Community Bankers Trust Corporation Reports 2nd Quarter 2011 Results

Jul 28, 2011, 19:57 ET from Community Bankers Trust Corporation

GLEN ALLEN, Va., July 28, 2011 /PRNewswire/ -- Community Bankers Trust Corporation (the "Company") (NYSE Amex: BTC), the holding company for Essex Bank (the "Bank"), today reported second quarter 2011 net income of $521,000. This compares with a net loss of $19.6 million in the second quarter of 2010 and a net loss of $1.2 million in the first quarter of 2011.  Net income available to common stockholders was $247,000 in the second quarter of 2011 compared with a net loss available to common stockholders of $19.9 million in the second quarter of 2010 and a net loss available to common stockholders of $1.5 million in the first quarter of 2011.  Second quarter 2010 results included a $21.3 million provision for loan losses and $5.7 million in impairment of goodwill charges.

Rex L. Smith, III, President and Chief Executive Officer of the Company and the Bank, stated, "I am pleased to be able to report a profit for the quarter.  More importantly, I am encouraged by the trends that produced the profit.  We are beginning to see the results of the work we have done to strategically re-align the Bank.  We have been able to isolate and resolve the larger credit issues of the past and to focus on better resource utilization in the major business lines of the Bank.

"We have methodically decreased the level of nonperforming loans, increased interest income and dramatically reduced operating expenses. Additionally, this is the third consecutive quarter that we have been able to increase our capital ratios."

Mr. Smith added, "While resolving our credit problems has been a top priority, we are also focused on generating new quality relationships to grow the core businesses in the markets we serve.  The entire management team is dedicated to accomplishing the goals we have set to return the Company to profitability and build value for our shareholders."

Key highlights for the second quarter of 2011 include the following:

  • Net interest income was $11.4 million for the second quarter of 2011, an increase of $1.3 million, or 13.2%, over the first quarter of 2011.
  • Non-covered nonaccruing loans declined 10.2% during the quarter, or $4.3 million, ending the period at $37.7 million.
  • Non-covered other real estate owned increased $5.1 million, to $12.4 million, on a linked quarter basis, as loans migrate from nonaccruing status to other real estate as a result of aggressive resolution of problem credits.
  • Interest expense declined $232,000, or 7.0%, on a linked quarter basis, the result of an aggressive deposit pricing strategy coupled with lower rates.
  • Net charged-off loans were $4.7 million for the second quarter of 2011, down from $5.5 million in the first quarter of 2011 and $8.7 million in the fourth quarter of 2010.
  • Noninterest expenses were $18.5 million for the six months ended June 30, 2011, a decline of $7.5 million, or 28.8%, compared with the first six months of 2010 noninterest expenses of $26.0 million. Excluding goodwill impairment charges of $5.7 million in the second quarter of 2010, noninterest expenses would have declined $1.8 million, or 8.7%.
  • Excluding FDIC covered assets, the ratio for the allowance for loan losses to total loans was 3.35% at June 30, 2011, which management believes is commensurate with risk within the non-covered loan portfolio.

RESULTS OF OPERATIONS

Net income available to common stockholders was $247,000, or $0.01 per common share on a diluted basis, for the quarter ended June 30, 2011 compared with a net loss available to common stockholders of $19.9 million, or $0.93 per common share on a diluted basis, for the quarter ended June 30, 2010. Net income was driven by an increase in net interest income from aggressive deposit pricing and noninterest expense controls. Additionally, there was no provision for loan losses in the second quarter of 2011 compared with $21.3 million in the second quarter of 2010.

Also positively influencing the performance in earnings in the second quarter of 2011 compared to the second quarter of 2010 was the recognition of $5.7 million in goodwill impairment charges in the second quarter of 2010. This eliminated the Company's goodwill balances, generated by the formation of the Company in 2008.  

Furthermore, the Company has focused on improvement in noninterest expenses. Noninterest expenses, excluding goodwill impairment charges, declined from $10.4 million in the second quarter of 2010, to $9.3 million in the second quarter of 2011.  Offsetting these improvements was a decline in total noninterest income, from negative $115,000 in the second quarter of 2010, to negative $1.4 million in the second quarter of 2011 as the Company recognized $2.7 million in FDIC indemnification asset amortization. This recognition resulted in a reduction in the amount carried on the balance sheet that the Company anticipates it will collect from the FDIC on the loans covered by FDIC shared loss agreements.  

The following table presents summary income statements for the three months ended June 30, 2011 and 2010, and six months ended June 30, 2011 and 2010.

SUMMARY INCOME STATEMENT

 (Dollars in thousands)

For the three months ended

For the six months ended

June 30, 2011

June 30, 2010

$

June 30, 2011

June 30, 2010

Interest income

$

14,492

$

14,933

27,886

$

30,179

Interest expense

3,079

4,820

6,390

10,008

Net interest income  

11,413

10,113

21,496

20,171

Provision for loan losses

-

21,282

1,498

26,324

Net interest income after provision for

 loan losses

11,413

(11,169)

19,998

(6,153)

Noninterest income

(1,431)

(115)

(2,837)

300

Noninterest expense

9,334

16,175

18,545

26,035

Income tax (expense) benefit

(127)

7,843

711

9,508

Net income (loss)

$

521

$

(19,616)

$

(673)

$

(22,380)

Dividends on preferred stock

-

221

-

442

Accretion of preferred stock discount

53

49

104

97

Preferred dividends not paid

221

-

442

-

Net income (loss) available to common

 stockholders

$

247

$

(19,886)

$

(1,219)

$

(22,919)

Net income (loss) per share available to

 common stockholders:

Basic

$

0.01

$

(0.93)

$

(0.06)

$

(1.07)

Diluted

$

0.01

$

(0.93)

$

(0.06)

$

(1.07)

Interest Income

Interest income for the second quarter of 2011 was $14.5 million, an increase of $1.1 million, or 8.2%, from first quarter 2011 interest income of $13.4 million.  Interest and fee income on loans was $12.2 million in the second quarter of 2011 compared with $11.1 million in the first quarter of 2011.  Interest and fees on FDIC covered loans increased $1.0 million on a linked quarter basis and was $4.8 million in the second quarter of 2011 compared with $3.8 in the first quarter of 2011.  The increase in income was the result of better than previously forecasted performance on FDIC guaranteed loans acquired in 2009, which also resulted in increased FDIC indemnification asset amortization in noninterest income.  Despite a decline of $29.6 million in average interest-earning assets on a linked quarter basis, interest and fees on non-covered loans increased $94,000.

