Limestone Bancorp (LMST) 8-K Results of Operations and Financial Condition

Exhibit 99.1

Limestone Bancorp Reports Net Income of $3.6 Million, or $0.49 Per Diluted Share, for the 2^nd Quarter of 2019 and $6.5 Million, or $0.87 Per Diluted Share, for the Six Months Ended June 30, 2019

LOUISVILLE, Ky.--(BUSINESS WIRE)--July 24, 2019--Limestone Bancorp, Inc. (NASDAQ: LMST) (“the Company”), parent company of Limestone Bank (“the Bank”), today reported unaudited results for the second quarter of 2019. Net income available to common shareholders for the second quarter of 2019 was $3.6 million, or $0.49 per basic and diluted common share, compared with $2.0 million, or $0.27 per basic and diluted share, for the second quarter of 2018. Net income for the six months ended June 30, 2019, was $6.5 million, or $0.87 per diluted common share, compared with net income of $3.9 million, or $0.57 per diluted share, for the six months ended June 30, 2018.

Net income before taxes was $3.0 million and $6.0 million for the second quarter of 2019 and for the first six months of 2019, respectively, compared to $2.5 million and $4.7 million for the second quarter and first six months of 2018, respectively. Income tax benefit was $611,000 and $488,000 for the second quarter of 2019 and for the first six months of 2019, respectively, compared to income tax expense of $483,000 and $812,000 for the second quarter of 2018 and for the first six months of 2018, respectively.

Income Taxes – During the first quarter of 2019, the Company benefitted $341,000, or $0.05 per basic and diluted share, from the establishment of a net deferred tax asset related to a change in Kentucky tax law enacted during the quarter. The new law eliminates the Kentucky bank franchise tax, which is assessed at a rate of 1.1% of average capital, and implements a state income tax for the Bank at a statutory rate of 5%. The new Kentucky income tax will go into effect on January 1, 2021.

In addition, the Company had state net operating loss carryforwards (“NOLs”) of $30.2 million, which were previously subject to a full valuation allowance and will begin to expire in 2025. In April 2019, tax legislation was enacted which allowed for certain Kentucky NOLs to be utilized in a combined filing return. Therefore, the Company will begin filing a Kentucky combined filing in 2021, and as a result, a state NOL tax benefit, net of federal impact, of $1.2 million, or approximately $0.16 per basic and diluted share, was recognized in the second quarter of 2019.

Net Interest Income – Net interest income decreased to $8.8 million for the second quarter of 2019, compared with $9.0 million in the first quarter of 2019 and increased from $8.4 million in the second quarter of 2018. Average loans increased to $793.5 million for the second quarter of 2019, compared to $766.5 million for the first quarter of 2019 and $734.7 million for the second quarter of 2018. Net interest margin decreased to 3.42% in the second quarter of 2019, compared with 3.61% for the first quarter of 2019 and 3.57% for the second quarter of 2018.

The yield on earning assets decreased to 4.81% for the second quarter of 2019, compared to 4.90% for the first quarter of 2019 and increased from 4.51% in the second quarter of 2018. Loan fee income can meaningfully impact net interest income, loan yields, and net interest margin. The amount of loan fee income included in total interest income was $167,000, $546,000, and $92,000 for the quarters ended June 30, 2019, March 31, 2019, and June 30, 2018, respectively. This represents six basis points, 22 basis points, and four basis points of yield on earning assets and net interest margin for the quarters ended June 30, 2019, March 31, 2019, and June 30, 2018, respectively. The cost of interest bearing liabilities was 1.68% for the second quarter of 2019, compared to 1.57% for the first quarter of 2019 and 0.42% for the second quarter of 2018.

Net interest income increased to $17.8 million for the first six months of 2019, compared with $16.6 million in the first six months of 2018. Average loans increased to $780.0 million for the first six months of 2019, compared to $729.5 million for the first six months of 2018. Net interest margin decreased to 3.51% in the first six months of 2019, compared with 3.60% for the first six months of 2018.

