Community Bankers Trust Corporation Reports Results for Third Quarter 2013

Quarterly Net Income of $1.8 million

25 Oct, 2013, 08:00 ET from Community Bankers Trust Corporation

GLEN ALLEN, Va., Oct. 25, 2013 /PRNewswire/ -- Community Bankers Trust Corporation (the "Company") (NASDAQ: ESXB), the holding company for Essex Bank (the "Bank"), today reported results for the third quarter of 2013 including the following:

Financial

  • Net income for the third quarter of 2013 was $1.8 million, compared with net income of $1.6 million for the second quarter of 2013 and net income of $1.8 million for the third quarter of 2012.
  • Net income of $4.7 million for the nine months ended September 30, 2013 is an increase of 17.6%, or $704,000, over the same period in 2012.
  • Non-accrual loans declined $2.6 million, or 16.6%, during the quarter to equal $13.0 million at September 30, 2013. Since September 30, 2012, the level of non-accrual loans has declined $12.7 million, or 49.3%.
  • The ratio of the allowance for loan losses to nonaccrual loans increased to 81.67% at September 30, 2013 compared with 61.38% at December 31, 2012 and 55.59% at September 30, 2012.

Strategic

  • During the quarter, the Bank entered into an agreement to sell its four branches in Georgia and approximately $192.2 million in related deposits to Community & Southern Bank.  The transfer is expected to be completed on November 8, 2013.  Accordingly, these deposits were classified as "deposits held for sale" on the balance sheet at September 30, 2013.  This transaction will add significant savings to the Company in 2014.
  • Management entered into a loan sale agreement with another financial institution to sell approximately $25.4 million of the loan portfolio in Georgia.  Likewise, these loans were classified as "loans held for sale" at September 30, 2013.  This transaction is scheduled to close in late October 2013.
  • During the quarter, the Company redeemed $4.5 million of the principal on its TARP preferred stock investment from the United States Treasury.  This payment was the first of a plan to extinguish TARP funds by early 2015 without compromising the Company's capital position. With the redemption, the original investment was reduced from $17.680 million to $13.180 million.  The Company plans to continue to make principal payments quarterly, subject to required approvals.

Rex L. Smith, III, President and Chief Executive Officer of the Company and the Bank, stated, "This was a quarter of great progress for the Company.  Our nonperforming loans are the lowest level in over three years demonstrating our successful efforts to resolve our past credit issues. While the Georgia branches gave the Company needed liquidity at the time of their acquisition, they no longer fit with the strategic focus of growth for the franchise.  Our strategy all along has been to consolidate the Company in the appropriate areas while realigning the balance sheet and clearing our credit problems from the past.  Paying back TARP principal in a non-dilutive manner was also in the plan and that has begun.  The sale of the Georgia branches is the last step in that strategy and it poises us for future growth in value. 

"We can now focus on the markets around our core franchise where we can gain competitive advantage.  We will accomplish this through a combination of de novo branching, expansion of loan production offices and acquisitions that are accretive in value.  This is a key objective that we have worked hard to reach, and it is one that will build significant value for the Company and our shareholders"

RESULTS OF OPERATIONS Net income was $1.8 million for the third quarter of 2013. This compares with net income of $1.8 million in the third quarter of 2012 and net income of $1.6 million in the second quarter of 2013.  Net income available to common stockholders was $1.5 million in the third quarter of 2013 compared with net income available to common stockholders of $1.5 million in the third quarter of 2012 and net income available to common stockholders of $1.3 million in the second quarter of 2013.  Earnings per common share, basic and fully diluted, were $0.07 per share for the third quarter of 2013 compared with $0.07 per share for the third quarter of 2012 and $0.06 per share for the second quarter of 2013.

For the nine months ended September 30, 2013, net income was $4.7 million compared with $4.0 million for the same period in 2012.  Earnings per common share, basic and fully diluted, were $0.18 and $0.15 for the first nine months of 2013 and 2012, respectively.  Fully diluted earnings per share have increased sequentially each quarter of 2013 and were $0.05 in the first quarter, $0.06 in the second quarter and $0.07 in the third quarter.  Net income improved $704,000, or 17.6%, and was driven by a reduction of $2.7 million in noninterest expenses that was partially offset by a $1.7 million decrease in noninterest income.

The following table presents summary income statements for the three months and nine months ended September 30, 2013 and September 30, 2012 and the three months ended June 30, 2013.

SUMMARY INCOME STATEMENT

(Dollars in thousands)

For the three months ended

For the nine months ended

September

 30,

2013

June

30,

2013

September

30,

2012

September

30,

2013

September

30,

2012

Interest income

$       13,171

$   12,491

$       12,872

$       37,828

$       40,800

Interest expense

1,749

1,791

2,339

5,434

7,638

Net interest income 

11,422

10,700

10,533

32,394

33,162

Provision for loan losses

-

-

-

-

750

Net interest income after provision

  for loan losses

11,422

10,700

10,533

32,394

32,412

Noninterest income

593

1,338

2,471

3,257

4,908

Noninterest expense

9,433

9,758

10,358

28,902

31,611

Net income before income taxes

2,582

2,280

2,646

6,749

5,709

Income tax expense

800

673

837

2,036

1,700

Net income

1,782

1,607

1,809

4,713

4,009

Dividends on preferred stock

208

221

221

650

663

Accretion of preferred stock discount

73

59

55

190

165

Net income available to common

  stockholders

$         1,501

$     1,327

$         1,533

$         3,873

$         3,181

EPS Basic

$           0.07

$        0.06

$           0.07

$           0.18

$           0.15

EPS Diluted

$           0.07

$        0.06

$           0.07

$           0.18

$           0.15

 

Interest Income Interest income was $13.2 million for the third quarter of 2013, an increase of $680,000, or 5.4%, from $12.5 million in the second quarter of 2013. The primary driver of this linked quarter increase was the pay-off on a commercial acquisition and development (A&D) loan in the FDIC covered loan portfolio during the third quarter of 2013.  The pool of A&D loans was written down to a $0 carrying value in 2011, and thus any disposition or settlement results in dollar-for-dollar interest income recognition.  In this instance, the Bank recognized $895,000 in interest income, with a net profit of $806,000.  The reduction to interest income, resulting in the net profit, is in related indemnification asset amortization, as covered below.