Interest income declined 3.0%, or $441,000, from $14.9 million in the second quarter of 2010 to $14.5 million in the second quarter of 2011.  The primary reason for the decline was a 12.0% decrease in average earning assets, from $1.046 billion in the second quarter of 2010 to $921.1 million in the second quarter of 2011.  The impact of the decline in average earning assets was partially offset by an increase in yield on earning assets, from 5.88% for the second quarter of 2010 to 6.34% for the second quarter of 2011.  The increase in yield was driven by the FDIC covered loan portfolio, which yielded 9.76% against the carrying value in the second quarter of 2010 and increased to 18.28% for the second quarter of 2011.

Interest income was $27.9 million for the six months ended June 30, 2011, a decrease of $2.3 million from interest income of $30.2 million for the six months ended June 30, 2010.  Average earnings assets declined from $1.044 billion for the first six months of 2010 to $939.6 million for the first six months of 2011.  Soft loan demand plus a focus by the Company on the remediation and resolution of problem credits is the primary reason for the 10.0%, or $104.5 million, decline in average earning assets over the comparative periods.

Interest Expense

Interest expense for the second quarter of 2011 was $3.1 million, a decrease of $232,000, or 7.0%, from interest expense of $3.3 million for the first quarter of 2011.  Average interest-bearing liabilities declined $22.2 million, or 2.4%, from $919.2 million in the first quarter of 2011 to $897.0 million in the second quarter of 2011, the result of a continued de-leveraging strategy.  Total deposits at June 30, 2011 were $910.5 million, a decline of $19.0 million, or 2.1%, from total deposits of $929.5 million at March 31, 2011.  Interest bearing deposits declined $19.4 million and noninterest bearing deposits increased $367,000 over this time frame.  Due to aggressive repricing, coupled with lower rates, the cost of interest bearing liabilities declined from 1.44% in the first quarter of 2011 to 1.37% in the second quarter of 2011.

Interest expense declined $1.7 million from $4.8 million in the second quarter of 2010 to $3.1 million in the second quarter of 2011. The 36.1% decrease resulted from decreases in both the amount of interest bearing liabilities and their cost.  First, the average balance of interest bearing liabilities declined $125.4 million, or 12.3% from the second quarter of 2010 to the second quarter of 2011.  Second, the cost of interest bearing liabilities declined from 1.89% for the second quarter of 2010 to 1.37% in the second quarter of 2011.

Interest expense declined $3.6 million year over year, from $10.0 million for the six months ended June 30, 2010 to $6.4 million for the six months ended June 30, 2011.  This decline of 36.2% was driven by a decline in average interest bearing liabilities, from $1.021 billion for the first six months of 2010 to $908.0 million for the same period in 2011.  Additionally contributing to the decrease in interest expense was a decrease in the cost of interest bearing liabilities, from 1.96% for the first six months of 2010 to 1.41% for the first six months in 2011.

Net Interest Income

Net interest income was $11.4 million for the quarter ended June 30, 2011, compared with $10.1 million for the quarter ended March 31, 2011.  This represents an increase of $1.3 million, or 13.2%, and was the result primarily of an increase in interest and fees on FDIC covered loans of $1.0 million, from $3.8 million in the first quarter of 2011 to $4.8 million in the second quarter of 2011, at a resultant yield of 18.28% on $105.8 million in average carry balances of the loans in that portfolio for the second quarter of 2011.  On a tax equivalent basis, net interest income was $11.5 million for the second quarter of 2011 compared with tax equivalent net interest income of $10.3 million for the first quarter of 2011.  The tax equivalent net interest margin increased to 5.01% in the second quarter of 2011 compared to 4.33% in the first quarter of 2011.

Net interest income increased $1.3 million year over year, from $10.1 million in the second quarter of 2010 to $11.4 million in the second quarter of 2011.  This represents an increase of 12.9% and was the result primarily of an increase in the Company's interest spread, from 3.99% in the second quarter of 2010 to 4.97% in the second quarter of 2011.  This increased the Company's net interest margin from 4.04% in the second quarter of 2010 to 5.01% for the same period in 2011.  A decline in the cost of interest bearing liabilities, from 1.89% for the second quarter of 2010 to 1.37% for the second quarter of 2011, coupled with an increase in the yield on FDIC covered loans noted above, were the drivers of this increase.

Net interest income was $21.5 million for the six months ended June 30, 2011, compared with $20.2 million for the six months ended June 30, 2010.  The increase in net interest income was the result primarily of decreases in the average balances of interest-bearing liabilities of $112.9 million, or 11.1%, coupled with lower rates, which has reduced interest expense 36.2%, from $10.0 million in the first six months of 2010 to $6.4 million for the first six months of 2011.  The tax equivalent net interest margin increased to 4.65% in the first six months of 2011 from 4.04% in the first six months of 2010.

The following table compares the Company's net interest margin, on a tax-equivalent basis, for the three months ended June 30, 2011, June 30, 2010, and March 31, 2011 and for the six months ended June 30, 2011 and June 30, 2010.  

NET INTEREST MARGIN

(Dollars in thousands)

