LOUISVILLE, Ky.--(BUSINESS WIRE)--October 21, 2020--Limestone Bancorp, Inc. (NASDAQ: LMST) (“the Company”), parent company of Limestone Bank (“the Bank”), today reported unaudited results for the third quarter of 2020. Net income available to common shareholders for the third quarter of 2020 was $2.1 million, or $0.28 per basic and diluted common share, compared with $2.3 million, or $0.31 per basic and diluted share, for the third quarter of 2019. Net income for the nine months ended September 30, 2020, was $5.9 million, or $0.79 per diluted common share, compared with net income of $8.8 million, or $1.17 per diluted share, for the nine months ended September 30, 2019.

Net income before taxes was $2.3 million and $6.8 million for the third quarter of 2020 and for the first nine months of 2020, respectively, compared to $2.8 million and $8.8 million for the third quarter and first nine months of 2019, respectively. Income tax expense was $190,000 and $944,000 for the third quarter of 2020 and for the first nine months of 2020, respectively, compared to income tax expense of $531,000 and $43,000 for the third quarter of 2019 and for the first nine months of 2019, respectively.

For 2019 and 2020, income tax expense benefitted from the establishment of a net deferred tax asset related to a change in Kentucky tax law enacted during 2019. Income tax expense benefitted $244,000 and $33,000 for the third quarter of 2020 and 2019, respectively, or $0.03 per basic and diluted common share, and less than $0.01 per basic and diluted common share, respectively. Income tax expense benefitted $395,000 and $1.6 million for the first nine months of 2020 and 2019, respectively, or $0.05 per basic and diluted common share, and $0.21 per basic and diluted common share, respectively. The new Kentucky income tax will go into effect on January 1, 2021.

Net Interest Income – The interest rate environment has been challenging during the first nine months of 2020 as the Federal Reserve, after lowering rates 75 basis points in the latter half of 2019, lowered the federal funds target rate by 50 basis points on March 6, 2020, and 100 basis points on March 15, 2020.

Net interest income decreased to $9.9 million for the third quarter of 2020, compared to $10.1 million for the second quarter of 2020, and increased compared to $8.7 million for the third quarter of 2019. Average loans decreased to $963.5 million for the third quarter of 2020, compared to $978.3 million for the second quarter of 2020, and increased compared to $800.2 million for the third quarter of 2019. Average loans for the second and third quarters of 2020 were positively impacted by the branch purchase transaction on November 15, 2019, which included $126.8 million in loans at the time of purchase, as well as $42.3 million loan originations under the SBA Paycheck Protection Program. Net interest margin decreased to 3.27% for the third quarter of 2020, compared with 3.33% for the second quarter of 2020, and 3.35% for the third quarter of 2019.

The yield on earning assets decreased to 3.98% in the third quarter of 2020, compared to 4.21% in the second quarter of 2020, and 4.79% in the third quarter of 2019. The yield on earning assets for the second and third quarters of 2020 were negatively impacted by falling interest rates on the Bank’s fed funds, certain floating rate investment securities, and loans with variable rate repricing features. 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 $387,000, $535,000, and $247,000 for the quarters ended September 30, 2020, June 30, 2020, and September 30, 2019, respectively. This represents 13 basis points, 17 basis points, and nine basis points of yield on earning assets and net interest margin for the quarters ended September 30, 2020, June 30, 2020, and September 30, 2019, respectively. Loan fee income for the third quarter of 2020 included $195,000 in fees earned on SBA PPP loans, as compared to $179,000 in the second quarter of 2020.

The cost of interest-bearing liabilities was 0.90% for the third quarter of 2020, compared to 1.11% in the second quarter of 2020, and 1.75% in the third quarter of 2019. The cost of interest-bearing liabilities continued to decline based on the downward repricing of time deposits. Time deposits declined $47.9 million during the third quarter of 2020 as approximately $127.3 million of time deposits with an average rate of 1.41% matured or repriced at lower interest rates. During the third quarter of 2020, newly originated or renewed time deposits had an average rate of 0.39% and an average term of approximately 23 months.