Interest income increased $299,000, or 2.3%, when comparing the third quarters of 2013 and 2012. Interest and fees on FDIC covered loans increased $607,000, or 20.7%, when comparing the third quarter of 2013 to the third quarter of 2012.  This was due to the aforementioned disposition of the A&D loan.  Loans covered by the FDIC shared loss agreements either make scheduled principal payments, payoff, mature or are charged-off and billed at a rate of 80% of loss to the FDIC.  Once these balances decline, amounts represented by the FDIC guarantee is reduced.  Non-covered interest and fees on loans declined $197,000, or 2.6%, to $7.5 million during the same time period.  While loan balances have grown, competition continues to compress loan yields.  Non-covered loan yield declined from 5.54% in the third quarter of 2012 to 5.03% in the third quarter of 2013.  Interest income on securities declined slightly, by $113,000, to $2.1 million for the third quarter of 2013 when compared with the third quarter of 2012.   The yield on securities, on a tax-equivalent basis, decreased from 2.88% in the third quarter of 2012 to 2.79% in the third quarter of 2013.

For the nine months ended September 30, 2013, interest income of $37.8 million represented a decrease of $3.0 million, or 7.3%, from interest income of $40.8 million for the same period in 2012.  Interest and fees on FDIC covered loans declined $2.3 million when comparing the nine months ended September 30, 2013 to the same period in 2012.    Interest and fees on non-covered loans was $22.6 million for the nine months ended September 30, 2013 compared with $23.0 million for the same period in 2012.  The rate earned on these balances declined from 5.54% for the first nine months of 2012 to 5.17% for the first nine months of 2013.  This rate decline was mitigated, in large part, by an increase  of $32.1 million, or 5.8%, in the average balance of non-covered loans when comparing the nine month periods of 2013 and 2012.  Interest and dividends on securities decreased $370,000 when comparing the first nine months of 2012 to the same period in 2013, and was $6.2 million for the first nine months of 2013 compared with $6.6 million for the same period in 2012.  The yield on securities, on a tax-equivalent basis, was 2.73% for the first nine months of 2013, a decline from 3.03% for the first nine months of 2012.  The lower yield is the result of reinvesting maturing securities in a lower yielding market, coupled with the purchase of shorter durations.

Interest Expense Interest expense was $1.7 million for the third quarter of 2013 compared with interest expense of $1.8 million in the second quarter of 2013, an improvement of $42,000, or 2.3%.  While average interest bearing liabilities increased $8.2 million during the third quarter, the cost of interest bearing liabilities declined from 0.79% in the second quarter of 2013 to 0.75% in the third quarter of 2013. 

Year-over-year, interest expense declined $590,000, from $2.3 million in the third quarter of 2012 to $1.7 million in the third quarter of 2013. This expense decline of 25.2% resulted from a 27 basis point decline in the cost of interest bearing funds while average balances increased $7.7 million over the same period. The cost of deposits declined similarly from 0.95% in the third quarter of 2012 to 0.72% for the third quarter of 2013.  The cost of FHLB and other borrowings also exhibited improvement, from 2.56% in the third quarter of 2012 to 1.28% in the third quarter of 2013.

For the nine months ended September 30, 2013, total interest expense declined $2.2 million, or 28.9%, and was $5.4 million compared with $7.6 million for the same period in 2012.  The cost of interest bearing deposits decreased from $6.7 million to $4.9 million when comparing the first nine months of 2012 and 2013, respectively.  The rate paid on average total interest bearing deposits declined from 1.02% to 0.75%.  The cost of FHLB and other borrowings declined to 1.38% for the first nine months of 2013 compared with 3.12% for the same period in 2012.  The cost of total interest bearing liabilities decreased from 1.12% for the first nine months of 2012 to 0.79% for the same period in 2013.

Net Interest Income Net interest income was $11.4 million for the quarter ended September 30, 2013, compared with $10.7 million for the quarter ended June 30, 2013.  This represents an increase of $722,000, or 6.7%.  On a tax equivalent basis, net interest income was $11.5 million for the third quarter of 2013 compared with $10.8 million for the second quarter of 2013.   An increase of 20 basis points in the yield on earning assets, coupled with a four basis point decline in the cost of interest bearing liabilities, improved the interest spread and net interest margin on a linked quarter basis.  The primary driver to the increase in yield was related to the covered loan portfolio, which yielded 18.11% due to the disposition of the A&D loan mentioned above. The tax equivalent net interest margin increased from 4.32% in the second quarter of 2012 to 4.55% in the third quarter of 2013. The interest spread increased from 4.25% to 4.49% on a linked quarter basis. 

Year-over-year, net interest income increased $889,000, or 8.4%, from $10.5 million in the third quarter of 2012 to $11.4 million in the third quarter of 2013.  This was primarily the result of an increase in the Company's net interest spread, from 4.25% in the third quarter of 2012 to 4.49% in the third quarter of 2013.  The most significant factor influencing the positive change in the interest spread year-over-year was a 27 basis point decline in the cost of interest bearing liabilities.  The Company's net interest margin improved 23 basis points from 4.32% in the third quarter of 2012 to 4.55%, for the same period in 2013. 

For the nine months ended September 30, 2013, net interest income of $32.4 million decreased $768,000, or 2.3%, from net interest income of $33.2 million for the first nine months of 2012.  The Company's net interest spread declined from 4.51% for the first nine months of 2012 to 4.28% for the same period in 2013.  While the cost of interest bearing liabilities declined from 1.12% to 0.79% during the comparison period, the yield on earning assets declined by 56 basis points to 5.07% for the nine month period in 2013. The result was a net interest margin of 4.35% for the first nine months of 2013 compared with 4.58% for the first nine months in 2012.