For the three months ended

6/30/2011

6/30/2010

3/31/2011

Average interest earning assets

$           921,089

$           1,046,439

$           950,678

Interest income

$             14,492

$                 14,933

$             13,394

Interest income - tax equivalent

$             14,610

$                 15,386

$             13,606

Yield on interest earning assets

6.34%

5.88%

5.73%

Average interest bearing liabilities

$           896,970

$           1,022,327

$           919,214

Interest expense

$               3,079

$                   4,820

$                3,311

Cost of interest bearing liabilities

1.37%

1.89%

1.44%

Net interest income

$             11,413

$                 10,113

$             10,083

Net interest income - tax equivalent

$             11,531

$                 10,566

$             10,295

Interest spread

4.97%

3.99%

4.28%

Net interest margin

5.01%

4.04%

4.33%

For the six months ended

6/30/2011

6/30/2010

Average interest earning assets

$               939,582

$           1,044,120

Interest income

$                 27,886

$                 30,179

Interest income - tax equivalent

$                 28,216

$                 31,094

Yield on interest earning assets

6.01%

5.96%

Average interest bearing liabilities

$               908,031

$           1,020,922

Interest expense

$                   6,390

$                 10,008

Cost of interest bearing liabilities

1.41%

1.96%

Net interest income

$                 21,496

$                 20,171

Net interest income - tax equivalent

$                 21,826

$                 21,086

Interest spread

4.60%

4.00%

Net interest margin

4.65%

4.04%

Provision for Loan Losses

The provision for loan losses for non-covered loans was $0 for the quarter ended June 30, 2011.  This compares with a provision of $1.5 million for the first quarter of 2011 and a provision of $21.3 million for the quarter ended June 30, 2010.  The ratio of the allowance for loan losses to nonperforming assets was 33.52% at June 30, 2011, compared with 43.39% at March 31, 2011.  The ratio of allowance for loan losses to total non-covered loans was 3.35% at June 30, 2011 compared with 4.19% at March 31, 2011 and 6.89% at June 30, 2010. The decrease in the allowance for loan losses to total non-covered loans from June 2010 to June 2011 was primarily the result of aggressive charge-offs for non-performing loans.  Net charged-off loans were $4.7 million for the quarter ended June 30, 2011 compared with net charged-off loans of $5.5 million for the quarter ended March 31, 2011. Since the beginning of 2010, the Company has charged-off $30.5 million in loans and realized $1.2 million in recoveries.  

Provision for loan losses on non covered loans was $1.5 million for the six months ended June 30, 2011 compared with $26.3 million for the six months ended June 30, 2010.  Charged-off loans were $10.5 million for the six months ended June 30, 2011 compared to $5.5 million for the six months ended June 30, 2010.  Loan recoveries were $221,000 for the first six months of 2011 compared to $687,000 for the same period in 2010.

The following table reconciles the activity in the Company's non-covered allowance for loan losses, by quarter, for the past six quarters.

CREDIT QUALITY

(Dollars in thousands)

2011

2010

Second

First

Fourth

Third

Second

First

Quarter

Quarter

Quarter

Quarter

Quarter

Quarter

Allowance for loan losses:

Beginning of period

$  21,542

$  25,543

$ 34,353

$  38,785

$  19,798

$ 18,169

Provision for loan losses

-

1,498

(77)

1,116

20,402

5,042

Charge-offs

(4,825)

(5,634)

(8,898)

(5,647)

(2,029)

(3,486)

Recoveries

86

135

165

99

614

73

Net charge-offs

$  (4,739)

$  (5,499)

$   (8,733)

$(5,548)

$  (1,415)

$ (3,413)

End of period

$  16,803

$  21,542

$   25,543

$  34,353

$  38,785

$  19,798

Noninterest Income

On a linked quarter basis, noninterest income was negative $1.4 million for both the first and second quarters of 2011.  The largest component of noninterest income was FDIC indemnification asset amortization, which reduces noninterest income, and was $2.7 million for each period, respectively. By amortizing the FDIC indemnification asset the Company is reducing the asset and recognizing interest income from borrowers of loans covered by FDIC shared loss agreements.  

Noninterest income was positively affected in the second quarter of 2011 by reduced loss on sale of OREO, totaling $249,000 for the second quarter of 2011 compared with $612,000 in the first quarter of 2011.  Also positively affecting noninterest income on a linked quarter basis was an increase in service charges on deposit accounts of $61,000.  Service charges on deposit accounts were $637,000 for the second quarter of 2011 compared with $576,000 for the first quarter of 2011. Offsetting increases in noninterest income were a decrease in other noninterest income of $52,000, from $714,000 in the first quarter of 2011 to $662,000 in the second quarter of 2011, and a decrease in gains on sales of securities of $485,000.  Gains on securities sales were $176,000 in the second quarter of 2011 versus gains of $661,000 in the first quarter of 2011.

Noninterest income declined from negative $115,000 in the second quarter of 2010 to negative $1.4 million for the second quarter of 2011.  FDIC indemnification asset amortization was the largest factor in this decline and was $2.7 million for the second quarter of 2011 compared with $362,000 in the second quarter of 2010.  Other noninterest income also decreased and was $662,000 in the second quarter of 2011 compared with $1.3 million for the second quarter of 2010. Other categories offset these decreases in noninterest income. Gain/(loss) on sale of OREO increased from losses of $1.2 million in the second quarter of 2010 to losses of $249,000 in the second quarter of 2011. Gain/(loss) on sales of securities were a loss of $452,000 in the second quarter of 2010 and increased to gains of $176,000 for the second quarter of 2011.  Service charges on deposit accounts were $622,000 in the second quarter of 2010 and increased to $637,000 in the second quarter of 2011.

For the six months ended June 30, 2011, noninterest income equaled negative $2.8 million versus $300,000 for the six months ended June 30, 2010. Again, this change was due primarily to accelerated FDIC indemnification asset amortization of $4.7 million, from $739,000 for the first six months of 2010 to $5.4 million for the same period in 2011.  The increase in FDIC indemnification asset amortization has resulted in the increased yield realized in interest and fees on FDIC covered loans over the same time frame, as projected losses carried within the FDIC indemnification asset have been realized instead, through payment performance of the associated borrowers.  Service charges on deposit accounts increased $26,000 and were $1.2 million each six month period.

Also positively affecting noninterest income over the six months comparison periods was a reduction in losses on sales of OREO properties of $2.7 million, from $3.6 million for 2010 to $861,000 in 2011.  Additionally, gains/(losses) on sales of securities increased by $935,000, from a loss of $98,000 in the first six months of 2010 to gains realized for the same period in 2011 of $837,000.  

Other noninterest income decreased $2.1 million year over year from $3.5 million in the first six months of 2010 to $1.4 million for the same period in 2011.  This decrease reflects fewer reimbursable loss events in FDIC covered loans.

Noninterest Expense

On a linked quarter basis, noninterest expenses totaled $9.3 million for the three months ended June 30, 2011 compared with $9.2 million for the quarter ended March 31, 2011, an increase of $123,000, or 1.3%.

Other operating expenses increased $397,000, or 23.7%, from $1.7 million in the first quarter of 2011, to $2.1 million in the second quarter of 2011. Of this increase, $183,000 was related to the issuance and expense of annual stock retainers for Directors that occurred following the annual meeting of stockholders. Additionally, direct expenses on other real estate owned increased $178,000 on a linked quarter basis.  Also increasing on a linked quarter basis were data processing fees, which increased $24,000, from $452,000 to $476,000, or 5.3%.  Professional fees increased by $7,000, from $191,000 in the first quarter of 2011, to $198,000 in the second quarter of 2011.

