By GLEN ALLEN, Va., Jan. 29, 2014 /PRNewswire/ --
Financial Highlights for the fourth quarter and year ended December 31, 2013
-- Net income increased 5.8%, or $324,000, to $5.9 million for the year
ended December 31, 2013 as compared with $5.6 million for the year ended
December 31, 2012.
-- Net income for the fourth quarter of 2013 was $1.2 million compared with
net income of $1.8 million for the third quarter of 2013 and net income
of $1.6 million for the fourth quarter of 2012.
-- Non-accrual loans decreased 7.2%, or $939,000, to $12.1 million at
December 31, 2013, as compared with the previous quarter end.
-- The level of non-accrual loans decreased $8.9 million, or 42.5%, from
December 31, 2012 to December 31, 2013.
-- The ratio of the allowance for loan losses to non-accrual loans
increased to 86.28% at December 31, 2013 compared with 61.38% at
December 31, 2012.
Operational Highlights for the fourth quarter and year ended December 31, 2013
-- During the fourth quarter, the Company completed the sale of its four
Georgia branches and $193.2 million in related deposits to Community &
Southern Bank.
-- Additionally, the Company sold $24.3 million of loans related to the
Georgia franchise to another financial institution.
-- Total non-covered loans increased $27.2 million, or 4.8%, from September
30, 2013 to December 31, 2013.
-- During 2013, the Company redeemed $7.0 million of the principal on its
TARP preferred stock investment from the United States Treasury. With
these redemptions, the original investment was reduced by 39.6% from
$17.680 million to $10.680 million. These payments are part of a plan to
extinguish TARP funds by early 2015 without compromising the Company's
capital position. The Company plans to continue to make principal
payments quarterly, subject to required approvals.
Community Bankers Trust Corporation (NASDAQ: ESXB) (the "Company"), the holding company for Essex Bank (the "Bank"), today reported financial results for its fourth quarter and year ended December 31, 2013.
(Logo: http://photos.prnewswire.com/prnh/20140129/PH54398LOGO)
Rex L. Smith, III, President and Chief Executive Officer of the Company and the Bank, stated, "We are pleased and energized by our progress during 2013, and specifically the considerable progress we achieved in the fourth quarter. Throughout the year, we remained focused on expanding our core operations, improving our loan ratios, and increasing profits. Our nonperforming loans are the lowest level in over three years, demonstrating our successful efforts to resolve our past credit issues. The sale of the Georgia branches accelerates the progress of the strategic focus of the Company, which is growth in our core markets. Our strategy all along has been to consolidate the Company into the markets where we can gain a competitive advantage and pursue robust loan and deposit growth. Our new branch locations in Annapolis and at our Richmond headquarters are the initial steps in that strategy."
Mr. Smith continued, "We are also delighted to have decreased our TARP principal by 19% in the fourth quarter and have done so in a shareholder friendly, non-dilutive manner. We expect to continue paying this principle down throughout 2014, and believe this is evidence of our positive operating performance and strong capital position.
"We feel that the progressive actions taken by our management throughout 2013 has now positioned the Company for greater upside in the coming year. We are solely focused on markets around our core franchise where we can gain a competitive advantage. We expect to accomplish this through a combination of de novo branching, expansion of loan production offices and possible acquisitions that are immediately 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 $1.2 million for the fourth quarter of 2013. This compares with net income of $1.6 million in the fourth quarter of 2012 and net income of $1.8 million in the third quarter of 2013. The decline in net income on a linked-quarter basis was primarily the result of OREO write-downs taken in the fourth quarter of 2013. The decline in net income from the fourth quarter of 2012 to the fourth quarter of 2013 was the result of increased advertising expenses and the final tax payment to the state of Delaware as the Company reincorporated into the state of Virginia to save on corporate taxes and fees.
Net income available to common stockholders was $914,000 in the fourth quarter of 2013 compared with net income available to common stockholders of $1.3 million in the fourth quarter of 2012 and net income available to common stockholders of $1.5 million in the third quarter of 2013. Earnings per common share, basic and fully diluted, were $0.04 per share for the fourth quarter of 2013 compared with $0.06 per share for the fourth quarter of 2012 and $0.07 per share for the third quarter of 2013.
For the year ended December 31, 2013, net income was $5.9 million compared with $5.6 million in 2012. Earnings per common share, basic and fully diluted, were $0.22 and $0.21 for the years ended December 31, 2013 and 2012, respectively. While the net interest margin and net interest earnings were squeezed, as has been typical in the industry, the Company benefitted from no provision for loan losses during 2013 as asset quality continues to improve.
The following table presents summary income statements for the three months and the years ended December 31, 2013 and December 31, 2012 and the three months ended September 30, 2013.