The following tables compare the Company's net interest margin, on a tax-equivalent basis, for the three months ended September 30, 2013, September 30, 2012 and June 30, 2013 and nine months ended September 30, 2013 and September 30, 2012.

NET INTEREST MARGIN

(Dollars in thousands)

For the three months ended

September

30,

2013

June

30,

2013

September

30,

2012

Average interest earning assets

$

1,004,053

$

1,000,921

$

981,090

Interest income

$

13,171

$

12,491

$

12,872

Interest income - tax equivalent

$

13,261

$

12,575

$

12,932

Yield on interest earning assets

5.24%

5.04%

5.27%

Average interest bearing liabilities

$

923,193

$

914,998

$

915,514

Interest expense

$

1,749

$

1,791

$

2,339

Cost of interest bearing liabilities

0.75%

0.79%

1.02%

Net interest income

$

11,422

$

10,700

$

10,533

Net interest income - tax equivalent

$

11,512

$

10,784

$

10,593

Interest spread

4.49%

4.25%

4.25%

Net interest margin

4.55%

4.32%

4.32%

 

For the nine months ended

September

30,

2013

September

30,

2012

Average interest earning assets

$

1,003,813

$

970,701

Interest income

$

37,828

$

40,800

Interest income - tax equivalent

$

38,079

$

40,982

Yield on interest earning assets

5.07%

5.63%

Average interest bearing liabilities

$

922,534

$

912,070

Interest expense

$

5,434

$

7,638

Cost of interest bearing liabilities

0.79%

1.12%

Net interest income

$

32,394

$

33,162

Net interest income - tax equivalent

$

32,645

$

33,344

Interest spread

4.28%

4.51%

Net interest margin

4.35%

4.58%

 

Provision for Loan Losses The Company did not record a provision for loan losses for the first nine months of 2013.  The Company records a separate provision for loan losses for its non-covered loan portfolio and its FDIC covered loan portfolio.  There was no provision for loan losses on the FDIC covered loan portfolio during the first nine months of 2013.  Likewise, there was no provision for loan losses on the non-covered loan portfolio during the first nine months of 2013.  For the non-covered loan portfolio, this was partially the result of increased coverage levels for the ratio of the allowance for loan losses to nonperforming loans and the ratio of the allowance for loan losses to nonaccrual loans.  A decrease in the level of nonperforming assets to loans and other real estate owned and the level of net charge-offs for the periods has resulted in the increased coverage levels.  These items will be presented in greater detail in the Asset Quality section of this press release.

The Company recorded a provision for loan losses of $750,000 for the first nine months of 2012.  The provision for loan losses on non-covered loans was $1.0 million for the nine months ended September 30, 2012.  The provision for loan losses on the FDIC covered loan portfolio was $0 for the three months and a $250,000 credit for the nine months ended September 30, 2012.  Improvement in expected losses on the Company's FDIC covered portfolio resulted in the $250,000 provision benefit during the first quarter of 2012.

Noninterest Income Noninterest income was $593,000 for the third quarter of 2013 compared with $1.3 million for the second quarter of 2013.  This is a linked quarter decrease of $745,000, or 55.7%.  The most significant factor attributing to the decline was the loss on the sale of a loan of $614,000 incurred in the third quarter of 2013.  Gain on sale of securities, net declined $92,000 and other noninterest income declined $79,000 on a linked quarter basis.  Service charges on deposit accounts increased $40,000 during the quarter.

Year-over-year, noninterest income decreased $1.9 million, or 76.0%, from $2.5 million in the third quarter of 2012 to $593,000 in the third quarter of 2013.  The loss on the loan sale mentioned above coupled with a reduction in realized gains on sales of securities resulted in this decline.  Realized gains on sale of securities was $38,000 in the third quarter of 2013 compared with realized gains of $1.2 million for the same period in 2012.  This equaled a decline of $1.1 million, or 96.8%, year-over-year. 

Noninterest income declined $1.7 million, or 33.6%, for the nine month comparison periods ended September 30, 2013 and September 30, 2012.  Noninterest income of $3.3 million for the first three quarters of 2013 compares with $4.9 million for the same period in 2012.  A decrease of $908,000 in gains on sales of securities represents the largest decrease.  Realized gains were $1.4 million for the first nine months of 2012 compared with $446,000 for the same period in 2013.  The other primary driver for the decline in noninterest income was related to the aforementioned loss on the sale of a loan taken in the third quarter of 2013.

Noninterest Expense On a linked quarter basis, noninterest expenses totaled $9.4 million for the three months ended September 30, 2013 and $9.8 million for the quarter ended June 30, 2013, a decline of $325,000, or 3.3%.  Salaries and employee benefits increased $195,000, or 5.0%, during the third quarter of 2013 as management augmented staffing needs primarily in lending personnel and credit administration.  FDIC indemnification asset amortization increased $124,000, or 7.8%, on a linked quarter basis and was $1.7 million for the third quarter of 2013.  This increase is directly attributable to the gain on the sale of the A&D loan mentioned earlier in this release.

Noninterest expenses declined $925,000, or 8.9%, when comparing the third quarter of 2013 to the same period in 2012.  Other operating expenses declined $990,000, from $2.3 million in the third quarter of 2012 to $1.3 million in the third quarter of 2013. Fewer losses or write-downs on the sale or disposition of OREO properties is the main contributor to the decline in other operating expenses.  Additionally, FDIC assessment charges declined $143,000, or 38.9%, over these time frames.  These declines were partially offset by slight increases in FDIC indemnification asset amortization and salaries and wages.  FDIC indemnification asset amortization increased $137,000, or 8.7%, while salaries and employee benefits increased by $68,000, or 1.7%, during the same time frame.   

