued interest payable and other liabilities		8,922			7,601			7,163			8,411
Total liabilities		1,577,606			1,564,432			1,665,756			1,557,647
Stockholders’ equity		202,573			196,225			169,334			171,115
Total Liabilities and Stockholders’ Equity	$	1,780,179		$	1,760,657		$	1,835,090		$	1,728,762
Ending shares outstanding		11,281,691			10,580,494			8,756,440			8,756,057
Book value per common share	$	14.56		$	14.59		$	15.34		$	15.55
Tangible book value per common share		11.67			11.53			12.01			12.21
Asset Quality Data
Loan 90 days or more past due still on accrual	$	7,048		$	10,497		$	5,968		$	9,896
Non-accrual loans		38,784			38,199			78,888			16,369
Total non-performing loans		45,832			48,696			84,856			26,265
Real estate acquired through foreclosures		73,645			68,450			14,548			12,934
Other repossessed assets		53			51			80			77
Total non-performing assets	$	119,530		$	117,197		$	99,484		$	39,276
Non-performing loans to total loans		3.45	%		3.64	%		6.00	%		1.89	%
Non-performing assets to total assets		6.71			6.66			5.42			2.27
Allowance for loan losses to non-performing loans		64.13			55.11			31.10			83.60
Allowance for loan losses to total loans		2.21			2.01			1.87			1.58
Risk-based Capital Ratios
Tier I leverage ratio		11.71	%		11.11	%		9.59	%		10.13	%
Tier I risk-based capital ratio		14.44			14.00			11.93			11.90
Total risk-based capital ratio		16.35			15.93			13.83			13.80
FTE employees		288			281			278			281

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