RICHMOND, Va., Jan. 29, 2016 /PRNewswire/ -- Community Bankers Trust Corporation (the "Company") (NASDAQ: ESXB), the holding company for Essex Bank (the "Bank"), today reported unaudited results for the fourth quarter and year ended December 31, 2015. Net income available to common shareholders was $2.2 million, or $0.10 per common share, basic and fully diluted, for the fourth quarter. For the year ended December 31, 2015, the Company had a net loss available to common shareholders of $2.5 million, or $0.11 per common share, basic and fully diluted. Excluding the one-time pre-tax charge of $13.1 million related to the termination of the FDIC shared-loss agreements in the third quarter of 2015, net income for the year would have been approximately $6.1 million, or $0.28 per common share, basic and fully diluted. (See "Non-GAAP Financial Measures" at the end of this release for the calculation of net income without the effect of the one-time charge.)
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Rex L. Smith, III, President and Chief Executive Officer, stated, "I am excited by what we accomplished in the past year, but especially for the momentum created in the fourth quarter. While the termination of the shared loss agreement creates a loss for the year, it will generate a significant cost savings going forward. Essex Bank has positive core operating growth and a healthy balance sheet with strong capital, solid asset quality, and liquidity, which, in addition to the growth in loans and the expense reductions, give us real earnings power going into 2016.
Smith added, "The growth in new loans and non-interest bearing deposits was strong in the quarter and for the year. The new branches in Bowie Maryland and Richmond, Virginia are off to great starts. Additionally, we expect to open our Fairfax branch in late February of this year. This will augment our loan production office there. This type of growth is crucial for our franchise moving forward, and we saw the results of this in the fourth quarter."
Smith concluded, "Management has worked hard to simplify the balance sheet and continues to make every effort to grow the organization in accordance with our strategic plans. The earnings are down year over year as expected from executing on our strategic plans, and the initiatives that we have put into place should yield positive results for 2016."
RESULTS OF OPERATIONS
Net income was $2.2 million for the fourth quarter of 2015, compared with a net loss of $7.7 million in the third quarter of 2015 and net income of $2.3 million in the fourth quarter of 2014. Earnings/(loss) per common share, basic and fully diluted, were $0.10 per share for the fourth quarter of 2015, compared with $(0.35) per share in the third quarter of 2015 and $0.10 per share in the fourth quarter of 2014.
On a linked quarter basis, net income increased $9.9 million. Excluding the one-time charge related to the termination of the FDIC shared-loss agreements in the third quarter, net income would have increased $1.4 million. The write-down of three bank properties in the third quarter of 2015, two in held for sale totaling $684,000 and one held in other real estate owned for $392,000, was the major factor for this increase. Additionally, salaries and employee benefits decreased by $366,000 on a linked quarter basis. In the third quarter of 2015, the Company recorded $161,000 in severance payments related to position consolidations that will reduce the salaries and employee benefits expense by approximately $600,000 annually, before tax.
Net loss was $2.5 million for the year ended December 31, 2015, compared with net income of $7.5 million and net income available to common shareholders of $7.3 million for the same period in 2014. Excluding the aforementioned one-time FDIC-related charge, net income would have been approximately $6.1 million for the year ended December 31, 2015. The Company estimates that the elimination of the FDIC indemnification asset will result in an increase in net income of approximately $3.0 million over the 12 month period following its termination. Earnings/(loss) per common share, basic and fully diluted, were $(0.11) for the year ended December 31, 2015 versus $0.33 for the same period in 2014.