SUMMARY INCOME STATEMENT
(Dollars in thousands) For the three months ended For the year ended
-------------------------- ------------------
December September 30, December December December 31,
31, 2013 31, 31, 2012
2013 2012 2013
---- ---- ----
Interest income $12,217 $13,171 $12,919 $50,045 $53,719
Interest expense 1,644 1,749 2,054 7,078 9,692
----- ----- ----- ----- -----
Net interest income 10,573 11,422 10,865 42,967 44,027
Provision for loan losses - - 450 - 1,200
--- --- --- --- -----
Net interest income after provision
for loan losses 10,573 11,422 10,415 42,967 42,827
Noninterest income 1,467 593 1,299 4,724 6,206
Noninterest expense 10,386 9,433 9,693 39,288 41,303
------ ----- ----- ------ ------
Net income before income taxes 1,654 2,582 2,021 8,403 7,730
Income tax expense 461 800 448 2,497 2,148
--- --- --- ----- -----
Net income 1,193 1,782 1,573 5,906 5,582
Dividends on preferred stock 235 208 221 885 884
Accretion of preferred stock discount 44 73 55 234 220
--- --- --- --- ---
Net income available
to common stockholders $914 $1,501 $1,297 $4,787 $4,478
==== ====== ====== ====== ======
EPS Basic $0.04 $0.07 $0.06 $0.22 $0.21
EPS Diluted $0.04 $0.07 $0.06 $0.22 $0.21
Interest Income
Interest income was $12.2 million for the fourth quarter of 2013, a decrease of $954,000, or 7.2%, from $13.2 million in the third quarter of 2013. The reason for the decline in interest income on a linked quarter basis is two-fold. The pay offs on commercial acquisition and development (A&D) loans in the FDIC covered loan portfolio resulted in a net change of $557,000 in interest and secondly, the Company sold its Georgia loan portfolio in late October. These loans were subsequently replaced with robust loan growth in the Virginia and Maryland markets, yet most of the growth came in the month of December.
Interest income decreased $702,000, or 5.4%, when comparing the fourth quarters of 2013 and 2012. Interest and fees on loans decreased $637,000, or 8.3%, when comparing the fourth quarter of 2013 to the fourth quarter of 2012. Despite an overall increase in loan volume for the year, the majority of the growth was in December 2013. Meanwhile, loan yields on non-covered loans declined from 5.44% in the fourth quarter of 2012 to 4.78% in the fourth quarter of 2013. Interest income on securities declined slightly, by $175,000, to $2.1 million for the fourth quarter of 2013 when compared with the fourth quarter of 2012. The yield on securities, on a tax-equivalent basis, decreased from 3.00% in the fourth quarter of 2012 to 2.93% in the fourth quarter of 2013.
For the year ended December 31, 2013, interest income of $50.0 million represented a decrease of $3.7 million, or 6.8%, from interest income of $53.7 million for the same period in 2012. Interest and fees on FDIC covered loans declined $2.2 million when comparing the year ended December 31, 2013 to the same period in 2012. Interest and fees on non-covered loans was $29.7 million for the year ended December 31, 2013 compared with $30.7 million for the same period in 2012. The rate earned on these balances declined from 5.51% for the year ended December 31, 2012, to 5.07% for the year ended December 31, 2013. This rate decline was mitigated, in large part, by an increase of $29.2 million, or 5.3%, in the average balance of non-covered loans when comparing the years 2013 and 2012. Interest and dividends on securities decreased $545,000 when comparing the years 2012 and 2013, and was $8.4 million for the 2013 year compared with $8.9 million for the 2012 year. The yield on securities, on a tax-equivalent basis, was 2.78% for the twelve months of 2013, a decline from 3.02% for the twelve 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 $1.6 million for the fourth quarter of 2013 compared with interest expense of $1.7 million in the third quarter of 2013, an improvement of $105,000, or 6.0%. While average interest bearing liabilities increased $3.3 million during the fourth quarter, the cost of interest bearing liabilities declined from 0.75% in the third quarter of 2013 to 0.70% in the fourth quarter of 2013.
Year-over-year, interest expense declined $410,000, from $2.0 million in the fourth quarter of 2012 to $1.6 million in the fourth quarter of 2013. This expense decline of 20.0% resulted from an 18 basis point decline in the cost of interest bearing funds while average balances decreased $1.4 million over the same period. The cost of deposits declined similarly from 0.85% in the fourth quarter of 2012 to 0.69% for the fourth quarter of 2013. The cost of Federal Home Loan Bank advances and other borrowings also exhibited improvement, from 1.39% in the fourth quarter of 2012 to 0.92% in the fourth quarter of 2013.
For the twelve months ended December 31, 2013, total interest expense declined $2.6 million, or 27.0%, and was $7.1 million compared with $9.7 million for the same period in 2012. The cost of interest bearing deposits decreased from $8.5 million to $6.4 million when comparing the twelve months ended 2012 and 2013, respectively. The rate paid on average total interest bearing deposits declined from 0.98% to 0.73%. The cost of Federal Home Loan Bank advances and other borrowings declined to 1.25% for the twelve months ended 2013, compared with 2.59% for the same period in 2012. The cost of total interest bearing liabilities decreased from 1.06% for the year ended December 31, 2012 to 0.77% for the same period in 2013.
Net Interest Income
Net interest income was $10.6 million for the quarter ended December 31, 2013, compared with $11.4 million for the quarter ended September 30, 2013. This represents a decrease of $849,000, or 7.4%. On a tax equivalent basis, net interest income was $10.7 million for the fourth quarter of 2013 compared with $11.5 million for the third quarter of 2013. The decline in net interest income on a linked quarter basis is the direct result of the factors noted above in the Interest Income section of this press release. The tax equivalent net interest margin decreased from 4.55% in the third quarter of 2013 to 4.22% in the fourth quarter of 2013. The interest spread decreased from 4.49% to 4.17% on a linked quarter basis.
Year-over-year, net interest income decreased $292,000, or 2.7%, from $10.9 million in the fourth quarter of 2012 to $10.6 million in the fourth quarter of 2013. The Company's net interest margin declined 17 basis points from 4.39% in the fourth quarter of 2012 to 4.22% for the same period in 2013.