The yield on earning assets increased to 4.86% for the first six months of 2019, compared to 4.48% for the first six months of 2018. The amount of loan fee income included in total interest income was $713,000 and $189,000 for the six months ended June 30, 2019 and June 30, 2018, respectively. This represents 14 basis points and four basis points of yield on earning assets and net interest margin for the six months ended June 30, 2019 and 2018, respectively. The cost of interest bearing liabilities was 1.62% for the first six months of 2019, compared to 1.05% in the first six months of 2018.

Provision and Allowance for Loan Losses – The allowance for loan losses to total loans was 1.10% at June 30, 2019, compared to 1.10% at March 31, 2019, and 1.15% at June 30, 2018. Net loan recoveries were $146,000 and net loan charge-offs of $48,000, respectively, for the three and six months ended June 30, 2019, compared to net loan recoveries of $204,000 and $528,000, respectively, for the three and six months ended June 30, 2018. Based upon historically strong trends in asset quality and management’s assessment of risk in the loan portfolio, no provision for loan losses was recorded for the three and six months ended June 30, 2019, compared to a negative provision for loan loss of $150,000 recorded for the three and six months ended June 30, 2018.

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”), remained unchanged at $6.2 million, or 0.55% of total assets, at June 30, 2019, compared with $6.2 million, or 0.57% of total assets, at March 31, 2019, and decreased compared to $8.6 million, or 0.83% of total assets, at June 30, 2018. Non-performing loans increased to $2.9 million, or 0.37% of total loans, at June 30, 2019, compared with $2.8 million, or 0.36% of total loans, at March 31, 2019, and decreased from $4.1 million, or 0.55% of total loans, at June 30, 2018.

OREO decreased to $3.2 million at June 30, 2019, compared with $3.3 million at March 31, 2019, and $4.5 million at June 30, 2018. Fair value write-downs arising from changing marketing strategies totaled $110,000 and $260,000 for the three and six months ended June 30, 2019, respectively, compared to $265,000 and $325,000 for the three and six months ended June 30, 2018, respectively.

Non-interest Income and Expense – Non-interest income for the second quarter of 2019 increased $99,000 to $1.4 million, compared with $1.3 million for the second quarter of 2018. The increase from the second quarter of 2018 was primarily due to an increase in bank card interchange fees of $150,000. Non-interest expense decreased $181,000, or 2.4% to $7.2 million for the second quarter of 2019, compared with $7.4 million for the second quarter of 2018. The decrease from the second quarter of 2018 was primarily due to a decrease of $96,000 in marketing expense and $95,000 in OREO expense.

Non-interest income for the first six months of 2019 increased $132,000 to $2.7 million, compared with $2.6 million for the first six months of 2018. The increase was primarily due to an increase in bank card interchange fees of $257,000 partially offset by a decrease in service charges on deposit accounts of $92,000. Non-interest expense decreased $69,000, or 0.5% to $14.5 million for the first six months of 2019, compared with $14.6 million for the first six months of 2018. The decrease was primarily due to decreases of $169,000 in marketing expense and $110,000 in FDIC insurance expense partially offset by an increase in salaries and employee benefits of $157,000, or 2.0%, and an increase in deposit account related expense of $151,000.

Capital – At June 30, 2019, the Bank’s Tier 1 leverage ratio was 10.01%, compared with 9.88% at March 31, 2019, and its Total risk-based capital ratio was 13.26% at June 30, 2019, compared with 13.01% at March 31, 2019. At June 30, 2019, the Company’s Tier 1 leverage ratio was 9.46%, compared with 9.30% at March 31, 2019, and its Total risk-based capital ratio was 12.56%, compared with 12.32% at March 31, 2019. At June 30, 2019, the Company’s Common equity Tier 1 risk-based capital ratio was 9.82%, compared with 9.57% at March 31, 2019.

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, 2018.

Additional Information
Unaudited supplemental financial information for the second quarter ending June 30, 2019, follows.

