Community Bankers Trust Corporation Reports 2nd Quarter 2011 Results

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