LIMESTONE BANCORP, INC. - FORM 10-Q

Attached files

file	filename
EX-31.1 - EXHIBIT 31.1 - LIMESTONE BANCORP, INC.	a6723514ex31_1.htm
EX-32.2 - EXHIBIT 32.2 - LIMESTONE BANCORP, INC.	a6723514ex32_2.htm
EX-31.2 - EXHIBIT 31.2 - LIMESTONE BANCORP, INC.	a6723514ex31_2.htm
EX-32.1 - EXHIBIT 32.1 - LIMESTONE BANCORP, INC.	a6723514ex32_1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2011

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-33033

PORTER BANCORP, INC.

(Exact name of registrant as specified in its charter)

Kentucky		61-1142247
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

2500 Eastpoint Parkway, Louisville, Kentucky		40223
(Address of principal executive offices)		(Zip Code)

(502) 499-4800

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

	Large accelerated filer ¨	Accelerated filer ¨
	Non-accelerated filer ¨	Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

Indicate the number of shares outstanding of each of the issuer’s class of common stock, as of the latest practicable date.

11,838,428 shares of Common Stock, no par value, were outstanding at April 30, 2011.

		Page
PART I -	FINANCIAL INFORMATION

ITEM 1.	FINANCIAL STATEMENTS	1

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
	CONDITION AND RESULTS OF OPERATIONS	27

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	39

ITEM 4.	CONTROLS AND PROCEDURES	40

PART II -	OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS	41

ITEM 1A.	RISK FACTORS	41

ITEM 2.	UNREGISTERED SALES ON EQUITY SECURITIES AND USE OF PROCEEDS	41

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	41

ITEM 4.	REMOVED & RESERVED	41

ITEM 5.	OTHER INFORMATION	41

ITEM 6.	EXHIBITS	42

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

The following consolidated financial statements of Porter Bancorp Inc. and Subsidiary, PBI Bank, Inc., are submitted:

Unaudited Consolidated Balance Sheets for March 31, 2011 and December 31, 2010

Unaudited Consolidated Statements of Income for the three months ended March 31, 2011 and 2010

Unaudited Consolidated Statement of Changes in Stockholders’ Equity for the three months ended March 31, 2011

Unaudited Consolidated Statements of Cash Flows for the three months ended March 31, 2011 and 2010

Notes to Unaudited Consolidated Financial Statements

PORTER BANCORP, INC.

Unaudited Consolidated Balance Sheets

(dollars in thousands except share data)

	March 31,		December 31,
	2011		2010
Assets
Cash and due from financial institutions	$	156,726	$	178,693
Federal funds sold		5,377		6,742
Cash and cash equivalents		162,103		185,435
Securities available for sale		163,032		106,309
Mortgage loans held for sale		330		345
Loans, net of allowance of $33,599 and $34,285, respectively		1,243,568		1,268,383
Premises and equipment		22,175		22,468
Other real estate owned		73,942		67,635
Goodwill		23,794		23,794
Accrued interest receivable and other assets		48,163		49,583
Total assets	$	1,737,107	$	1,723,952

Liabilities and Stockholders’ Equity
Deposits
Non-interest bearing	$	106,772	$	98,398
Interest bearing		1,375,551		1,369,270
Total deposits		1,482,323		1,467,668
Federal funds purchased and repurchase agreements		11,429		11,616
Federal Home Loan Bank advances		14,564		15,022
Accrued interest payable and other liabilities		5,507		6,681
Subordinated capital note		8,550		8,550
Junior subordinated debentures		25,000		25,000
Total liabilities		1,547,373		1,534,537

Stockholders’ equity
Preferred stock, no par, 1,000,000 shares authorized,
Series A – 35,000 issued and outstanding;
Liquidation preference of $35 million at March 31, 2011		34,528		34,484
Series C – 317,042 issued and outstanding;
Liquidation preference of $3.6 million at March 31, 2011		3,283		3,283
Common stock, no par, 19,000,000 shares authorized, 11,840,176
and 11,846,107 shares issued and outstanding, respectively		112,236		112,236
Additional paid-in capital		19,526		19,438
Retained earnings		18,017		17,822
Accumulated other comprehensive income		2,144		2,152
Total stockholders' equity		189,734		189,415
Total liabilities and stockholders’ equity	$	1,737,107	$	1,723,952

See accompanying notes to unaudited consolidated financial statements.

