Limestone Bancorp (LMST) 8-K Porter Bancorp, Inc. Announces First Quarter 2011 Results

Exhibit 99.1

Porter Bancorp, Inc. Announces First Quarter 2011 Results

LOUISVILLE, Ky.--(BUSINESS WIRE)--May 2, 2011--Porter Bancorp, Inc. (NASDAQ: PBIB), parent company of PBI Bank, with 18 full-service banking offices in Kentucky, today reported results for the first quarter of 2011.

The Company reported net income available to common shareholders of $305,000, or $0.03 per diluted share, for the first quarter of 2011, compared with $2.7 million, or $0.30 per diluted share, for the first quarter of 2010.

“Porter Bancorp reported growth in net interest margin and non-interest income compared with the first quarter of last year,” stated Maria L. Bouvette, President and CEO of Porter Bancorp. “Our first quarter earnings were below historical levels due to higher costs related to non-performing loans, foreclosed properties and provision for loan losses. These factors continue to be a drag on our near-term earnings due to the continued weakness in our construction and land development portfolio.

“We remain focused on improving loan quality and reducing non-performing assets. We made solid progress in reducing our exposure to higher risk construction and land development loans since last year. Our construction and land development loans are down 29.1% since the first quarter of 2010 and represented only 13.8% of our loan portfolio at March 31, 2011. We also continue to be diligent in moving non-performing loans through the system of collection or foreclosure to minimize our potential losses. We believe these efforts will be key drivers in improving Porter Bancorp’s future profitability,” continued Ms. Bouvette.

First Quarter Results

• Net income declined to $799,000 for the three months ended March 31, 2011, compared with $3.3 million for the first quarter of 2010. Earnings per diluted common share were $0.03 compared with $0.30 in the first quarter of 2010.
• Net interest margin increased 22 basis points to 3.54% in the first quarter of 2011 compared with 3.32% in the first quarter of 2010. The increase in margin since last year benefited from a lower average cost of funds.
• Average loans decreased 8.1% to $1.29 billion in the first quarter of 2011 compared with $1.40 billion in the first quarter of 2010. Net loans decreased 6.8% to $1.24 billion in the first quarter of 2011, compared with $1.33 billion at March 31, 2010.
• Deposits decreased 0.2% to $1.48 billion compared with $1.49 billion at March 31, 2010, and increased 1.0% from $1.47 billion at December 31, 2010. Demand and savings account deposits increased by 8.5% and 10.3%, respectively during the first quarter of 2011 compared with the fourth quarter of 2010.
• Total assets decreased 1.2% to $1.74 billion compared with $1.76 billion at March 31, 2010.
• Efficiency ratio was 60.7% for the first three months of 2011, compared with 50.9% for the first quarter of 2010. Our efficiency ratio increased primarily due to higher credit related costs and increases in other real estate owned (OREO) expense.
• Non-performing loans increased $9.5 million during the first quarter to $69.9 million at March 31, 2011, compared with $60.4 million at December 31, 2010. The increase was primarily in the commercial and residential real estate segments of our portfolio.
• Non-performing assets increased $15.8 million during the first quarter to $143.9 million at March 31, 2011. The increase was primarily due to a higher level of non-performing loans described above and non-performing loans moving through the collection and foreclosure process.
• On April 19, 2011, an Oldham County, Kentucky jury rendered a judgment against PBI Bank for $529,000 in compensatory damages and from $529,000 to $882,000 in punitive damages. The case concerns a dispute with a prior landowner in connection with a project for which PBI Bank provided development financing to a third party. The final amount of the judgment is subject to additional proceedings. We intend to file motions to set aside the judgment, and if denied, to file an appeal. Based on advice of legal counsel, we believe that we have several meritorious grounds for appeal and no amounts have been accrued for this matter as we expect a favorable outcome to the bank.

Net Interest Income

Net interest income decreased 2.9% to $13.8 million for the three months ended March 31, 2011, a decrease of $409,000, compared with $14.2 million for the same period in 2010. This decrease was primarily attributable to a decrease in average earning assets, partially offset by decreased cost of funds, compared with 2010.