The following table presents summary income statements for the three months and years ended December 31, 2015 and December 31, 2014 and the three months ended September 30, 2015:
SUMMARY INCOME STATEMENT
(Dollars in thousands) For the three months ended For the year ended
31-Dec-15 30-Sep-15 31-Dec-14 31-Dec-15 31-Dec-14
--------- --------- --------- --------- ---------
Interest income $11,846 $11,723 $11,726 $47,552 $48,725
Interest expense 1,884 1,878 1,883 7,497 6,933
----- ----- ----- ----- -----
Net interest income 9,962 9,845 9,843 40,055 41,792
Provision for loan losses - - - - -
Net interest income after provision
for loan losses 9,962 9,845 9,843 40,055 41,792
Noninterest income 1,225 1,253 1,832 5,081 5,269
Noninterest expense 8,269 23,029 8,743 50,260 36,817
----- ------ ----- ------ ------
Net (loss) income before income taxes 2,918 (11,931) 2,932 (5,124) 10,244
Income tax (benefit) expense 704 (4,215) 673 (2,627) 2,728
--- ------ --- ------ -----
Net (loss) income 2,214 (7,716) 2,259 (2,497) 7,516
Dividends on preferred stock - - - - 247
Net (loss) income available
to common shareholders $2,214 $(7,716) $2,259 $(2,497) $7,269
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EPS Basic $0.10 $(0.35) $0.10 $(0.11) $0.33
===== ====== ===== ====== =====
EPS Diluted $0.10 $(0.35) $0.10 $(0.11) $0.33
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Net Interest Income
Linked Quarter Basis
Net interest income was $10.0 million for the quarter ended December 31, 2015, compared with $9.8 million for the third quarter of 2015, representing an increase of $117,000, or 1.2%. The linked quarter increase was due primarily to interest and fees on loans, which increased $254,000, or 3.2%, as a result of increased loan volume in the fourth quarter of 2015. Interest and fees on purchased credit impaired (PCI) loans declined $76,000 on a linked quarter basis, while securities income decreased $56,000. Total interest expense remained relatively unchanged and was $1.9 million in both the third and fourth quarters of 2015.
The yield on earning assets was 4.45% for both the third and fourth quarters of 2015. The yield on loans, excluding PCI loans, was 4.59% and 4.64% for the third and fourth quarters, respectively. The yield on PCI loans also was unchanged and was 10.97% for each of the third and fourth quarters of 2015. Securities yields have remained relatively stable and were 2.96% on a tax-equivalent basis for the fourth quarter of 2015 and 2.97% on a tax-equivalent basis for the third quarter of 2015.
Interest expense increased only $6,000, or 0.3%, in the fourth quarter of 2015, compared with the third quarter of 2015. Average interest bearing liabilities increased $6.2 million during the quarter, and the cost of total interest bearing liabilities was 0.79% each quarter. Federal Home Loan Bank (FHLB) and other borrowings increased $8.0 million during the fourth quarter of 2015 and averaged $100.0 million at a rate of 1.11%, down from 1.19% in the third quarter of 2015.
The interest spread was 3.66% in both the third and fourth quarters of 2015. The yield on earning assets was 4.45% for both the third and fourth quarters of 2015. The cost of interest bearing liabilities also remained constant on a linked quarter basis and was 0.79% each period. This resulted in a net interest margin, on a tax-equivalent basis, of 3.75% in the third quarter and the fourth quarter of 2015.
Year-Over-Year Quarter
Net interest income increased $119,000 from $9.8 million in the fourth quarter of 2014 to $10.0 million in the same period in 2015. This increase was driven by volume increases in loans, from an average balance of $646.0 million in the fourth quarter of 2014 to $711.8 million in the fourth quarter of 2015. This resulted in an increase of $684,000 in interest and fees on loans in the fourth quarter of 2015 compared with the same period in 2014. This more than offset the $516,000 decline in interest and fees on PCI loans in the year-over-year quarterly comparison period. Tax-equivalent securities income increased $66,000 in the fourth quarter of 2015 compared with the same period in 2014.
The yield on earning assets declined from 4.55% in the fourth quarter of 2014 to 4.45% for the fourth quarter of 2015. The most notable decline was in PCI loan yields, which fell from 12.62% in the fourth quarter of 2014 to 10.97% in the fourth quarter of 2015. The yield on loans, excluding PCI loans, declined from 4.64% in the fourth quarter of 2014 to 4.59% in the fourth quarter of 2015. Securities yields, on a tax-equivalent basis, increased from 2.82% in the fourth quarter of 2014 to 2.96% in the fourth quarter of 2015.