PORTER BANCORP, INC.

Unaudited Consolidated Statements of Income

(dollars in thousands, except per share data)

	Three Months Ended
	March 31,
	2011		2010
Interest income
Loans, including fees	$	18,110	$	19,873
Taxable securities		1,042		2,335
Tax exempt securities		260		216
Fed funds sold and other		204		202
		19,616		22,626
Interest expense
Deposits		5,360		7,383
Federal Home Loan Bank advances		142		720
Subordinated capital note		73		75
Junior subordinated debentures		155		152
Federal funds purchased and other		118		119
		5,848		8,449
Net interest income		13,768		14,177
Provision for loan losses		5,100		3,000
Net interest income after provision for loan losses		8,668		11,177

Non-interest income
Service charges on deposit accounts		630		720
Income from fiduciary activities		255		252
Secondary market brokerage fees		76		60
Title insurance commissions		31		37
Net gain on sales of loans originated for sale		221		91
Net gain on sales of securities		83		57
Other		491		475
		1,787		1,692
Non-interest expense
Salaries and employee benefits		4,124		3,947
Occupancy and equipment		972		1,022
Other real estate owned expense		1,367		378
FDIC Insurance		855		705
State franchise tax		582		543
Professional fees		280		266
Loan collection expense		262		175
Communications		168		186
Postage and delivery		123		188
Advertising		102		96
Other		560		543
		9,395		8,049
Income before income taxes		1,060		4,820
Income tax expense		261		1,564
Net income		799		3,256
Less:
Dividends on preferred stock		438		438
Accretion on Series A preferred stock		44		44
Earnings allocated to participating securities		12		42
Net income available to common shareholders	$	305	$	2,732
Basic earnings per common share	$	0.03	$	0.30
Diluted earnings per common share	$	0.03	$	0.30

See accompanying notes to unaudited consolidated financial statements.

PORTER BANCORP, INC.

Unaudited Consolidated Statement of Changes in Stockholders’ Equity

For Three Months Ended March 31, 2011

(dollars in thousands, except share and per share data)

Accumulated

Amount

Additional

Other

Series A

Series C

Series A

Series C

Paid-In

Retained

Comprehensive

Common

Preferred

Common

Preferred

Capital

Earnings

Income

Total

Balances, January 1, 2011

11,846,107

35,000

317,042

112,236

34,484

3,283

19,438

17,822

2,152

189,415

Forfeited unvested stock

(5,931

)

–

Stock-based compensation expense

–

Comprehensive income:

Net income

–

799

–

799

Changes in accumulated other

comprehensive income,

net of taxes

–

)

Total comprehensive income

–

791

Dividends 5% on Series A preferred stock

–

(438

)

–

(438

)

Dividends on Series C preferred

stock ($0.01 per share)

–

)

–

)

Amortization of Series A preferred

stock discount

–

(44

)

–

Cash dividends declared on

common stock ($0.01 per share)

–

(119

)

–

(119

)

Balances, March 31, 2011

11,840,176

35,000

317,042

112,236

34,528

3,283

19,526

18,017

2,144

189,734

See accompanying notes to unaudited consolidated financial statements.

PORTER BANCORP, INC.