All other expense categories realized decreases in the second quarter of 2011 compared to the first quarter of 2011.  FDIC assessment expense declined $111,000, from $872,000 in the first quarter of 2011 to $761,000 in the second quarter of 2011.  Occupancy expenses declined $81,000, from $814,000 to $733,000.  Legal fees declined $70,000, from $105,000 in the first quarter of 2011 to $35,000 in the second quarter of 2011. Salaries and employee benefits decreased $33,000 and equipment expense decreased $10,000 on a linked quarter basis.

Noninterest expenses declined $6.8 million when comparing the second quarter of 2011 to the same period in 2010.  Excluding non-cash goodwill impairment charges of $5.7 million realized in the second quarter of 2010, noninterest expenses would have declined $1.1 million, from $10.4 million in the second quarter of 2010 to $9.3 million in the second quarter of 2011.  Salaries and employee benefits were the largest category decrease and were $4.8 million in the second quarter of 2010 and $4.2 million in the second quarter of 2011, a decrease of $634,000, or 13.2%.  Also seeing a significant decline were professional fees, which decreased $545,000, or 73.4%, from $743,000 in the second quarter of 2010 to $198,000 in the second quarter of 2011.

For the six months ended June 30, 2011, excluding the goodwill impairment charge noted above, noninterest expenses would have declined $1.8 million.  Noninterest expenses, excluding goodwill, were $20.3 million for the first six months of 2010 and declined to $18.5 million for the first six months in 2011.  The two major drivers of this 8.7% decrease were salaries and employee benefits, which declined $1.6 million over the six months comparison periods, and professional fees, which decreased $688,000.  Salaries and employee benefits were $9.9 million for the first six months of 2010 and $8.4 million for the first six months of 2011, a decrease of 15.7%.  Professional fees were $1.1 million for the first six months of 2010 and $389,000 for the first six months of 2011, a decrease of 63.9%.

Income Taxes

Income tax expense was $127,000 for the three months ended June 30, 2011, compared with an income tax benefit of $838,000 for the three months ended March 31, 2011 and income tax benefit of $7.8 million in the second quarter of 2010. For the six months ended June 30, 2011, income tax benefit totaled $711,000 compared with income tax benefit of $9.5 million for the six months ended June 30, 2010.

FINANCIAL CONDITION

At June 30, 2011, the Company had total assets of $1.065 billion, a decrease of $50.1 million, or 4.5%, from total assets of $1.116 billion at December 31, 2010. Total loans, including $104.3 million in loans covered by the FDIC shared loss agreements, were $605.4 million at June 30, 2011, decreasing $35.7 million, or 5.6%, from $641.1 million at December 31, 2010.   The carrying value of covered loans declined $11.2 million, or 9.7%, from December 31, 2010. Non-covered loans equaled $501.1 million at June 30, 2011, declining $24.5 million, or 4.7%, since December 31, 2010.  The decline in loan volume within the non-covered loan portfolio was the direct result of $10.5 million in loan charge-offs coupled with loan run-off and an overall weak loan demand.

On a linked quarter basis, total real estate loans declined $18.1 million and were $438.4 million at June 30, 2011.  Commercial lending activity increased $4.4 million, or 9.4%, during the second quarter of 2011 and was $51.5 million at June 30, 2011.  Consumer installment loans increased during the second quarter of 2011 and were $9.6 million, an increase of $894,000, or 10.3%. The increase in commercial and consumer installment loans reflects an effort by management to diversify the loan portfolio away from a heavy dependence on real estate lending.  

The following table shows the composition of the Company's non-covered loan portfolio on a linked quarter basis.

NON-COVERED LOANS

(Dollars in thousands)

June 30, 2011

March 31, 2011

Amount

% of Non-

Covered Loans

Amount

% of Non-

Covered Loans

Mortgage loans on real estate:

Residential 1-4 family

$     131,205

26.18%

$       133,327

25.91%

Commercial

197,897

39.49%

201,017

39.07%

Construction and land development

85,002

16.96%

95,286

18.52%

Second mortgages

8,306

1.66%

8,429

1.64%

Multifamily

13,397

2.67%

15,356

2.98%

Agriculture

2,566

0.51%

3,020

0.59%

Total real estate loans

438,373

87.47%

456,435

88.71%

Commercial loans

51,511

10.28%

47,092

9.15%

Consumer installment loans

9,600

1.92%

8,706

1.69%

All other loans

1,710

0.33%

2,245

0.45%

Gross loans

501,194

100.00%

514,478

100.00%

Less allowance for loan losses

(16,803)

(21,542)

Less unearned income on loans

(138)

(202)

Non-covered loans, net of unearned income

$    484,253

$       492,734

Due to declining loan balances and lower cash and cash equivalents, the Company's securities portfolio increased $4.1 million, or 1.3%, during the first six months of 2011 to equal $311.6 million. The Company had Federal funds sold of $0 at June 30, 2011 versus $2.0 million at December 31, 2010. During the second quarter of 2011 the Company decreased holdings, through sales activity, in U.S. Treasury and U.S. Government agencies, realized gains of $176,000, and reinvested in agency mortgage backed securities. The primary reinvestment choice was GNMA mortgage backed securities, which are higher yielding, but carry the same zero percent risk weighting as U.S. Treasury and U.S. Government agencies for regulatory capital purposes. The Company does not hold private label mortgage backed securities.

The following table shows the composition of the Company's securities portfolio, excluding equity securities, on a linked quarter basis.

