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Limestone Bancorp Reports Net Income of $1.8 million, or $0.24 per Diluted Share, for the 4th Quarter of 2019 and $10.5 million, or $1.41 per Diluted Share, for the Twelve Months Ended December 31, 2019

Non-recurring Acquisition Related Expenses totaled $775,000, or $0.08 per Diluted Share

Limestone Bancorp, Inc. (NASDAQ: LMST) ("the Company"), parent company of Limestone Bank ("the Bank"), today reported unaudited results for the fourth quarter and full year 2019. Net income available to common shareholders for the fourth quarter of 2019 was $1.8 million, or $0.24 per basic and diluted common share, compared with $2.4 million, or $0.33 per basic and diluted share, for the fourth quarter of 2018. Net income for the year ended December 31, 2019, was $10.5 million, or $1.41 per diluted common share, compared with $8.8 million, or $1.23 per diluted share, for the year ended December 31, 2018.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20200122005728/en/

Limestone Bank Branch Locations (Graphic: Business Wire)

Net income before taxes was $11.0 million for the year ended December 31, 2019, compared with $10.8 million for the year ended December 31, 2018. Income tax expense was $480,000 for 2019 compared to $2.0 million for 2018.

Branch Acquisition On November 15, 2019, the Bank completed the acquisition of four branch banking centers located in the Kentucky cities of Elizabethtown, Frankfort, and Owensboro. The purchase included approximately $126.8 million in performing loans and $1.5 million in premises and equipment, as well as approximately $131.8 million in customer deposits. This acquisition allows the Bank to further optimize its branch footprint regionally and solidifies its presence and ability to serve customers in Daviess, Hardin, and Franklin counties. Fourth quarter results were impacted by non-recurring acquisition related expenses of approximately $775,000, or $0.08 per common share after taxes.

Income Taxes During the first and second quarters of 2019, the Company benefitted from the enactment of state tax legislation eliminating the Kentucky bank franchise tax which is assessed at a rate of 1.1% of average capital. The legislation 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, and the Company will begin filing a Kentucky combined filing in 2021. The enactment resulted in a tax benefit of $341,000, or $0.05 per basic and diluted share, in the first quarter of 2019 and $1.2 million, or approximately $0.16 per basic and diluted share, in the second quarter of 2019.

Net Interest Income On a sequential quarter basis, net interest margin was under pressure as the Federal Reserve lowered its federal funds target rate by 25 basis points on July 31, 2019, September 18, 2019, and October 30, 2019. The Companys interest rate risk profile is marginally asset sensitive as its assets generally reprice more quickly than its liabilities over a twelve-month horizon. In particular, the Feds actions served to lower rates on the short end of the yield curve impacting yields on fed funds, certain floating rate investment securities, and loans with variable rate pricing features. As of December 31, 2019, time deposits comprise $476.5 million of the Companys liabilities with $389.3 million, or 82%, set to reprice or mature within one year of which, $179.4 million with a current average rate of 2.19% reprice or mature in the first quarter of 2020.

Net interest income was $8.9 million for the fourth quarter of 2019, compared to $8.7 million in the third quarter of 2019, and $8.7 million in the fourth quarter of 2018. Average loans increased to $846.2 million for the fourth quarter of 2019, compared to $800.2 million for the third quarter of 2019 and $765.5 million for the fourth quarter of 2018, and was positively impacted by the loans acquired in the branch purchase transaction. Net interest margin decreased to 3.23% in the fourth quarter of 2019, compared with 3.35% for the third quarter of 2019 and 3.46% for the fourth quarter of 2018.

The yield on earning assets decreased to 4.57% for the fourth quarter of 2019, compared to 4.79% for the third quarter of 2019 and 4.66% in the fourth 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 $218,000, $247,000, and $167,000 for the quarters ended December 31, 2019, September 30, 2019, and December 31, 2018, respectively. This represents eight basis points, nine basis points, and seven basis points of yield on earning assets and net interest margin for the quarters ended December 31, 2019, September 30, 2019, and December 31, 2018, respectively.