Unaudited Consolidated Statements of Cash Flows

For Three Months Ended March 31, 2011 and 2010

(dollars in thousands)

	2011			2010
Cash flows from operating activities
Net income	$	799		$	3,256
Adjustments to reconcile net income to
net cash from operating activities
Depreciation and amortization		610			844
Provision for loan losses		5,100			3,000
Net amortization (accretion) on securities		321			(226	)
Stock-based compensation expense		118			99
Deferred income taxes		238			1,177
Net gain on loans originated for sale		(221	)		(91	)
Loans originated for sale		(7,188	)		(6,182	)
Proceeds from sales of loans originated for sale		7,234			5,588
Net gain on sales of investment securities		(83	)		(57	)
Net (gain) loss on sales of other real estate owned		391			(1	)
Net write-down of other real estate owned		486			240
Earnings on bank owned life insurance		(70	)		(70	)
Net change in accrued interest receivable and other assets		1,130			1,338
Net change in accrued interest payable and other liabilities		(1,169	)		(1,707	)
Net cash from operating activities		7,696			7,208
Cash flows from investing activities
Purchases of available-for-sale securities		(66,641	)		(23,105	)
Sales and calls of available-for-sale securities		2,894			8,163
Maturities and prepayments of available-for-sale securities		6,773			6,832
Proceeds from sale of other real estate owned		624			878
Improvements to other real estate owned		(1,037	)		(338	)
Loan originations and payments, net		12,951			3,582
Purchases of premises and equipment, net		(42	)		(35	)
Net cash from investing activities		(44,478	)		(4,023	)
Cash flows from financing activities
Net change in deposits		14,655			(45,056	)
Net change in federal funds purchased and repurchase agreements		(187	)		78
Repayment of Federal Home Loan Bank advances		(458	)		(35,695	)
Cash dividends paid on preferred stock		(441	)		(438	)
Cash dividends paid on common stock		(119	)		(1,765	)
Net cash from financing activities		13,450			(82,876	)
Net change in cash and cash equivalents		(23,332	)		(79,691	)
Beginning cash and cash equivalents		185,435			172,173
Ending cash and cash equivalents	$	162,103		$	92,482
Supplemental cash flow information:
Interest paid	$	5,861		$	8,744
Income taxes paid		—			—
Supplemental non-cash disclosure:
Transfer from loans to other real estate	$	8,812		$	52,214
Financed sales of other real estate owned		2,041			6,295

See accompanying notes to unaudited consolidated financial statements.

PORTER BANCORP, INC.

Notes to Unaudited Consolidated Financial Statements

Note 1 – Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation – The consolidated financial statements include Porter Bancorp, Inc. (Company or PBI) and its wholly-owned subsidiary, PBI Bank (Bank). All significant inter-company transactions and accounts have been eliminated in consolidation.

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, the financial statements do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for three months ended March 31, 2011 are not necessarily indicative of the results that may be expected for the entire year. A description of other significant accounting policies is presented in the notes to the Consolidated Financial Statements for the year ended December 31, 2010 included in the Company’s Annual Report on Form 10-K.

Use of Estimates – To prepare financial statements in conformity with U.S. generally accepted accounting principles, management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and future results could differ. The allowance for loan losses, fair values of financial instruments, goodwill and other intangibles, and fair values of other real estate owned are particularly subject to change.

Reclassifications – Some items in the prior year financial statements were reclassified to conform to the current presentation.

New Accounting Standards

In January 2011, the FASB issued ASU No. 2011-01, “Deferral of the Effective Date of Disclosures about Troubled Debt Restructurings in Update No. 2010-20.” The provisions of ASU No. 2010-20 required the disclosure of more granular information on the nature and extent of troubled debt restructurings and their effect on the allowance for loan and lease losses effective for the Company’s reporting period ended March 31, 2011. The amendments in ASU No. 2011-01 defer the effective date related to these disclosures, enabling creditors to provide such disclosures after the FASB completes their project clarifying the guidance for determining what constitutes a troubled debt restructuring. As the provisions of this ASU only defer the effective date of the disclosure requirements related to troubled debt restructurings, the adoption of this ASU will have no impact on the Company’s statements of income and condition.