SECURITIES PORTFOLIO

(Dollars in thousands)

June 30, 2011

March 31, 2011

Amortized Cost

Fair Value

Amortized Cost

Fair Value

Securities Available for Sale

U.S. Treasury issue and other

     U.S. Government agencies

$

9,820

$

10,018

$

78,933

$

77,731

State, county and municipal

48,748

50,308

49,698

49,657

Corporate and other bonds

5,067

5,075

5,076

5,094

Mortgage backed securities

165,163

166,877

79,971

80,865

Total securities available for sale

$

228,798

$

232,278

$

213,678

$

213,347

Securities Held to Maturity

June 30, 2011

March 31, 2011

Amortized Cost

Fair Value

Amortized Cost

Fair Value

State, county and municipal

12,181

13,097

13,063

13,808

Mortgage backed securities

60,207

63,592

64,730

68,049

Total securities held to maturity

$

72,388

$

76,689

$

77,793

$

81,857

Total deposits at June 30, 2011 were $910.5 million, a decrease of $51.3 million from December 31, 2010. Time deposits declined $55.5 million during the first six months of 2011 as management kept rates low among all regions as loan demand remained weak and covered loans continued to decline in volume. The Company is attempting to restructure the deposit mix away from higher priced time deposits and more into lower cost transactional accounts.  The most notable change was the increase in NOW accounts, which increased $5.0 million, or 4.7%, from $106.2 million at December 31, 2010 to $111.2 million at June 30, 2011.  Additionally, savings accounts increased $3.4 million, or 5.4%, during the first six months of 2011.   The Company's total loan-to-deposit ratio was 66.5% at June 30, 2011 compared to 66.7% at December 31, 2010.

The following table details the change in the mix of interest bearing deposits from December 31, 2010 to June 30, 2011.

INTEREST BEARING DEPOSITS

(Dollars in thousands)

June 30, 2011

March 31, 2011

December 31, 2010

NOW

$              111,268

$            105,870

$                 106,248

MMDA

121,210

127,284

127,594

Savings

67,564

66,733

64,121

Time deposits less than $100,000

332,895

346,018

367,333

Time deposits $100,000 and over

213,043

219,508

234,070

   Total interest bearing deposits

$              845,980

$             865,413

$                  899,366

The Company had Federal Home Loan Bank (FHLB) advances of $37.0 million at each of June 30, 2011 and December 31, 2010.

Stockholders' equity at June 30, 2011 was $109.1 million, or 10.2% of total assets, and increased from stockholders' equity of $107.1 million, or 9.6% of total assets, at December 31, 2010.   Stockholders' equity was $109.1 million, or 9.1% of total assets, at June 30, 2010.

Since June 30, 2010, the Company, through its balance sheet management strategy, has increased its common tangible equity to common tangible asset ratio from 6.43% at June 30, 2010 to 7.47% at June 30, 2011.  Additionally, the common tangible book value increased from $3.50 at June 30, 2010 to $3.57 at June 30, 2011. See the "Non-GAAP Financial Measures" table for additional information.

Asset Quality – non-covered assets

Nonaccrual loans were $37.7 million at June 30, 2011 compared with $42.0 million at March 31, 2011. Total nonperforming assets increased $486,000 from March 31, 2010 to $50.1 million at June 30, 2011.   Total charge-offs for the second quarter of 2011 were $4.8 million and recoveries were $86,000.  For the second quarter of 2010, total charge-offs were $2.0 million and recoveries were $614,000.  Non-covered other real estate owned increased $5.1 million, from $7.3 million at March 31, 2011 to $12.4 million at June 30, 2011.

For the six months ended June 30, 2011, net charge-offs were $10.2 million compared to $4.8 million for the same period in 2010.  Total charge-offs were $10.5 million for the first six months of 2011 and $5.5 million for the same period in 2010.  Recoveries for the six month comparison period were $221,000 in 2011 and $687,000 in 2010. Management's aggressive strategy to work non-performing loans and other real estate owned is evidenced in the volume of charge-offs as well as the level of the loan loss reserve.

Despite the level of charge-offs noted above and the increase in other real estate owned, the Company continues to report a loan loss reserve at 3.35% of non-covered loans.  Likewise, the allowance for loan losses equaled 44.5% of nonaccrual loans at June 30, 2011.  

The following table sets forth selected asset quality data, excluding FDIC covered assets, and ratios for the dates indicated:

ASSET QUALITY (NON-COVERED)

(Dollars in thousands)

2011

2010

Second

First

Fourth

Third

Second

Quarter

Quarter

Quarter

Quarter

Quarter

Nonaccruing loans

$  37,736

$  42,029

$   36,532

$   43,298

$   41,690

Loans past due over 90 days and accruing interest

-

282

389

35

-

Total nonperforming non-covered loans

$  37,736

$  42,311

$   36,921

$   43,333

$   41,690

Other real estate owned non-covered

12,393

7,332

5,928

4,320

4,333

Total nonperforming non-covered assets

$  50,129

$  49,643

$   42,849

$   47,653

$   46,023

Allowance for loan losses

$  16,803

$  21,542

$   25,543

$    34,353

$     38,785

Average loans during quarter, net of

 unearned income

$  506,752

$  517,805

$  539,503

$  557,324

$  575,457

Loans, net of unearned income

$  501,056

$  514,276

$  525,548

$  547,509

$  562,539

Allowance for loan losses to loans

3.35%

4.19%

4.86%

6.27%

6.89%

Allowance for loan losses to

 nonperforming assets

33.52%

43.39%

59.61%

72.09%

84.27%

Allowance for loan losses to nonaccrual

 loans

44.53%

51.26%

69.92%

79.34%

93.03%

Nonperforming assets to loans and other

 real estate

9.76%

9.52%

8.06%

8.64%

8.12%

Net charge-offs for quarter to average

 loans, annualized

3.74%

4.25%

6.47%

3.98%

0.98%

A further breakout of nonaccrual loans, excluding covered loans, at June 30, 2011 and March 31, 2011 is below:

NON-COVERED NONACCRUAL LOANS

(Dollars in thousands)

June 30, 2011

March 31, 2011

Amount of

Nonaccrual

Loans

% of

Non-covered

Loans

Amount of

Nonaccrual

Loans

% of

Non-covered

Loans

Mortgage loans on real estate:

Residential 1-4 family

$7,041

1.41%

$8,421

6.32%

Commercial

8,352

1.67%

8,589

4.27%

Construction and land development

20,700

4.13%

22,804

23.93%

Second mortgages

199

0.04%

289

3.43%

Multifamily

Agriculture

53

0.01%

53

1.75%

 Total real estate loans

36,345

7.26%

40,156

8.80%

Commercial loans

1,330

0.27%

1,734

3.68%

Consumer installment loans

61

0.01%

139

1.60%

All other loans

-

-

Gross loans

$37,736

7.54%

$42,029

8.17%

Capital Requirements

Total Stockholders' equity was $109.1 million at June 30, 2011.  The Company's ratio of total risk-based capital was 16.4% at June 30, 2011 compared to 15.6% at December 31, 2010.  The tier 1 risk-based capital ratio was 15.3% at June 30, 2011 and 14.4% at December 31, 2010. The Company's tier 1 leverage ratio was 8.9% at June 30, 2011 and 8.1% at December 31, 2010.  All capital ratios exceed regulatory minimums.

