Limestone Bancorp (LMST) 8-K Porter Bancorp, Inc. Reports Second Quarter 2015 Results

Exhibit 99.1

Porter Bancorp, Inc. Reports Second Quarter 2015 Results

Continued Improvement in Asset Quality

LOUISVILLE, Ky.--(BUSINESS WIRE)--July 30, 2015--Porter Bancorp, Inc. (NASDAQ: PBIB), parent company of PBI Bank, today reported unaudited results for the second quarter of 2015.

The Company reported net loss attributable to common shareholders for the second quarter of 2015 of $2.0 million, or ($0.08) per basic and diluted common share, compared with net loss attributable to common shareholders of $6.3 million, or ($0.53) per basic and diluted share, for the second quarter of 2014. Net loss attributable to common shareholders for the six months ended June 30, 2015, was $1.3 million, or ($0.06) per diluted common share, compared with net loss attributable to common shareholders of $7.3 million, or ($0.61) per diluted share, for the six months ended June 30, 2014.

Net Interest Income – Net interest income remained unchanged at $7.3 million for the second quarter of 2015 compared to the first quarter of 2015, and decreased from $7.6 million in the second quarter of 2014. Average loans decreased to $641.6 million for the second quarter of 2015 compared with $643.0 million in the first quarter of 2015 and $677.6 million in the second quarter of 2014. Net interest margin remained unchanged at 3.21% in the second quarter of 2015 compared to the first quarter of 2015, and increased from 3.13% in the second quarter of 2014 primarily driven by improving cost of funds which declined to 0.87% in the second quarter of 2015, compared with 0.91% in the first quarter of 2015 and 1.15% in the second quarter of 2014.

Allowance for Loan Losses – The allowance for loan losses to total loans was 2.59% at June 30, 2015 compared to 2.94% at March 31, 2015, and 3.91% at June 30, 2014. The reduced level of the allowance is primarily driven by improving trends in loan category risk ratings and declining historical average charge-off levels. Net loan charge-offs increased to $1.8 million for the second quarter of 2015 compared to $767,000 for the first quarter of 2015, but decreased compared to $6.6 million for the second quarter of 2014. The allowance for loan losses for loans evaluated collectively for impairment was 2.64% at June 30, 2015, compared with 3.18% at March 31, 2015, and 4.15% at June 30, 2014. Because of ongoing improvements in asset quality and management’s confidence in the assessment of risk in the loan portfolio, no provision expense was recorded during 2015.

Non-performing Assets – Non-performing assets, which include loans past due 90 days and still accruing, loans on nonaccrual, and other real estate owned (“OREO”), decreased considerably to $69.9 million, or 7.13% of total assets at June 30, 2014, compared with $80.1 million, or 7.94% of total assets at March 31, 2015, and $101.3 million, or 9.69% of total assets at June 30, 2014.

Non-performing loans decreased to $30.3 million, or 4.67% of total loans, at June 30, 2015, compared with $36.5 million, or 5.77% of total loans at March 31, 2015 and $44.4 million, or 6.9% of total loans at June 30, 2014. The decrease from the previous quarter was primarily driven by $5.3 million in principal payments received on nonaccrual loans, $608,000 of nonaccrual loans migrating to OREO, and $2.1 million of charge-offs.

OREO at June 30, 2015 decreased to $39.5 million, compared with $43.6 million at March 31, 2015 and $56.9 million at June 30, 2014. The Company acquired $608,000 in OREO and sold $2.4 million in OREO during the second quarter of 2015. Fair value write-downs arising from reductions in listing prices for certain properties as well as updated appraisals totaled $2.3 million in the second quarter of 2015, compared with $300,000 in the first quarter of 2015 and $400,000 in the second quarter of 2014. Progress continues to be made in the disposition of OREO. Currently, $12.7 million of OREO property is subject to a contract for sale or letter of intent.