For the nine months ended September 30, 2013, noninterest expenses were $28.9 million, a decrease of $2.7 million, or 8.6%, from noninterest expenses of $31.6 million for the nine months ended September 30, 2012. Other operating expenses declined 14.3%, or $845,000, from $5.9 million for the nine months ended September 30, 2012 to $5.0 million for the same period in 2013.   FDIC assessment declined $833,000, or 57.5%, from $1.4 million for the nine months ended September 30, 2012 to $615,000 for the nine months ended September 30, 2013.  Indemnification asset amortization of $4.8 million for the nine months ended September 30, 2013 represented a decrease of 11.7% from $5.4 million during the same period in 2012.  Lastly, salaries and employee benefits were down $453,000, or 3.6%, for the same time frame.

Income Taxes Income tax expense was $800,000 for the three months ended September 30, 2013, compared with income tax expense of $673,000 in the second quarter of 2013.  Income tax expense was $837,000 in the third quarter of 2012.  For the nine months ended September 30, 2013, income tax expense was $2.0 million compared with $1.7 million for the same period in 2012.

FINANCIAL CONDITION At September 30, 2013, the Company had total assets of $1.115 billion, a decrease of $38.3 million, or 3.3%, from total assets of $1.153 billion at December 31, 2012.  Total loans were $646.2 million at September 30, 2013, decreasing $13.9 million from $660.1 million at December 31, 2012 and $2.4 million since September 30, 2012.  This decline is solely attributable to the re-classification of the Georgia loan portfolio to loans held for sale.  Otherwise, loan growth has been steady for the Bank and would have been $18.9 million, excluding the Georgia-based portfolio.  As anticipated, the carrying value of FDIC covered loans declined $7.4 million, or 8.7%, from December 31, 2012 and were $77.3 million at September 30, 2013. Non-covered loans equaled $569.0 million at September 30, 2013 compared to $575.5 million at December 31, 2012.  

The following table shows the composition of the Company's non-covered loan portfolio at September 30, 2013, June 30, 2013 and December 31, 2012.

NON-COVERED LOANS

(Dollars in thousands)

September 30, 2013

June 30, 2013

December 31, 2012

Amount

% of Non-Covered Loans

Amount

% of Non-Covered Loans

Amount

% of Non-Covered Loans

Mortgage loans on real estate:

Residential 1-4 family

$

140,137

24.63%

$

141,292

24.04%

$

135,420

23.52%

Commercial

233,699

41.07%

244,839

41.65%

246,521

42.83%

Construction and land development

53,117

9.33%

61,333

10.43%

61,127

10.62%

Second mortgages

6,577

1.16%

7,002

1.19%

7,230

1.26%

Multifamily

34,640

6.09%

37,587

6.39%

28,683

4.98%

Agriculture

8,369

1.47%

8,977

1.53%

10,359

1.80%

   Total real estate loans

476,539

83.75%

501,030

85.23%

489,340

85.01%

Commercial loans

85,440

15.02%

79,279

13.49%

77,835

13.52%

Consumer installment loans

5,563

0.98%

6,070

1.03%

6,929

1.20%

All other loans

1,480

0.26%

1,482

0.25%

1,526

0.27%

   Gross loans

569,022

100.00%

587,861

100.00%

575,630

100.00%

Allowance for loan losses

(10,653)

(11,523)

(12,920)

Net unearned income/unamortized

premium on loans

(62)

(104)

(148)

Non-covered loans, net of unearned income

$

558,307

$

576,234

$

562,562

 

The Company's securities portfolio, excluding equity securities, decreased $47.8 million, or 13.6%, from $351.4 million at December 31, 2012 to $303.5 million at September 30, 2013. Realized gains were $446,000 during the first three quarters of 2013 through sales and call activity.  The Company took a short-term position in a $40 million U.S. Treasury issue at December 31, 2012 to fully invest short-term excess cash balances on deposit by local municipal governments.  The issue matured in the first quarter of 2013 and is the primary factor for the decrease in securities balances from December 31, 2012.  The maturity of these funds was not reinvested but was offset by a decline in public funds.

The Company had cash and cash equivalents of $30.1 million at September 30, 2013, increasing $6.0 million or 24.8% from $24.1 million at December 31, 2012.  There were $7.0 million in Federal funds purchased at September 30, 2013 compared with $5.4 million at December 31, 2012. 

The following table shows the composition of the Company's securities portfolio, excluding equity securities, at September 30, 2013, June 30, 2013 and December 31, 2012.

SECURITIES PORTFOLIO

(Dollars in thousands)

September 30, 2013

June 30, 2013

December 31, 2012

Amortized Cost

 Fair

Value

Amortized Cost

 Fair   Value

Amortized Cost

 Fair

Value

Securities Available for Sale

U.S. Treasury issue and other

      U.S. Government agencies

$

100,518

$

99,829

$

113,390

$

113,205

$

153,480

$

153,277

U.S. Government sponsored agencies

487

489

-

-

500

503

State, county and municipal

137,396

134,144

135,227

133,435

112,110

117,596

Corporate and other bonds

7,398

7,408

6,963

7,002

7,530

7,618

Mortgage backed securities - U.S. Government

     agencies

7,777

7,693

11,810

11,887

15,192

15,560

Mortgage backed securities - U.S. Government

     sponsored agencies

21,156

21,074

12,580

12,596

14,349

14,524

  Total securities available for sale

$

274,732

$

270,637

$

279,970

$

278,125

$

303,161

$

309,078

September 30, 2013

June 30, 2013

December 31, 2012

Amortized Cost

 Fair Value

Amortized Cost

 Fair Value

Amortized Cost

 Fair

Value

Securities Held to Maturity

State, county and municipal

$

11,455

$

12,219

$

11,812

$

12,602

$

11,825

$

12,967

Mortgage backed securities - U.S. Government

     agencies

7,244

7,644

7,832

8,313

9,112

9,727

Mortgage backed securities - U.S. Government

     sponsored agencies

14,211

14,899

16,103

16,878

21,346

22,534

  Total securities held to maturity

$

32,910

$

34,762

$

35,747

$

37,793

$

42,283

$

45,228

 

Interest bearing deposits at September 30, 2013 were $695.5 million, a decrease of $200.8 million from December 31, 2012. This decline is the direct result of the reclassification of approximately $176.0 million of interest bearing deposits to deposits held for sale as mentioned above.