The Company will defer the August 2011 payment of its regular quarterly cash dividend with respect to its Fixed Rate Cumulative Perpetual Preferred Stock, Series A, which the Company issued to the United States Department of Treasury in connection with the Company's participation in the Treasury's TARP Capital Purchase Program in December 2008.  The Company had previously deferred four payments.  The Company has also deferred, beginning in September 2010, the interest payments that it makes with respect to trust preferred subordinated debt.

About Community Bankers Trust Corporation

The Company is the holding company for Essex Bank, a Virginia state bank with 24 full-service offices, 13 of which are in Virginia, seven of which are in Maryland and four of which are in Georgia. The Company also operates one loan production office. Additional information is available on the Company's website at www.cbtrustcorp.com.

Earnings Conference Call and Webcast

The Company will host a conference call for the financial community on Friday, July 29, 2011, at 11:00 a.m. Eastern Time to discuss the second quarter 2011 financial results. The public is invited to listen to this conference call by dialing 800-860-2442 at least 10 minutes prior to the call.  Interested parties may also listen to this conference call through the internet by accessing the "Investor Information" page of the Company's internet site at www.cbtrustcorp.com.

A replay of the conference call will be available from 2:00 p.m. Eastern Time on July 29, 2011 until 9:00 a.m. Eastern Time on August 6, 2011. The replay will be available by dialing 877-344-7529 and entering access code 450672 or through the internet by accessing the "Investor Information" page of the Company's internet site at www.cbtrustcorp.com.

Forward-Looking Statements

This release contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that are subject to risks and uncertainties. These forward-looking statements include, without limitation, statements with respect to the Company's operations, growth strategy and goals. Actual results may differ materially from those included in the forward-looking statements due to a number of factors, including, without limitation, the effects of and changes in the following: the quality or composition of the Company's loan or investment portfolios, including collateral values and the repayment abilities of borrowers and issuers; assumptions that underlie the Company's allowance for loan losses; general economic and market conditions, either nationally or in the Company's  market areas; the ability of the Company to comply with regulatory actions, and the costs associated with doing so; the interest rate environment; competitive pressures among banks and financial institutions or from companies outside the banking industry; real estate values; the demand for deposit, loan, and investment products and other financial services; the demand, development and acceptance of new products and services; the Company's compliance with, and the timing of future reimbursements from the FDIC to the Company under, the shared loss agreements; assumptions and estimates that underlie the accounting for loan pools under the shared loss agreements; consumer profiles and spending and savings habits; the securities and credit markets; costs associated with the integration of banking and other internal operations; management's evaluation of goodwill and other assets on a periodic basis, and any resulting impairment charges, under applicable accounting standards; the soundness of other financial institutions with which the Company does business; inflation; technology; and legislative and regulatory requirements. Many of these factors and additional risks and uncertainties are described in the Company's Annual Report on Form 10-K for the year ended December 31, 2010 and other reports filed from time to time by the Company with the Securities and Exchange Commission. This press release speaks only as of its date, and the Company disclaims any duty to update the information in it.

Consolidated Statements of Financial Condition

Unaudited Condensed

(Dollars in thousands)

June 30, 2011

December 31, 2010

June 30, 2010

    Assets

Cash and due from banks

$     11,065

$     8,604

$    18,544

Interest bearing bank deposits

7,408

22,777

10,871

Federal funds sold

-

2,000

16,729

 Total cash and cash equivalents

18,473

33,381

46,144

Securities available for sale, at fair value

232,278

215,560

213,925

Securities held to maturity

72,388

84,771

98,070

Equity securities, restricted, at cost

6,965

7,170

8,331

 Total securities

311,631

307,501

320,326

Loans held for resale

83

-

-

Loans

501,056

525,548

562,539

Covered FDIC loans

104,314

115,537

132,960

Allowance for loan losses (non-covered)

(16,803)

(25,543)

(38,785)

Allowance for loan losses (covered)

(829)

(829)

(829)

 Net loans

587,738

614,713

655,885

Bank premises and equipment

35,017

35,587

36,344

Other real estate owned

12,393

5,928

4,333

Covered FDIC other real estate owned

8,674

9,889

8,755

Covered FDIC receivable

1,570

7,250

15,595

Bank owned life insurance

6,961

6,829

6,689

Core deposit intangibles, net

13,689

14,819

15,949

FDIC indemnification asset

51,127

58,369

70,662

Other assets

18,127

21,328

23,212

   Total assets

$   1,065,483

$  1,115,594

$  1,203,894

    Liabilities

Deposits:

 Demand:

   Noninterest bearing

64,495

62,359

67,223

   Interest bearing

845,980

899,366

977,264

     Total deposits

910,475

961,725

1,044,487

Federal funds purchased

-

-

-

Federal Home Loan Bank advances

37,000

37,000

37,000

Trust preferred capital notes

4,124

4,124

4,124

Other liabilities

4,806

5,618

9,175

   Total liabilities

956,405

1,008,467

1,094,786

    Stockholders' Equity

Preferred stock (5,000,000 shares authorized $0.01 par value)

  17,680 shares issued and outstanding

17,680

17,680

17,680

Discount on preferred stock

(556)

(660)

(757)

Warrants on preferred stock

1,037

1,037

1,037

Common stock (50,000,000 shares authorized $0.01 par

  value) issued and outstanding of 21,627,549 shares,

  21,468,455 shares, and 21,468,455 shares, respectively

216

215

215

Additional paid in capital

144,181

143,999

143,999

(Accumulated deficit) retained earnings

(55,776)

(54,999)

(55,797)

Accumulated other comprehensive income (loss)

2,296

(145)

2,731

   Total stockholders' equity

109,078

107,127

109,108

   Total liabilities and stockholders' equity

$    1,065,483

$ 1,115,594

$ 1,203,894

Consolidated Statements of Operations

Unaudited Condensed

(Dollars in thousands)

