Limestone Bancorp (LMST) 8-K Porter Bancorp, Inc. Reports Second Quarter Results

Exhibit 99.1

Porter Bancorp, Inc. Reports Second Quarter Results

Second Quarter 2013 Net Loss Available to Common Shareholders of $1.7 million

LOUISVILLE, Ky.--(BUSINESS WIRE)--July 30, 2013--Porter Bancorp, Inc. (NASDAQ: PBIB), parent company of PBI Bank, with 18 full-service banking offices in Kentucky, today reported unaudited results for the second quarter of 2013.

The Company reported a net loss available to common shareholders of $1.7 million, or ($0.14) per diluted share, for the second quarter of 2013 compared with a net loss of $319,000, or ($0.03) per diluted share, for the second quarter of 2012. Net loss available to common shareholders for the six months ended June 30, 2013, was $2.2 million, or ($0.19) per diluted common share, compared with net income available to common shareholders of $661,000, or $0.06 per diluted share, for the six months ended June 30, 2012.

The second quarter 2013 loss of $1.7 million represents a decline of $1.4 million compared with the $319,000 loss reported in the second quarter of 2012. This was primarily due to decreased non-interest income and increased non-interest expense, compared with the second quarter of 2012, countered by a $4.0 million reduction in the provision for loan losses. Additionally, our net interest margin improved to 3.24% for the second quarter of 2013 compared to 3.07% in the first quarter of 2013 and declined from 3.35% for the second quarter of 2012.

The $2.2 million loss for the six months ended June 30, 2013 represents a decline of $2.9 million compared to the six months ended June 30, 2012. This was primarily due to decreased net interest income driven by the reduction of the size of our loan portfolio, a decline in our net interest margin, a reduction of $2.8 million in gains on sales of investment securities, and increased non-interest expense. This was offset by a decrease in the provision for loan losses expense from $7.8 million for the six months ended June 30, 2012, to $450,000 for the six months ended June 30, 2013.

No provision for loan losses was recorded in the second quarter of 2013, which is a significant decrease compared to $4.0 million in the second quarter of 2012. The decrease was attributable to the $52.3 million reduction in loan portfolio size, lower net loan charge-offs during the quarter, and a reduction in loans migrating downward in risk grade classification.

We have successfully reduced the size of our balance sheet in accordance with our capital plan. Average assets were $1.1 billion in the second quarter of 2013 compared to $1.4 billion in the second quarter of 2012. This was accomplished primarily by reducing our commercial real estate and construction and development loans within our loan portfolio and through the redemption of higher cost certificates of deposit accounts. The reduction of our balance sheet was the primary driver for net interest income declining by $2.4 million to $8.4 million in the second quarter of 2013 compared to $10.8 million in the second quarter of 2012. Additionally, our net interest margin declined to 3.24% in the second quarter of 2013 compared to 3.35% in the second quarter of 2012, but improved from 3.07% in the first quarter of 2013.

Financial performance continues to be negatively impacted by the Bank’s high level of non-performing loans and other real estate owned. Non-performing assets, which include loans past due 90 days and still accruing, loans on nonaccrual, and other real estate owned, decreased in dollars to $159.3 million, or 14.86% of total assets at June 30, 2013, compared with $165.1 million, or 14.58% of total assets, at March 31, 2013.

Non-performing loans decreased to $112.3 million, or 14.49% of total loans, at June 30, 2013, compared with $120.9 million, or 14.62% of total loans, at March 31, 2013. In addition, net charge-offs decreased from $17.3 million in the first quarter of 2013 to $2.3 million in the second quarter of 2013.

Total past due and nonaccrual loans decreased approximately $8.1 million to $123.8 million at June 30, 2013 from $132.0 million at March 31, 2013.

	June 30, 2013		March 31, 2013		Increase/ (Decrease)
	(in thousands)
Past Due Loans:
30 – 59 Days	$	8,600	$	8,052	$	548
60 – 89 Days		2,979		2,960		19
90 Days and Over		71		—		71
Nonaccrual Loans		112,185		120,943		(8,758	)
Total Past Due and Nonaccrual Loans	$	123,835	$	131,955	$	(8,120	)

Foreclosed properties at June 30, 2013 increased to $47.0 million compared with $44.2 million at March 31, 2013, but decreased from $54.4 million at June 30, 2012. The Company acquired $11.9 million in other real estate owned and sold $8.1 million in other real estate owned during the second quarter of 2013. Fair value write-downs arising from new appraisals or lower marketing prices totaled $977,000 in the second quarter of 2013 compared to $350,000 in the second quarter of 2012 and $307,000 in the first quarter of 2013.

