Limestone Bancorp (LMST) 8-K Limestone Bancorp Reports 2018 Net Income of $8.8 Million, or $1.23 Per Share

Exhibit 99.1

Limestone Bancorp Reports 2018 Net Income of $8.8 Million, or $1.23 Per Share

LOUISVILLE, Ky.--(BUSINESS WIRE)--January 23, 2019--Limestone Bancorp, Inc. (NASDAQ: LMST) (“the Company”), parent company of Limestone Bank (“the Bank”), today reported unaudited results for the fourth quarter of 2018. Net income for the fourth quarter of 2018 was $2.4 million, or $0.33 per basic and diluted common share, compared with $33.3 million, or $5.31 per basic and diluted share, for the fourth quarter of 2017. Net income for the year ended December 31, 2018, was $8.8 million, or $1.23 per basic and diluted common share, compared with $38.5 million, or $6.15 per basic and diluted common share, for the year ended December 31, 2017.

Net income before taxes was $10.8 million for the year ended December 31, 2018, compared with $6.6 million for the year ended December 31, 2017. Income tax expense was $2.0 million for 2018 and income tax benefit was $31.9 million for 2017 due to the reversal of the Company’s deferred tax asset valuation allowance and the change in federal corporate tax rates in connection with the enactment of the Tax Cuts and Jobs Act of 2017.

Net Interest Income – Net interest income was $8.7 million for the fourth quarter of 2018, compared to $8.4 million in the third quarter of 2018, and $8.0 million in the fourth quarter of 2017. Average loans increased to $765.5 million for the fourth quarter of 2018, compared with $748.4 million in the third quarter of 2018, and $695.6 million for the fourth quarter of 2017. Net interest margin was relatively stable at 3.46% for the fourth quarter of 2018, compared to 3.45% for the third quarter of 2018, and 3.50% for the fourth quarter of 2017.

The yield on earning assets increased to 4.66% for the fourth quarter of 2018, compared to 4.56% for the third quarter of 2018, and 4.24% for the fourth quarter of 2017. The cost of interest bearing liabilities was 1.46% for the fourth quarter of 2018, compared to 1.32% for the third quarter of 2018, and 0.88% for the fourth quarter of 2017.

Net interest income increased to $33.7 million for the year ended December 31, 2018, compared with $31.1 million for 2017. Average loans increased to $743.4 million for 2018, compared with $667.5 million for 2017. Net interest margin increased to 3.53% for 2018, compared with 3.48% for 2017. The yield on earning assets increased to 4.55% for the year ended December 31, 2018, compared to 4.18% for 2017 and cost of interest bearing liabilities was 1.23% for 2018, compared to 0.83% for 2017.

Provision and Allowance for Loan Losses – Because of improvement in asset quality, the level of net loan recoveries during the period, and management’s assessment of risk in the loan portfolio, a negative provision for loan losses of $500,000 was recorded for the year ended December 31, 2018, compared to a negative provision for loan losses of $800,000 for 2017. No provision was recorded in the fourth quarter of 2018, compared to a negative provision of $800,000 in the fourth quarter of 2017.

The allowance for loan losses to total loans was 1.16% at December 31, 2018, compared to 1.14% at September 30, 2018, and 1.15% at December 31, 2017. Net loan recoveries were $1.2 million for 2018, compared to net loan recoveries of $35,000 for 2017.

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 $6.4 million, or 0.60% of total assets at December 31, 2018, compared with $7.4 million, or 0.70% of total assets at September 30, 2018, and $11.1 million, or 1.14% of total assets, at December 31, 2017. Non-performing loans decreased to $2.9 million, or 0.38% of total loans at December 31, 2018, compared with $3.6 million, or 0.48% of total loans at September 30, 2018, and $6.7 million, or 0.94% of total loans, at December 31, 2017. The decrease from the previous year was primarily driven by $3.6 million in principal payments received on nonaccrual loans, $730,000 of nonaccrual loans migrating to OREO, and $293,000 of charge-offs offset by $1.2 million in loans placed on nonaccrual during 2018.

OREO at December 31, 2018, decreased to $3.5 million, compared with $3.8 million at September 30, 2018, and $4.4 million at December 31, 2017. During the year, the Company sold $876,000 in OREO and acquired $730,000 in new OREO properties. Fair value write-downs arising from changing marketing strategies and new appraisals totaled $850,000 for 2018, compared to $2.0 million for 2017.