2011

2010

Second

First

Second

First

YTD

Quarter

Quarter

YTD

Quarter

Quarter

Interest and dividend income

Interest and fees on loans

$  14,562

$  7,328

$  7,234

$ 17,201

$    8,478

$ 8,723

Interest and fees on FDIC covered loans

8,658

4,838

3,820

6,979

3,386

3,593

Interest on federal funds sold

4

2

2

4

3

1

Interest on deposits in other banks

24

10

14

54

24

30

Taxable

3,997

2,085

1,912

4,167

2,162

2,005

Nontaxable

641

229

412

1,774

880

894

Total interest income

27,886

14,492

13,394

30,179

14,933

15,246

Interest expense

Interest on deposits

5,690

2,711

2,979

9,343

4,486

4,857

Interest on federal funds purchased

1

1

-

1

1

-

Interest on other borrowed funds

699

367

332

664

333

331

Total interest expense

6,390

3,079

3,311

10,008

4,820

5,188

Net interest income

21,496

11,413

10,083

20,171

10,113

10,058

Provision for loan losses

1,498

-

1,498

26,324

21,282

5,042

Net interest income after provision for loan losses

19,998

11,413

8,585

(6,153)

(11,169)

5,016

Noninterest income

Loss on sale of OREO

(861)

(249)

(612)

(3,559)

(1,182)

(2,377)

FDIC indemnification asset amortization

(5,402)

(2,657)

(2,745)

(739)

(362)

(377)

Gain/(loss) on sale of securities

837

176

661

(98)

(452)

354

Service charges on deposit accounts

1,213

637

576

1,187

622

565

Other

1,376

662

714

3,509

1,259

2,250

Total noninterest income

(2,837)

(1,431)

(1,406)

300

(115)

415

Noninterest expense

Salaries and employee benefits

8,375

4,171

4,204

9,936

4,805

5,131

Occupancy expenses

1,547

733

814

1,452

713

739

Equipment expenses

650

320

330

775

363

412

Legal fees

140

35

105

142

96

46

Professional fees

389

198

191

1,077

743

334

FDIC assessment

1,633

761

872

1,218

613

605

Data processing fees

928

476

452

1,078

572

506

Amortization of intangibles

1,130

565

565

1,131

566

565

Impairment of goodwill

-

-

-

5,727

5,727

-

Other operating expenses

3,753

2,075

1,678

3,499

1,977

1,522

Total noninterest expense

18,545

9,334

9,211

26,035

16,175

9,860

Net (loss)/income before income taxes

(1,384)

648

(2,032)

(31,888)

(27,459)

(4,429)

Income tax benefit (expense)

711

(127)

838

9,508

7,843

1,665

Net (loss)/income

$(673)

$521

$(1,194)

$(22,380)

$(19,616)

$(2,764)

 Dividends accrued on preferred stock

-

-

-

442

221

221

 Accretion of discount on preferred stock

104

53

51

97

49

48

 Preferred dividends not paid

442

221

221

-

-

-

Net (loss)/income available to common stockholders

$(1,219)

$247

$(1,466)

$(22,919)

$(19,886)

$(3,033)

Income Statement Trend Analysis

Unaudited Condensed

(Dollars in thousands)

2011

2010

Second

First

Fourth

Third

Second

Quarter

Quarter

Quarter

Quarter

Quarter

Interest and dividend income

Interest and fees on loans

$  7,328

$  7,234

$8,008

$ 8,235

$    8,478

Interest and fees on FDIC covered loans

4,838

3,820

3,088

3,692

3,386

Interest on federal funds sold

2

2

4

1

3

Interest on deposits in other banks

10

14

27

19

24

Taxable

2,085

1,912

1,979

2,340

2,162

Nontaxable

229

412

488

866

880

Total interest income

14,492

13,394

13,594

15,153

14,933

Interest expense

Interest on deposits

2,711

2,979

3,557

4,141

4,486

Interest on federal funds purchased

1

-

1

1

1

Interest on other borrowed funds

367

332

339

342

333

Total interest expense

3,079

3,311

3,897

4,484

4,820

Net interest income

11,413

10,083

9,697

10,669

10,113

Provision for loan losses

-

1,498

(77)

1,116

21,282

Net interest income after provision for loan losses

11,413

8,585

9,774

9,553

(11,169)

Noninterest income

Loss on sale of OREO

(249)

(612)

(723)

(770)

(1,182)

FDIC indemnification asset amortization

(2,657)

(2,745)

(1,174)

(1,252)

(362)

Gains/(loss) on sale of securities

176

661

3,982

(296)

(452)

Service charges on deposit accounts

637

576

618

659

622

Other

662

714

168

132

1,259

Total noninterest income

(1,431)

(1,406)

2,871

(1,527)

(115)

Noninterest expense

Salaries and employee benefits

4,171

4,204

3,999

5,255

4,805

Occupancy expenses

733

814

722

774

713

Equipment expenses

320

330

297

322

363

Legal fees

35

105

197

117

96

Professional fees

198

191

300

425

743

FDIC assessment

761

872

598

579

613

Data processing fees

476

452

493

735

572

Amortization of intangibles

565

565

565

565

566

Impairment of goodwill

-

-

-

-

5,727

Other operating expenses

2,075

1,678

1,660

1,615

1,977

Total noninterest expense

9,334

9,211

8,831

10,387

16,175

Net income/(loss) before income taxes

648

(2,032)

3,814

(2,361)

(27,459)

Income tax (expense) benefit

(127)

838

(1,128)

1,062

7,843

Net income/(loss)

$521

$(1,194)

$2,686

$(1,299)

$(19,616)

 Dividends accrued on preferred stock

-

-

-

-

221

 Accretion of discount on preferred stock

53

51

49

48

49

 Preferred dividends not paid

221

221

221

221

-

Net income/(loss) available to common stockholders

$247

$(1,466)

$2,416

$(1,568)

$(19,886)

Net Interest Margin Analysis

Average Balance Sheet

(Dollars in thousands)

Three months ended June 30, 2011

Three months ended June 30, 2010

Average

Average

Average

Interest

Rates

Average

Interest

Rates

Balance

Income/

Earned/

Balance

Income/

Earned/

Sheet

Expense

Paid

Sheet

Expense

Paid

ASSETS:

Loans non-covered, including fees

$

506,752

$

7,328

5.78%

$

575,457

$

8,478

5.89%

FDIC covered loans, including fees

105,842

4,838

18.28%

138,675

3,386

9.76%

Total loans

612,594

12,166

7.94%

714,132

11,864

6.65%

Interest bearing bank balances

12,222

10

0.33%

16,885

24

0.56%

Federal funds sold

5,827

2

0.13%

6,521

3

0.18%

Investments (taxable)