LIMESTONE BANCORP, INC. Unaudited Financial Information (in thousands, except share and per share data)
	Three			Three			Six				Six
	Months			Months			Months				Months
	Ended			Ended			Ended				Ended
	6/30/19			6/30/18			6/30/19				6/30/18
Income Statement Data
Interest income	$	12,376		$	10,585		$		24,562		$	20,600
Interest expense		3,576			2,211				6,803			4,045
Net interest income		8,800			8,374				17,759			16,555
Provision (negative provision) for loan losses		—			(150	)			—			(150	)
Net interest income after provision		8,800			8,524				17,759			16,705
Service charges on deposit accounts		571			591				1,067			1,159
Bank card interchange fees		596			446				1,104			847
Bank owned life insurance income		118			138				217			237
Gain (loss) on sales and calls of securities, net		(5	)		(6	)			(5	)		(6	)
Other		166			178				347			361
Non-interest income		1,446			1,347				2,730			2,598
Salaries & employee benefits		3,915			3,885				7,830			7,673
Occupancy and equipment		854			880				1,752			1,775
Professional fees		179			222				344			427
Marketing expense		212			308				439			608
FDIC insurance		103			139				211			321
Data processing expense		315			307				628			631
State franchise and deposit tax		315			282				630			564
Deposit account related expense		310			221				591			440
Other real estate owned expense		142			237				308			319
Litigation and loan collection expense		34			48				80			101
Other		845			876				1,692			1,715
Non-interest expense		7,224			7,405				14,505			14,574
Income before income taxes		3,022			2,466				5,984			4,729
Income tax expense (benefit)		(611	)		483				(488	)		812
Net income	$	3,633		$	1,983		$		6,472		$	3,917
Weighted average shares – Basic		7,459,631			7,424,742			7,464,743				6,858,228
Weighted average shares – Diluted		7,459,631			7,424,742			7,464,743				6,858,228
Basic earnings per common share	$	0.49		$	0.27		$	0.87			$	0.57
Diluted earnings per common share	$	0.49		$	0.27		$	0.87			$	0.57
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		Three		Three				Three
	Months			Months		Months		Months				Months
	Ended			Ended		Ended		Ended				Ended
	6/30/19			3/31/19		12/31/18		9/30/18				6/30/18
Income Statement Data
Interest income	$	12,376		$	12,186	$	11,741	$		11,120		$	10,585
Interest expense		3,576			3,227		3,037			2,708			2,211
Net interest income		8,800			8,959		8,704			8,412			8,374
Provision (negative provision) for loan losses		—			—		—			(350	)		(150	)
Net interest income after provision		8,800			8,959		8,704			8,762			8,524
Service charges on deposit accounts		571			496		588			608			591
Bank card interchange fees		596			508		573			411			446
Bank owned life insurance income		118			99		100			100			138
Gain (loss) on sales and calls of securities, net		(5	)		—		—			—			(6	)
Other		166			181		411			390			178
Non-interest income		1,446			1,284		1,672			1,509			1,347
Salaries & employee benefits		3,915			3,915		3,923			3,893			3,885
Occupancy and equipment		854			898		915			896			880
Professional fees		179			165		201			186			222
Marketing expense		212			227		247			259			308
FDIC insurance		103			108		118			118			139
Data processing expense		315			313		280			281			307
State franchise and deposit tax		315			315		272			282			282
Deposit account related expense		310			281		170			213			221
Other real estate owned expense		142			166		278			271			237
Litigation and loan collection expense		34			46		83			61			48
Other		845			847		835			770			876
Non-interest expense		7,224			7,281		7,322			7,230			7,405
Income before income taxes		3,022			2,962		3,054			3,041			2,466
Income tax expense (benefit)		(611	)		123		614			604			483
Net income	$	3,633		$	2,839	$	2,440	$		2,437		$	1,983
Weighted average shares – Basic		7,459,631			7,469,912		7,457,206		7,455,316				7,424,742
Weighted average shares – Diluted		7,459,631			7,469,912		7,457,206		7,455,316				7,424,742
Basic earnings per common share	$	0.49		$	0.38	$	0.33	$	0.33			$	0.27
Diluted earnings per common share	$	0.49		$	0.38	$	0.33	$	0.33			$	0.27
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
	6/30/19			3/31/19			12/31/18			9/30/18			6/30/18
Assets
Loans	$	803,114		$	786,585		$	765,244		$	757,051		$	749,234
Allowance for loan losses		(8,832	)		(8,686	)		(8,880	)		(8,634	)		(8,580	)
Net loans		794,282			777,899			756,364			748,417			740,654
Securities available for sale		208,614			206,411			201,192			184,870			178,896
Federal funds sold & interest bearing deposits		40,755			24,029			28,398			31,761			33,534
Cash and due from financial institutions		6,860			6,461			6,963			5,770			7,013
Premises and equipment		14,827			14,926			14,655			17,027			16,813
Premises held for sale		995			1,050			1,050			—			—
Bank owned life insurance		15,853			15,739			15,646			15,551			15,456
FHLB Stock		6,693			6,813			7,233			7,233			7,323
Other real estate owned		3,225			3,335			3,485			3,750			4,510
Deferred taxes, net		28,708			28,568			29,282			30,230			30,623
Accrued interest receivable and other assets		5,976			6,092			5,424			5,882			5,699
Total Assets	$	1,126,788		$	1,091,323		$	1,069,692		$	1,050,491		$	1,040,521
Liabilities and Equity
Certificates of deposit	$	505,263		$	465,369		$	450,886		$	457,239		$	435,454
Interest checking		95,296			96,537			94,269			87,407			88,955
Money market		162,917			166,430			171,924			159,499			150,048
Savings		33,553			34,066			34,534			34,320			35,220
Total interest bearing deposits		797,029			762,402			751,613			738,465			709,677
Demand deposits		141,448			146,440			142,618			135,561			136,553
Total deposits		938,477			908,842			894,231			874,026			846,230
FHLB advances		51,470			51,511			46,549			51,591			71,630
Junior subordinated debentures		21,000			21,000			21,000			21,000			21,000
Senior debt		10,000			10,000			10,000			10,000			10,000
Accrued interest payable and other liabilities		4,419			3,651			5,815			5,662			5,262
Total liabilities		1,025,366			995,004			977,595			962,279			954,122
Total common stockholders’ equity		101,422			96,319			92,097			88,212			86,399
Total Liabilities and Stockholders’ Equity	$	1,126,788		$	1,091,323		$	1,069,692		$	1,050,491		$	1,040,521
Ending shares outstanding		7,457,832			7,460,614			7,462,720			7,456,590			7,454,993
Book value per common share	$	13.60		$	12.91		$	12.34		$	11.83		$	11.59
Tangible book value per common share		13.60			12.91			12.34			11.83			11.59