Non-interest Income and Expense – Non-interest income increased $375,000 to $5.8 million for the year ended December 31, 2018, compared with $5.4 million for the year ended December 31, 2017. The increase between years was primarily attributable to a $310,000 increase in bank card interchange fees, a $232,000 increase in other non-interest income, and a $102,000 increase in service charges on deposit accounts, partially offset by a reduction in the gain on sales of securities of $294,000.

The $232,000 net increase in other non-interest income for 2018 includes a $150,000 third quarter gain on sale of the Bank’s secondary market residential mortgage servicing rights portfolio, as well as a $632,000 fourth quarter gain on sale of a subdivided lot at the Company’s headquarters, partially offset by a $392,000 fourth quarter impairment charge associated with the transfer of the Bank’s data processing center to Premises Held for Sale.

In December 2018, the Bank completed a core system conversion, which Management believes will provide opportunities for work flow efficiencies and improvements in customer experience. In connection with the completion of the core systems conversion, Management approved the closure of its central data processing facility. Support services personnel will be relocated from the bank-owned data processing facility to other nearby facilities in 2019. In December 2018, the data processing facility was transferred to Premises Held For Sale at fair value, as determined by an independent third party appraisal, less estimated cost to sell. The transfer to held for sale resulted in the $392,000 impairment charge noted above, which is included in other non-interest income. Upon sale of the facility, Management expects to realize annual occupancy expense savings of approximately $200,000.

Non-interest income increased $30,000 to $1.7 million for the fourth quarter of 2018, compared with $1.6 million for the fourth quarter of 2017. The increase was due primarily to a $204,000 increase in other non-interest income as described in the paragraph above and a $170,000 increase in bank card interchange fees, partially offset by a reduction in net gain on sale of securities of $293,000 as compared to 2017.

Non-interest expense decreased $1.6 million to $29.1 million for the year ended December 31, 2018, compared with $30.8 million for the year ended December 31, 2017. The decrease in non-interest expense was due primarily to a $1.1 million decrease in OREO expense and a $855,000 decrease in FDIC insurance attributable to the Bank’s improved risk profile, partially offset by a $399,000 increase in salaries and employee benefits.

Non-interest expense decreased $1.8 million to $7.3 million for the fourth quarter of 2018, compared with $9.1 million for the fourth quarter of 2017. The decrease from the fourth quarter of 2017 was primarily due to a decrease in OREO expense of $1.6 million as well as a decrease in FDIC insurance expense of $239,000 attributable to the Bank’s improved risk profile. This decrease was partially offset by an increase in salaries and employee benefits of $266,000.

Capital – At December 31, 2018, the Bank’s Tier 1 leverage ratio was 9.60%, compared with 8.70% at December 31, 2017, and its Total risk-based capital ratio was 12.88% at December 31, 2018, compared with 11.61% at December 31, 2017. At December 31, 2018, the Company’s Tier I leverage ratio was 9.00%, compared with 7.11% at December 31, 2017, and its Total risk-based capital ratio was 12.23%, compared with 10.55% at December 31, 2017. At December 31, 2018, the Company’s Common equity Tier I risk-based capital ratio was 9.44%, compared with 6.92% at December 31, 2017.

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, 2017.

Additional Information

Unaudited supplemental financial information for the quarter and year ending December 31, 2018, follows.