The following table compares the mix of interest bearing deposits at September 30, 2013, June 30, 2013, December 31, 2012 and September 30, 2012.

INTEREST BEARING DEPOSITS

(Dollars in thousands)

September 30, 2013

June 30, 2013

December 31, 2012

September 30, 2012

NOW

$

93,026

$

135,765

$

142,923

$

117,120

MMDA

92,814

110,976

113,171

113,288

Savings

73,996

83,562

77,506

76,499

Time deposits less than $100,000

222,657

279,972

287,422

292,374

Time deposits $100,000 and over

213,011

253,937

275,318

263,087

   Total interest bearing deposits

$

695,504

$

864,212

$

896,340

$

862,368

 

The Company had Federal Home Loan Bank advances of $31.5 million at September 30, 2013 compared with $49.8 million at December 31, 2012.  The blended rate on the average balance of these borrowings was 1.38% during the first nine months of 2013, down from 3.12% for the same period in 2012.

Stockholders' equity was $108.5 million at September 30, 2013 and $115.3 million at December 31, 2012. During the third quarter, the Bank retired $4.5 million of its outstanding TARP preferred stock, which lowered its equity base.  However, the equity-to-asset ratios remained solid at 9.7% and 10.0%, respectively, at September 30, 2013 and December 31, 2012.

Asset Quality – non-covered assets Nonaccrual loans were $13.0 million at September 30, 2013, down 38.0%, or $8.0 million, from nonaccrual loans of $21.0 million at December 31, 2012.  The September 30, 2013 total is down $12.7 million, or 49.3%, from nonaccrual loans of $25.7 million at September 30, 2012.  The decrease from December 31, 2012 was the net result of $2.1 million in additions to nonaccrual loans and $10.1 million in reductions.  With respect to the reductions to nonaccrual loans, $2.8 million were paid out by the borrower or another lending institution, $1.7 million were moved to foreclosure, $2.5 million were charged-off, $2.3 million were returned to accrual status and $819,000 were the result of payments to existing credits. 

Total nonperforming assets of $21.5 million at September 30, 2013 represented a decrease of $1.7 million, or 7.3%, during the third quarter of 2013.  Nonperforming assets declined $10.8 million, or 33.4%, since December 31, 2012 and $16.2 million, or 42.9%, since September 30, 2012.  

There were net charge-offs of $870,000 in the third quarter of 2013 compared with $735,000 in the second quarter of 2013 and a net recovery of $777,000 in the third quarter of 2012.  Total charge-offs for the third quarter of 2013 were $1.0 million compared with $1.3 million in the second quarter of 2013 and $819,000 in the third quarter of 2012.  Recoveries for the third quarter of 2013 were $148,000 compared with $567,000 in the second quarter of 2013 and $1.6 million in the third quarter of 2012.  

Non-covered OREO increased $903,000 during the third quarter of 2013 to equal $8.5 million at September 30, 2013. The change in non-covered OREO during the third quarter of 2013 was reflected in additions of $1.2 million of which $352,000 were capitalized expenditures to improve properties.  Reductions to OREO were $295,000 through sales and write-downs.  Non-covered OREO was $10.8 million at December 31, 2012 and $11.9 million at September 30, 2012.

The allowance for loan losses equaled 81.67% of non-covered nonaccrual loans at September 30, 2013 compared with 73.66% at June 30, 2013, 61.38% at December 31, 2012 and 55.59% at September 30, 2012. The ratio of the allowance for loan losses to total nonperforming assets was 49.45% at September 30, 2013, 49.59% at June 30, 2013, 39.94% at December 31, 2012 and 37.93% at September 30, 2012.  The ratio of nonperforming assets to loans and other real estate owned declined from 6.60% at September 30, 2012 to 3.73% at September 30, 2013.  The ratio of nonperforming assets to loans and other real estate owned was 5.52% at December 31, 2012.

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

CREDIT QUALITY

(Dollars in thousands)

2013

2012

Third

Second

First

Fourth

Third

Quarter

Quarter

Quarter

Quarter

Quarter

Allowance for loan losses:

Beginning of period

$

11,523

$

12,258

$

12,920

$

14,303

$

13,526

Provision for loan losses

-

-

-

450

-

Charge-offs

(1,018)

(1,302)

(908)

(1,974)

(819)

Recoveries

148

567

246

141

1,596

Net (charge-offs) recovery

(870)

(735)

(662)

(1,833)

777

End of period

$

10,653

$

11,523

$

12,258

$

12,920

$

14,303

 

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)

2013

2012

September

June

March

December

September

30

30

31

31

30

Non-accruing loans

$

13,044

$

15,644

$

18,963

$

21,048

$

25,730

Loans past due over 90 days and accruing interest

-

-

465

509

85

Total nonperforming non-covered loans

13,044

15,644

19,428

21,557

25,815

Other real estate owned non-covered

8,496

7,593

9,712

10,793

11,896

Total nonperforming non-covered assets

$

21,540

$

23,237

$

29,140

$

32,350

$

37,711

Allowance for loan losses to loans

1.87%

1.96%

2.11%

2.25%

2.56%

Allowance for loan losses to nonperforming assets

49.45%

49.59%

42.07%

39.94%

37.93%

Allowance for loan losses to nonaccrual loans

81.67%

73.66%

64.64%

61.38%

55.59%

Nonperforming assets to loans and other real estate

3.73%

3.90%

4.94%

5.52%

6.60%

Net charge-offs for quarter to average loans,

   annualized

0.59%

0.50%

0.46%

1.30%

(0.56%)