Net interest income increased to $29.8 million for the first nine months of 2020, compared with $26.5 million in the first nine months of 2019. Average loans increased to $963.7 million for the first nine months of 2020, compared to $786.8 million for the first nine months of 2019. Average loans were positively impacted by the branch purchase transaction on November 15, 2019, along with loan growth during 2019 and 2020, as well as loan originations under the SBA Paycheck Protection Program. Net interest margin decreased to 3.30% in the first nine months of 2020, compared with 3.46% for the first nine months of 2019.

The yield on earning assets decreased to 4.23% for the first nine months of 2020, compared to 4.83% for the first nine months of 2019. The amount of loan fee income included in total interest income was $1.1 million and $960,000 for the nine months ended September 30, 2020 and September 30, 2019, respectively. This represents 13 basis points of yield on earning assets and net interest margin for the nine months ended September 30, 2020 and 2019. The cost of interest-bearing liabilities was 1.15% for the first nine months of 2020, compared to 1.67% in the first nine months of 2019.

As of September 30, 2020, time deposits comprise $398.4 million of the Company’s liabilities including $84.7 million with a current average rate of 1.01% which reprice or mature in the fourth quarter of 2020. The following table denotes contractual time deposit maturities and average rates as of September 30, 2020:

Maturity Quarter		As of September 30, 2020 (in thousands)				Weighted Average Rate
Q4-2020			84,715			1.01
Q1-2021			100,682			1.03
Q2-2021			90,146			0.61
Q3-2021			28,443			0.77
Q4-2021			9,837			0.75
Thereafter			84,606			1.23
Total time deposits		$	398,429			0.95	%

Investment Securities – The securities portfolio serves as a source of liquidity and earnings and contributes to the management of interest rate risk. Investments are made in various types of liquid assets, including U.S. Treasury obligations and securities of various federal agencies, obligations of states and political subdivisions, corporate bonds, and collateralized loan obligations. The investment portfolio increased by $948,000, or 0.5%, to $203.5 million at September 30, 2020, compared with $202.6 million at June 30, 2020, and $203.4 million at September 30, 2019.

The following table sets forth the carrying value of our securities portfolio at the dates indicated.

		September 30, 2020													June 30, 2020
		Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses				Fair Value			Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses				Fair Value
		(dollars in thousands)
Securities available for sale
U.S. Government and federal agencies		$	19,158		$	931		$	—			$	20,089		$	20,302		$	772		$	—			$	21,074
Agency mortgage-backed residential			76,388			2,974			(13	)			79,349			85,048			3,152			(21	)			88,179
Collateralized loan obligations			44,730			—			(1,905	)			42,825			44,730			—			(3,042	)			41,688
State and municipal			34,391			1,076			(32	)			35,435			28,708			917			(57	)			29,568
Corporate bonds			27,116			373			(1,643	)			25,846			23,347			313			(1,573	)			22,087
Total available for sale		$	201,783		$	5,354		$	(3,593	)		$	203,544		$	202,135		$	5,154		$	(4,693	)		$	202,596

The Bank owns Collateralized Loan Obligations (CLOs), which are debt securities secured by professionally managed portfolios of senior-secured loans to corporations. CLO managers are typically large non-bank financial institutions or banks and are typically $300 million to $1 billion in size, contain one hundred or more loans and have five to six credit tranches ranging from AAA, AA, A, BBB, BB, B and equity tranche. Interest and principal are paid first to the AAA tranche then to the next lower rated tranche. Losses are borne first by the equity tranche then by the subsequently higher rated tranche. CLOs may be less liquid than government securities from time to time and volatility in the CLO market may cause the value of these investments to decline.

The market value of CLOs may be affected by, among other things, changes in composition of the underlying loans, changes in the cash flows from the underlying loans, defaults and recoveries on the underlying loans, capital gains and losses on the underlying loans, prepayments on the underlying loans, and other conditions or economic factors. During the first quarter of 2020, the fair value of the Bank’s CLO portfolio declined as the market was disrupted by COVID-19. At March 31, 2020, the CLO portfolio had an unrealized loss of $4.0 million, or 9% of amortized cost. During the second and third quarters of 2020, the fair value improved as the market stabilized. At September 30, 2020, the portfolio had an unrealized loss of $1.9 million, or 4% of amortized cost.