For the year ended December 31, 2013, net interest income of $42.9 million decreased $1.1 million, or 2.4%, from net interest income of $44.0 million for the year ended December 31, 2012. The Company's net interest spread declined from 4.46% for the year ended December 31, 2012 to 4.25% for the same period in 2013. While the cost of interest bearing liabilities declined from 1.06% to 0.77% during the comparison period, the yield on earning assets declined by 50 basis points to 5.02% for the 2013 year. The result was a net interest margin of 4.32% for the year ended December 31, 2013, compared with 4.53% for the 2012 year.
The following tables compare the Company's net interest margin, on a tax-equivalent basis, for the three months ended December 31, 2013, December 31, 2012 and September 30, 2013 and twelve months ended December 31, 2013 and December 31, 2012.
NET INTEREST MARGIN
(Dollars in thousands) For the three months ended
--------------------------
December September December
31, 30, 31,
2013 2013 2012
---- ---- ----
Average interest earning assets $1,001,665 $1,004,053 $996,023
Interest income $12,217 $13,171 $12,919
Interest income - tax equivalent $12,305 $13,261 $12,988
Yield on interest earning assets 4.87% 5.24% 5.22%
Average interest bearing liabilities $926,476 $923,193 $927,856
Interest expense $1,644 $1,749 $2,054
Cost of interest bearing liabilities 0.70% 0.75% 0.88%
Net interest income $10,573 $11,422 $10,865
Net interest income - tax equivalent $10,661 $11,512 $10,934
Interest spread 4.17% 4.49% 4.34%
Net interest margin 4.22% 4.55% 4.39%
For the year ended
------------------
December December
31, 31,
2013 2012
---- ----
Average interest earning assets $1,003,271 $977,066
Interest income $50,045 $53,719
Interest income - tax equivalent $50,384 $53,971
Yield on interest earning assets 5.02% 5.52%
Average interest bearing liabilities $923,528 $916,038
Interest expense $7,078 $9,692
Cost of interest bearing liabilities 0.77% 1.06%
Net interest income $42,967 $44,027
Net interest income - tax equivalent $43,306 $44,279
Interest spread 4.25% 4.46%
Net interest margin 4.32% 4.53%
Provision for Loan Losses
The Company did not record a provision for loan losses in 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 2013. Likewise, there was no provision for loan losses on the non-covered loan portfolio during 2013. For the non-covered loan portfolio, this was the direct result of continued improvement in loan quality as evidenced by the decreasing amount of non-accrual loans as well a much lower volume of net charge-offs taken during the year versus the prior two years. 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 $450,000 for the fourth quarter of 2012 and $1.2 million for the year ended December 31, 2012. The provision for loan losses on non-covered loans was $1.5 million for the year ended December 31, 2012. The provision for loan losses on the FDIC covered loan portfolio was $0 for the fourth quarter and a $250,000 credit for the year ended December 31, 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 $1.5 million for the fourth quarter of 2013 compared with $593,000 for the third quarter of 2013. This is a linked quarter increase of $874,000, or 147.4%. Noninterest Income improved quarter-over-quarter as the Company took a $614,000 loss on the sale of a loan in the third quarter and had a gain of $255,000 on the sale of the Georgia operations in the fourth quarter of 2013, a linked quarter difference of $869,000. Other noninterest income increased $78,000 on a linked quarter basis, and gain on sale of securities increased $34,000. Offsetting these linked quarter increases was a decline in service charges on deposit accounts of $107,000.
Year-over-year, noninterest income increased $168,000, or 12.9%, from $1.3 million in the fourth quarter of 2012 to $1.5 million in the fourth quarter of 2013. Gain/(loss) on sale of other loans exhibited the largest increase year-over-year at $255,000. Also increasing year-over-year was other noninterest income, which was $432,000 in the fourth quarter of 2012 compared with $506,000 in the fourth quarter of 2013, an increase of $74,000. Offsetting these increases were year-over-year declines in service charges on deposit accounts of $95,000 and gains on sales of securities of $66,000.
Noninterest income declined $1.5 million, or 23.9%, when comparing the years ended December 31, 2013 and December 31, 2012. Noninterest income of $4.7 million for 2013 compares with $6.2 million for 2012. A decrease of $974,000 in gains on sales of securities represented the largest decrease. Realized gains were $1.5 million in 2012 compared with $518,000 for the same period in 2013. Gain/(loss) on sale of other loans declined $359,000 and other noninterest income declined $152,000, the result of fewer billable losses under shared-loss agreements reimbursed by the FDIC.
Noninterest Expense
On a linked quarter basis, noninterest expenses totaled $10.4 million for the three months ended December 31, 2013 and $9.4 million for the quarter ended September 30, 2013, an increase of $953,000, or 10.1%. Other real estate expense increased $861,000 to $828,000 in the fourth quarter of 2013. The majority of this increase was the result of management's continued conservative valuation of OREO properties which were curtailed approximately $630,000 during the fourth quarter. Other operating expenses increased $387,000 to $1.7 million in the fourth quarter of 2013. The majority of this increase, $200,000, was attributable to final Delaware franchise fee payments due to the change of the Company's state of incorporation to Virginia. Partially offsetting this linked quarter increase was a decrease in salaries and employee benefits of $105,000 and lower FDIC indemnification asset amortization of $76,000, or 4.4%.
