Porter Bancorp Reports 1st Quarter 2018 Net Income of $1.9 million or $0.31 per Diluted Share

Porter Bancorp, Inc. (NASDAQ: PBIB) (“the Company”), parent company of Limestone Bank (“the Bank”), today reported unaudited results for the first quarter of 2018. The Company reported net income available to common shareholders for the first quarter of 2018 of $1.9 million, or $0.31 per basic and diluted common share, compared to net income available to common shareholders of $1.6 million, or $0.27 per basic and diluted share, for the first quarter of 2017.

“We are pleased with the favorable financial results for the first quarter of 2018 which were largely driven by quality loan production, net interest income growth, and expense management,” said John T. Taylor, President and CEO. “We are also pleased with the $14.95 million private placement of common stock completed on March 30, 2018, which will provide capital to support the growth of our banking franchise.”

Rebranding – Effective February, 20, 2018, the Bank changed its name to Limestone Bank. We believe the new name reflects the Bank’s Kentucky heritage, which can be traced back more than 110 years. Changing the name of Porter Bancorp, Inc. to Limestone Bancorp, Inc. is on the agenda for the 2018 annual meeting of shareholders.

Net Interest Income – Net interest income before provision expense increased to $8.2 million for the first quarter of 2018, compared with $8.0 million in the fourth quarter of 2017, and $7.7 million in the first quarter of 2017. Average loans increased to $724.2 million for the first quarter of 2018, compared with $695.6 million in the fourth quarter of 2017 and $649.3 million in the first quarter of 2017. Net interest margin increased to 3.63% in the first quarter of 2018, compared with 3.50% in the fourth quarter of 2017 and 3.55% in the first quarter of 2017.

Our yield on earning assets improved to 4.45% in the first quarter of 2018, compared to 4.24% in the fourth quarter of 2017 and 4.23% in the first quarter of 2017. The cost of interest bearing liabilities was 0.96% in the first quarter of 2018, compared to 0.88% for the fourth quarter of 2017, and 0.78% in the first quarter of 2017.

Provision and Allowance for Loan Losses – There was no provision for loan losses in the first quarter of 2017 or 2018 due to ongoing improvements in asset quality and management’s assessment of risk in the loan portfolio.

The allowance for loan losses to total loans was 1.17% at March 31, 2018, compared to 1.15% at December 31, 2017, and 1.35% at March 31, 2017. The reduced level of the allowance from a year over year comparison is primarily driven by declining historical charge-off levels and improving trends in credit quality. Net loan recoveries were $324,000 for the first quarter of 2018, compared to net recoveries of $25,000 for the fourth quarter of 2017, and net charge-offs of $1,000 for the first quarter of 2017.

Non-performing Assets – Non-performing assets, which include loans past due 90 days and still accruing, loans on nonaccrual, and other real estate owned (“OREO”), decreased to $8.8 million, or 0.88% of total assets at March 31, 2018, compared with $9.9 million, or 1.02% of total assets at December 31, 2017, and $14.7 million, or 1.56% of total assets at March 31, 2017.

Non-performing loans decreased to $4.4 million, or 0.60% of total loans at March 31, 2018, compared with $5.5 million, or 0.77% of total loans at December 31, 2017, and decreased from $8.1 million, or 1.22% of total loans at March 31, 2017. The decrease from the previous quarter was primarily driven by $995,000 in principal payments received on nonaccrual loans. OREO remained unchanged at March 31, 2018, at $4.4 million, compared to December 31, 2017, and decreased compared to $6.6 million at March 31, 2017. The Company acquired $110,000 in OREO and sold $70,000 in OREO during the first quarter of 2018. Fair value write-downs arising from lower marketing prices or new appraisals totaled $60,000 in the first quarter of 2018, compared with $1.9 million in the fourth quarter of 2017, and no write-downs in the first quarter of 2017.

In addition to nonaccrual loans and OREO, loans classified as Troubled Debt Restructures (TDRs) and on accrual totaled $922,000 at March 31, 2018, compared to $1.2 million at December 31, 2017 and March 31, 2017.

Non-interest Income and Expense – Non-interest income for the first quarter of 2018 increased $59,000 to $1.3 million, compared with $1.2 million for the first quarter of 2017. The increase from the first quarter of 2017 was primarily due to an increase in bank card interchange fees of $64,000 as well as an increase in service charges on deposit accounts of $67,000. These increases were partially offset by a decrease in other non-interest income of $69,000.

Non-interest expense decreased $84,000, or 1.20% to $7.2 million for the first quarter of 2018, compared with $7.3 million for the first quarter of 2017.