At June 30, 2013, PBI Bank’s Tier 1 leverage ratio was 6.08% compared to 5.95% at March 31, 2013 and its Total risk-based capital ratio was 10.60% at June 30, 2013 compared to 10.29% at March 31, 2013, which are below the minimums of 9.0% and 12.0% required by the Bank’s Consent Order. At June 30, 2013, Porter Bancorp’s leverage ratio was 4.91%, compared with 4.91% at March 31, 2013 and 4.50% at December 31, 2012, and its Total risk-based capital ratio was 10.46% compared with 10.16% at March 31, 2013, and 9.81% at December 31, 2012.

On July 16, 2013, a jury in Louisville, Kentucky returned a verdict against PBI Bank awarding the plaintiffs compensatory damages of $1.5 million and punitive damages of $5.5 million. The verdict is subject to post-trial motions and has not yet been entered as a judgment. After conferring with our legal advisors, we believe the findings and damages are excessive and contrary to the law, and that we have meritorious grounds to seek reconsideration of the verdict and to appeal. The Bank intends to file motions to reduce or overturn the award and otherwise for reconsideration of the case. In accordance with U.S. generally accepted accounting principles (GAAP), we record contingent liabilities resulting from claims against us when a loss is assessed to be probable and the amount of the loss is reasonably estimable. As such, we accrued $1.5 million related to this matter during the quarter ended June 30, 2013.

We are continuing our efforts to strengthen our capital levels and comply with the Consent Order. Management and the Board of Directors are evaluating appropriate strategies for increasing the Company’s capital in order to meet the capital requirements of our Consent Order. These include, among other things, a possible public offering or private placement of common stock to new and existing shareholders. As previously announced, Sandler O’Neill & Partners, LP is acting as our financial advisor and assisting our Board in this evaluation. Asset quality remediation, capital restoration, and lowering the risk profile of the Company continue to be major objectives during 2013 as well as delivering quality financial products and services to our customers throughout the Commonwealth of Kentucky.

PBIB-G

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,” “possible,” “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 indicated by forward-looking statements due to various risks and uncertainties, including our ability to reduce our level of higher risk loans such as commercial real estate and real estate development loans, reduce our level of non-performing loans and other real estate owned, and increase net interest income in a low interest rate environment, as well as our need to increase capital. These and other risks and uncertainties are described in greater detail 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 second quarter ending June 30, 2013 follows.