Noninterest expenses increased $693,000 when comparing the fourth quarter of 2013 to the same period in 2012. Other operating expenses increased $402,000, from $1.3 million in the fourth quarter of 2012 to $1.7 million in the fourth quarter of 2013. The majority of this increase was the result of final tax payments referenced above to the State of Delaware. FDIC assessment charges increased $191,000 over these time frames due to an accrual adjustment in the fourth quarter of 2012. Data processing fees increased $170,000 year-over-year, the result of a credit from our third party core processor in the fourth quarter of 2012 related to Hurricane Sandy. FDIC indemnification asset amortization increased $148,000, or 9.9%.
For the year ended December 31, 2013, noninterest expenses were $39.3 million, a decrease of $2.0 million from noninterest expenses of $41.3 million for the year ended December 31, 2012. FDIC assessment declined $642,000, or 43.2%, from $1.5 million for the year ended December 31, 2012 to $843,000 for the year ended December 31, 2013. Salaries and employee benefits were down $530,000, or 3.2%, for the same time frame. Indemnification asset amortization of $6.4 million for the year ended December 31, 2013 represented a decrease of $487,000, or 7.0%, from $6.9 million during 2012.
Income Taxes
Income tax expense was $461,000 for the three months ended December 31, 2013, compared with income tax expense of $800,000 in the third quarter of 2013. Income tax expense was $448,000 in the fourth quarter of 2012. For the year ended December 31, 2013, income tax expense was $2.5 million compared with $2.1 million for 2012.
FINANCIAL CONDITION
At December 31, 2013, the Company had total assets of $1.090 billion, a decrease of $63.8 million, or 5.5%, from total assets of $1.153 billion at December 31, 2012. Total loans were $669.4 million at December 31, 2013, increasing $9.3 million from $660.1 million at December 31, 2012 and $23.2 million since September 30, 2013. Loan growth was steady for the year and strong during the fourth quarter. The Company more than offset the sale of $24.3 million in loans from Georgia with new loans generation of $27.2 million. The Georgia loans were classified as loans held for sale at September 30, 2013. As anticipated, the carrying value of FDIC covered loans declined $11.4 million, or 13.4%, from December 31, 2012 and were $73.3 million at December 31, 2013. Non-covered loans equaled $596.2 million at December 31, 2013, compared with $575.5 million at December 31, 2012.
The following table shows the composition of the Company's non-covered loan portfolio at December 31, 2013, September 30, 2013 and December 31, 2012.
NONCOVERED LOANS
(Dollars in thousands) December 31, September 30, December 31,
2013 2013 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 $141,974 23.81% $140,137 24.63% $135,420 23.52%
Commercial 239,389 40.14% 233,699 41.07% 246,521 42.83%
Construction and land development 54,745 9.18% 53,117 9.33% 61,127 10.62%
Second mortgages 6,369 1.07% 6,577 1.16% 7,230 1.26%
Multifamily 35,774 6.00% 34,640 6.09% 28,683 4.98%
Agriculture 9,267 1.55% 8,369 1.47% 10,359 1.80%
----- ---- ----- ---- ------ ----
Total real estate loans 487,518 81.75% 476,539 83.75% 489,340 85.01%
Commercial loans 101,761 17.07% 85,440 15.01% 77,835 13.52%
Consumer installment loans 5,623 0.94% 5,563 0.98% 6,929 1.20%
All other loans 1,435 0.24% 1,480 0.26% 1,526 0.27%
----- ---- ----- ---- ----- ----
Gross loans 596,337 100.00% 569,022 100.00% 575,630 100.00%
Allowance for loan losses (10,444) (10,653) (12,920)
Net unearned income/unamortized premium
on loans (164) (62) (148)
Non-covered loans, net of unearned income $585,729 $558,307 $562,562
====== ====== ======
The Company's securities portfolio, excluding equity securities, decreased $57.0 million, or 16.2%, from $351.4 million at December 31, 2012 to $294.3 million at December 31, 2013. Realized gains were $518,000 during 2013 through sales and call activity. This is a decrease of $974,000 from $1.5 million in securities gains realized in 2012. 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 $23.8 million at December 31, 2013, decreasing $302,000 from $24.1 million at December 31, 2012. There were $6.0 million in Federal funds purchased and securities sold under agreements to repurchase at December 31, 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 December 31, 2013, September 30, 2013 and December 31, 2012.
SECURITIES PORTFOLIO
(Dollars in thousands) December 31, September 30, December 31,
2013 2013 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 $99,789 $98,987 $100,518 $99,829 $153,480 $153,277
U.S. Government sponsored agencies 487 486 487 489 500 503
State, county and municipal 138,884 134,096 137,396 134,144 112,110 117,596
Corporate and other bonds 6,369 6,349 7,398 7,408 7,530 7,618
Mortgage backed securities - U.S. 3,608 3,439 7,777 7,693 15,192 15,560
Government agencies
22,631 22,420 21,156 21,074 14,349 14,524
Mortgage backed securities - U.S.
Government sponsored agencies
Total securities available for sale $271,768 $265,777 $274,732 $270,637 $303,161 $309,078
======== ====== ======== ======== ======== ======
December 31, September 30, December 31,
2013 2013 2012
------------- -------------- -------------
Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value
-------------- ---------- -------------- ---------- -------------- ---------------
Securities Held to Maturity
State, county and municipal $9,385 $10,103 $11,455 $12,219 $11,825 $12,967
Mortgage backed securities - U.S. 6,604 7,002 7,244 7,644 9,112 9,727
Government agencies
12,574 13,200 14,211 14,899 21,346 22,534
Mortgage backed securities - U.S.