Net interest margin increased 22 basis points to 3.54% in the first quarter of 2011 from our margin of 3.32% in the prior year first quarter due primarily to lower cost of funds. The yield on earning assets declined 26 basis points from the 2010 first quarter, compared with a 55 basis point decline in rates paid on interest-bearing liabilities. Net interest margin decreased 6 basis points to 3.54% from our margin of 3.60% in the fourth quarter of 2010 due primarily to a lower yield on earning assets. The yield on earning assets declined 15 basis points from the fourth quarter of 2010 compared with an 11 basis point decline in rates paid on interest-bearing liabilities.

Average earning assets declined 8.7% to $1.6 billion for the three months ended March 31, 2011, compared with $1.7 billion for the three months ended March 31, 2010. The decline in average earnings assets was primarily due to an 8.1% decrease in average loans to $1.3 billion at March 31, 2011.

Average deposits decreased 4.2% to $1.48 billion, down from $1.55 billion for the three months ended March 31, 2010. Average deposits increased 3.3% to $1.48 billion, up from $1.43 billion for the three months ended December 31, 2010.

Non-Interest Income

Non-interest income for the first quarter of 2011 increased 5.6%, or $95,000, to $1.79 million compared with $1.69 million in the first quarter of 2010. The increase in non-interest income was due to increased gains on sales of loans originated for sale, partially offset by lower service charges on deposit accounts.

Non-Interest Expense

Non-interest expense for the first quarter of 2011 increased 16.7% from the prior year’s first quarter due primarily to increased OREO expense, FDIC insurance premiums, and salaries and employee benefits expense. OREO expense increased to $1.4 million in the first quarter of 2011 compared with $378,000 in the first quarter of 2010, due primarily to increased losses on sales of OREO, OREO write-downs to reflect current market values and OREO maintenance expense. FDIC insurance premiums rose 21.3% to $855,000 in the first quarter of 2011 compared with $705,000 in the first quarter of 2010. Salaries and employee benefits expense increased to $4.1 million in the first quarter of 2011 compared with $3.9 million in the prior year’s first quarter due to merit raises and increases in staff.

Balance Sheet Review

Total assets decreased 1.2% to $1.74 billion at March 31, 2011, from $1.76 billion at March 31, 2010, and increased 0.8% from $1.72 billion at December 31, 2010. Since December 31, 2010, total loans are down 2.0%, or $25.5 million, to $1.28 billion from $1.30 billion at December 31, 2010, primarily due to efforts to move troubled loans through the collection, foreclosure, and disposition process. Deposits at March 31, 2011, increased 1.0% to $1.48 billion from $1.47 billion at December 31, 2010, primarily due to increased demand and savings account deposits. Demand and savings account deposits increased by 8.5% and 10.3%, respectively, during the first quarter of 2011.

Asset Quality

Nonperforming loans increased to $69.9 million, or 5.5% of total loans, at March 31, 2011, compared with $60.4 million, or 4.6% of total loans at December 31, 2010, and $60.5 million, or 4.4% of total loans at March 31, 2010. The increase in nonperforming loans was due primarily to the continued weakness in housing unit sales and loss of tenants or inability to lease vacant space by our customers. We continue to resolve troubled loans by working them through the collection, foreclosure, and disposition process. As a result, foreclosed properties at March 31, 2011, rose to $73.9 million compared with $67.6 million at December 31, 2010, and $59.7 million at March 31, 2010. Our ratio of non-performing assets to total assets increased during the quarter to 8.28% at March 31, 2011, compared with 7.43% at December 31, 2010.