The cost of interest-bearing liabilities was 1.65% for the fourth quarter of 2019, compared to 1.75% for the third quarter of 2019 and 1.46% for the fourth quarter of 2018. Net interest income and the cost of interest-bearing liabilities for the fourth quarter of 2019 were also impacted by the subordinated debt issuance of $17.0 million at a fixed rate of 5.75% on July 23, 2019. This capital was deployed in the branch acquisition transaction.

Net interest income increased to $35.4 million for the year ended December 31, 2019, compared with $33.7 million for 2018. Average loans increased to $801.8 million for 2019, compared with $743.4 million for 2018. Net interest margin decreased to 3.40% for 2019, compared with 3.53% for 2018. The yield on earning assets increased to 4.76% for the year ended December 31, 2019, compared to 4.55% for 2018 and cost of interest-bearing liabilities was 1.66% for 2019, compared to 1.23% for 2018.

Provision and Allowance for Loan Losses The allowance for loan losses to total loans was 0.90% at December 31, 2019, compared to 1.11% at September 30, 2019, and 1.16% at December 31, 2018. Excluding acquired loans, the allowance for loan losses to total loans was 1.04% at December 31, 2019. Loans acquired in the branch purchase transaction totaled approximately $124.7 million at December 31, 2019, and were recorded at fair value as determined by an independent third party which includes adjustments for yield and credit risk. Net loan charge-offs were $504,000 for 2019, compared to net loan recoveries of $1.2 million for 2018. Based upon historically strong trends in asset quality and managements assessment of risk in the loan portfolio, no provision for loan losses was recorded for the year ended December 31, 2019, compared to a negative provision for loan losses of $500,000 for 2018. No provision was recorded in the fourth quarter of 2019 or 2018, respectively.

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 $5.2 million, or 0.42% of total assets, at December 31, 2019, compared with $5.8 million, or 0.51% of total assets, at September 30, 2019, and decreased compared to $6.4 million, or 0.60% of total assets, at December 31, 2018. Non-performing loans decreased to $2.0 million, or 0.22% of total loans, at December 31, 2019, compared with $2.6 million, or 0.32% of total loans, at September 30, 2019, and decreased from $2.9 million, or 0.38% of total loans, at December 31, 2018.

OREO remained unchanged at $3.2 million at December 31, 2019, compared to September 30, 2019, and decreased compared to $3.5 million at December 31, 2018. Fair value write-downs arising from changing marketing strategies and new appraisals totaled $260,000 for 2019, compared to $850,000 for 2018.

Non-interest Income and Expense Non-interest income increased $139,000 to $5.9 million for the year ended December 31, 2019, compared with $5.8 million for the year ended December 31, 2018. The increase was primarily due to an increase in bank card interchange fees of $607,000 partially offset by a decrease in other non-interest income of $468,000 related to the $150,000 one-time gain on the sale of the secondary market residential servicing rights portfolio in the third quarter of 2018 and a $632,000 gain on the sale of a subdivided lot at the Companys headquarters offset by a $392,000 impairment charge associated with the transfer of the Banks former data processing center to Premises Held for Sale in the fourth quarter of 2018.

Non-interest expense increased $1.1 million, or 3.9% to $30.3 million, for the year ended December 31, 2019, compared with $29.1 million for the year ended December 31, 2018, primarily due to approximately $775,000 of expenses attributable to the branch acquisition. There was also an increase of $744,000 in salary and employee benefits, as the Bank added sales talent and customer facing associates during 2019, and branch staff added in connection with the branch purchase transaction. Deposit account related expense increased $401,000, which was offset by decreases in OREO expenses of $500,000, and FDIC insurance expense of $346,000.