LIMESTONE BANCORP, INC. Unaudited Financial Information (in thousands, except share and per share data)
	As of
	6/30/19			3/31/19			12/31/18			9/30/18			6/30/18
Average Balance Sheet Data
Assets	$	1,100,459		$	1,075,553		$	1,066,216		$	1,037,636		$	1,013,008
Loans		793,460			766,505			765,542			748,444			734,709
Earning assets		1,033,581			1,009,948			1,001,093			968,876			943,023
Deposits		926,730			900,829			895,377			869,707			842,757
Long-term debt and advances		71,989			76,524			75,339			74,994			76,209
Interest bearing liabilities		855,100			834,637			824,300			810,917			783,123
Stockholders’ equity		97,730			93,491			89,836			87,486			88,701
Quarterly Performance Ratios
Return on average assets		1.32	%		1.07	%		0.91	%		0.93	%		0.79	%
Return on average equity		14.91			12.32			10.78			11.05			8.97
Yield on average earning assets (tax equivalent)		4.81			4.90			4.66			4.56			4.51
Cost of interest bearing liabilities		1.68			1.57			1.46			1.32			1.13
Net interest margin (tax equivalent)		3.42			3.61			3.46			3.45			3.57
Efficiency ratio		70.47			71.08			70.57			72.88			76.13
Asset Quality Data
Nonaccrual loans	$	2,028		$	1,921		$	1,991		$	2,692		$	3,170
Troubled debt restructurings on accrual		905			910			910			910			916
Loan 90 days or more past due still on accrual		—			—			—			—			—
Total non-performing loans		2,933			2,831			2,901			3,602			4,086
Real estate acquired through foreclosures		3,225			3,335			3,485			3,750			4,510
Other repossessed assets		—			—			—			—			—
Total non-performing assets	$	6,158		$	6,166		$	6,386		$	7,352		$	8,596
Non-performing loans to total loans		0.37	%		0.36	%		0.38	%		0.48	%		0.55	%
Non-performing assets to total assets		0.55			0.57			0.60			0.70			0.83
Allowance for loan losses to non-performing loans		301.13			306.82			306.10			239.70			209.99
Allowance for loan losses to total loans		1.10	%		1.10	%		1.16	%		1.14	%		1.15	%
Loan Charge-off Data
Loans charged off	$	(72	)	$	(278	)	$	(133	)	$	(143	)	$	(293	)
Recoveries		218			84			379			547			497
Net recoveries (charge-offs)	$	146		$	(194	)	$	246		$	404		$	204
Loans by Risk Category
Pass	$	767,662		$	756,493		$	745,604		$	736,193		$	720,446
Watch		22,929			17,412			13,164			12,314			19,091
Special Mention		—			—			113			114			115
Substandard		12,523			12,680			6,363			8,430			9,582
Doubtful		—			—			—			—			—
Total	$	803,114		$	786,585		$	765,244		$	757,051		$	749,234
Loans by Past Due Status
Past due loans:
30 – 59 days	$	858		$	2,001		$	1,593		$	1,492		$	1,134
60 – 89 days		1,015			240			331			929			538
90 days or more		—			—			—			—			—
Nonaccrual loans		2,028			1,921			1,991			2,692			3,170
Total past due and nonaccrual loans	$	3,901		$	4,162		$	3,915		$	5,113		$	4,842