Interest expense, year-over-year, was $1.9 million in each of the fourth quarters of 2014 and 2015. The average balance of interest bearing liabilities increased $2.3 million for the year-over-year quarterly comparison period.
The combination of the items described above resulted in a decrease in the interest spread of 10 basis points, from 3.76% in the fourth quarter of 2014 to 3.66% in the fourth quarter of 2015. The tax-equivalent net interest margin declined from 3.83% in the fourth quarter of 2014 to 3.76% for the same period in 2015.
Year-Over-Year 2015 and 2014
Net interest income was $40.1 million for the year ended December 31, 2015 versus $41.8 million for the year ended December 31, 2014. This decrease in net interest income was the result of lower interest income of $1.2 million coupled with higher interest expense of $564,000. This is a decrease of $1.7 million, or 4.2%. While the income on loans, excluding PCI loans, has increased $2.4 million in 2015 compared with 2014, the income derived from PCI loans has dropped by $3.4 million. Cash payments on zero carrying value ADC loans were $825,000 greater during 2014 when compared with 2015. Interest income on securities decreased 2.2%, or $175, 000. However, interest income on securities, on a tax-equivalent basis, increased 5.3%, or $439,000, during the same time frame as more of the portfolio was shifted to tax-exempt municipals with higher tax equivalent yield.
The tax-equivalent yield on earning assets dropped 30 basis points, from 4.87% for the year ended December 31, 2014 to 4.57% for the year ended December 31, 2015. The yield on total loans declined 60 basis points, from 5.91% in 2014 to 5.31% in 2015. PCI loan yield fell from 15.94% to 12.39%, and the yield on loans, excluding PCI loans, declined 12 basis points, from 4.77% to 4.65%. The tax-equivalent yield on securities increased from 2.76% for 2014 to 2.94% for 2015. The average balance of tax-exempt securities increased $44.4 million over the time frame and is responsible for the increase in yield on the portfolio.
Interest expense increased $564,000, or 8.1%, from $6.9 million for the year ended December 31, 2014 to $7.5 million for the year ended 2015. Interest on FHLB and other borrowings increased $403,000 during this time frame on average balance increases of $11.3 million, coupled with an increase in rate from 0.91% to 1.22%, due to locking in five year funding in the fourth quarter of 2014.
The rate paid on total interest bearing liabilities increased from 0.75% for the year ended December 31, 2014 to 0.80% for the same period in 2015. The increase in FHLB and other borrowings was the main factor for this increase.
The combination of the decrease in yield on earning assets coupled with the slight increase in cost of interest bearing liabilities resulted in a decrease in the interest spread from 4.12% in 2014 to 3.77% for the same period in 2015. As a result, the net interest margin declined from 4.18% for 2014 to 3.87% for the same period in 2015.
NET INTEREST MARGIN
(Dollars in thousands) For the three months ended
--------------------------
31-Dec-15 30-Sep-15 31-Dec-14
--------- --------- ---------
Average interest earning assets $1,083,016 $1,073,790 $1,039,810
Interest income $11,846 $11,723 $11,726
Interest income - tax-equivalent $12,149 $12,032 $11,917
Yield on interest earning assets 4.45% 4.45% 4.55%
Average interest bearing liabilities $949,359 $943,208 $947,061
Interest expense $1,884 $1,878 $1,883
Cost of interest bearing liabilities 0.79% 0.79% 0.79%
Net interest income $9,962 $9,845 $9,843
Net interest income - tax-equivalent $10,265 $10,154 $10,034
Interest spread 3.66% 3.66% 3.76%
Net interest margin 3.76% 3.75% 3.83%
For the twelve months ended
---------------------------
31-Dec-15 31-Dec-14
--------- ---------
Average interest earning assets $1,064,587 $1,011,687
Interest income $47,552 $48,725
Interest income - tax-equivalent $48,663 $49,222
Yield on interest earning assets 4.57% 4.87%
Average interest bearing liabilities $942,720 $928,826
Interest expense $7,497 $6,933
Cost of interest bearing liabilities 0.80% 0.75%
Net interest income $40,055 $41,792
Net interest income - tax-equivalent $41,166 $42,289
Interest spread 3.77% 4.12%
Net interest margin 3.87% 4.18%
Provision for Loan Losses
The Company has two categories of loans -- loans, excluding PCI loans, and PCI loans. As a result, the Company records a separate provision for loan losses for its loan portfolio, excluding PCI loans, and for its PCI loan portfolio. There was no provision for loan losses on loans, excluding PCI loans, for the years ended December 31, 2014 and December 31, 2015. Likewise, there was no provision for loan losses on the PCI portfolio during the same time frames.