In April 2011, the FASB issued ASU No. 2011-02, ‘A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring.” The provisions of ASU No. 2011-02 provide additional guidance related to determining whether a creditor has granted a concession, include factors and examples for creditors to consider in evaluating whether a restructuring results in a delay in payment that is insignificant, prohibit creditors from using the borrower’s effective rate test to evaluate whether a concession has been granted to the borrower, and add factors for creditors to use in determining whether a borrower is experiencing financial difficulties. A provision in ASU no. 2011-02 also ends the FASB’s deferral of the additional disclosures about troubled debt restructurings as required by ASU No. 2010-20. The provisions of ASU No. 2011-02 are effective for the Company’s reporting period ending September 30, 2011. The adoption of ASU No. 2011-02 is not expected to have a material impact on the Company’s statements of income and condition.

Note 2 – Stock Plans and Stock Based Compensation

The Company has a stock option plan and a stock incentive plan. On February 23, 2006, the Company adopted the Porter Bancorp, Inc. 2006 Stock Incentive Plan. The 2006 Plan permits the issuance of up to 400,000 shares of the Company’s common stock upon the exercise of stock options or upon the grant of stock awards. As of March 31, 2011, the Company had granted outstanding options to purchase 13,324 shares. The Company also had granted 121,251 unvested shares net of forfeitures and vesting. The Company has 194,798 shares remaining available for issue under the plan. All shares issued under the above mentioned plans came from authorized and unissued shares.

On May 15, 2006, the board of directors approved the Porter Bancorp, Inc. 2006 Non-Employee Directors Stock Ownership Incentive Plan, which was approved by holders of the Company’s voting common stock on June 8, 2006. On May 22, 2008, shareholders voted to amend the plan to change the form of incentive award from stock options to unvested shares. Under the terms of the plan, 100,000 shares are reserved for issuance to non-employee directors upon the exercise of stock options or upon the grant of unvested stock awards granted under the plan. Prior to the amendment, options were granted automatically under the plan at fair market value on the date of grant. The options vest over a three-year period and have a five year term. Unvested shares are granted automatically under the plan at fair market value on the date of grant and vest semi-annually on the anniversary date of the grant over three years. To date, the Company has granted options to purchase 45,155 shares and issued 3,651 unvested shares to non-employee directors. At March 31, 2011, 47,300 shares remain available for issue under this plan.

All stock options have an exercise price that is equal to or greater than the fair market value of the Company’s stock on the date the options were granted. Options granted generally become fully exercisable at the end of three years of continued employment. Options have a life of five years.

The following table summarizes stock option activity:

	Three Months Ended					Twelve Months Ended
	March 31, 2011					December 31, 2010
				Weighted					Weighted
				Average					Average
				Exercise					Exercise
	Options			Price		Options			Price
Outstanding, beginning		86,469		$	20.72		312,227		$	21.80
Forfeited		(291	)		22.03		(16,797	)		21.55
Expired		(27,699	)		22.03		(208,961	)		22.27
Outstanding, ending		58,479		$	20.09		86,469		$	20.72

The following table details stock options outstanding:

	March 31, 2011
Stock options vested and currently exercisable:		58,479
Weighted average exercise price	$	20.09
Aggregate intrinsic value	$	0
Weighted average remaining life (in years)		0.9
Total Options Outstanding:		58,479
Aggregate intrinsic value	$	0
Weighted average remaining life (in years)		0.9

The intrinsic value of stock options is calculated based on the exercise price of the underlying awards and the market price of our common stock as of the reporting date. The intrinsic value of the vested and expected to vest stock options is $0 at March 31, 2011. There were no options exercised during the first three months of 2011. The Company recorded no stock option compensation expense during the three months ended March 31, 2011. No options were modified during the period. As of March 31, 2011, no stock options issued by the Company have been exercised.