The following table details past due loans and non-performing assets as of:
	June 30, 2015		March 31, 2015		December 31, 2014		September 30, 2014		June 30, 2014
	(in thousands)
Past due loans:
30 – 59 days	$	1,941	$	4,370	$	3,960	$	3,507	$	3,057
60 – 89 days		650		1,769		980		3,333		991
90 days or more		92		18		151		—		—
Nonaccrual loans		30,215		36,500		47,175		44,670		44,375
Total past due and nonaccrual loans	$	32,898	$	42,657	$	52,266	$	51,510	$	48,423
Loans past due 90 days or more	$	92	$	18	$	151	$	—	$	—
Nonaccrual loans		30,215		36,500		47,175		44,670		44,375
OREO		39,545		43,618		46,197		54,507		56,882
Other repossessed assets		—		—		—		—		—
Total non-performing assets	$	69,852	$	80,136	$	93,523	$	99,177	$	101,257

In addition to nonaccrual loans and OREO, loans classified as Troubled Debt Restructures (TDRs) and on accrual totaled $18.5 million at June 30, 2015, compared to $18.8 million at March 31, 2015 and $32.4 million at June 30, 2014.

Non-interest Income – Non-interest income decreased $1.1 million to $1.6 million for the second quarter of 2015, compared with $2.7 million for the first quarter of 2015, and increased $616,000 compared with $949,000 for the second quarter of 2014. The decline in non-interest income was driven primarily by a reduction in gains on the sales of securities which totaled $199,000 in the second quarter of 2015, compared to $1.5 million in the first quarter of 2015. The increase from the second quarter of 2014 was due to an increase in gains on the sales of securities of $197,000, and an increase in OREO rental income of $354,000.

Non-interest Expense – Non-interest expense increased $1.6 million to $11.0 million for the second quarter of 2015, compared with $9.4 million for the first quarter of 2015, and increased $1.2 million compared with $9.8 million for the second quarter of 2014. The increase from the first quarter of 2015 was primarily due to an increase in OREO expenses of approximately $2.2 million, partially offset by decreases in professional fees and other non-interest expenses. OREO expenses increased primarily due to an increase in fair value write-downs of $2.0 million resulting from declines in the fair value of the real estate based upon reductions in listing prices for certain properties as well as updated appraisals.

Capital – At June 30, 2015, PBI Bank’s Tier 1 leverage ratio improved slightly to 5.95% compared with 5.84% at March 31, 2015, and its Total risk-based capital ratio was 10.34% at June 30, 2015 compared with 10.26% at March 31, 2015, which are below the minimums of 9.0% and 12.0% required by the Bank’s Consent Order. At June 30, 2015, Porter Bancorp’s leverage ratio was 4.25% compared with 4.13% at March 31, 2015, and its Total risk-based capital ratio was 10.25%, compared with 10.00% at March 31, 2015. At June 30, 2015, PBI Bank’s Common equity Tier I risk-based capital ratio was 8.43% compared with 8.32% at March 31, 2015, and Porter Bancorp’s Common equity Tier I risk-based capital ratio was 4.42% compared with 4.68% at March 31, 2015.

Management and the Board of Directors remain committed to evaluating and implementing appropriate strategies for increasing the Company’s capital in order to meet the capital requirements of the Consent Order.

Tax Benefit Preservation Plan - On June 24, 2015, the Board of Directors approved the adoption of a tax benefits preservation plan designed to preserve the value of certain of the Company’s deferred tax assets primarily associated with net operating loss carryforwards (NOLs) under Section 382 of the Internal Revenue Code.

NOLs can generally be used to offset future taxable income and therefore reduce federal income tax obligations. However, the Company’s ability to use its NOLs would be limited if there was an “ownership change” under Section 382. This would occur if shareholders owning (or deemed to own under the tax rules) 5% or more of the Company’s stock increase their aggregate ownership of the Company by more than 50 percentage points over a defined period of time. The plan is intended to reduce the likelihood of an “ownership change” occurring as a result of the buying and selling of the Company’s common stock.

The primary purpose of the tax preservation plan is to protect the value of our NOLs for our shareholders. While our net deferred tax asset of $51.9 million at June 30, 2015 is subject to a full valuation allowance, it remains very important to the Company.

In connection with the plan, the Company declared a dividend of one preferred stock purchase right for each share of common stock outstanding as of the close of business on July 10, 2015. Any shareholder or group that acquires beneficial ownership of 5 percent or more of the Company (an “acquiring person”) could be subject to significant dilution in its holdings if the Board of Directors does not approve such acquisition. Existing shareholders holding 5 percent or more of the Company will not be considered acquiring persons unless they acquire additional shares, subject to certain exceptions described in the plan. In addition, in its discretion, the Board of Directors may exempt certain transactions and certain persons whose acquisition of securities is determined by the Board not to jeopardize the Company’s deferred tax assets. The rights will expire on July 29, 2018 or earlier in certain circumstances.