Noninterest Income
Linked Quarter
Noninterest income was $1.2 million in the fourth quarter of 2015, compared with $1.3 million in the third quarter of 2015. The decrease was $28,000, or 2.2%. Gain on sales of securities was $109,000 in the fourth quarter of 2015, an increase of $35,000 from $74,000 in the third quarter of 2015. Also increasing in the fourth quarter of 2015 over the third quarter of 2015 were service charges on deposit accounts, which increased $18,000 and were $601,000 for the fourth quarter. Mortgage loan fees were $144,000 in the fourth quarter of 2015, a decline of $86,000 from the third quarter of 2015.
Year-over-Year Quarter
Noninterest income decreased $607,000 and was $1.2 million in the fourth quarter of 2015 versus $1.8 million for the same period in 2014. Gains on sales of securities decreased $486,000 from $595,000 in the fourth quarter of 2014 to $109,000 for the same period in 2015. Other noninterest income also reflected a year-over-year decrease of $154,000 and was $182,000 in the fourth quarter of 2015 versus $336,000 one year ago. Gain on sales of other loans were none for the current quarter versus $48,000 one year ago when the Company sold SBA loans at a gain. Increasing in the year-over-year quarterly comparison period were mortgage loan income, which increased $48,000, and service charges on deposit accounts, which increased $35,000.
Year-over-Year 2015 and 2014
Noninterest income was $5.1 million for the year ended December 31, 2015 versus $5.3 million for the year ended December 31, 2014. This is a decrease of $188,000, or 3.6%. Gain on sales of securities decreased $617,000 in 2015 compared with 2014 and was $472,000 in the current year compared with $1.1 million in 2014. Gains on sales of loans of $69,000 represented a decline of $132,000 in 2015 compared with 2014. Other noninterest income of $736,000 in 2015 was a decrease of $63,000 when compared with 2014. Partially offsetting these decreases in year-over-year noninterest income was mortgage loan income of $784,000, an increase of $573,000 over the year ended December 31, 2014. The mortgage division began operations in the second quarter of 2014 and has progressively increased its production. Also increasing for the year ended December 31, 2015 over the year ended December 31, 2014 were service charges on deposit accounts, which increased $69,000 and were $2.3 million in 2015.
Noninterest Expenses
Linked Quarter
Noninterest expenses were $8.3 million for the quarter ended December 31, 2015, a linked quarter decrease of $14.8 million. The decrease was primarily due to the $13.1 million expense in indemnification asset amortization as a result of the termination of the FDIC shared-loss agreements in the third quarter of 2015. There will be no further indemnification asset amortization as a result of this termination, in which the Bank was paid $3.1 million by the FDIC. Other real estate expenses decreased $663,000 and were $195,000 in the fourth quarter of 2015 versus $858,000 in the third quarter of 2015. Management wrote down the value of two branch buildings that are held for sale by a total of $684,000 in the third quarter of 2015. Additionally, the Company further wrote down a piece of other real estate by $392,000 in the third quarter of 2015 to reflect management's assessment of current market value. Salaries and employee benefits decreased $366,000, from $4.8 million in the third quarter of 2015 to $4.4 million in the fourth quarter of 2015. Of this decrease, $161,000 was related to severance payments paid in the third quarter of 2015 as the Company right-sized its workforce to improve efficiencies.