Although the Bank attempts to mitigate the credit and liquidity risks associated with CLOs by purchasing CLOs with credit ratings of A or higher, completing pre-purchase due diligence, and through ongoing monitoring, no assurance can be given that these risk mitigation efforts will be successful. At September 30, 2020, $27.0 million, $13.5 million, and $2.4 million of our CLOs were AA, A, and BBB rated, respectively. There was one CLO rated below A at BBB, which was downgraded during the third quarter of 2020. Stress testing was completed on each security in the CLO portfolio as of quarter-end. Each security in the portfolio passed, without dollar loss, a stress scenario characterized as severe, which assumed a ten percent per annum constant prepayment rate, a twelve percent per annum constant default rate for four years followed by a four percent rate thereafter, and a forty-five percent recovery rate on a one-year lag. The Bank’s CLOs are all floating rate with rates set on a quarterly basis at three-month LIBOR plus a spread.

The fair value of the Bank’s corporate bond portfolio has also been impacted by market disruption and declining rates. At March 31, 2020, the corporate bond portfolio had a net unrealized loss of $1.3 million, or 6% of amortized cost. At September 30, 2020, the portfolio had a net unrealized loss of $1.3 million, or 5% of amortized cost. The corporate bond portfolio consists of 12 subordinated debt securities of U.S. banks and bank holding companies with maturities ranging from 2024 to 2037. The securities are either initially fixed for five years converting to floating at an index over LIBOR or floating at an index over LIBOR from inception. Management regularly monitors the financial condition of these corporate issuers by reviewing their regulatory and public filings.

The Bank has the intent and ability to hold its CLO and corporate debt securities to maturity and, at this juncture, has determined the value declines are temporary in nature.

Provision and Allowance for Loan Losses – The Bank maintains an allowance for loan losses believed to be sufficient to absorb probable incurred losses existing in the loan portfolio. Management evaluates the adequacy of the allowance using, among other things, historical loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of the underlying collateral and current economic conditions and trends. The allowance may be allocated for specific loans or loan categories, but the entire allowance is available for any loan. The allowance consists of specific and general components. The specific component relates to loans that are individually evaluated and measured for impairment. The general component is based on historical loss experience adjusted for qualitative environmental factors. Management develops allowance estimates based on actual loss experience adjusted for current economic conditions and trends. Allowance estimates are a prudent measurement of the risk in the loan portfolio applied to individual loans based on loan type. If the mix and amount of future charge-off percentages differ significantly from the assumptions used by management in making its determination, management may be required to materially increase its allowance for loan losses and provision for loan losses, which could adversely affect results.

The allowance for loan losses to total loans was 1.18% at September 30, 2020, compared to 1.05% at June 30, 2020, and 1.11% at September 30, 2019. Loans acquired in the November 2019 branch transaction totaled $100.3 million at September 30, 2020, and $109.8 million at June 30, 2020. These loans were recorded at fair value as determined by an independent third party. The remaining discount associated with the fair value purchase accounting adjustments on the acquired loans was $301,000 at September 30, 2020, compared to $347,000 at June 30, 2020. Any subsequent deterioration of these acquired loans may require an adjustment through the allowance for loan loss. Net loan charge-offs were $97,000 and $395,000, respectively, for the three and nine months ended September 30, 2020, compared to net loan recoveries of $72,000 and $24,000, respectively, for the three and nine months ended September 30, 2019.