 

A further breakout of nonaccrual loans, excluding covered loans, at September 30, 2013, June 31, 2013 and December 31, 2012 is below:

NON-COVERED NONACCRUAL LOANS

(Dollars in thousands)

September 30, 2013

June 30, 2013

December 31, 2012

Amount

% of Non-Covered Loans

Amount

% of Non-Covered Loans

Amount

% of Non-Covered Loans

Mortgage loans on real estate:

Residential 1-4 family

$

4,492

0.79%

$

5,232

0.89%

$

5,562

0.97%

Commercial

1,530

0.27%

1,421

0.24%

5,818

1.01%

Construction and land development

6,500

1.14%

8,465

1.44%

8,815

1.53%

Second mortgages

135

0.02%

129

0.02%

141

0.03%

Multifamily

-

-

-

-

-

-

Agriculture

208

0.04%

223

0.04%

250

0.04%

   Total real estate loans

12,865

2.26%

15,470

2.63%

20,586

3.58%

Commercial loans

127

0.02%

114

0.02%

385

0.07%

Consumer installment loans

52

0.01%

60

0.01%

77

0.01%

All other loans

-

-

-

-

-

-

   Gross loans

$

13,044

2.29%

$

15,644

2.66%

$

21,048

3.66%

 

Capital Requirements Total stockholders' equity declined $4.3 million during the third quarter of 2013 due to the aforementioned TARP principal payment of $4.5 million.  The Company's current plan, subject to the consent of its primary regulators, is to repay the TARP funds through minimum quarterly payments of $2.25 million while maintaining solid regulatory capital ratios.  Future payments will depend on regulatory approval of repurchases, as well as continuing an adequate level of the Company's earnings to support the payments and satisfactory financial condition.

The Company's ratio of total risk-based capital was 16.7% at September 30, 2013 compared with 17.0% at December 31, 2012.  The tier 1 risk-based capital ratio was 15.5% at September 30, 2013 and 15.8% at December 31, 2012. The Company's tier 1 leverage ratio was 9.5% at September 30, 2013 and 9.4% at December 31, 2012.  All capital ratios exceed regulatory minimums.

Earnings Conference Call and Webcast

The Company will host a conference call for the financial community on Friday, October 25, 2013, at 10:00 a.m. Eastern Time to discuss the second quarter 2013 financial results. The public is invited to listen to this conference call by dialing 877-870-4263 at least five minutes prior to the call.  Interested parties may also listen to this conference call through the internet by accessing the "Corporate Overview – Corporate Profile" page of the Company's internet site at www.cbtrustcorp.com.

A replay of the conference call will be available from 12:00 noon Eastern Time on October 25, 2013 until 9:00 a.m. Eastern Time on November 4, 2013. The replay will be available by dialing 877-344-7529 and entering access code 10034897 or through the internet by accessing the "Corporate Overview – Corporate Profile" page of the Company's internet site at www.cbtrustcorp.com.

About Community Bankers Trust Corporation and Essex Bank

Community Bankers Trust Corporation is the holding company for Essex Bank, a Virginia state bank with 23 full-service offices, 13 of which are in Virginia, six of which are in Maryland and four of which are in Georgia.  The four branches in Georgia are scheduled to be sold in November 2013.  The Bank also operates two loan production offices in Virginia.  The Bank closed its branch office in Clinton, Maryland on August 16, 2013 and plans to open a new branch office in Annapolis, Maryland in the first quarter of 2014.

Additional information on the Bank is available on the Bank's website at www.essexbank.com.  For information on Community Bankers Trust Corporation, please visit its website 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, performance, future 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; current business, economic and market conditions in the Company's Georgia market area; relationships with deposit customers in the Georgia market area; 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; levels of fraud in the banking industry; the level of attempted cyber attacks in the banking industry; 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, 2012 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 Balance Sheets

Unaudited Condensed

(Dollars in thousands)

September 30, 2013

December 31, 2012

September 30, 2012

     Assets

Cash and due from banks

$

11,585

$

12,502

$

15,116

Interest bearing bank deposits

18,531

11,635

17,298

Federal funds sold

-

-

5,000

  Total cash and cash equivalents

30,116

24,137

37,414

Securities available for sale, at fair value

270,637

309,078

256,394

Securities held to maturity

32,910

42,283

48,689

Equity securities, restricted, at cost

6,403

7,405

7,351

  Total securities

309,950

358,766

312,434

Loans held for sale

25,396

1,266

1,736

Loans not covered by FDIC shared-loss agreements

568,960

575,482

559,532

Loans covered by FDIC shared-loss agreements

77,270

84,637

89,121

Allowance for loan losses (non-covered)

(10,653)

(12,920)

(14,303)

Allowance for loan losses (covered)

(484)

(484)

(456)

  Net loans

635,093

646,715

633,894

Bank premises and equipment

28,078

33,638

34,002

Bank premises and equipment held for sale

5,177

-

-

Other real estate owned, non-covered

8,496

10,793

11,896

Other real estate owned, covered by FDIC

2,145

3,370

2,943

FDIC receivable

330

895

715

Bank owned life insurance

20,622

15,146

15,008

Core deposit intangibles, net

8,600

10,297

10,862

FDIC indemnification asset

27,115

33,837

36,191

Other assets

13,858

14,428

15,182

    Total assets

$

1,114,976

$

1,153,288

$

1,112,277

     Liabilities

Deposits:

    Noninterest bearing

72,795

77,978

78,388

    Interest bearing

695,504

896,340

862,368

      Total deposits

768,299

974,318

940,756

Deposits held for sale

192,199

-

-

Federal funds purchased and securities sold under agreements to repurchase

7,000

5,412

-

Federal Home Loan Bank advances

31,503

49,828

50,000

Trust preferred capital notes

4,124

4,124

4,124

Other liabilities

3,381

4,289

4,259

    Total liabilities

1,006,506

1,037,971

999,139

     Stockholders' Equity

Preferred stock (5,000,000 shares authorized $0.01 par value, 17,680 shares issued and outstanding)