266,929

2,085

3.12%

217,695

2,162

3.97%

Investments (tax exempt)

23,517

347

5.90%

91,206

1,333

5.84%

Total earning assets

921,089

14,610

6.34%

1,046,439

15,386

5.88%

Allowance for loan losses

(20,440)

(23,358)

Non-earning assets

171,930

196,591

Total assets

$

1,072,579

$

1,219,672

LIABILITIES AND

STOCKHOLDERS' EQUITY

Demand - interest bearing

$

236,189

$

347

0.59%

$

227,433

$

393

0.69%

Savings

66,661

88

0.53%

62,386

87

0.56%

Time deposits

552,425

2,276

1.65%

691,278

4,006

2.32%

Total deposits

855,275

2,711

1.27%

981,097

4,486

1.83%

Fed funds purchased

571

1

0.64%

106

1

0.53%

FHLB and other borrowings

41,124

367

3.57%

41,124

333

3.25%

Total interest bearing liabilities

896,970

3,079

1.37%

1,022,327

4,820

1.89%

Non-interest bearing deposits

58,008

64,070

Other liabilities

10,888

6,646

Total liabilities

965,866

1,093,043

Stockholders' equity

106,713

126,629

Total liabilities and

stockholders' equity

$

1,072,579

$

1,219,672

Net interest earnings

$

11,531

$

10,566

Interest spread

4.97%

3.99%

Net interest margin

5.01%

4.04%

(1)  Income and yields are reported on a tax equivalent basis assuming a federal tax rate of 34%.

Net Interest Margin Analysis

Average Balance Sheet

(Dollars in thousands)

Six months ended June 30, 2011

Six months ended June 30, 2010

Average

Average

Average

Interest

Rates

Average

Interest

Rates

Balance

Income/

Earned/

Balance

Income/

Earned/

Sheet

Expense

Paid

Sheet

Expense

Paid

ASSETS:

Loans non-covered, including fees

$

512,203

$

14,562

5.69%

$

576,579

$

17,201

5.97%

FDIC covered loans, including fees

109,134

8,658

15.87%

142,546

6,979

9.79%

Total loans

621,337

23,220

7.47%

719,125

24,180

6.72%

Interest bearing bank balances

13,445

24

0.36%

19,744

54

0.54%

Federal funds sold

5,222

4

0.16%

4,121

4

0.19%

Investments (taxable)

265,939

3,997

3.01%

209,353

4,167

3.98%

Investments (tax exempt)

33,639

971

5.77%

91,777

2,689

5.86%

Total earning assets

939,582

28,216

6.01%

1,044,120

31,094

5.96%

Allowance for loan losses

(22,667)

(21,015)

Non-earning assets

166,660

201,722

Total assets

$

1,083,575

$

1,224,827

LIABILITIES AND

STOCKHOLDERS' EQUITY

Demand - interest bearing

$

234,346

$

693

0.59%

$

219,682

$

793

0.72%

Savings

65,814

173

0.52%

61,368

180

0.59%

Time deposits

566,390

4,824

1.70%

698,428

8,370

2.40%

Total deposits

866,550

5,690

1.31%

979,478

9,343

1.91%

Fed funds purchased

357

1

0.63%

320

1

0.21%

FHLB and other borrowings

41,124

699

3.40%

41,124

664

3.23%

Total interest bearing liabilities

908,031

6,390

1.41%

1,020,922

10,008

1.96%

Non-interest bearing deposits

62,870

62,420

Other liabilities

5,240

11,358

Total liabilities

976,141

1,094,700

Stockholders' equity

107,434

130,127

Total liabilities and

stockholders' equity

$

1,083,575

$

1,224,827

Net interest earnings

$

21,826

$

21,086

Interest spread

4.60%

4.00%

Net interest margin

4.65%

4.04%

(1)  Income and yields are reported on a tax equivalent basis assuming a federal tax rate of 34%.

Non-GAAP Financial Measures

The information below presents certain financial information determined by methods other than in accordance with accounting principles generally accepted in the United States of America (GAAP). Common tangible book value equals total stockholders' equity less preferred stock, goodwill and identifiable intangible assets, and common tangible book value per share is computed by dividing common tangible book value by the number of common shares outstanding. Common tangible assets equal total assets less preferred stock, goodwill and identifiable intangible assets.

Management believes that common tangible book value and the ratio of common tangible book value to common tangible assets are meaningful because they are some of the measures that the Company and investors use to assess capital adequacy. Management believes that presenting the change in common tangible book value per share, the change in stock price to common tangible book value per share, and the change in the ratio of common tangible book value to common tangible assets provide meaningful period-to-period comparisons of these measures.

These measures are a supplement to GAAP used to prepare the Company's financial statements and should not be viewed as a substitute for GAAP measures. In addition, the Company's non-GAAP measures may not be comparable to non-GAAP measures of other companies. The following table reconcile these non-GAAP measures from their respective GAAP basis measures.

6/30/2011

12/31/2010

6/30/2010

Common Tangible Book Value

Total Stockholder's Equity

109,078,000

107,127,000

109,108,000

Preferred Stock

18,161,000

18,057,000

17,960,000

Goodwill

-

-

-

Core deposit intangible

13,688,000

14,819,000

15,949,000

Common Tangible Book Value

77,229,000

74,251,000

75,199,000

Shares Outstanding

21,627,549

21,468,455

21,468,455

Common Tangible Book Value Per Share

$                         3.57

$                 3.46

$                 3.50

Stock Price

$                         1.35

$                 1.05

$                 2.24

Price/Common Tangible Book

37.8%

30.4%

64.0%

Common Tangible Book/Common Tangible Assets

Total Assets

1,065,483,000

1,115,594,000

1,203,894,000

Preferred Stock (net)

18,161,000

18,057,000

17,960,000

Goodwill

-

-

-

Core deposit intangible

13,688,000

14,819,000

15,949,000

Common Tangible Assets

1,033,634,000

1,082,718,000

1,169,985,000

Common Tangible Book

$               77,229,000

$        74,251,000

$        75,199,000

Common Tangible Equity to Assets

7.47%

6.86%

6.43%

SOURCE Community Bankers Trust Corporation



RELATED LINKS

http://www.cbtrustcorp.com