PORTER BANCORP, INC. Unaudited Financial Information (in thousands, except share and per share data)
	Three			Three			Three			Six				Six
	Months			Months			Months			Months				Months
	Ended			Ended			Ended			Ended				Ended
	6/30/13			3/31/13			6/30/12			6/30/13				6/30/12
Income Statement Data
Interest income	$	11,168		$	11,258		$	14,812		$		22,426		$	30,567
Interest expense		2,816			2,960			4,017				5,776			8,318
Net interest income		8,352			8,298			10,795				16,650			22,249
Provision for loan losses		—			450			4,000				450			7,750
Net interest income after provision		8,352			7,848			6,795				16,200			14,499
Service charges on deposit accounts		506			493			556				999			1,110
Income from fiduciary activities		—			517			291				517			542
Bank card interchange fees		196			172			199				368			376
Other real estate owned income		230			112			24				342			62
Gains (losses) on sales of securities, net		703			—			1,511				703			3,530
Income from bank owned life insurance		305			79			79				384			158
Other		208			274			358				482			685
Non-interest income		2,148			1,647			3,018				3,795			6,463
Salaries & employee benefits		3,999			4,139			3,982				8,138			8,294
Occupancy and equipment		913			931			969				1,844			1,855
Other real estate owned expense		1,657			791			1,205				2,448			2,462
FDIC insurance		650			639			832				1,289			1,705
Franchise tax		537			537			592				1,074			1,184
Loan collection expense		2,407			1,035			586				3,442			946
Professional fees		499			406			567				905			923
Communications expense		179			175			168				354			348
Postage and delivery		102			113			109				215			231
Insurance expense		160			151			104				311			200
Other		706			647			548				1,353			1,161
Non-interest expense		11,809			9,564			9,662				21,373			19,309
Income (loss) before income taxes		(1,309	)		(69	)		151				(1,378	)		1,653
Income tax expense (benefit)		—			—			—				—			—
Net income (loss)		(1,309	)		(69	)		151				(1,378	)		1,653
Less:
Dividends on preferred stock		437			438			438				875			875
Accretion on preferred stock		45			45			45				90			90
Earnings (loss) allocated to participating securities		(110	)		(28	)		(13	)			(131	)		27
Net income (loss) available to common	$	(1,681	)	$	(524	)	$	(319	)	$		(2,212	)	$	661
Weighted average shares – Basic		11,761,788			11,847,907			11,733,156			11,801,663				11,701,655
Weighted average shares – Diluted		11,761,788			11,847,907			11,733,156			11,801,663				11,701,655
Basic earnings (loss) per common share	$	(0.14	)	$	(0.04	)	$	(0.03	)	$	(0.19		)	$	0.06
Diluted earnings (loss) per common share	$	(0.14	)	$	(0.04	)	$	(0.03	)	$	(0.19		)	$	0.06
Cash dividends declared per common share	$	0.00		$	0.00		$	0.00		$	0.00			$	0.00

PORTER BANCORP, INC. Unaudited Financial Information (in thousands, except share and per share data)
	Three			Three			Three			Six			Six
	Months			Months			Months			Months			Months
	Ended			Ended			Ended			Ended			Ended
	6/30/13			3/31/13			6/30/12			6/30/13			6/30/12
Average Balance Sheet Data
Assets	$	1,104,807		$	1,151,816		$	1,363,340		$	1,128,182		$	1,387,973
Loans		806,941			872,505			1,078,497			839,542			1,098,839
Earning assets		1,050,515			1,111,469			1,307,520			1,080,824			1,329,199
Deposits		1,008,102			1,053,884			1,231,281			1,030,867			1,255,284
Long-term debt and advances		36,652			37,169			38,959			36,909			39,255
Interest bearing liabilities		941,059			983,481			1,159,447			962,153			1,183,651
Stockholders’ equity		46,904			47,749			83,987			47,324			84,323
Performance Ratios
Return on average assets		(0.48)	%		(0.02)	%		0.04	%		(0.25)	%		0.24	%
Return on average equity		(11.19)			(0.59)			0.72			(5.87)			3.94
Yield on average earning assets (tax equivalent)		4.31			4.15			4.59			4.23			4.66
Cost of interest bearing liabilities		1.20			1.22			1.39			1.21			1.41
Net interest margin (tax equivalent)		3.24			3.07			3.35			3.15			3.40
Efficiency ratio		120.54			96.17			78.54			108.26			76.68
Loan Charge-off Data
Loans charged-off	$	(3,404	)	$	(17,962	)	$	(6,438	)	$	(21,366	)	$	(9,020	)
Recoveries		1,124			671			79			1,795			285
Net charge-offs	$	(2,280	)	$	(17,291	)	$	(6,359	)	$	(19,571	)	$	(8,735	)
Nonaccrual Loan Activity
Nonaccrual loans at beginning of period	$	120,943		$	94,517		$	97,230		$	94,517		$	92,020
Net principal pay-downs		(8,118	)		(4,105	)		(4,084	)		(12,223	)		(9,324	)
Charge-offs		(3,256	)		(17,472	)		(4,902	)		(20,728	)		(7,214	)
Loans foreclosed and transferred to OREO		(11,875	)		(3,648	)		(15,243	)		(15,523	)		(19,072	)
Loans returned to accrual status		(421	)		—			—			(421	)		—
Loans placed on nonaccrual during the period		14,912			51,651			8,652			66,563			25,243
Nonaccrual loans at end of period	$	112,185		$	120,943		$	81,653		$	112,185		$	81,653
Troubled Debt Restructurings (TDRs)
Accruing	$	54,927		$	55,171		$	85,068		$	54,927		$	85,068
Nonaccrual		46,510			52,592			37,748			46,510			37,748
Total	$	101,437		$	107,763		$	122,816		$	101,437		$	122,816
Other Real Estate Owned (OREO) Activity (Net of Allowance)
OREO at beginning of period	$	44,192		$	43,671		$	35,574		$	43,671		$	41,449
Real estate acquired		11,875			3,680			23,910			15,555			28,126
Valuation adjustment write-downs		(977	)		(307	)		(350	)		(1,284	)		(830	)
Proceeds from sales of properties		(7,898	)		(2,655	)		(4,223	)		(10,553	)		(13,433	)
Loss on sales, net		(162	)		(197	)		(546	)		(359	)		(948	)
Capital improvements		—			—			—			—			1
OREO at end of period	$	47,030		$	44,192		$	54,365		$	47,030		$	54,365