Additional information regarding the plan was provided on June 29, 2015 in a Current Report on Form 8-K and in a Registration Statement on Form 8-A filed with the Securities and Exchange Commission.

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 first quarter ending June 30, 2015 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
	6/30/15			3/31/15		6/30/14			6/30/15				6/30/14
Income Statement Data
Interest income	$	9,167		$	9,203	$	10,166		$	18,370			$	20,063
Interest expense		1,828			1,913		2,552			3,741				5,149
Net interest income		7,339			7,290		7,614			14,629				14,914
Provision for loan losses		—			—		6,300			—				6,300
Net interest income after provision		7,339			7,290		1,314			14,629				8,614
Service charges on deposit accounts		475			409		487			884				955
Bank card interchange fees		229			203		205			432				366
Other real estate owned income		372			357		18			729				25
Gains (losses) on sales of securities, net		199			1,497		2			1,696				46
Other		290			230		237			520				472
Non-interest income		1,565			2,696		949			4,261				1,864
Salaries & employee benefits		4,028			3,847		3,949			7,875				7,690
Occupancy and equipment		828			870		896			1,698				1,788
Professional fees		714			979		484			1,693				773
FDIC insurance		564			570		571			1,134				1,111
Data processing expense		278			304		280			582				549
State franchise and deposit tax		285			285		405			570				830
Other real estate owned expense		2,932			733		774			3,665				1,436
Loan collection expense		291			283		1,249			574				1,788
Other		1,114			1,521		1,196			2,635				2,341
Non-interest expense		11,034			9,392		9,804			20,426				18,306
Income (loss) before income taxes		(2,130	)		594		(7,541	)		(1,536		)		(7,828	)
Income tax expense (benefit)		—			—		(1,307	)		—				(1,307	)
Net income (loss)		(2,130	)		594		(6,234	)		(1,536		)		(6,521	)
Less:
Dividends on preferred stock		—			—		789			—				1,574
Earnings (loss) allocated to participating securities		(91	)		185		(693	)		(269		)		(772	)
Net income (loss) attributable to common	$	(2,039	)	$	409	$	(6,330	)	$	(1,267		)	$	(7,323	)
Weighted average shares – Basic		24,589,507			17,493,397		11,981,121				21,079,238			11,992,925
Weighted average shares – Diluted		24,589,507			17,493,397		11,981,121				21,079,238			11,992,925
Basic earnings (loss) per common share	$	(0.08	)	$	0.02	$	(0.53	)	$		(0.06	)	$	(0.61	)
Diluted earnings (loss) per common share	$	(0.08	)	$	0.02	$	(0.53	)	$		(0.06	)	$	(0.61	)
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
	6/30/15			3/31/15			6/30/14			6/30/15			6/30/14
Average Balance Sheet Data
Assets	$	1,003,507		$	1,011,561		$	1,056,809		$	1,007,512		$	1,065,151
Loans		641,587			642,959			677,643			642,269			687,857
Earning assets		930,415			936,037			991,416			933,210			1,005,218
Deposits		924,840			931,698			966,164			928,250			975,117
Long-term debt and advances		33,208			33,902			35,372			33,553			35,303
Interest bearing liabilities		846,892			854,423			893,921			850,637			902,506
Stockholders’ equity		33,770			33,971			37,611			33,870			37,303
Performance Ratios
Return on average assets		(0.85	)%		0.24	%		(2.37	)%		(0.31	)%		(1.23	)%
Return on average equity		(25.30	)		7.09			(66.48	)		(9.15	)		(35.25	)
Yield on average earning assets (tax equivalent)		4.00			4.03			4.16			4.02			4.08
Cost of interest bearing liabilities		0.87			0.91			1.15			0.89			1.15
Net interest margin (tax equivalent)		3.21			3.21			3.13			3.21			3.04
Efficiency ratio		126.75			110.64			114.52			118.80			109.41
Loan Charge-off Data
Loans charged-off	$	(2,264	)	$	(1,327	)	$	(8,323	)	$	(3,591	)	$	(11,405	)
Recoveries		476			560			1,741			1,036			2,114
Net charge-offs	$	(1,788	)	$	(767	)	$	(6,582	)	$	(2,555	)	$	(9,291	)
Nonaccrual Loan Activity
Nonaccrual loans at beginning of period	$	36,500		$	47,175		$	77,344		$	47,175		$	101,767
Net principal pay-downs		(5,336	)		(10,754	)		(12,195	)		(16,090	)		(22,440	)
Charge-offs		(2,082	)		(955	)		(8,125	)		(3,037	)		(10,597	)
Loans foreclosed and transferred to OREO		(608	)		(337	)		(13,331	)		(945	)		(30,226	)
Loans returned to accrual status		(620	)		(78	)		(2,362	)		(698	)		(3,232	)
Loans placed on nonaccrual during the period		2,361			1,449			3,044			3,810			9,103
Nonaccrual loans at end of period	$	30,215		$	36,500		$	44,375		$	30,215		$	44,375
Troubled Debt Restructurings (TDRs)
Accruing	$	18,548		$	18,798		$	32,389		$	18,548		$	32,389
Nonaccrual		15,006			19,002			18,500			15,006			18,500
Total	$	33,554		$	37,800		$	50,889		$	33,554		$	50,889
Other Real Estate Owned (OREO) Activity (Net of Allowance)
OREO at beginning of period	$	43,618		$	46,197		$	45,918		$	46,197		$	30,892
Real estate acquired		608			347			13,515			955			30,866
Valuation adjustment write-downs		(2,330	)		(300	)		(400	)		(2,630	)		(650	)
Proceeds from sales of properties		(2,391	)		(2,629	)		(2,205	)		(5,020	)		(4,280	)
Gain (loss) on sales, net		40			3			54			43			54
OREO at end of period	$	39,545		$	43,618		$	56,882		$	39,545		$	56,882