Non-Accrual Loan Activity
	(in thousands)
Non-accrual loans at December 31, 2010	$	59,799
Loans returned to accrual status		(2,500	)
Net principal pay-downs		(448	)
Charge-offs		(4,279	)
Loans foreclosed and transferred to OREO		(7,987	)
Loans placed on non-accrual during the period		21,379
Non-accrual loans at March 31, 2011	$	65,964
Other Real Estate Owned (OREO) Activity
	(in thousands)
OREO at December 31, 2010	$	67,635
Real estate acquired		8,812
Valuation adjustment write downs		(486	)
Properties sold		(2,665	)
Gain (loss) on sales, net		(391	)
Capital improvements		1,037
OREO at March 31, 2011	$	73,942

Our loan loss reserve as a percentage of total loans was 2.63% at March 31, 2011, and at December 31, 2010, compared with 1.95% at March 31, 2010. Net loan charge-offs for the first quarter of 2011 were $5.8 million, or 0.4% of average loans for the quarter.

Our provision for loan losses was $5.1 million in the first quarter of 2011, compared with $15.5 million in the fourth quarter of 2010, and $3.0 million in the prior year first quarter.

“Our earnings outlook for 2011 remains challenged by the continued softness in real estate markets, including lower market values and soft demand for residential and commercial real estate,” continued Ms. Bouvette. “Our primary focus is to improve Porter Bancorp’s profitability, preserve our strong capital base and reduce the credit risks in our loan portfolio. Our core business remains solid with continued growth in our net interest margin and non-interest income since the fourth quarter of last year.

“We remain confident about Porter Bancorp’s future based on our strong capital base and our solid market position in Kentucky’s major markets. Our entire team remains focused on reducing the level of nonperforming assets, improving our operating efficiency and maintaining our high level of customer service. We have made significant additions to our underwriting and workout division teams to address these concerns. We believe these will be key factors in building long-term shareholder value,” concluded Ms. Bouvette.

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. The words “believe,” “may,” “should,” “anticipate,” “estimate,” “expect,” “intend,” “objective,” “seek,” “plan,” “strive” or similar words, or negatives of these words, identify forward-looking statements. 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 first quarter ending March 31, 2011 follows.

PORTER BANCORP, INC.
Unaudited Financial Information
(in thousands, except share and per share data)
	Three		Three			Three
	Months		Months			Months
	Ended		Ended			Ended
	3/31/11		12/31/10			3/31/10
Income Statement Data
Interest income	$	19,616	$	20,315		$	22,626
Interest expense		5,848		6,229			8,449
Net interest income		13,768		14,086			14,177
Provision for loan losses		5,100		15,500			3,000
Net interest income after provision		8,668		(1,414	)		11,177
Service charges on deposit accounts		630		714			720
Income from fiduciary activities		255		236			252
Gains on sales of loans originated for sale		221		144			91
Gains (losses) on sales of securities, net		83		2,896			57
Other than temporary impairment on securities		—		(132	)		—
Other		598		604			572
Non-interest income		1,787		4,462			1,692
Salaries & employee benefits		4,124		3,176			3,947
Occupancy and equipment		972		988			1,022
Other real estate owned expense		1,367		9,859			378
FDIC insurance		855		705			705
Franchise tax		582		543			543
Professional fees		280		270			266
Loan collection fees		262		360			175
Communications expense		168		199			186
Postage and delivery		123		153			188
Advertising		102		131			96
Other		560		583			543
Non-interest expense		9,395		16,967			8,049
Income (loss) before income taxes		1,060		(13,919	)		4,820
Income tax expense (benefit)		261		(4,989	)		1,564
Net income (loss)		799		(8,930	)		3,256
Less:
Dividends on preferred stock		438		437			438
Accretion on preferred stock		44		45			44
Earnings (loss) allocated to participating securities		12		(365	)		42
Net income (loss) available to common	$	305	$	(9,047	)	$	2,732
Weighted average shares – Basic		11,704,651		11,707,334			9,072,052
Weighted average shares – Diluted		11,704,651		11,707,334			9,072,052
Basic earnings (loss) per common share	$	0.03	$	(0.77	)	$	0.30
Diluted earnings (loss) per common share	$	0.03	$	(0.77	)	$	0.30
Cash dividends declared per common share	$	0.01	$	0.01		$	0.19