Government sponsored agencies
Total securities held to maturity $28,563 $30,305 $32,910 $34,762 $42,283 $45,228
======= ======= ======= ======= ======= =======
Interest bearing deposits at December 31, 2013 were $822.2 million, an increase of $126.7 million, or 18.2%, from September 30, 2013. During the fourth quarter, the Company added $64.9 million in short-term brokered certificates of deposit to fund the sale of the Georgia operations, which closed on November 8, 2013. The $192.2 million in deposits related to the Georgia divestiture were classified as deposits held for sale at September 30, 2013. For the year ended December 31, 2013 interest bearing deposits declined $74.1 million as the Company was deleveraged $63.8 million as a result of the sale.
The following table compares the mix of interest bearing deposits at December 31, 2013, September 30, 2013, and December 31, 2012.
INTEREST BEARING DEPOSITS
(Dollars in thousands)
December 31, 2013 September 30, 2013 December 31, 2012
----------------- ------------------ -----------------
NOW $102,111 $93,026 $142,923
MMDA 94,170 92,814 113,171
Savings 75,159 73,996 77,506
Time deposits less than $100,000 235,482 222,657 287,422
Time deposits $100,000 and over 315,287 213,011 275,318
Total interest bearing deposits $822,209 $695,504 $896,340
======== ======== ========
The Company had Federal Home Loan Bank advances of $77.1 million at December 31, 2013 compared with $31.5 million at September 30, 2013 and $49.8 million at December 31, 2012. The blended rate on the average balance of these borrowings was 0.92% for the fourth quarter of 2013 and 1.25% for the year ended December 31, 2013. This is a decline from the fourth quarter 2012 cost of 1.39% and year end 2012 cost of 2.59%. The Company used a combination of retail deposit growth, brokered deposits and Federal Home Loan Bank advances to fund the sale of the Georgia operations, which resulted in the growth of $45.6 million in advances in the fourth quarter of 2013.
Stockholders' equity was $106.7 million at December 31, 2013 and $115.3 million at December 31, 2012. During 2013, the Company retired $7.0 million of its outstanding TARP preferred stock, which lowered its equity base. However, the equity-to-asset ratios remained solid at 9.8%, and 10.0%, respectively, at December 31, 2013 and December 31, 2012.
Asset Quality - non-covered assets
Nonaccrual loans were $12.1 million at December 31, 2013, down 42.5%, or $8.9 million, from $21.0 million at December 31, 2012. Nonaccrual loans were $13.0 million at September 30, 2013. The decrease from December 31, 2012 was the net result of $2.6 million in additions to nonaccrual loans and $11.5 million in reductions. With respect to the reductions to nonaccrual loans, $3.5 million were paid out by the borrower or another lending institution, $1.7 million were moved to foreclosure, $2.7 million were charged-off, $2.3 million were returned to accrual status and $1.3 million were the result of payments to existing credits.
Total nonperforming assets of $18.3 million at December 31, 2013 represented a decrease of $3.2 million, or 14.8%, during the fourth quarter of 2013 and declined $14.0 million, or 43.3%, during the 2013 year.
There were net charge-offs of $209,000 in the fourth quarter of 2013 compared with $870,000 in the third quarter of 2013 and $1.8 million in the fourth quarter of 2012. For the year ended December 31, 2013, there were charge-offs of $3.5 million and recoveries of $1.0 million. This resulted in net charge-offs for 2013 that totaled $2.5 million. Net charge-offs were $3.4 million for the year ended December 31, 2012.
Non-covered other real estate owned decreased $2.3 million during the fourth quarter of 2013 and $4.5 million during the 2013 year. Non-covered other real estate owned balances were $6.2 million at December 31, 2013 compared with $8.5 million at September 30, 2013 and $10.8 million at December 31, 2012. Management continues to work other real estate owned aggressively and has taken prudent periodic write-downs to effectively move properties out of the portfolio and continue to improve the quality of the balance sheet.
The allowance for loan losses equaled 86.28% of non-covered nonaccrual loans at December 31, 2013 compared with 81.67% at September 30, 2013 and 61.38% at December 31, 2012. The ratio of the allowance for loan losses to total nonperforming assets was 56.92% at December 31, 2013 compared with 49.45% at September 30, 2013 and 39.94% at December 31, 2012. The ratio of nonperforming assets to loans and other real estate owned has declined sequentially each quarter of 2013 and was 5.52% at December 31, 2012 and 3.05% at December 31, 2013.