13,180

17,680

17,680

               Discount on preferred stock

(44)

(234)

(289)

               Warrants on preferred stock

1,037

1,037

1,037

Common stock (200,000,000 shares authorized $0.01 par value; 21,701,131 shares issued and outstanding  at September 30, 2013)

217

217

217

Additional paid in capital

144,595

144,398

144,351

Accumulated deficit

(46,736)

(50,609)

(51,906)

Accumulated other comprehensive income

(3,779)

2,828

2,048

   Total stockholders' equity

$

108,470

$

115,317

$

113,138

   Total liabilities and stockholders' equity

$

1,114,976

$

1,153,288

$

1,112,277

 

Consolidated Statements of Operations

Unaudited Condensed

(Dollars in thousands)

Three months ended

Nine months ended

September

30,

2013

June

30,

2013

September

30,

2012

September

30,

2013

September

30,

2012

 Interest and dividend income

 Interest and fees on loans

$

7,513

$

7,622

$

7,710

$

22,646

$

22,971

 Interest and fees on FDIC covered loans

3,538

2,745

2,931

8,942

11,211

 Interest on federal funds sold

-

1

-

3

4

 Interest on deposits in other banks

11

14

9

33

40

 Investments (taxable)

1,934

1,945

2,103

5,717

6,219

 Investments (nontaxable)

175

164

119

487

355

 Total interest income

13,171

12,491

12,872

37,828

40,800

 Interest expense

 Interest on deposits

1,568

1,600

2,056

4,869

6,650

 Interest on federal funds purchased

1

2

3

4

6

 Interest on other borrowed funds

180

189

280

561

982

 Total interest expense

1,749

1,791

2,339

5,434

7,638

 Net interest income

11,422

10,700

10,533

32,394

33,162

 Provision for loan losses

-

-

-

-

750

 Net interest income after provision for loan losses

11,422

10,700

10,533

32,394

32,412

 Noninterest income

 Gain on sale of securities, net

38

130

1,180

446

1,354

 Service charges on deposit accounts

741

701

716

2,105

2,007

 Gain/(loss) on sale of other loans, net

(614)

-

-

(614)

-

 Other 

428

507

575

1,320

1,547

 Total noninterest income

593

1,338

2,471

3,257

4,908

 Noninterest expense

 Salaries and employee benefits

4,096

3,901

4,028

11,990

12,443

 Occupancy expenses

690

717

708

2,070

2,024

 Equipment expenses

276

247

266

790

831

 Legal fees

24

38

3

75

42

 Professional fees

52

139

74

241

307

 FDIC assessment

225

223

368

615

1,448

 Data processing fees

485

551

473

1,573

1,489

 FDIC indemnification asset amortization

1,716

1,592

1,579

4,809

5,444

 Amortization of intangibles

566

566

565

1,697

1,695

 Other operating expenses

1,303

1,784

2,294

5,042

5,888

 Total noninterest expense

9,433

9,758

10,358

28,902

31,611

 Net income before income taxes

2,582

2,280

2,646

6,749

5,709

 Income tax expense

800

673

837

2,036

1,700

 Net income

1,782

1,607

1,809

4,713

4,009

 Dividends on preferred stock

208

221

221

650

663

 Accretion of discount on preferred stock

73

59

55

190

165

 Net income available to common

    stockholders

$

1,501

$

1,327

$

1,533

$

3,873

$

3,181

 

Income Statement Trend Analysis

Unaudited

(Dollars in thousands)

Three months ended

Three months ended

September

30,

June

30,

March

31,

December 31,

September 30,

2013

2013

2013

2012

2012

Interest and dividend income

Interest and fees on loans

$

7,513

$

7,622

$

7,511

$

7,687

$

7,710

Interest and fees on FDIC covered loans

3,538

2,745

2,659

2,894

2,931

Interest on federal funds sold

-

1

2

1

-

Interest on deposits in other banks

11

14

8

14

9

Investments (taxable)

1,934

1,945

1,838

2,189

2,103

Investments (nontaxable)

175

164

148

134

119

Total interest income

13,171

12,491

12,166

12,919

12,872

Interest expense

Interest on deposits

1,568

1,600

1,701

1,858

2,056

Interest on federal funds purchased

1

2

1

3

3

Interest on other borrowed funds

180

189

192

193

280

Total interest expense

1,749

1,791

1,894

2,054

2,339

Net interest income

11,422

10,700

10,272

10,865

10,533

Provision for loan losses

-

-

-

450

-

Net interest income after provision for loan losses

11,422

10,700

10,272

10,415

10,533

Noninterest income

Gains on sale of securities, net

38

130

278

138

1,180

Service charges on deposit accounts

741

701

663

729

716

Gain/(loss) on sale of other loans, net

(614)

-

-

-

-

Other

428

507

385

431

575

Total noninterest income

593

1,338

1,326

1,298

2,471

Noninterest expense

Salaries and employee benefits

4,096

3,901

3,993

4,068

4,028

Occupancy expenses

690

717

663

691

708

Equipment expenses

276

247

267

256

266

Legal fees

24

38

13

9

3

Professional fees

52

139

50

84

74

FDIC assessment

225

223

167

37

368

Data processing fees

485

551

537

335

473

FDIC indemnification asset amortization

1,716

1,592

1,501

1,492

1,579

Amortization of intangibles

565

566

565

566

565

Other operating expenses

1,304

1,784

1,955

2,154

2,294

Total noninterest expense

9,433

9,758

9,711

9,692

10,358

Net income before income tax

2,582

2,280

1,887

2,021

2,646

Income tax benefit

800

673

563

448

837

Net income

1,782

1,607

1,324

1,573

1,809

  Dividends on preferred stock

208

221

221

221

221

  Accretion of discount on preferred  stock

73

59

58

55

55

Net income available to common stockholders

$

1,501

$

1,327

$

1,045

$

1,297

$

1,533

 