A provision of $1.4 million and $3.5 million, or $0.14 and $0.37, per common shares after taxes, was recorded in the third quarter and the first nine months of 2020, respectively, compared to no provision for loan losses in the third quarter and first nine months of 2019. The 2020 loan loss provisions were attributable to the net loan charge-offs during the period, trends within the portfolio over the period, and primarily to changes in the economic and business environment attributable to COVID-19, the state and national emergencies that have been declared and the resultant risk the pandemic poses for business disruptions for the Bank’s borrowers which may lead to credit quality deterioration. Substandard loans increased $15.4 million during the third quarter of 2020. The increase in substandard loans was primarily attributable to $12.3 million in commercial and industrial loans migrating from watch to substandard during the quarter.

While the Company expects the U.S. Government’s economic response to the COVID-19 pandemic through monetary policy and fiscal stimulus have provided meaningful support to the economy, management deemed it prudent to increase the allowance for loan losses through its qualitative environmental factors to account for the pandemic risk.

COVID-19 Short-term Loan Concessions – The Bank has elected to account for eligible loan modifications under Section 4013 of the CARES Act. To be an eligible loan under Section 4013 of the CARES Act, a loan modification must be (1) related to the coronavirus pandemic (“COVID-19”); (2) executed on a loan that was not more than 30 days past due as of December 31, 2019; and (3) executed between March 1, 2020, and the earlier of (A) 60 days after the date of termination of the national emergency declared by the President on March 13, 2020, concerning the COVID-19 outbreak (the “national emergency”) or (B) December 31, 2020. Eligible loan modifications are not required to be classified as TDRs and will not be reported as past due provided they are performing in accordance with the modified terms. Interest income will continue to be recognized in accordance with GAAP unless the loan is placed on nonaccrual status.

Short term loan modifications totaled $64.9 million as of September 30, 2020, compared to $161.5 million at June 30, 2020. The following table details the status of the Bank’s short-term loan modifications by loan category or type as of September 30, 2020:

		First Modification Active			Subsequent Modification Active			Modification Ended			Total Modified Loans			Total Loan Portfolio			% Modified to Total Portfolio
		(in thousands)
Hotel, Motel, & Lodging		$	—		$	8,112		$	22,818		$	30,930		$	51,435		60.1	%
Retail Facility			3,087			6,764			—			9,851			62,707		15.7
Commercial Real Estate			5,228			76			107			5,411			161,524		3.3
1-4 Family Residential			2,306			450			225			2,981			194,829		1.5
Restaurant Full Service			2,184			6,307			2,872			11,363			19,966		56.9
Restaurant Limited Service			2,303			—			—			2,303			14,842		15.5
Multi-family			—			—			—			—			63,757		—
Construction and Development			—			—			—			—			39,980		—
Commercial & Industrial			345			—			1,239			1,584			218,762		0.7
Farmland			—			—			—			—			69,017		—
Consumer, Agriculture & Other			486			—			—			486			77,649		0.6
Total		$	15,939		$	21,709		$	27,261		$	64,909		$	974,468		6.7	%

First Modification Active includes loans within the terms of the original modification agreement. Subsequent Modification Active includes loans with a matured original modification that have been further modified within the short-term parameters. Modification Ended includes loans that have reached final deferred payment and have yet to make a payment in accordance with the loan’s original terms or have yet to request a subsequent modification. Loans that returned to original contracted terms with a verified payment are considered cured and are no longer included as modified loans in the table above.

Subsequent to September 30, 2020, $27.1 million of the loans categorized as Modification Ended in the table above have received a verified payment and are now considered cured.

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”), increased to $4.2 million, or 0.32%, of total assets at September 30, 2020, compared with $3.5 million, or 0.27%, of total assets at June 30, 2020, and $5.8 million, or 0.51%, of total assets at September 30, 2019. Non-performing loans increased to $2.5 million, or 0.26%, of total loans at September 30, 2020, compared with $1.9 million, or 0.19%, of total loans at June 30, 2020, and $2.6 million, or 0.32%, of total loans at September 30, 2019.

OREO remained unchanged at $1.6 million as of September 30, 2020, compared to June 30, 2020, and decreased compared to $3.2 million at September 30, 2019. There were no fair value write-downs arising from changing marketing strategies for the three or nine months ended September 30, 2020, compared to no fair value write-downs and $260,000 for the three and nine months ended September 30, 2019, respectively.