Year-over-Year Quarter
Noninterest expenses were $8.3 million for the fourth quarter of 2015 versus $8.7 million for the fourth quarter of 2014. The decrease in year-over-year quarters was primarily the result of the termination of the FDIC shared-loss agreements, which resulted in no indemnification asset amortization in the current quarter versus $1.4 million in the fourth quarter of 2014. Also decreasing were other real estate expenses, which were $195,000 in the fourth quarter of 2015 versus a credit of $235,000 in the fourth quarter of 2014. The credit in the fourth quarter of 2014 was due to gains on the sale of OREO properties and increased rental income. These improvements were partially offset by increases in the year-over-year quarterly comparison periods in salaries and employee benefits of $324,000 and FDIC assessment of $100,000.
Year-over-Year 2015 and 2014
Noninterest expenses were $50.3 million for the year ended December 31, 2015. This compares with noninterest expenses of $36.8 million for the year ended December 31, 2014. This is an increase of $13.5 million, of which the indemnification asset amortization write-off was $11.8 million. The second largest increase was in salaries and employee benefits, which increased $2.0 million, primarily through the addition of loan production employees, including the mortgage division that began operations in the second quarter of 2014. Other real estate expenses were $1.3 million for the year ended December 31, 2015, an increase of $735,000 over $540,000 for the year ended December 31, 2014. Other operating expenses of $6.5 million for the year ended December 31, 2015 increased $120,000, or 1.9%, over the same period in 2014.
Income Taxes
Income tax expense was $704,000 for the fourth quarter of 2015 compared with a benefit of $4.2 million in the third quarter of 2015 as a result of the loss reported for the quarter through the termination of the FDIC shared-loss agreements. Income tax expense was $673,000 in the fourth quarter of 2014. Income tax reflects a benefit of $2.6 million for the year ended December 31, 2015 versus income tax expense of $2.7 million for the year ended December 31, 2014.
FINANCIAL CONDITION
Total assets of $1.179 billion at December 31, 2015 were $23.6 million, or 2.0% greater than the $1.156 billion reported at December 31, 2014. Total assets increased $30.2 million, or 2.6%, from September 30, 2015. Total loans, excluding PCI loans, were $748.7 million at December 31, 2015, increasing $88.7 million, or 13.4%, since year end 2014. Commercial mortgage loans exhibited the largest dollar volume increase year-over-year and were up $35.8 million, or 12.7%, and ended the year at $318.0 million. This is also the largest category of loans in the portfolio. Residential 1-4 family mortgage loans increased $27.4 million, or 16.4%, over this time frame and were $194.6 million at December 31, 2015. Multifamily loans increased $11.6 million, or 34.2%, and were $45.4 million at December 31, 2015. Construction and land development loans of $67.4 million at December 31, 2015 reflected an increase of 18.2%, or $10.4 million, since year end 2014. Commercial loans of $102.5 million at December 31, 2015 was an increase of $2.7 million over the balance at December 31, 2014. PCI loans were $59.0 million at December 31, 2015, $8.5 million lower than at year-end 2014.
The following table shows the composition of the Company's loan portfolio, excluding PCI loans, net of deferred fees and costs, at December 31, 2015, September 30, 2015, and December 31, 2014:
LOANS (excluding PCI loans)
(Dollars in thousands) 31-Dec-15 30-Sep-15 31-Dec-14
Amount % of Loans Amount % of Loans Amount % of Loans
------ ---------- ------ ---------- ------ ----------
Mortgage loans on real estate:
Residential 1-4 family $194,576 25.99% $184,256 26.59% $167,171 25.33%
Commercial 317,955 42.47% 288,111 41.57% 282,127 42.75%
Construction and land development 67,408 9.00% 64,059 9.24% 57,027 8.64%
Second mortgages 8,378 1.12% 7,940 1.15% 5,997 0.91%
Multifamily 45,389 6.05% 45,609 6.58% 33,812 5.12%
Agriculture 6,238 0.83% 6,335 0.91% 7,163 1.08%
----- ----- -----
Total real estate loans 639,944 85.47% 596,310 86.04% 553,297 83.83%
Commercial loans 102,507 13.69% 90,295 13.03% 99,783 15.12%
Consumer installment loans 4,928 0.66% 5,005 0.73% 5,496 0.83%
All other loans 1,345 0.18% 1,392 0.20% 1,444 0.22%
----- ----- -----
Gross loans 748,724 100.00% 693,002 100.00% 660,020 100.00%
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Allowance for loan losses (9,559) (9,701) (9,267)
Loans (excluding PCI loans), net of unearned
income $739,165 $683,301 $650,753
Total securities of $288.2 million at December 31, 2015 reflected a decrease of $31.4 million from year-end 2014. This decrease is the result of a shift in assets to higher yielding loans, the growth of which was noted earlier. The fair value of securities available-for-sale was $243.3 million at December 31, 2015, and state, county and municipal bonds were 58.2% of this total, at $141.5 million. The book value of securities held-to-maturity was $36.5 million at December 31, 2015 with state, county and municipal bonds totaling $35.5 million. Gains on the sale of securities of $472,000 were realized in the year ended December 31, 2015.