LIMESTONE BANCORP, INC.
Unaudited Financial Information
(in thousands, except share and per share data)
	Three		Three			Twelve			Twelve
	Months		Months			Months			Months
	Ended		Ended			Ended			Ended
	12/31/18		12/31/17			12/31/18			12/31/17
Income Statement Data
Interest income	$	11,741	$	9,717		$	43,461		$	37,522
Interest expense		3,037		1,716			9,790			6,405
Net interest income		8,704		8,001			33,671			31,117
Provision (negative provision) for loan losses		—		(800	)		(500	)		(800	)
Net interest income after provision		8,704		8,801			34,171			31,917
Service charges on deposit accounts		588		636			2,355			2,253
Bank card interchange fees		573		403			1,831			1,521
Bank owned life insurance income		100		103			437			412
Gain (loss) on sales and calls of securities, net		—		293			(6	)		288
Other		411		207			1,162			930
Non-interest income		1,672		1,642			5,779			5,404
Salaries & employee benefits		3,923		3,657			15,489			15,090
Occupancy and equipment		915		919			3,586			3,420
Professional fees		201		202			814			978
Marketing expense		247		218			1,114			1,098
FDIC insurance		118		357			557			1,412
Data processing expense		280		325			1,192			1,256
State franchise and deposit tax		272		281			1,118			956
Deposit account related expense		170		250			823			896
Other real estate owned expense		278		1,881			868			1,973
Litigation and loan collection expense		83		58			245			179
Other		835		924			3,320			3,509
Non-interest expense		7,322		9,072			29,126			30,767
Income before income taxes		3,054		1,371			10,824			6,554
Income tax expense (benefit)		614		(31,899	)		2,030			(31,899	)
Net income		2,440		33,270			8,794			38,453
Weighted average shares – Basic		7,457,206		6,259,864			7,159,723			6,249,059
Weighted average shares – Diluted		7,457,206		6,259,864			7,159,723			6,249,059
Basic earnings per common share	$	0.33	$	5.31		$	1.23		$	6.15
Diluted earnings per common share	$	0.33	$	5.31		$	1.23		$	6.15
Cash dividends declared per common share	$	0.00	$	0.00		$	0.00		$	0.00

LIMESTONE BANCORP, INC.
Unaudited Financial Information
(in thousands, except share and per share data)
	Three			Three			Twelve			Twelve
	Months			Months			Months			Months
	Ended			Ended			Ended			Ended
	12/31/18			12/31/17			12/31/18			12/31/17
Average Balance Sheet Data
Assets	$	1,066,216		$	960,269		$	1,026,310		$	947,961
Loans		765,542			695,646			743,352			667,474
Earning assets		1,001,093			916,561			957,454			904,069
Deposits		895,377			862,625			860,825			864,278
Long-term debt and advances		75,339			50,335			75,154			38,057
Interest bearing liabilities		824,300			774,507			799,032			773,247
Stockholders’ equity		89,836			41,397			84,860			37,851
Performance Ratios
Return on average assets		0.91	%		13.75	%		0.86	%		4.06	%
Return on average equity		10.78			318.85			10.36			101.59
Yield on average earning assets (tax equivalent)		4.66			4.24			4.55			4.18
Cost of interest bearing liabilities		1.46			0.88			1.23			0.83
Net interest margin (tax equivalent)		3.46			3.50			3.53			3.48
Efficiency ratio		70.57			97.03			73.82			84.91
Loan Charge-off Data
Loans charged-off	$	(133	)	$	(226	)	$	(616	)	$	(901	)
Recoveries		379			201			1,794			936
Net recoveries (charge-offs)	$	246		$	(25	)	$	1,178		$	35
Nonaccrual Loan Activity
Nonaccrual loans at beginning of period	$	2,692		$	5,769		$	5,457		$	9,216
Net principal pay-downs		(1,124	)		(488	)		(3,594	)		(4,952	)
Charge-offs		(28	)		(137	)		(293	)		(665	)
Loans foreclosed and transferred to OREO		—			—			(730	)		(270	)
Loans returned to accrual status		—			—			(77	)		(199	)
Loans placed on nonaccrual during the period		451			313			1,228			2,327
Nonaccrual loans at end of period	$	1,991		$	5,457		$	1,991		$	5,457
Troubled Debt Restructurings (TDRs)
Accruing	$	910		$	1,217		$	910		$	1,217
Nonaccrual		—			1,829			—			1,829
Total	$	910		$	3,046		$	910		$	3,046
Other Real Estate Owned (OREO) Activity
OREO at beginning of period	$	3,750		$	6,330		$	4,409		$	6,821
Real estate acquired		—			—			730			270
Valuation adjustment write-downs		(265	)		(1,865	)		(850	)		(1,963	)
Proceeds from sales of properties		—			(55	)		(876	)		(793	)
Gain (loss) on sales, net		—			(1	)		72			74
OREO at end of period	$	3,485		$	4,409		$	3,485		$	4,409