PORTER BANCORP, INC. Unaudited Financial Information (in thousands, except share and per share data)
	As of
	6/30/15			3/31/15			12/31/14			9/30/14			6/30/14			3/31/14
Assets
Loans	$	648,321		$	632,428		$	624,999		$	638,360		$	643,030		$	682,591
Allowance for loan losses		(16,809	)		(18,597	)		(19,364	)		(24,198	)		(25,133	)		(25,415	)
Net loans		631,512			613,831			605,635			614,162			617,897			657,176
Loans held for sale		125			—			8,926			—			280			—
Securities held to maturity		42,202			42,263			42,325			42,386			43,488			43,550
Securities available for sale		151,758			157,290			190,791			192,146			180,723			166,442
Federal funds sold & interest bearing deposits		63,987			101,872			66,011			73,494			95,353			99,286
Cash and due from financial institutions		7,403			7,899			14,169			11,336			6,913			7,449
Premises and equipment		19,167			19,323			19,507			19,649			19,788			19,821
Bank owned life insurance		9,320			9,231			9,167			9,103			9,039			8,981
FHLB Stock		7,323			7,323			7,323			7,323			7,323			7,323
Other real estate owned		39,545			43,618			46,197			54,507			56,882			45,918
Accrued interest receivable and other assets		6,998			7,056			7,938			6,608			7,181			7,584
Total Assets	$	979,340		$	1,009,706		$	1,017,989		$	1,030,714		$	1,044,867		$	1,063,530
Liabilities and Equity
Certificates of deposit	$	564,253		$	597,117		$	574,681		$	609,682		$	631,110		$	656,475
Interest checking		84,627			86,614			91,086			76,431			76,625			79,689
Money market		110,529			102,349			109,734			100,890			95,946			89,678
Savings		35,942			36,418			36,430			36,364			37,178			38,524
Total interest bearing deposits		795,351			822,498			811,931			823,367			840,859			864,366
Demand deposits		108,800			108,011			114,910			110,165			109,956			110,507
Total deposits		904,151			930,509			926,841			933,532			950,815			974,873
Federal funds purchased & repurchase agreements		1,265			1,145			1,341			1,817			2,451			2,240
FHLB advances		3,430			3,597			15,752			16,940			14,134			4,345
Junior subordinated debentures		29,500			29,725			29,950			30,175			30,400			30,625
Accrued interest payable and other liabilities		10,949			10,758			10,640			18,922			16,453			15,110
Total liabilities		949,295			975,734			984,524			1,001,386			1,014,253			1,027,193
Preferred stockholders’ equity		2,771			2,771			8,552			38,283			38,283			38,283
Common stockholders’ equity (deficit)		27,274			31,201			24,913			(8,955	)		(7,669	)		(1,946	)
Total stockholders’ equity		30,045			33,972			33,465			29,328			30,614			36,337
Total Liabilities and Stockholders’ Equity	$	979,340		$	1,009,706		$	1,017,989		$	1,030,714		$	1,044,867		$	1,063,530
Ending shares outstanding		25,759,223			25,663,495			14,890,514			13,099,400			13,104,853			12,894,741
Book value per common share	$	1.06		$	1.22		$	1.67		$	(0.68	)	$	(0.59	)	$	(0.15	)
Tangible book value per common share		1.03			1.18			1.61			(0.76	)		(0.67	)		(0.25	)