Net Interest Margin Analysis

Average Balance Sheet

(Dollars in thousands)

Three months ended September 30, 2013

Three months ended September 30, 2012

Average Balance Sheet

Interest  Income / Expense

Average Rates Earned / Paid

Average Balance Sheet

Interest Income / Expense

Average Rates Earned / Paid

ASSETS:

     Loans, including fees

$

592,172

$

7,513

5.03%

$

556,355

$

7,710

5.54%

     Loans covered by FDIC shared-loss agreements

77,497

3,538

18.11%

91,036

2,931

12.88%

        Total loans

669,669

11,051

6.55%

647,391

10,641

6.57%

     Interest bearing bank balances

17,416

11

0.27%

16,057

9

0.23%

     Federal funds sold

1,391

-

0.10%

842

-

0.10%

     Investments (taxable)

293,941

1,934

2.63%

304,075

2,103

2.77%

     Investments (tax exempt)(1)

21,636

265

4.89%

12,725

179

5.66%

        Total earning assets

1,004,053

13,261

5.24%

981,090

12,932

5.27%

     Allowance for loan losses

(11,932)

(14,129)

     Non-earning assets

129,392

140,065

        Total assets

$

1,121,513

$

1,107,026

LIABILITIES AND

     STOCKHOLDERS' EQUITY

     Demand - interest bearing

$

245,660

$

194

0.31%

$

239,089

$

190

0.32%

     Savings

85,836

75

0.35%

74,785

56

0.30%

     Time deposits

535,699

1,299

0.96%

555,894

1,810

1.30%

        Total interest bearing deposits

867,195

1,568

0.72%

869,768

2,056

0.95%

     Fed funds purchased and securities sold under

      agreements to repurchase

654

1

0.68%

1,872

3

0.72%

     FHLB and other borrowings

55,344

180

1.28%

43,874

280

2.56%

        Total interest bearing liabilities

923,193

1,749

0.75%

915,514

2,339

1.02%

     Non-interest bearing deposits

84,428

72,300

     Other liabilities

3,808

4,623

        Total liabilities

1,011,429

992,437

     Stockholders' equity

110,084

114,589

        Total liabilities and stockholders'

          equity

$

1,121,513

$

1,107,026

     Net interest earnings

$

11,512

$

10,593

     Interest spread

4.49%

4.25%

     Net interest margin

4.55%

4.32%

(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)

Nine months ended September 30, 2013

Nine months ended September 30, 2012

Average Balance Sheet

Interest Income / Expense

Average Rates Earned / Paid

Average Balance Sheet

Interest Income / Expense

Average Rates Earned / Paid

ASSETS:

Loans, including fees

$

585,304

$

22,646

5.17%

$

553,154

$

22,971

5.54%

Loans covered by FDIC shared-loss agreements

80,450

8,942

14.86%

93,192

11,211

16.04%

   Total loans

665,754

31,588

6.34%

646,346

34,182

7.05%

Interest bearing bank balances

18,079

33

0.25%

22,019

40

0.24%

Federal funds sold

4,353

3

0.10%

4,796

4

0.11%

Investments (taxable)

295,689

5,717

2.58%

285,140

6,219

2.91%

Investments (tax exempt)(1)

19,938

738

4.93%

12,400

537

5.78%

   Total earning assets

1,003,813

38,079

5.07%

970,701

40,982

5.63%

Allowance for loan losses

(12,763)

(14,694)

Non-earning assets

130,516

146,689

   Total assets

$

1,121,566

$

1,102,696

LIABILITIES AND

STOCKHOLDERS' EQUITY

Demand - interest bearing

$

244,573

$

574

0.31%

$

237,756

$

671

0.38%

Savings

81,974

207

0.34%

73,003

198

0.36%

Time deposits

540,923

4,088

1.01%

558,079

5,781

1.38%

   Total interest bearing deposits

867,470

4,869

0.75%

868,838

6,650

1.02%

Fed funds purchased and securities sold

under agreements to repurchase

710

4

0.73%

1,185

6

0.71%

FHLB and other borrowings

54,354

561

1.38%

42,047

982

3.12%

   Total interest bearing liabilities

922,534

5,434

0.79%

912,070

7,638

1.12%

Non-interest bearing deposits

80,377

71,148

Other liabilities

3,954

4,637

   Total liabilities

1,006,865

987,855

Stockholders' equity

114,701

114,841

   Total liabilities and

   stockholders' equity

$

1,121,566

$

1,102,696

Net interest earnings

$

32,645

$

33,344

Interest spread

4.28%

4.51%

Net interest margin

4.35%

4.58%

(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 reconciles these non-GAAP measures from their respective GAAP basis measures.

September 30,

2013

December 31,

2012

September 30,

2012

Common Tangible Book Value

Total stockholder's equity

108,470,000

115,317,000

113,138,000

Preferred stock (net)

14,173,000

18,483,000

18,428,000

Core deposit intangible (net)

8,600,000

10,297,000

10,862,000

Common tangible book value

85,697,000

86,537,000

83,848,000

Shares outstanding

21,701,131

21,670,212

21,656,951

Common tangible book value per share

$                3.95

$                3.99

$                3.87

Stock Price

$                3.68

$                2.65

$                2.80

Price/common tangible book

93.2%

66.4%

72.3%

Common tangible book/common tangible assets

     Total assets

1,114,976,000

1,153,288,000

1,112,277,000

     Preferred stock (net)

14,173,000

18,483,000

18,428,000

     Core deposit intangible

8,600,000

10,297,000

10,862,000

Common tangible assets

1,092,203,000

1,124,508,000

1,082,987,000

Common tangible book 

85,697,000

86,537,000

83,848,000

Common tangible equity to assets

7.85%

7.70%

7.74%

 

SOURCE Community Bankers Trust Corporation



RELATED LINKS

http://www.cbtrustcorp.com