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
	12/31/18		9/30/18			6/30/18			3/31/18		12/31/17
Income Statement Data
Interest income	$	11,741	$	11,120		$	10,585		$	10,015	$	9,717
Interest expense		3,037		2,708			2,211			1,834		1,716
Net interest income		8,704		8,412			8,374			8,181		8,001
Provision (negative provision) for loan losses		—		(350	)		(150	)		—		(800	)
Net interest income after provision		8,704		8,762			8,524			8,181		8,801
Service charges on deposit accounts		588		608			591			568		636
Bank card interchange fees		573		411			446			401		403
Bank owned life insurance income		100		100			138			99		103
Gain (loss) on sales and calls of securities, net		—		—			(6	)		—		293
Other		411		390			178			183		207
Non-interest income		1,672		1,509			1,347			1,251		1,642
Salaries & employee benefits		3,923		3,893			3,885			3,788		3,657
Occupancy and equipment		915		896			880			895		919
Professional fees		201		186			222			205		202
Marketing expense		247		259			308			300		218
FDIC insurance		118		118			139			182		357
Data processing expense		280		281			307			324		325
State franchise and deposit tax		272		282			282			282		281
Deposit account related expense		170		213			221			219		250
Other real estate owned expense		278		271			237			82		1,881
Litigation and loan collection expense		83		61			48			53		58
Other		835		770			876			839		924
Non-interest expense		7,322		7,230			7,405			7,169		9,072
Income before income taxes		3,054		3,041			2,466			2,263		1,371
Income tax expense (benefit)		614		604			483			329		(31,899	)
Net income	$	2,440	$	2,437		$	1,983		$	1,934	$	33,270
Weighted average shares – Basic		7,457,206		7,455,316			7,424,742			6,285,420		6,259,864
Weighted average shares – Diluted		7,457,206		7,455,316			7,424,742			6,285,420		6,259,864
Basic earnings per common share	$	0.33	$	0.33		$	0.27		$	0.31	$	5.31
Diluted earnings per common share	$	0.33	$	0.33		$	0.27		$	0.31	$	5.31
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
	12/31/18			9/30/18			6/30/18			3/31/18			12/31/17
Assets
Loans	$	765,244		$	757,051		$	749,234		$	729,432		$	712,115
Allowance for loan losses		(8,880	)		(8,634	)		(8,580	)		(8,526	)		(8,202	)
Net loans		756,364			748,417			740,654			720,906			703,913
Loans held for sale		—			—			—			—			70
Securities available for sale		201,192			184,870			178,896			160,812			152,720
Federal funds sold & interest bearing deposits		28,398			31,761			33,534			30,073			25,966
Cash and due from financial institutions		6,963			5,770			7,013			7,610			8,137
Premises and equipment		14,655			17,027			16,813			16,789			16,789
Premises held for sale		1,050			—			—			—			—
Bank owned life insurance		15,646			15,551			15,456			15,323			15,229
FHLB Stock		7,233			7,233			7,323			7,323			7,323
Other real estate owned		3,485			3,750			4,510			4,385			4,409
Deferred taxes, net		29,282			30,230			30,623			30,997			31,313
Accrued interest receivable and other assets		5,424			5,882			5,699			5,886			4,932
Total Assets	$	1,069,692		$	1,050,491		$	1,040,521		$	1,000,104		$	970,801
Liabilities and Equity
Certificates of deposit	$	450,886		$	457,239		$	435,454		$	431,921		$	424,235
Interest checking		94,269			87,407			88,955			92,048			99,383
Money market		171,924			159,499			150,048			150,974			151,388
Savings		34,534			34,320			35,220			35,984			34,632
Total interest bearing deposits		751,613			738,465			709,677			710,927			709,638
Demand deposits		142,618			135,561			136,553			135,984			137,386
Total deposits		894,231			874,026			846,230			846,911			847,024
FHLB advances		46,549			51,591			71,630			26,752			11,797
Junior subordinated debentures		21,000			21,000			21,000			23,025			23,250
Senior debt		10,000			10,000			10,000			10,000			10,000
Accrued interest payable and other liabilities		5,815			5,662			5,262			5,186			6,057
Total liabilities		977,595			962,279			954,122			911,874			898,128
Preferred stockholders’ equity		—			—			—			2,771			2,771
Common stockholders’ equity		92,097			88,212			86,399			85,459			69,902
Total stockholders’ equity		92,097			88,212			86,399			88,230			72,673
Total Liabilities and Stockholders’ Equity	$	1,069,692		$	1,050,491		$	1,040,521		$	1,000,104		$	970,801
Ending shares outstanding		7,462,720			7,456,590			7,454,993			7,409,864			6,259,864
Book value per common share	$	12.34		$	11.83		$	11.59		$	11.53		$	11.17
Tangible book value per common share		12.34			11.83			11.59			11.53			11.17