From time-to-time the Company issues unvested shares to employees and non-employee directors. The shares vest either semi-annually or annually over three to ten years on the anniversary date of the issuance date provided the employee or director continues in such capacity at the vesting date. No unvested shares were issued the three months ended March 31, 2011. The Company recorded $118,000 of stock-based compensation during the first quarter of 2011 to salaries and employee benefits. A deferred tax benefit of $41,000 was recognized related to this expense.

The following table summarizes unvested share activity as of and for the periods indicated:

	Three Months Ended					Twelve Months Ended
	March 31, 2011					December 31, 2010
				Weighted					Weighted
				Average					Average
				Grant					Grant
	Shares			Price		Shares			Price
Outstanding, beginning		157,697		$	13.43		119,598		$	15.00
Granted		—			—		72,655			11.11
Vested		(26,909	)		12.25		(24,505	)		14.46
Forfeited		(5,886	)		14.08		(10,051	)		12.78
Outstanding, ending		124,902		$	13.65		157,697		$	13.43

Unrecognized stock based compensation expense related to stock options and unvested shares for the remainder of 2011 and beyond is estimated as follows (in thousands):

April 2011 – December 2011	$	355
2012		463
2013		377
2014		264
2015 & thereafter		169

Note 3 - Securities

The fair value of available for sale securities and the related gross unrealized gains and losses recognized in accumulated other comprehensive income were as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
March 31, 2011
U.S. Government and federal agency	$	10,595	$	60	$	—		$	10,655
Agency mortgage-backed: residential		109,491		1,438		(375	)		110,554
State and municipal		30,427		1,315		(2	)		31,740
Corporate bonds		7,249		579		(23	)		7,805
Other		572		—		—			572
Total debt securities		158,334		3,392		(400	)		161,326
Equity		1,400		311		(5	)		1,706
Total	$	159,734	$	3,703	$	(405	)	$	163,032

December 31, 2010
U.S. Government and federal agency	$	5,973	$	37	$	—		$	6,010
Agency mortgage-backed: residential		60,270		1,590		(5	)		61,855
State and municipal		26,039		995		(32	)		27,002
Corporate bonds		8,744		507		(32	)		9,219
Other		572		—		—			572
Total debt securities		101,598		3,129		(69	)		104,658
Equity		1,400		254		(3	)		1,651
Total	$	102,998	$	3,383	$	(72	)	$	106,309

Sales and calls of available for sale securities were as follows:

	Three Months Ended
	March 31,
	2011		2010
	(in thousands)
Proceeds	$	2,894	$	8,163
Gross gains		83		256
Gross losses		—		(199	)

The amortized cost and fair value of the debt investment securities portfolio are shown by contractual maturity. Contractual maturities may differ from actual maturities if issuers have the right to call or prepay obligations with or without call or prepayment penalties.

	March 31, 2011
	Amortized Cost		Fair Value
	(in thousands)
Maturity
Available-for-sale
Within one year	$	1,725	$	1,751
One to five years		14,640		15,404
Five to ten years		30,158		31,255
Beyond ten years		2,320		2,362
Mortgage-backed		109,491		110,554
Total	$	158,334	$	161,326

Securities pledged at March 31, 2011 and December 31, 2010 had carrying values of approximately $73.8 million and $73.1 million, respectively, and were pledged to secure public deposits, repurchase agreements, and Federal Home Loan Bank advances.

The Company evaluates securities for OTTI at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to the length of time and the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, underlying credit quality of the issuer, and the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. In analyzing an issuer’s financial condition, the Company may consider whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, the sector or industry trends and cycles affecting the issuer, and the results of reviews of the issuer’s financial condition. Management currently intends to hold all securities with unrealized losses until recovery, which for fixed income securities may be at maturity.