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
---- ----
Fourth Third Second First Fourth
Quarter Quarter Quarter Quarter Quarter
------ ------ ------ ------ ------
Allowance for loan losses:
Beginning of period $10,653 $11,523 $12,258 $12,920 $14,303
Provision for loan losses - - - - 450
Charge-offs (263) (1,018) (1,302) (908) (1,974)
Recoveries 54 148 567 246 141
--- --- --- --- ---
Net (charge-offs) recovery (209) (870) (735) (662) (1,833)
---- ---- ---- ---- -----
End of period $10,444 $10,653 $11,523 $12,258 $12,920
===== ===== ===== ===== =====
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
---- ----
December September June March December
31 30 30 31 31
--- --- --- --- ---
Non-accruing loans $12,105 $13,044 $15,644 $18,963 $21,048
Loans past due over 90 days and accruing interest - - - 465 509
--- --- --- --- ---
Total nonperforming non-covered loans 12,105 13,044 15,644 19,428 21,557
Other real estate owned non-covered 6,244 8,496 7,593 9,712 10,793
----- ----- ----- ----- ------
Total nonperforming non-covered assets $18,349 $21,540 $23,237 $29,140 $32,350
======= ======= ======= ======= =======
Allowance for loan losses to loans 1.75% 1.87% 1.96% 2.11% 2.25%
Allowance for loan losses to nonperforming assets 56.92% 49.45% 49.59% 42.07% 39.94%
Allowance for loan losses to nonaccrual loans 86.28% 81.67% 73.66% 64.64% 61.38%
Nonperforming assets to loans and other real estate 3.05% 3.73% 3.90% 4.94% 5.52%
Net charge-offs for quarter to average loans,
annualized 0.14% 0.59% 0.50% 0.46% 1.30%
A further breakout of nonaccrual loans, excluding covered loans, at December 31, 2013, September 30, 2013 and December 31, 2012 is below:
NON-COVERED NONACCRUAL LOANS
(Dollars in thousands) December 31, 2013 September 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 $4,229 0.71% $4,492 0.79% $5,562 0.97%
Commercial 1,382 0.23% 1,530 0.27% 5,818 1.01%
Construction and land development 5,882 0.99% 6,500 1.14% 8,815 1.53%
Second mortgages 225 0.04% 135 0.02% 141 0.03%
Multifamily - - - - - -
Agriculture 205 0.03% 208 0.04% 250 0.04%
--- ---- --- ---- --- ----
Total real estate loans 11,923 2.00% 12,865 2.26% 20,586 3.58%
Commercial loans 127 0.02% 127 0.02% 385 0.07%
Consumer installment loans 55 0.01% 52 0.01% 77 0.01%
All other loans - - - - - -
--- --- --- --- --- ---
Gross loans $12,105 2.03% $13,044 2.29% $21,048 3.66%
======= ===== =======
Capital Requirements
Total stockholders' equity declined $1.8 million during the fourth quarter of 2013 due to a TARP principal payment of $2.5 million in November. 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 16.8% at December 31, 2013 compared with 17.0% at December 31, 2012. The tier 1 risk-based capital ratio was 15.6% at December 31, 2013 and 15.8% at December 31, 2012. The Company's tier 1 leverage ratio was 9.5% at December 31, 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 Wednesday, January 29, 2014, at 10:00 a.m. Eastern Time to discuss the fourth quarter and 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 January 29, 2014, until 9:00 a.m. Eastern Time on February 6, 2014. The replay will be available by dialing 877-344-7529 and entering access code 10039343 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 19 full-service offices, 13 of which are in Virginia and six of which are in Maryland. The Bank also operates two loan production offices in Virginia. The Bank 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; 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 performance of vendors or other parties with which the Company does business; time and costs associated with de novo branching, acquisitions and similar transactions and the related integration of operations; the realization of gains and expense savings from acquisitions, dispositions and similar transactions; 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; 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)
December 31, September 30, December 31,
2013 2013 2012
Assets
------
Cash and due from banks $10,857 $11,585 $12,502
Interest bearing bank deposits 12,978 18,531 11,635
Federal funds sold - - -
--- --- ---
Total cash and cash equivalents 23,835 30,116 24,137
Securities available for sale, at fair value 265,777 270,637 309,078
Securities held to maturity 28,563 32,910 42,283
Equity securities, restricted, at cost 8,358 6,403 7,405
----- ----- -----
Total securities 302,698 309,950 358,766
Loans held for sale 100 25,396 1,266
Loans not covered by FDIC shared-loss agreements 596,173 568,960 575,482
Loans covered by FDIC shared-loss agreements 73,275 77,270 84,637
Allowance for loan losses (non-covered) (10,444) (10,653) (12,920)
Allowance for loan losses (covered) (484) (484) (484)
---- ---- ----
Net loans 658,520 635,093 646,715
Bank premises and equipment 27,872 28,078 33,638
Bank premises and equipment held for sale - 5,177 -
Other real estate owned, non-covered 6,244 8,496 10,793
Other real estate owned, covered by FDIC 2,692 2,145 3,370
FDIC receivable 368 330 895
Bank owned life insurance 20,795 20,622 15,146
Core deposit intangibles, net 6,621 8,600 10,297
FDIC indemnification asset 25,409 27,115 33,837
Other assets 14,378 13,858 14,428
------ ------ ------