Capital – The Company completed a private placement of common stock on March 30, 2018. In the transaction, the Company issued 150,000 common shares and 1.0 million non-voting common shares to Patriot Financial Partners III, L.P. at $13.00 per share resulting in total proceeds of $14.950 million of which $5.0 million was contributed as capital to the Bank. The balance of the proceeds will be used for general corporate purposes and to support the growth of the Bank.

At March 31, 2018, the Bank’s Tier 1 leverage ratio was 9.31%, compared with 8.70% at December 31, 2017, and its Total risk-based capital ratio was 12.43% at March 31, 2018, compared with 11.61% at December 31, 2017. At March 31, 2018, the Bank’s Common equity Tier 1 risk-based capital ratio was 11.18%, compared with 10.35% at December 31, 2017. At March 31, 2018, the Company’s Tier 1 leverage ratio was 9.18%, compared with 7.11% at December 31, 2017, and its Total risk-based capital ratio was 12.56%, compared with 10.55% at December 31, 2017. At March 31, 2018, the Company’s Common equity Tier 1 risk-based capital ratio was 8.98%, compared with 6.92% at December 31, 2017.

Deferred Tax Assets and Liabilities – The Company has a net deferred tax asset of $31.0 million at March 31, 2018. Deferred tax assets and liabilities are shown below:

					March 31,				December 31,
					2018				2017
					(in thousands)
Deferred tax assets:
Net operating loss carry-forward					$	25,362			$	25,645
Allowance for loan losses						1,790				1,723
Other real estate owned write-down						2,445				2,432
Other						2,269				2,388
						31,866				32,188
Deferred tax liabilities:
FHLB stock dividends						557				557
Other						312				318
						869				875
Net deferred tax asset					$	30,997			$	31,313

About Porter Bancorp, Inc.

Porter Bancorp, Inc. (NASDAQ: PBIB) is a Louisville, Kentucky-based bank holding company which operates banking centers in 12 counties through its wholly-owned subsidiary Limestone Bank. Our markets include metropolitan Louisville in Jefferson County and the surrounding counties of Henry and Bullitt, and extend south along the Interstate 65 corridor. We serve southern and south central Kentucky from banking centers in Butler, Green, Hart, Edmonson, Barren, Warren, Ohio and Daviess counties. We also have 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 Porter Bancorp’s plans, objectives, expectations or future performance are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The words “believe,” “may,” “should,” “anticipate,” “estimate,” “expect,” “intend,” “objective,” “possible,” “seek,” “plan,” “strive” or similar words, or negatives of these words, identify forward-looking statements 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 first quarter ending March 31, 2018, follows.

PORTER BANCORP, INC. Unaudited Financial Information (in thousands, except share and per share data)
			Three Months Ended
			3/31/18				12/31/17					3/31/17
Income Statement Data
Interest income			$	10,015			$	9,717				$	9,225
Interest expense				1,834				1,716					1,484
Net interest income				8,181				8,001					7,741
Provision (negative provision) for loan losses				—				(800	)				—
Net interest income after provision				8,181				8,801					7,741
Service charges on deposit accounts				568				636					501
Bank card interchange fees				401				403					337
Bank owned life insurance income				99				103					102
Gains (loss) on sales and calls of securities, net				—				293					—
Other				183				207					252
Non-interest income				1,251				1,642					1,192
Salaries & employee benefits				3,788				3,657					3,947
Occupancy and equipment				895				919					821
Professional fees				205				202					303
Marketing expense				300				218					254
FDIC insurance				182				357					342
Data processing expense				324				325					292
State franchise and deposit tax				282				281					225
Other real estate owned expense				82				1,881					(16	)
Litigation and loan collection expense				53				58					3
Other				1,058				1,174					1,082
Non-interest expense				7,169				9,072					7,253
Income before income taxes				2,263				1,371					1,680
Income tax expense (benefit)				329				(31,899	)				—
Net income				1,934				33,270					1,680
Less:
Earnings allocated to participating securities				34				797					44
Net income attributable to common			$	1,900			$	32,473				$	1,636
Weighted average shares – Basic				6,173,397				6,109,991					6,063,026
Weighted average shares – Diluted				6,173,397				6,109,991					6,063,026
Basic earnings per common share			$	0.31			$	5.31				$	0.27
Diluted earnings per common share			$	0.31			$	5.31				$	0.27
Cash dividends declared per common share			$	0.00			$	0.00				$	0.00