Non-interest Income and Expense – Non-interest income for the third quarter of 2020 increased $208,000 to $1.7 million, compared with $1.5 million for the third quarter of 2019. The increase was primarily related to bank card interchange fees primarily as a result of the deposit accounts acquired in the branch acquisition transaction on November 15, 2019. Non-interest expense increased $628,000, or 8.4%, to $8.1 million for the third quarter of 2020, compared with $7.5 million for the third quarter of 2019. The increase in the third quarter of 2020 was primarily due to an increase in salaries and employee benefits of $211,000 and $187,000 in deposit account related expense. The Bank added sales talent and customer facing associates during the latter half of 2019 and branch staff in connection with the branch purchase transaction. The increase in deposit account related expense is the result of the deposit accounts acquired in the branch acquisition transaction.

Non-interest income for the first nine months of 2020 increased $803,000 to $5.1 million, compared with $4.3 million for the first nine months of 2019. The increase was primarily due to an increase in bank card interchange fees of $767,000. Non-interest expense increased $2.6 million, or 11.8%, to $24.6 million for the first nine months of 2020, compared with $22.0 million for the first nine months of 2019. The increase was primarily due to increases of $1.6 million in salaries and employee benefits and $507,000 in deposit account related expense. The Bank added sales talent and customer facing associates during the latter half of 2019 and branch staff in connection with the branch purchase transaction. As a result, average FTEs for 2020 were elevated as compared to 2019. In response to COVID-19 and the change in customer branch usage patterns, the Bank realized a reduction in FTEs during the second quarter of 2020 through attrition and workforce reduction. The increase in deposit account related expense is the result of the deposit accounts acquired in the branch acquisition transaction.

Capital – The Company’s capital ratios were positively impacted by the additional $8.0 million of subordinated notes issued on July 21, 2020, as the subordinated notes meet the requirements to qualify as Tier 2 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 Bank’s 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 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: the impact and duration of the COVID-19 pandemic and national, state and local emergency conditions the pandemic has produced; 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, regulation, fiscal, and monetary policies, 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, 2019, and Form 10-Q for the six months ended June 30, 2020.

Additional Information

Unaudited supplemental financial information for the third quarter ending September 30, 2020, follows.