Total assets $1,089,532 $1,114,976 $1,153,288
========== ========== ==========
Liabilities
-----------
Deposits:
Noninterest bearing 70,132 72,795 77,978
Interest bearing 822,209 695,504 896,340
------- ------- -------
Total deposits 892,341 768,299 974,318
Deposits held for sale - 192,199 -
Federal funds purchased and securities sold under 6,000 7,000 5,412
agreements to repurchase
Federal Home Loan Bank advances 77,125 31,503 49,828
Trust preferred capital notes 4,124 4,124 4,124
Other liabilities 3,283 3,381 4,289
----- ----- -----
Total liabilities 982,873 1,006,506 1,037,971
Stockholders' Equity
--------------------
Preferred stock (5,000,000 shares authorized $0.01 par value, 10,680, 13,180 and
17,680 shares issued and outstanding, respectively) 10,680 13,180 17,680
Discount on preferred stock - (44) (234)
Warrants on preferred stock 1,037 1,037 1,037
Common stock (200,000,000 shares authorized $0.01 par value; 21,709,096 shares
issued and outstanding at December 31, 2013) 217 217 217
Additional paid in capital 144,656 144,595 144,398
Accumulated deficit (45,822) (46,736) (50,609)
Accumulated other comprehensive income (4,109) (3,779) 2,828
------ ------ -----
Total stockholders' equity $106,659 $108,470 $115,317
-------- -------- --------
Total liabilities and stockholders' equity $1,089,532 $1,114,976 $1,153,288
========== ========== ==========
Consolidated Statements of Operations
Unaudited Condensed
(Dollars in thousands)
Three months ended Three months ended
------------------ ------------------
December September June March December
31, 30, 30, 31, 31,
2013 2013 2013 2013 2012
---- ---- ---- ---- ----
Interest and dividend income
Interest and fees on loans $7,050 $7,513 $7,622 $7,511 $7,687
Interest and fees on FDIC covered loans 2,994 3,538 2,745 2,659 2,894
Interest on federal funds sold - - 1 2 1
Interest on deposits in other banks 25 11 14 8 14
Investments (taxable) 1,976 1,934 1,945 1,838 2,189
Investments (nontaxable) 172 175 164 148 134
--- --- --- --- ---
Total interest income 12,217 13,171 12,491 12,166 12,919
Interest expense
Interest on deposits 1,501 1,568 1,600 1,701 1,858
Interest on federal funds purchased - 1 2 1 3
Interest on other borrowed funds 143 180 189 192 193
--- --- --- --- ---
Total interest expense 1,644 1,749 1,791 1,894 2,054
Net interest income 10,573 11,422 10,700 10,272 10,865
Provision for loan losses - - - - 450
--- --- --- --- ---
Net interest income after provision for loan losses 10,573 11,422 10,700 10,272 10,415
Noninterest income
Gain/(loss) on sale of securities, net 72 38 130 278 138
Service charges on deposit accounts 634 741 701 663 729
Gain/(loss) on sale of other loans, net 255 (614) - - -
Other 506 428 507 385 432
--- --- --- --- ---
Total noninterest income 1,467 593 1,338 1,326 1,299
Noninterest expense
Salaries and employee benefits 3,991 4,096 3,901 3,993 4,068
Occupancy expenses 647 690 717 663 691
Equipment expenses 248 276 247 267 256
Legal fees 20 24 38 13 9
Professional fees 49 52 139 50 84
FDIC assessment 228 225 223 167 37
Data processing fees 505 485 551 537 335
FDIC indemnification asset amortization 1,640 1,716 1,592 1,501 1,492
Amortization of intangibles 506 565 566 565 566
Other real estate expense 828 (33) 502 737 833
Other operating expenses 1,724 1,337 1,282 1,218 1,322
----- ----- ----- ----- -----
Total noninterest expense 10,386 9,433 9,758 9,711 9,693
Net income before income taxes 1,654 2,582 2,280 1,887 2,021
Income tax expense 461 800 673 563 448
--- --- --- --- ---
Net income 1,193 1,782 1,607 1,324 1,573
Dividends on preferred stock 235 208 221 221 221
Accretion of discount on preferred stock 44 73 59 58 55
--- --- --- --- ---
Net income available to common
stockholders $914 $1,501 $1,327 $1,045 $1,297
==== ====== ====== ====== ======
Income Statement Trend Analysis
Unaudited
(Dollars in thousands) Year Ended
----------
December December December
31, 31, 31,
2013 2012 2011
----
Interest and dividend income
Interest and fees on loans $29,696 $30,658 $29,272
Interest and fees on FDIC covered loans 11,936 14,105 17,576
Interest on federal funds sold 3 5 6
Interest on deposits in other banks 58 54 65
Investments (taxable) 7,693 8,408 8,091
Investments (nontaxable) 659 489 1,025
-----
Total interest income 50,045 53,719 56,035
Interest expense
Interest on deposits 6,370 8,508 10,815
Interest on federal funds purchased 4 9 1
Interest on other borrowed funds 704 1,175 1,412
-----
Total interest expense 7,078 9,692 12,228
Net interest income 42,967 44,027 43,807
Provision for loan losses - 1,200 1,498
--- ----- -----
Net interest income after provision for loan losses 42,967 42,827 42,309
Noninterest income
Gains on sale of securities, net 518 1,492 2,868
Service charges on deposit accounts 2,739 2,736 2,503
Gain/(loss) on sale of other loans, net (359) - -
Other 1,826 1,978 2,862
-----
Total noninterest income 4,724 6,206 8,233
Noninterest expense
Salaries and employee benefits 15,981 16,511 16,603
Occupancy expenses 2,717 2,715 2,894
Equipment expenses 1,038 1,087 1,237
Legal fees 95 51 444
Professional fees 290 391 583
FDIC assessment 843 1,485 2,788
Data processing fees 2,078 1,824 1,864
FDIC indemnification asset amortization 6,449 6,936 10,364
Amortization of intangibles 2,202 2,261 2,261