LIMESTONE BANCORP, INC.
Unaudited Financial Information
(in thousands, except share and per share data)
	As of
	12/31/18			9/30/18			6/30/18			3/31/18			12/31/17
Quarterly Performance Ratios
Return on average assets		0.91	%		0.93	%		0.79	%		0.79	%		13.75	%
Return on average equity		10.78			11.05			8.97			10.71			318.85
Yield on average earning assets (tax equivalent)		4.66			4.56			4.51			4.45			4.24
Cost of interest bearing liabilities		1.46			1.32			1.13			0.96			0.88
Net interest margin (tax equivalent)		3.46			3.45			3.57			3.63			3.50
Efficiency ratio		70.57			72.88			76.13			76.01			97.03
Asset Quality Data
Nonaccrual loans	$	1,991		$	2,692		$	3,170		$	4,370		$	5,457
Troubled debt restructurings on accrual		910			910			916			922			1,217
Loan 90 days or more past due still on accrual		—			—			—			—			1
Total non-performing loans		2,901			3,602			4,086			5,292			6,675
Real estate acquired through foreclosures		3,485			3,750			4,510			4,385			4,409
Other repossessed assets		—			—			—			—			—
Total non-performing assets	$	6,386		$	7,352		$	8,596		$	9,677		$	11,084
Non-performing loans to total loans		0.38	%		0.48	%		0.55	%		0.73	%		0.94	%
Non-performing assets to total assets		0.60			0.70			0.83			0.97			1.14
Allowance for loan losses to non-performing loans		306.10			239.70			209.99			161.11			122.88
Allowance for loan losses to total loans		1.16	%		1.14	%		1.15	%		1.17	%		1.15	%
Loans by Risk Category
Pass	$	745,604		$	736,193		$	720,446		$	695,507		$	673,033
Watch		13,164			12,314			19,091			17,938			25,715
Special Mention		113			114			115			162			164
Substandard		6,363			8,430			9,582			15,825			13,203
Doubtful		—			—			—			—			—
Total	$	765,244		$	757,051		$	749,234		$	729,432		$	712,115
Loans by Past Due Status
Past due loans:
30 – 59 days	$	1,593		$	1,492		$	1,134		$	6,402		$	1,478
60 – 89 days		331			929			538			472			171
90 days or more		—			—			—			—			1
Nonaccrual loans		1,991			2,692			3,170			4,370			5,457
Total past due and nonaccrual loans	$	3,915		$	5,113		$	4,842		$	11,244		$	7,107
Risk-based Capital Ratios - Company
Tier I leverage ratio		9.00	%		8.91	%		8.70	%		9.18	%		7.11	%
Common equity Tier I risk-based capital ratio		9.44			9.21			8.92			8.98			6.92
Tier I risk-based capital ratio		11.08			10.83			10.41			11.03			8.44
Total risk-based capital ratio		12.23			12.07			11.76			12.56			10.55
Risk-based Capital Ratios – Limestone Bank
Tier I leverage ratio		9.60	%		9.51	%		9.37	%		9.31	%		8.70	%
Common equity Tier I risk-based capital ratio		11.83			11.56			11.23			11.18			10.35
Tier I risk-based capital ratio		11.83			11.56			11.23			11.18			10.35
Total risk-based capital ratio		12.88			12.60			12.26			12.43			11.61
FTE employees		214			215			217			214			217

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
	12/31/18			9/30/18			6/30/18			3/31/18			12/31/17
Efficiency Ratio	(in thousands)
Net interest income	$	8,704		$	8,412		$	8,374		$	8,181		$	8,001
Non-interest income		1,672			1,509			1,347			1,251			1,642
Less: Net gain (loss) on securities		—			—			(6	)		—			293
Revenue used for efficiency ratio		10,376			9,921			9,727			9,432			9,350
Non-interest expense		7,322			7,230			7,405			7,169			9,072
Efficiency ratio		70.57	%		72.88	%		76.13	%		76.01	%		97.03	%

	Twelve Months Ended
	12/31/18			12/31/17
Efficiency Ratio	(in thousands)
Net interest income	$	33,671		$	31,117
Non-interest income		5,779			5,404
Less: Net gain (loss) on securities		(6	)		288
Revenue used for efficiency ratio		39,456			36,233
Non-interest expense		29,126			30,767
Efficiency ratio		73.82	%		84.91	%

CONTACT:
John T. Taylor
Chief Executive Officer
(502) 499-4800