LIMESTONE BANCORP, INC. Unaudited Financial Information (in thousands, except share and per share data)
		Three			Three			Nine					Nine
		Months			Months			Months					Months
		Ended			Ended			Ended					Ended
		9/30/20			9/30/19			9/30/20					9/30/19
Income Statement Data
Interest income		$	12,094		$	12,485		$		38,147			$	37,047
Interest expense			2,151			3,755				8,332				10,558
Net interest income			9,943			8,730				29,815				26,489
Provision for loan losses			1,350			—				3,500				—
Net interest income after provision			8,593			8,730				26,315				26,489
Service charges on deposit accounts			565			633				1,674				1,700
Bank card interchange fees			881			623				2,494				1,727
Bank owned life insurance income			113			97				325				314
Gain (loss) on sales and calls of securities, net			—			—				(5	)			(5	)
Other			183			181				579				528
Non-interest income			1,742			1,534				5,067				4,264
Salaries & employee benefits			4,413			4,202				13,584				12,032
Occupancy and equipment			1,008			880				2,990				2,632
Professional fees			261			254				704				598
Marketing expense			134			251				452				690
FDIC insurance			81			—				148				211
Data processing expense			382			315				1,121				943
State franchise and deposit tax			360			315				1,080				945
Deposit account related expense			487			300				1,398				891
Other real estate owned expense			20			25				58				333
Litigation and loan collection expense			54			32				178				112
Communications expense			201			193				666				572
Insurance expense			102			109				316				335
Postage and delivery			156			129				476				404
Other			420			446				1,379				1,258
Non-interest expense			8,079			7,451				24,550				21,956
Income before income taxes			2,256			2,813				6,832				8,797
Income tax expense			190			531				944				43
Net income		$	2,066		$	2,282		$		5,888			$	8,754
Weighted average shares – Basic			7,499,223			7,471,582			7,489,795					7,467,048
Weighted average shares – Diluted			7,499,223			7,471,582			7,489,795					7,467,048
Basic earnings per common share		$	0.28		$	0.31		$	0.79				$	1.17
Diluted earnings per common share		$	0.28		$	0.31		$	0.79				$	1.17
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
			9/30/20		6/30/20				3/31/20				12/31/19			9/30/19
Income Statement Data
Interest income		$	12,094		$	12,786			$	13,267		$	12,537		$	12,485
Interest expense			2,151			2,676				3,505			3,676			3,755
Net interest income			9,943			10,110				9,762			8,861			8,730
Provision for loan losses			1,350			1,100				1,050			—			—
Net interest income after provision			8,593			9,010				8,712			8,861			8,730
Service charges on deposit accounts			565			441				668			681			633
Bank card interchange fees			881			863				750			711			623
Bank owned life insurance income			113			116				96			96			97
Gain (loss) on sales and calls of securities, net			—			(5	)			—			—			—
Other			183			186				210			166			181
Non-interest income			1,742			1,601				1,724			1,654			1,534
Salaries & employee benefits			4,413			4,633				4,538			4,201			4,202
Occupancy and equipment			1,008			983				999			890			880
Professional fees			261			235				208			171			254
Marketing expense			134			104				214			218			251
FDIC insurance			81			67				—			—			—
Data processing expense			382			380				359			316			315
State franchise and deposit tax			360			360				360			265			315
Deposit account related expense			487			460				451			333			300
Other real estate owned expense			20			22				16			35			25
Litigation and loan collection expense			54			59				65			77			32
Communications expense			201			247				218			200			193
Insurance expense			102			111				103			109			109
Postage and delivery			156			152				168			140			129
Acquisition costs			—			—				—			775			—
Other			420			423				536			584			446
Non-interest expense			8,079			8,236				8,235			8,314			7,451
Income before income taxes			2,256			2,375				2,201			2,201			2,813
Income tax expense			190			393				361			437			531
Net income		$	2,066		$	1,982			$	1,840		$	1,764		$	2,282
Weighted average shares – Basic			7,499,223			7,488,173				7,481,884			7,471,680			7,471,582
Weighted average shares – Diluted			7,499,223			7,488,173				7,481,884			7,471,680			7,471,582
Basic earnings per common share		$	0.28		$	0.26			$	0.25		$	0.24		$	0.31
Diluted earnings per common share		$	0.28		$	0.26			$	0.25		$	0.24		$	0.31
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
			9/30/20			6/30/20				3/31/20					12/31/19				9/30/19
Assets
Loans		$	974,468			$	975,759			$	961,561			$	926,271			$	803,569
Allowance for loan losses			(11,481	)			(10,228	)			(9,150	)			(8,376	)			(8,904	)
Net loans			962,987				965,531				952,411				917,895				794,665
Securities available for sale			203,544				202,596				198,657				209,000				203,381
Federal funds sold & interest-bearing deposits			24,358				39,027				23,639				21,962				50,327
Cash and due from financial institutions			7,593				9,990				9,509				8,241				7,680
Premises and equipment			18,572				19,000				19,282				19,658				15,098
Premises held for sale			1,110				1,149				1,185				900				935
Bank owned life insurance			23,347				16,238				16,128				16,037				15,946
FHLB Stock			5,962				6,142				6,837				6,237				6,467
Other real estate owned			1,625				1,625				3,225				3,225				3,225
Deferred taxes, net			26,540				27,054				28,208				27,765				28,029
Goodwill			6,252				6,252				6,252				6,252				—
Intangible assets			2,308				2,372				2,436				2,500				—
Accrued interest receivable and other assets			7,426				7,532				6,441				6,107				6,411
Total Assets		$	1,291,624			$	1,304,508			$	1,274,210			$	1,245,779			$	1,132,164
Liabilities and Equity
Certificates of deposit		$	398,429			$	446,370			$	467,535			$	476,534			$	488,121
Interest checking			168,735				167,814				157,621				146,038				95,508
Money market			174,588				166,376				154,851				160,837				153,663
Savings			134,962				119,327				92,235				56,015				34,618
Total interest-bearing deposits			876,714				899,887				872,242				839,424				771,910
Demand deposits			217,675				224,901				185,658				187,551				151,524
Total deposits			1,094,389				1,124,788				1,057,900				1,026,975				923,434
FHLB advances			30,634				20,644				61,349				61,389				56,430
Junior subordinated debentures			21,000				21,000				21,000				21,000				21,000
Subordinated capital note			25,000				17,000				17,000				17,000				17,000
Senior debt			—				5,000				5,000				5,000				5,000
Accrued interest payable and other liabilities			8,315				7,020				7,450				8,665				4,973
Total liabilities			1,179,338				1,195,452				1,169,699				1,140,029				1,027,837
Total stockholders’ equity			112,286				109,056				104,511				105,750				104,327
Total Liabilities and Stockholders’ Equity		$	1,291,624			$	1,304,508			$	1,274,210			$	1,245,779			$	1,132,164
Ending shares outstanding			7,499,183				7,485,872				7,489,305				7,471,975				7,471,582
Book value per common share		$	14.97			$	14.57			$	13.95			$	14.15			$	13.96
Tangible book value per common share			13.83				13.42				12.79				12.98				13.96