Non-interest income for the fourth quarter of 2019 decreased $18,000 to $1.7 million, compared with $1.7 million for the fourth quarter of 2018. The decrease from the fourth quarter of 2018 was primarily due to an increase in bank card interchange fees of $138,000 offset by a decrease in other non-interest income related to gains on sales as described in the paragraph above.

Non-interest expense increased $992,000 to $8.3 million for the fourth quarter of 2019, compared with $7.3 million for the fourth quarter of 2018. The increase from the fourth quarter of 2018 was primarily due to $775,000 of expenses attributable to the branch transaction as well as an increase of $278,000 in salary and employee benefits, as the Bank added sales talent and customer facing associates during 2019 and branch staff added in connection with the branch purchase transaction. This increase was partially offset by a decrease in OREO expenses of $243,000 and FDIC insurance expense of $118,000.

Capital At December 31, 2019, the Banks Tier 1 leverage ratio was 9.99%, compared with 9.60% at December 31, 2018, and its Total risk-based capital ratio was 12.08% at December 31, 2019, compared with 12.88% at December 31, 2018. At December 31, 2019, the Banks Common equity Tier 1 risk-based capital ratio was 11.25%, compared with 11.83% at December 31, 2018. At December 31, 2019, the Companys Tier 1 leverage ratio was 8.30%, compared with 9.00% at December 31, 2018, and its Total risk-based capital ratio was 11.85%, compared with 12.23% at December 31, 2018. At December 31, 2019, the Companys Common equity Tier 1 risk-based capital ratio was 8.32%, compared with 9.44% at December 31, 2018. The decrease in the ratios resulted primarily from the core deposit intangible and goodwill arising from the branch acquisitions, which closed on November 15, 2019.

The Companys capital ratios were positively impacted by the $17.0 million of subordinated notes issued during the third quarter, as the subordinated notes meet the requirements to qualify as Tier 2 capital. The Banks capital ratios also benefitted as the Company contributed $10.0 million of the proceeds to the Bank as Common Equity Tier 1 Capital.

About Limestone Bancorp, Inc.

Limestone Bancorp, Inc. (NASDAQ: LMST) is a Louisville, Kentucky-based bank holding company, which operates banking centers in 14 counties through its wholly-owned subsidiary Limestone Bank. The Banks markets include metropolitan Louisville in Jefferson County and the surrounding counties of Bullitt and Henry and extend south along the Interstate 65 corridor. The Bank serves south central, southern, and western Kentucky from banking centers in Barren, Butler, Daviess, Edmonson, Green, Hardin, Hart, Ohio, and Warren counties. The Bank also has banking centers in Lexington, Kentucky, the second largest city in the state, and Frankfort, Kentucky, the state capital. 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 Bancorps 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. These forward-looking statements include statements related to the expected benefits of the branch acquisition. 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 fourth quarter ending December 31, 2019, 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

 

 

12/31/19

 

12/31/18

 

12/31/19

 

12/31/18

 

 

 

 

 

 

 

 

 

 

 

 

Income Statement Data

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

$

12,537

 

$

11,741

 

$

49,584

 

$

43,461

 

Interest expense

 

3,676

 

 

3,037

 

 

14,234

 

 

9,790

 

Net interest income

 

8,861

 

 

8,704

 

 

35,350

 

 

33,671

 

Provision (negative provision) for loan losses

 


 

 


 

 


 

 

(500

)

Net interest income after provision

 

8,861

 

 

8,704

 

 

35,350

 

 

34,171

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service charges on deposit accounts

 

681

 

 

588

 

 

2,381

 

 

2,355

 

Bank card interchange fees

 

711

 

 

573

 

 

2,438

 

 

1,831

 

Bank owned life insurance income

 

96

 

 

100

 

 

410

 

 

437

 

Gain (loss) on sales and calls of securities, net

 


 

 


 

 

(5

)

 

(6

)

Other

 

166

 

 

411

 

 

694

 

 

1,162

 

Non-interest income

 

1,654

 