PORTER BANCORP, INC. Unaudited Financial Information (in thousands, except share and per share data)
		As of		As of			As of			As of
		6/30/13		3/31/13			12/31/12			6/30/12
Assets
Loans	$	774,785		$	827,076		$	899,092		$	1,040,909
Loan loss reserve		(37,559	)		(39,839	)		(56,680	)		(51,594	)
Net loans		737,226			787,237			842,412			989,315
Mortgage loans held for sale		133			—			507			383
Securities available for sale		176,942			183,247			178,476			194,091
Federal funds sold & interest bearing deposits		56,512			62,505			41,161			30,762
Cash and due from financial institutions		7,754			8,683			8,411			5,599
Premises and equipment		20,368			20,667			20,805			21,223
Other real estate owned		47,030			44,192			43,671			54,365
Accrued interest receivable and other assets		26,166			26,338			27,188			39,114
Total Assets	$	1,072,131		$	1,132,869		$	1,162,631		$	1,334,852
Liabilities and Equity
Certificates of deposit	$	690,557		$	739,934		$	760,573		$	909,504
Interest checking		78,218			83,522			87,234			82,208
Money market		65,620			62,111			63,715			60,704
Savings		40,121			41,952			39,227			39,509
Total interest bearing deposits		874,516			927,519			950,749			1,091,925
Demand deposits		106,320			108,841			114,310			112,797
Total deposits		980,836			1,036,360			1,065,059			1,204,722
Federal funds purchased & repurchase agreements		3,292			2,853			2,634			2,501
FHLB advances		5,016			5,324			5,604			6,398
Junior subordinated debentures		31,525			31,525			31,975			32,200
Accrued interest payable and other liabilities		12,710			10,069			10,169			7,526
Total liabilities		1,033,379			1,086,131			1,115,441			1,253,347
Stockholders’ equity		38,752			46,738			47,190			81,505
Total Liabilities and Stockholders’ Equity	$	1,072,131		$	1,132,869		$	1,162,631		$	1,334,852
Ending shares outstanding		12,322,207			12,139,975			12,002,421			11,934,872
Book value per common share	$	0.04		$	0.70		$	0.74		$	3.62
Tangible book value per common share		(0.10	)		0.55			0.58			3.44
Asset Quality Data
Loan 90 days or more past due still on accrual	$	71		$	—		$	86		$	88
Nonaccrual loans		112,185			120,943			94,517			81,653
Total non-performing loans		112,256			120,943			94,603			81,741
Real estate acquired through foreclosures		47,030			44,192			43,671			54,365
Other repossessed assets		—			—			—			5
Total non-performing assets	$	159,286		$	165,135		$	138,274		$	136,111
Non-performing loans to total loans		14.49	%		14.62	%		10.52	%		7.85	%
Non-performing assets to total assets		14.86			14.58			11.89			10.20
Allowance for loan losses to non-performing loans		33.46			32.94			59.91			63.12
Allowance for loan losses to total loans		4.85			4.82			6.30			4.96
Risk-based Capital Ratios
Tier I leverage ratio		4.91	%		4.91	%		4.50	%		7.56	%
Tier I risk-based capital ratio		6.88			6.77			6.46			9.95
Total risk-based capital ratio		10.46			10.16			9.81			11.94
FTE employees		264			264			278			300

CONTACT:
Porter Bancorp, Inc.
John T. Taylor, 502-499-4800
President