LIMESTONE BANCORP, INC. Unaudited Financial Information (in thousands, except share and per share data)
			As of
			9/30/20				6/30/20				3/31/20				12/31/19				9/30/19
Average Balance Sheet Data
Assets		$	1,295,814			$	1,305,923			$	1,273,167			$	1,167,179			$	1,105,432
Loans			963,486				978,316				949,204				846,235				800,194
Earning assets			1,213,039				1,222,760				1,188,314				1,090,752				1,035,522
Deposits			1,111,865				1,116,420				1,052,944				982,991				933,548
Long-term debt and advances			65,769				75,259				105,407				73,695				63,369
Interest bearing liabilities			955,661				971,770				971,554				882,473				852,539
Stockholders’ equity			110,930				107,348				107,632				105,295				103,818
Quarterly Performance Ratios
Return on average assets			0.63	%			0.61	%			0.58	%			0.60	%			0.82	%
Return on average equity			7.41				7.43				6.88				6.65				8.72
Yield on average earning assets (tax equivalent)			3.98				4.21				4.50				4.57				4.79
Cost of interest-bearing liabilities			0.90				1.11				1.45				1.65				1.75
Net interest margin (tax equivalent)			3.27				3.33				3.31				3.23				3.35
Efficiency ratio			69.14				70.30				71.70				71.70				72.59
Non-interest expense to average assets			2.48				2.54				2.60				2.83				2.67
Asset Quality Data
Nonaccrual loans		$	2,038			$	1,410			$	1,500			$	1,528			$	2,389
Troubled debt restructurings on accrual			489				462				466				475				188
Loan 90 days or more past due still on accrual			—				—				—				—				—
Total non-performing loans			2,527				1,872				1,966				2,003				2,577
Real estate acquired through foreclosures			1,625				1,625				3,225				3,225				3,225
Other repossessed assets			—				—				—				—				—
Total non-performing assets		$	4,152			$	3,497			$	5,191			$	5,228			$	5,802
Non-performing loans to total loans			0.26	%			0.19	%			0.20	%			0.22	%			0.32	%
Non-performing assets to total assets			0.32				0.27				0.41				0.42				0.51
Allowance for loan losses to non-performing loans			454.33				546.37				465.41				418.17				345.52
Allowance for loan losses to total loans			1.18	%			1.05	%			0.95	%			0.90	%			1.11	%
Loan Charge-off Data
Loans charged off		$	(150	)		$	(193	)		$	(335	)		$	(639	)		$	(299	)
Recoveries			53				171				59				111				371
Net recoveries (charge-offs)		$	(97	)		$	(22	)		$	(276	)		$	(528	)		$	72
Loans by Risk Category
Pass		$	923,895			$	925,558			$	915,985			$	888,707			$	754,050
Watch			27,782				43,014				38,464				27,522				37,537
Special Mention			364				—				—				—				—
Substandard			22,427				7,187				7,112				10,042				11,982
Doubtful			—				—				—				—				—
Total		$	974,468			$	975,759			$	961,561			$	926,271			$	803,569
Loans by Past Due Status
Past due loans:
30 – 59 days		$	482			$	458			$	1,158			$	1,747			$	979
60 – 89 days			265				197				248				670				557
90 days or more			—				—				—				—				—
Nonaccrual loans			2,038				1,410				1,500				1,528				2,389
Total past due and nonaccrual loans		$	2,785			$	2,065			$	2,906			$	3,945			$	3,925