LIMESTONE BANCORP, INC. Unaudited Financial Information (in thousands, except share and per share data)
	As of
	6/30/19		3/31/19		12/31/18		9/30/18		6/30/18
Risk-based Capital Ratios - Company
Tier I leverage ratio	9.46	%	9.30	%	9.00	%	8.91	%	8.70	%
Common equity Tier I risk-based capital ratio	9.82		9.57		9.44		9.21		8.92
Tier I risk-based capital ratio	11.56		11.29		11.08		10.83		10.41
Total risk-based capital ratio	12.56		12.32		12.23		12.07		11.76
Risk-based Capital Ratios – Limestone Bank
Tier I leverage ratio	10.01	%	9.88	%	9.60	%	9.51	%	9.37	%
Common equity Tier I risk-based capital ratio	12.26		12.01		11.83		11.56		11.23
Tier I risk-based capital ratio	12.26		12.01		11.83		11.56		11.23
Total risk-based capital ratio	13.26		13.01		12.88		12.60		12.26
FTE employees	219		207		214		215		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
	6/30/19			3/31/19			12/31/18			9/30/18			6/30/18
Efficiency Ratio	(in thousands)
Net interest income	$	8,800		$	8,959		$	8,704		$	8,412		$	8,374
Non-interest income		1,446			1,284			1,672			1,509			1,347
Less: Net gain (loss) on securities		(5)			—			—			—			(6)
Revenue used for efficiency ratio		10,251			10,243			10,376			9,921			9,727
Non-interest expense		7,224			7,281			7,322			7,230			7,405
Efficiency ratio		70.47	%		71.08	%		70.57	%		72.88	%		76.13	%

	Six Months Ended
	6/30/19			6/30/18
Efficiency Ratio	(in thousands)
Net interest income	$	17,759		$	16,555
Non-interest income		2,730			2,598
Less: Net gain (loss) on securities		(5)			(6)
Revenue used for efficiency ratio		20,494			19,159
Non-interest expense		14,505			14,574
Efficiency ratio		70.78	%		76.07	%

Contacts

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