 

1,672

 

 

5,918

 

 

5,779

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries & employee benefits

 

4,201

 

 

3,923

 

 

16,233

 

 

15,489

 

Occupancy and equipment

 

890

 

 

915

 

 

3,522

 

 

3,586

 

Professional fees

 

171

 

 

201

 

 

769

 

 

814

 

Marketing expense

 

218

 

 

247

 

 

908

 

 

1,114

 

FDIC insurance

 


 

 

118

 

 

211

 

 

557

 

Data processing expense

 

316

 

 

280

 

 

1,259

 

 

1,192

 

State franchise and deposit tax

 

265

 

 

272

 

 

1,210

 

 

1,118

 

Deposit account related expense

 

333

 

 

170

 

 

1,224

 

 

823

 

Other real estate owned expense

 

35

 

 

278

 

 

368

 

 

868

 

Litigation and loan collection expense

 

77

 

 

83

 

 

189

 

 

245

 

Communications expense

 

200

 

 

174

 

 

772

 

 

701

 

Insurance expense

 

109

 

 

107

 

 

444

 

 

478

 

Postage and delivery

 

140

 

 

66

 

 

544

 

 

364

 

Acquisition costs

 

775

 

 


 

 

775

 

 


 

Other

 

584

 

 

488

 

 

1,842

 

 

1,777

 

Non-interest expense

 

8,314

 

 

7,322

 

 

30,270

 

 

29,126

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

2,201

 

 

3,054

 

 

10,998

 

 

10,824

 

Income tax expense

 

437

 

 

614

 

 

480

 

 

2,030

 

Net income

$

1,764

 

$

2,440

 

$

10,518

 

$

8,794

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares Basic

 

7,471,680

 

 

7,457,206

 

 

7,468,215

 

 

7,159,723

 

Weighted average shares Diluted

 

7,471,680

 

 

7,457,206

 

 

7,468,215

 

 

7,159,723

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per common share

$

0.24

 

$

0.33

 

$

1.41

 

$

1.23

 

Diluted earnings per common share

$

0.24

 

$

0.33

 

$

1.41

 

$

1.23

 

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

 

 

12/31/19

 

9/30/19

 

6/30/19

 

3/31/19

 

12/31/18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income Statement Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

$

12,537

 

$

12,485

 

$

12,376

 

$

12,186

 

$

11,741

 

Interest expense

 

3,676

 

 

3,755

 

 

3,576

 

 

3,227

 

 

3,037

 

Net interest income

 

8,861

 

 

8,730

 

 

8,800

 

 

8,959

 

 

8,704

 

Provision (negative provision) for loan losses

 


 

 


 

 


 

 


 

 


 

Net interest income after provision

 

8,861

 

 

8,730

 

 

8,800

 

 

8,959

 

 

8,704

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service charges on deposit accounts

 

681

 

 

633

 

 

571

 

 

496

 

 

588

 

Bank card interchange fees

 

711

 

 

623

 

 

596

 

 

508

 

 

573

 

Bank owned life insurance income

 

96

 

 

97

 

 

118

 

 

99

 

 

100

 

Gain (loss) on sales and calls of securities, net

 


 

 


 

 

(5

)

 


 

 


 

Other

 

166

 

 

181

 

 

166

 

 

181

 

 

411

 

Non-interest income

 

1,654

 

 

1,534

 

 

1,446

 

 

1,284

 

 

1,672

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries & employee benefits

 

4,201

 

 

4,202

 

 

3,915

 

 

3,915

 

 

3,923

 

Occupancy and equipment

 

890

 

 

880

 

 

854

 

 

898

 

 

915

 

Professional fees

 

171

 

 

254

 

 

179

 

 

165

 

 

201

 

Marketing expense

 

218

 

 

251

 

 

212

 

 

227

 

 

247

 

FDIC insurance

 


 

 


 

 

103

 

 

108

 

 

118

 