At March 31, 2011, the Company held 41 equity securities. Of these securities, 2 had unrealized losses of $1,500 and had been in an unrealized loss position for less than twelve months and 3 had an unrealized loss of $3,400 and had been in an unrealized loss position for more than twelve months. Management monitors the underlying financial condition of the issuers and current market pricing for these equity securities monthly. As of March 31, 2011, management does not believe any securities in our portfolio with unrealized losses should be classified as other than temporarily impaired.

Securities with unrealized losses at March 31, 2011 and December 31, 2010, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, are as follows:

	Less than 12 Months					12 Months or More					Total
Description of Securities	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
	(in thousands)
March 31, 2011
Agency mortgage-backed: residential	$	38,501	$	(375	)	$	—	$	—		$	38,501	$	(375	)
State and municipal		1,137		(2	)		—		—			1,137		(2	)
Corporate bonds		1,004		(23	)		—		—			1,004		(23	)
Equity		27		(2	)		19		(3	)		46		(5	)

Total temporarily impaired	$	40,669	$	(402	)	$	19	$	(3	)	$	40,688	$	(405	)


December 31, 2010
State and municipal	$	3,119	$	(32	)	$	—	$	—		$	3,119	$	(32	)
Agency mortgage-backed: residential		1,060		(5	)		—		—			1,060		(5	)
Corporate bonds		995		(32	)		—		—			995		(32	)
Equity		27		(1	)		74		(2	)		101		(3	)

Total temporarily impaired	$	5,201	$	(70	)	$	74	$	(2	)	$	5,275	$	(72	)

Note 4 – Loans

Loans were as follows:

	March 31, 2011			December 31, 2010
	(in thousands)
Commercial	$	76,521		$	90,290
Commercial Real Estate:
Construction		175,805			199,524
Farmland		86,161			85,523
Other		458,278			441,844
Residential Real Estate:
Multi-family		75,283			74,919
Other		349,247			353,418
Consumer		30,758			31,913
Agriculture		24,158			24,177
Other		956			1,060
Subtotal		1,277,167			1,302,668
Less: Allowance for loan losses		(33,599	)		(34,285	)
Loans, net	$	1,243,568		$	1,268,383

Activity in the allowance for loan losses was as follows:

	For the Three Months Ended
	March 31, 2011			March 31, 2010
	(in thousands)
Beginning balance	$	34,285		$	26,392
Provision for loan losses		5,100			3,000
Loans charged-off		(5,867	)		(2,906	)
Loan recoveries		81			57
Ending balance	$	33,599		$	26,543

The following table presents the activity in the allowance for loan losses by portfolio segment for the three months ended March 31, 2011:

	Commercial			Commercial Real Estate			Residential Real Estate			Consumer			Agriculture		Other		Total


Beginning balance	$	2,147		$	24,075		$	7,224		$	701		$	134	$	4	$	34,285
Provision for loan losses		(106	)		3,457			1,618			122			5		4		5,100
Loans charged off		(79	)		(4,141	)		(1,434	)		(213	)		–		–		(5,867	)
Recoveries		12			5			43			21			–		–		81

Ending balance	$	1,974		$	23,396		$	7,451		$	631		$	139	$	8	$	33,599

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on the impairment method as of March 31, 2011:

	Commercial		Commercial Real Estate		Residential Real Estate		Consumer		Agriculture		Other		Total

Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	57	$	4,660	$	—	$	—	$	—	$	—	$	4,717
Collectively evaluated for impairment		1,917		18,736		7,451		631		139		8		28,882

Total ending allowance balance	$	1,974	$	23,396	$	7,451	$	631	$	139	$	8	$	33,599


Loans:
Loans individually evaluated for impairment	$	3,475	$	60,246	$	10,629	$	—	$	86	$	—	$	74,436
Loans collectively evaluated for impairment		73,046		659,998		413,901		30,758		24,072		956		1,202,731

Total ending loans balance	$	76,521	$	720,244	$	424,530	$	30,758	$	24,158	$	956	$	1,277,167