Other real estate expense 2,034 2,493 3,788
Other operating expenses 5,561 5,549 6,212
-----
Total noninterest expense 39,288 41,303 49,038
Net income before income tax 8,403 7,730 1,504
Income tax expense 2,497 2,148 60
----- ----- ---
Net income 5,906 5,582 1,444
Dividends on preferred stock 885 884 884
Accretion of discount on preferred stock 234 220 206
--- --- ---
Net income available to common stockholders $4,787 $4,478 $354
NET INTEREST MARGIN ANALYSIS
AVERAGE BALANCE SHEETS
(Dollars in thousands)
Three months ended December 31, 2013 Three months ended December 31, 2012
------------------------------------ ------------------------------------
Average Average
Average Interest Rates Average Interest Rates
Balance Income/ Earned/ Balance Income/ Earned/
Sheet Expense Paid Sheet Expense Paid
----- ------- ---- ----- ------- ----
ASSETS:
Loans, including fees $585,461 $7,050 4.78% $564,926 $7,687 5.44%
Loans covered by FDIC
loss share 75,252 2,994 15.79% 86,415 2,894 13.40%
Total loans 660,713 10,044 6.03% 651,341 10,581 6.50%
Interest bearing bank
balances 35,304 25 0.28% 23,636 14 0.25%
Federal funds sold 783 - 0.10% 2,641 1 0.11%
Investments (taxable) 283,516 1,976 2.79% 302,949 2,189 2.89%
Investments (tax exempt) 21,349 260 4.88% 15,455 203 5.25%
Total earning assets 1,001,665 12,305 4.87% 996,023 12,988 5.22%
Allowance for loan losses (11,133) (14,323)
Non-earning assets 128,596 141,492
Total assets $1,119,128 $1,123,192
===
LIABILITIES AND
STOCKHOLDERS' EQUITY
Demand - interest bearing $220,656 $168 0.30% $240,391 $189 0.31%
Savings 79,572 70 0.35% 77,484 58 0.30%
Time deposits 564,191 1,263 0.89% 552,926 1,611 1.17%
Total interest-bearing
deposits 864,419 1,501 0.69% 870,801 1,858 0.85%
Fed funds purchased 107 - 0.00% 1,833 3 0.51%
FHLB and other borrowings 61,950 143 0.92% 55,222 193 1.39%
Total interest-bearing
liabilities 926,476 1,644 0.70% 927,856 2,054 0.88%
Non-interest bearing
deposits 80,172 76,154
Other liabilities 3,874 4,216
Total liabilities 1,010,522 1,008,226
Stockholders' equity 108,606 114,966
Total liabilities and
stockholders' equity $1,119,128 $1,123,192
===
Net interest earnings $10,661 $10,934
Interest spread 4.17% 4.34%
Net interest margin 4.22% 4.39%
NET INTEREST MARGIN ANALYSIS
AVERAGE BALANCE SHEETS
(Dollars in thousands)
Year ended December 31, Year ended December 31,
2013 2012
------------------------ ------------------------
Average Balance Interest Income / Average Rates Earned Average Balance Interest Income / Average Rates Earned
Sheet Expense /Paid Sheet Expense /Paid
--------------- ----------------- ----- ---------------- ----------------- -----
ASSETS:
Loans, including fees $585,343 $29,696 5.07% $556,113 $30,658 5.51%
Loans covered by FDIC loss share 79,140 11,936 15.08% 91,489 14,105 15.42%
------ ------ ------ ------
Total loans 664,483 41,632 6.27% 647,602 44,763 6.91%
Interest bearing bank balances 22,423 58 0.26% 22,425 54 0.24%
Federal funds sold 3,453 3 0.10% 4,254 5 0.11%
Investments (taxable) 292,618 7,693 2.63% 289,617 8,408 2.90%
Investments (tax exempt) 20,294 998 4.92% 13,168 741 5.63%
------ --- ------ ---
Total earning assets 1,003,271 50,384 5.02% 977,066 53,971 5.52%
Allowance for loan losses (12,352) (14,601)
Non-earning assets 130,033 145,507
------- -------
Total assets $1,120,952 $1,107,972
LIABILITIES AND
STOCKHOLDERS' EQUITY
Demand - interest bearing $238,545 $742 0.31% $238,418 $859 0.36%
Savings 81,368 277 0.34% 74,129 256 0.35%
Time deposits 546,788 5,351 0.98% 556,784 7,393 1.33%
------- ----- ------- -----
Total interest-bearing deposits 866,701 6,370 0.73% 869,331 8,508 0.98%
Fed funds purchased 558 4 0.73% 1,348 9 0.64%
FHLB and other borrowings 56,269 704 1.25% 45,359 1,175 2.59%
------ --- ------ -----
Total interest-bearing liabilities 923,528 7,078 0.77% 916,038 9,692 1.06%
------- ----- ------- -----
Non-interest bearing deposits 80,326 72,391
Other liabilities 3,933 4,532
----- -----
Total liabilities 1,007,787 992,961
Stockholders' equity 113,165 115,011
------- -------
Total liabilities and
stockholders' equity $1,120,952 $1,107,972
Net interest earnings $43,306 $44,279
======= =======
Interest spread 4.25% 4.46%
==== ====
Net interest margin 4.32% 4.53%
==== ====
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
December 31, September 30, December 31, 2012
2013 2013
Common Tangible Book Value
--------------------------
Total stockholder's equity 106,659,000 108,470,000 115,317,000
Preferred stock (net) 11,717,000 14,173,000 18,483,000
Core deposit intangible (net) 6,621,000 8,600,000 10,297,000
Common tangible book value 88,321,000 85,697,000 86,537,000
Shares outstanding 21,709,096 21,701,131 21,670,212
Common tangible book value per share $4.07 $3.95 $3.99
Stock Price $3.76 $3.68 $2.65
Price/common tangible book 92.4% 93.2% 66.4%
Common tangible book/common tangible assets
Total assets 1,089,532,000 1,114,976,000 1,153,288,000
Preferred stock (net) 11,717,000 14,173,000 18,483,000
Core deposit intangible 6,621,000 8,600,000 10,297,000
Common tangible assets 1,071,194,000 1,092,203,000 1,124,508,000
Common tangible book 88,321,000 85,697,000 86,537,000
Common tangible equity to assets 8.25% 7.85% 7.70%
SOURCE Community Bankers Trust Corporation