PORTER BANCORP, INC.
Unaudited Financial Information
(in thousands, except share and per share data)
	Three			Three			Three
	Months			Months			Months
	Ended			Ended			Ended
	3/31/11			12/31/10			3/31/10
Average Balance Sheet Data
Assets	$	1,738,253		$	1,716,430		$	1,834,208
Loans		1,290,851			1,317,606			1,404,486
Earning assets		1,591,561			1,564,243			1,743,509
Deposits		1,481,192			1,433,921			1,545,469
Long-term debt and advances		48,275			60,845			100,307
Interest bearing liabilities		1,434,718			1,402,052			1,558,604
Stockholders’ equity		190,585			201,478			169,759
Performance Ratios
Return on average assets		0.19	%		-2.06	%		0.72	%
Return on average equity		1.70			-17.58			7.78
Yield on average earning assets (tax equivalent)		5.03			5.18			5.29
Cost of interest bearing liabilities		1.65			1.76			2.20
Net interest margin (tax equivalent)		3.54			3.60			3.32
Efficiency ratio		60.72			107.49			50.90
Loan Charge-off Data
Loans charged-off	$	(5,867	)	$	(10,638	)	$	(2,906	)
Recoveries		81			31			57
Net charge-offs	$	(5,786	)	$	(10,607	)	$	(2,849	)

PORTER BANCORP, INC.
Unaudited Financial Information
(in thousands, except share and per share data)
	As of			As of			As of
	3/31/11			12/31/10			3/31/10
Assets
Loans	$	1,277,497		$	1,303,013		$	1,361,216
Loan loss reserve		(33,599	)		(34,285	)		(26,543	)
Net loans		1,243,898			1,268,728			1,334,673
Securities available for sale		163,032			106,309			180,582
Federal funds sold & interest bearing deposits		146,477			137,429			81,355
Cash and due from financial institutions		15,626			48,006			11,127
Premises and equipment		22,175			22,468			23,251
Other real estate owned		73,942			67,635			59,688
Goodwill		23,794			23,794			23,794
Accrued interest receivable and other assets		48,163			49,583			42,857
Total Assets	$	1,737,107		$	1,723,952		$	1,757,327
Liabilities and Equity
Certificates of deposit	$	1,168,841		$	1,166,820		$	1,204,022
Interest checking		85,343			87,690			76,305
Money market		83,133			80,082			69,618
Savings		38,234			34,678			35,577
Total interest bearing deposits		1,375,551			1,369,270			1,385,522
Demand deposits		106,772			98,398			99,518
Total deposits		1,482,323			1,467,668			1,485,040
Federal funds purchased & repurchase agreements		11,429			11,616			11,595
FHLB advances		14,564			15,022			47,285
Junior subordinated debentures		33,550			33,550			34,000
Accrued interest payable and other liabilities		5,507			6,681			6,670
Total liabilities		1,547,373			1,534,537			1,584,590
Stockholders’ equity		189,734			189,415			172,737
Total Liabilities and Stockholders’ Equity	$	1,737,107		$	1,723,952		$	1,757,327
Ending shares outstanding		11,840,176			11,846,107			9,263,986
Book value per common share	$	12.79		$	12.76		$	14.87
Tangible book value per common share		10.37			10.33			11.49
Asset Quality Data
Loan 90 days or more past due still on accrual	$	3,907		$	594		$	5,913
Non-accrual loans		65,964			59,799			54,545
Total non-performing loans		69,871			60,393			60,458
Real estate acquired through foreclosures		73,942			67,635			59,688
Other repossessed assets		41			52			80
Total non-performing assets	$	143,854		$	128,080		$	120,226
Non-performing loans to total loans		5.47	%		4.63	%		4.44	%
Non-performing assets to total assets		8.28			7.43			6.84
Allowance for loan losses to non-performing loans		48.09			56.77			43.90
Allowance for loan losses to total loans		2.63			2.63			1.95
Risk-based Capital Ratios
Tier I leverage ratio		10.93	%		11.08	%		9.24	%
Tier I risk-based capital ratio		14.59			14.39			12.20
Total risk-based capital ratio		16.52			16.32			14.12
FTE employees		300			286			280

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