PORTER BANCORP, INC. Unaudited Financial Information (in thousands, except share and per share data)
			Three Months Ended
			3/31/18					12/31/17					3/31/17
Average Balance Sheet Data
Assets			$	987,390				$	960,269				$	937,616
Loans				724,203					695,646					649,325
Earning assets				915,762					916,561					892,292
Deposits				834,695					862,625					853,556
Long-term debt and advances				74,063					50,335					35,956
Interest bearing liabilities				777,140					774,507					767,461
Stockholders’ equity				73,205					41,397					33,732
Performance Ratios
Return on average assets				0.79	%				13.75	%				0.73	%
Return on average equity				10.71					318.85					20.20
Yield on average earning assets (tax equivalent)				4.45					4.24					4.23
Cost of interest bearing liabilities				0.96					0.88					0.78
Net interest margin (tax equivalent)				3.63					3.50					3.55
Efficiency ratio				76.01					97.03					81.19
Loan Charge-off Data
Loans charged-off			$	(47	)			$	(201	)			$	(326	)
Recoveries				371					226					325
Net recoveries (charge-offs)			$	324				$	25				$	(1	)
Nonaccrual Loan Activity
Nonaccrual loans at beginning of period			$	5,457				$	5,769				$	9,216
Net principal pay-downs				(995	)				(488	)				(1,452	)
Charge-offs				(1	)				(137	)				(229	)
Loans foreclosed and transferred to OREO				(110	)				—					(100	)
Loans returned to accrual status				—					—					(136	)
Loans placed on nonaccrual during the period				19					313					803
Nonaccrual loans at end of period			$	4,370				$	5,457				$	8,102
Troubled Debt Restructurings (TDRs)
Accruing			$	922				$	1,217				$	1,244
Nonaccrual				1,362					1,829					3,374
Total			$	2,284				$	3,046				$	4,618
Other Real Estate Owned (OREO) Activity
OREO at beginning of period			$	4,409				$	6,330				$	6,821
Real estate acquired				110					—					100
Valuation adjustment write-downs				(60	)				(1,865	)				—
Proceeds from sales of properties				(70	)				(55	)				(388	)
Gain (loss) on sales, net				(4	)				(1	)				38
OREO at end of period			$	4,385				$	4,409				$	6,571

PORTER BANCORP, INC. Unaudited Financial Information (in thousands, except share and per share data)
			As of
			3/31/18					12/31/17					9/30/17					6/30/17					3/31/17
Assets
Loans			$	729,432				$	712,115				$	682,511				$	654,938				$	664,183
Allowance for loan losses				(8,526	)				(8,202	)				(8,977	)				(8,885	)				(8,966	)
Net loans				720,906					703,913					673,534					646,053					655,217
Loans held for sale				—					70					—					—					—
Securities held to maturity				—					—					41,424					41,635					41,752
Securities available for sale				160,812					152,720					149,797					154,993					156,001
Federal funds sold & interest bearing deposits				30,073					25,966					37,812					51,413					32,329
Cash and due from financial institutions				7,610					8,137					9,557					9,297					5,456
Premises and equipment				16,789					16,789					16,975					17,164					17,687
Bank owned life insurance				15,323					15,229					15,131					15,033					14,935
FHLB Stock				7,323					7,323					7,323					7,323					7,323
Other real estate owned				4,385					4,409					6,330					6,318					6,571
Deferred taxes, net				30,997					31,313					—					—					—
Accrued interest receivable and other assets				5,886					4,932					5,082					5,228					5,083
Total Assets			$	1,000,104				$	970,801				$	962,965				$	954,457				$	942,354
Liabilities and Equity
Certificates of deposit			$	431,921				$	424,235				$	445,577				$	458,068				$	470,029
Interest checking				92,048					99,383					94,523					97,169					104,811
Money market				150,974					151,388					156,905					153,700					122,434
Savings				35,984					34,632					35,946					36,363					36,380
Total interest bearing deposits				710,927					709,638					732,951					745,300					733,654
Demand deposits				135,984					137,386					133,896					129,518					127,049
Total deposits				846,911					847,024					866,847					874,818					860,703
FHLB advances				26,752					11,797					16,847					2,158					17,313
Junior subordinated debentures				23,025					23,250					23,475					23,700					23,925
Senior debt				10,000					10,000					10,000					10,000					—
Accrued interest payable and other liabilities				5,186					6,057					5,728					5,388					4,908
Total liabilities				911,874					898,128					922,897					916,064					906,849
Preferred stockholders’ equity				2,771					2,771					2,771					2,771					2,771
Common stockholders’ equity				85,459					69,902					37,297					35,622					32,734
Total stockholders’ equity				88,230					72,673					40,068					38,393					35,505
Total Liabilities and Stockholders’ Equity			$	1,000,104				$	970,801				$	962,965				$	954,457				$	942,354
Ending shares outstanding				7,409,864					6,259,864					6,259,864					6,259,864					6,247,520
Book value per common share			$	11.53				$	11.17				$	5.96				$	5.69				$	5.24
Tangible book value per common share				11.53					11.17					5.96					5.69					5.23