Data processing expense

 

316

 

 

315

 

 

315

 

 

313

 

 

280

 

State franchise and deposit tax

 

265

 

 

315

 

 

315

 

 

315

 

 

272

 

Deposit account related expense

 

333

 

 

300

 

 

310

 

 

281

 

 

170

 

Other real estate owned expense

 

35

 

 

25

 

 

142

 

 

166

 

 

278

 

Litigation and loan collection expense

 

77

 

 

32

 

 

34

 

 

46

 

 

83

 

Communications expense

 

200

 

 

193

 

 

189

 

 

190

 

 

174

 

Insurance expense

 

109

 

 

109

 

 

112

 

 

114

 

 

107

 

Postage and delivery

 

140

 

 

129

 

 

134

 

 

141

 

 

66

 

Acquisition costs

 

775

 

 


 

 


 

 


 

 


 

Other

 

584

 

 

446

 

 

410

 

 

402

 

 

488

 

Non-interest expense

 

8,314

 

 

7,451

 

 

7,224

 

 

7,281

 

 

7,322

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

2,201

 

 

2,813

 

 

3,022

 

 

2,962

 

 

3,054

 

Income tax expense (benefit)

 

437

 

 

531

 

 

(611

)

 

123

 

 

614

 

Net income

$

1,764

 

$

2,282

 

$

3,633

 

$

2,839

 

$

2,440

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares Basic

 

7,471,680

 

 

7,471,582

 

 

7,459,631

 

 

7,469,912

 

 

7,457,206

 

Weighted average shares Diluted

 

7,471,680

 

 

7,471,582

 

 

7,459,631

 

 

7,469,912

 

 

7,457,206

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per common share

$

0.24

 

$

0.31

 

$

0.49

 

$

0.38

 

$

0.33

 

Diluted earnings per common share

$

0.24

 

$

0.31

 

$

0.49

 

$

0.38

 

$

0.33

 

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

 

 

 

12/31/19

 

9/30/19

 

6/30/19

 

 

3/31/19

 

 

12/31/18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans

$

926,271

 

$

803,569

 

$

803,114

 

$

786,585

 

$

765,244

 

Allowance for loan losses

 

(8,376

)

 

(8,904

)

 

(8,832

)

 

(8,686

)

 

(8,880

)

Net loans

 

917,895

 

 

794,665

 

 

794,282

 

 

777,899

 

 

756,364

 

Securities available for sale

 

209,000

 

 

203,381

 

 

208,614

 

 

206,411

 

 

201,192

 

Federal funds sold & interest-bearing deposits

 

21,962

 

 

50,327

 

 

40,755

 

 

24,029

 

 

28,398

 

Cash and due from financial institutions

 

8,241

 

 

7,680

 

 

6,860

 

 

6,461

 

 

6,963

 

Premises and equipment

 

19,658

 

 

15,098

 

 

14,827

 

 

14,926

 

 

14,655

 

Premises held for sale

 

900

 

 

935

 

 

995

 

 

1,050

 

 

1,050

 

Bank owned life insurance

 

16,037

 

 

15,946

 

 

15,853

 

 

15,739

 

 

15,646

 

FHLB Stock

 

6,237

 

 

6,467

 

 

6,693

 

 

6,813

 

 

7,233

 

Other real estate owned

 

3,225

 

 

3,225

 

 

3,225

 

 

3,335

 

 

3,485

 

Deferred taxes, net

 

27,765

 

 

28,029

 

 

28,708

 

 

28,568

 

 

29,282

 

Goodwill

 

6,252

 

 


 

 


 

 


 

 


 

Intangible assets

 

2,500

 

 


 

 


 

 


 

 


 

Accrued interest receivable and other assets

 

6,107

 

 

6,411

 

 

5,976

 

 

6,092

 

 

5,424

 

Total Assets

$

1,245,779

 

$

1,132,164

 

$

1,126,788

 

$