LIMESTONE BANCORP, INC. Unaudited Financial Information (in thousands, except share and per share data)
		As of
		9/30/20			6/30/20			3/31/20			12/31/19			9/30/19
Risk-based Capital Ratios - Company
Tier I leverage ratio		8.17	%		8.05	%		8.29	%		8.30	%		9.66	%
Common equity Tier I risk-based capital ratio		8.54			8.45			8.26			8.32			10.19
Tier I risk-based capital ratio		9.77			9.93			9.86			9.32			11.88
Total risk-based capital ratio		13.22			12.57			12.37			11.85			14.84
Risk-based Capital Ratios – Limestone Bank
Tier I leverage ratio		9.90	%		9.54	%		9.67	%		9.99	%		11.25	%
Common equity Tier I risk-based capital ratio		11.88			11.79			11.50			11.25			13.87
Tier I risk-based capital ratio		11.88			11.79			11.50			11.25			13.87
Total risk-based capital ratio		12.97			12.78			12.38			12.08			14.89
FTE employees, end of period		224			228			248			244			226

Non-GAAP Financial Measures Reconciliation

Tangible book value per common share is a non-GAAP financial measure derived from GAAP based amounts. Tangible book value is calculated by excluding the balance of intangible assets from common stockholders’ equity. Tangible book value per common share is calculated by dividing tangible common equity by common shares outstanding, as compared to book value per common share, which is calculated by dividing common stockholders’ equity by common shares outstanding. Management believes this is consistent with bank regulatory agency treatment, which excludes tangible assets from the calculation of risk-based capital.

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 from the calculation net gains on the sale of securities and expenses disclosed from time to time as non-recurring in nature. Management believes this provides a reasonable measure of primary banking expenses relative to primary banking revenue.

			As of
			9/30/20			6/30/20				3/31/20			12/31/19			9/30/19
Tangible Book Value Per Share		(in thousands, except share and per share data)
Common stockholders’ equity		$	112,286		$	109,056			$	104,511		$	105,750		$	104,327
Less: Goodwill			6,252			6,252				6,252			6,252			—
Less: Intangible assets			2,308			2,372				2,436			2,500			—
Tangible common equity			103,726			100,432				95,823			96,998			104,327
Shares outstanding			7,499,183			7,485,872				7,489,305			7,471,975			7,471,582
Tangible book value per common share		$	13.83		$	13.42			$	12.79		$	12.98		$	13.96
Book value per common share			14.97			14.57				13.95			14.15			13.96

		Three Months Ended
			9/30/20			6/30/20				3/31/20			12/31/19			9/30/19
Efficiency Ratio		(in thousands)
Net interest income		$	9,943		$	10,110			$	9,762		$	8,861		$	8,730
Non-interest income			1,742			1,601				1,724			1,654			1,534
Less: Net gain (loss) on securities			—			(5	)			—			—			—
Revenue used for efficiency ratio			11,685			11,716				11,486			10,515			10,264
Non-interest expense			8,079			8,236				8,235			8,314			7,451
Less: Acquisition costs			—			—				—			775			—
Expenses used for efficiency ratio			8,079			8,236				8,235			7,539			7,451
Efficiency ratio			69.14	%		70.30	%			71.70	%		71.70	%		72.59	%