PORTER BANCORP, INC. Unaudited Financial Information (in thousands, except share and per share data)
			As of
			3/31/18					12/31/17					9/30/17					6/30/17					3/31/17
Asset Quality Data
Loan 90 days or more past due still on accrual			$	—				$	1				$	—				$	—				$	—
Nonaccrual loans				4,370					5,457					5,769					6,509					8,102
Total non-performing loans				4,370					5,458					5,769					6,509					8,102
Real estate acquired through foreclosures				4,385					4,409					6,330					6,318					6,571
Other repossessed assets				—					—					—					—					—
Total non-performing assets			$	8,755				$	9,867				$	12,099				$	12,827				$	14,673
Non-performing loans to total loans				0.60	%				0.77	%				0.85	%				0.99	%				1.22	%
Non-performing assets to total assets				0.88					1.02					1.26					1.34					1.56
Allowance for loan losses to non-performing loans				195.10					150.27					155.61					136.50					110.66
Allowance for loans evaluated individually			$	282				$	219				$	425				$	254				$	332
Loans evaluated individually for impairment				5,775					7,173					7,509					8,273					9,891
Allowance as % of loans evaluated individually				4.88	%				3.05	%				5.66	%				3.07	%				3.36	%
Allowance for loans evaluated collectively			$	8,244				$	7,983				$	8,552				$	8,631				$	8,634
Loans evaluated collectively for impairment				723,657					704,942					675,002					646,665					654,292
Allowance as % of loans evaluated collectively				1.14	%				1.13	%				1.27	%				1.33	%				1.32	%
Allowance for loan losses to total loans				1.17	%				1.15	%				1.32	%				1.36	%				1.35	%
Loans by Risk Category
Pass			$	695,507				$	673,033				$	633,203				$	610,356				$	617,361
Watch				17,938					25,715					35,167					29,433					26,442
Special Mention				162					164					598					604					492
Substandard				15,825					13,203					13,543					14,545					19,888
Doubtful				—					—					—					—					—
Total			$	729,432				$	712,115				$	682,511				$	654,938				$	664,183
Loans by Past Due Status
Past due loans:
30 – 59 days			$	6,402				$	1,478				$	872				$	1,328				$	972
60 – 89 days				472					171					612					765					289
90 days or more				—					1					—					—					—
Nonaccrual loans				4,370					5,457					5,769					6,509					8,102
Total past due and nonaccrual loans			$	11,244				$	7,107				$	7,253				$	8,602				$	9,363
Risk-based Capital Ratios - Company
Tier I leverage ratio				9.18	%				7.11	%				5.85	%				5.65	%				5.43	%
Common equity Tier I risk-based capital ratio				8.98					6.92					5.49					5.58					5.29
Tier I risk-based capital ratio				11.03					8.44					7.31					7.46					7.09
Total risk-based capital ratio				12.56					10.55					10.05					10.44					10.15
Risk-based Capital Ratios – Limestone Bank
Tier I leverage ratio				9.31	%				8.70	%				7.73	%				7.54	%				6.37	%
Common equity Tier I risk-based capital ratio				11.18					10.35					9.66					9.97					8.33
Tier I risk-based capital ratio				11.18					10.35					9.66					9.97					8.33
Total risk-based capital ratio				12.43					11.61					11.10					11.50					9.89
FTE employees				214					217					217					221					230

Non-GAAP Financial Measures Reconciliation

Tangible book value per common share is a non-GAAP financial measure derived from GAAP-based amounts. We calculate tangible book value per common share by excluding the balance of intangible assets from common stockholders’ equity. We calculate tangible book value per common share by dividing tangible common equity by common shares outstanding, as compared to book value per common share, which we calculate by dividing common stockholders’ equity by common shares outstanding. We believe 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. We calculate the efficiency ratio 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. We believe this provides a reasonable measure of primary banking expenses relative to primary banking revenue.

			As of
			3/31/18				12/31/17				9/30/17				6/30/17				3/31/17
Tangible Book Value Per Share			(in thousands, except share and per share data)
Common stockholder’s equity			$	85,459			$	69,902			$	37,297			$	35,622			$	32,734
Less: Intangible assets				—				—				—				—				42
Tangible common equity				85,459				69,902				37,297				35,622				32,692
Shares Outstanding				7,409,864				6,259,864				6,259,864				6,259,864				6,247,520
Tangible book value per common share			$	11.53			$	11.17			$	5.96			$	5.69			$	5.23
Book value per common share				11.53				11.17				5.96				5.69				5.24

			Three Months Ended
			3/31/18				12/31/17				3/31/17
Efficiency Ratio			(in thousands)
Net interest income			$	8,181			$	8,001			$	7,741
Non-interest income				1,251				1,642				1,192
Less: Net gain on securities				—				293				—
Revenue used for efficiency ratio				9,432				9,350				8,933
Non-interest expense				7,169				9,072				7,253
Efficiency ratio				76.01	%			97.03	%			81.19	%

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