PORTER BANCORP, INC. Unaudited Financial Information (in thousands, except share and per share data)
	As of
	6/30/15			3/31/15			12/31/14			9/30/14			6/30/14			3/31/14
Asset Quality Data
Loan 90 days or more past due still on accrual	$	92		$	18		$	151		$	—		$	—		$	—
Nonaccrual loans		30,215			36,500			47,175			44,670			44,375			77,344
Total non-performing loans		30,307			36,518			47,326			44,670			44,375			77,344
Real estate acquired through foreclosures		39,545			43,618			46,197			54,507			56,882			45,918
Other repossessed assets		—			—			—			—			—			—
Total non-performing assets	$	69,852		$	80,136		$	93,523		$	99,177		$	101,257		$	123,262
Non-performing loans to total loans		4.67	%		5.77	%		7.57	%		7.00	%		6.90	%		11.33	%
Non-performing assets to total assets		7.13			7.94			9.19			9.62			9.69			11.59
Allowance for loan losses to non-performing loans		55.46			50.93			40.92			54.17			56.64			32.86
Allowance for loans evaluated individually	$	842		$	254		$	752		$	1,788		$	1,753		$	2,453
Loans evaluated individually for impairment		49,011			55,299			71,993			78,695			79,742			122,158
Allowance as % of loans evaluated individually		1.72	%		0.46	%		1.04	%		2.27	%		2.20	%		2.01	%
Allowance for loans evaluated collectively	$	15,967		$	18,343		$	18,612		$	22,410		$	23,380		$	22,962
Loans evaluated collectively for impairment		599,310			577,129			553,006			559,665			563,288			560,433
Allowance as % of loans evaluated collectively		2.66	%		3.18	%		3.37	%		4.00	%		4.15	%		4.10	%
Allowance for loan losses to total loans		2.59	%		2.94	%		3.10	%		3.79	%		3.91	%		3.72	%
Loans by Risk Category
Pass	$	509,843		$	480,545		$	461,126		$	446,166		$	434,853		$	415,144
Watch		67,712			76,876			68,200			83,711			91,208			104,171
Special Mention		1,718			1,110			4,189			4,431			3,223			4,069
Substandard		69,048			73,897			91,484			104,052			113,746			159,207
Doubtful		—			—			—			—			—			—
Total	$	648,321		$	632,428		$	624,999		$	638,360		$	643,030		$	682,591
Risk-based Capital Ratios - Company
Tier I leverage ratio		4.25	%		4.13	%		4.51	%		4.02	%		4.10	%		4.87	%
Common equity Tier I risk-based capital ratio		4.42			4.68			N/A			N/A			N/A			N/A
Tier I risk-based capital ratio		6.02			5.85			6.70			5.93			6.19			7.22
Total risk-based capital ratio		10.25			10.00			10.61			10.05			10.27			10.93
Risk-based Capital Ratios – PBI Bank
Tier I leverage ratio		5.95	%		5.84	%		5.78	%		6.09	%		5.96	%		6.36	%
Common equity Tier I risk-based capital ratio		8.43			8.32			N/A			N/A			N/A			N/A
Tier I risk-based capital ratio		8.43			8.32			8.59			8.99			9.00			9.44
Total risk-based capital ratio		10.34			10.26			10.57			11.01			11.06			11.50
FTE employees		253			258			264			268			275			263

CONTACT:
Porter Bancorp, Inc.
John T. Taylor, 502-499-4800
Chief Executive Officer