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on the impairment method as of December 31, 2010:

	Commercial		Commercial Real Estate		Residential Real Estate		Consumer		Agriculture		Other		Total

Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	23	$	5,096	$	—	$	—	$	—	$	—	$	5,119
Collectively evaluated for impairment		2,124		18,979		7,224		701		134		4		29,166

Total ending allowance balance	$	2,147	$	24,075	$	7,224	$	701	$	134	$	4	$	34,285


Loans:
Loans individually evaluated for impairment	$	3,673	$	51,223	$	16,718	$	—	$	112	$	—	$	71,726
Loans collectively evaluated for impairment		86,617		675,668		411,619		31,913		24,065		1,060		1,230,942

Total ending loans balance	$	90,290	$	726,891	$	428,337	$	31,913	$	24,177	$	1,060	$	1,302,668

Impaired loans were as follows:

	March 31, 2011		December 31, 2010
	(in thousands)
Loans with no allocated allowance for loan losses	$	40,019	$	41,885
Loans with allocated allowance for loan losses		34,417		29,841
Total	$	74,436	$	71,726
Amount of the allowance for loan losses allocated	$	4,717	$	5,119

	Three Months Ended March 31, 2011		Year Ended December 31, 2010
Average of impaired loans during the period	$	73,081	$	69,167
Interest income recognized during impairment		338		1,358
Cash basis interest income recognized		87		115

Impaired loans include restructured loans and commercial, construction, agriculture, and commercial real estate loans on non-accrual or classified as doubtful, whereby collection of the total amount is improbable, or loss, whereby all or a portion of the loan has been written off or a specific allowance for loss had been provided.

The following table presents information related to loans individually evaluated for impairment by class of loans as of and for the three months ended March 31, 2011:

	Unpaid Principal Balance		Recorded Investment		Allowance For Loan Losses Allocated		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized

	(in thousands)
With No Related Allowance Recorded:
Commercial	$	2,370	$	2,334	$	—	$	2,428	$	22	$	8
Commercial real estate:
Construction		3,901		3,901		—		6,917		11		3
Farmland		6,754		6,754		—		6,750		86		7
Other		19,435		16,315		—		14,692		44		14
Residential real estate:
Multi-family		3,912		3,912		—		3,920		46		—
Other		7,810		6,717		—		9,753		76		2
Consumer		—		—		—		—		—		—
Agriculture		86		86		—		99		—		—
Other		—		—		—		—		—		—
With An Allowance Recorded:
Commercial		1,141		1,141		57		1,145		24		24
Commercial real estate:
Construction		6,105		5,633		796		4,807		—		—
Farmland		1,234		1,234		90		1,234		—		—
Other		28,361		26,409		3,774		21,336		29		29
Residential real estate:
Multi-family		—		—		—		—		—		—
Other		—		—		—		—		—		—
Consumer		—		—		—		—		—		—
Agriculture		—		—		—		—		—		—
Other		—		—		—		—		—		—

Total	$	81,109	$	74,436	$	4,717	$	73,081	$	338	$	87

The following table presents loans individually evaluated for impairment by class of loan as of December 31, 2010:

	Unpaid Principal Balance		Recorded Investment		Allowance For Loan Losses Allocated
	(in thousands)
With No Related Allowance Recorded:
Commercial	$	2,559	$	2,523	$	—
Commercial real estate:
Construction		3,269		3,268		—
Farmland		6,745		6,746		—
Other		12,662		12,518		—
Residential real estate:
Multi-family		3,929		3,929		—
Other		13,303		12,789		—
Consumer		—		—		—
Agriculture		119		112		—
Other		—		—		—
With An Allowance Recorded:
Commercial		1,150		1,150		23
Commercial real estate:
Construction		13,314		10,645		1,923
Farmland		1,234		1,234		89
Other		16,912

LIMESTONE BANCORP, INC. - FORM 10-Q - May 16, 2011

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