The Company had cash and cash equivalents of $17.0 million at December 31, 2015 versus $22.4 million at December 31, 2014. During the third quarter of 2015, management implemented a system that will result in lower reserve requirements and increase the level of earning assets.
The following table shows the composition of the Company's securities portfolio, excluding equity securities, at December 31, 2015, September 30, 2015, and December 31, 2014
SECURITIES PORTFOLIO
(Dollars in thousands) 31-Dec-15 30-Sep-15 31-Dec-14
--------- --------- ---------
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 $50,589 $49,941 $57,668 $57,027 $99,608 $98,707
U.S Government sponsored agencies 756 742 756 746 - -
State, county, and municipal 138,965 141,498 142,673 145,873 134,405 137,477
Corporate and other bonds 14,997 14,296 20,467 20,116 11,921 11,883
Mortgage backed securities - U.S. Government agencies 8,653 8,496 8,715 8,668 2,338 2,258
Mortgage backed securities -U.S. Government sponsored
agencies 28,637 28,297 34,475 34,531 24,096 24,243
Total securities available for sale $242,597 $243,270 $264,754 $266,961 $272,368 $274,568
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31-Dec-15 30-Sep-15 31-Dec-14
--------- --------- ---------
Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value
-------------- ---------- -------------- ---------- -------------- ----------
Securities Held to Maturity
State, county, and municipal $35,456 $36,557 $35,370 $36,237 $31,677 $32,780
Mortgage backed securities - U.S. Government agencies 1,022 1,054 3,362 3,536 4,293 4,531
Mortgage backed securities -U.S. Government sponsored
agencies - - - - 227 228
--- ---
Total securities held to maturity $36,478 $37,611 $38,732 $39,773 $36,197 $37,539
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Interest bearing deposits were $849.3 million at December 31, 2015, an increase of $14.9 since year-end 2014. However, there has been a change in the composition of the deposit mix. Time deposits less than or equal to $250,000 declined $7.5 million during 2015 while NOW, MMDA and savings accounts increased collectively in a greater amount, $17.7 million. Time deposits over $250,000 increased $4.8 million during 2015.
The following table compares the mix of interest bearing deposits at December 31, 2015, September 30, 2015, and December 31, 2014.
INTEREST BEARING DEPOSITS
(Dollars in thousands)
31-Dec-15 30-Sep-15 31-Dec-14
--------- --------- ---------
NOW $128,761 $112,277 $123,682
MMDA 108,810 109,748 101,784
Savings 84,047 87,368 78,478
Time deposits less than or equal to
$250,000 409,085 407,765 416,628
Time deposits over $250,000 118,600 116,858 113,809
Total interest bearing deposits $849,303 $834,016 $834,381
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FHLB advances were $95.7 million at December 31, 2015, $745,000 less than at year-end 2014. Long term debt was $5.7 million at December 31, 2015, declining $4.0 million since year-end 2014. This debt, originally totaling $10.7 million, was obtained in April 2014, and the proceeds were used to redeem the Company's remaining outstanding TARP preferred stock. The Company has repaid $5.0 million of this debt since it was obtained.
Shareholder's equity was $104.6 million at December 31, 2015. This is a decrease of $3.1 million since December 31, 2014 when shareholder's equity was $107.7 million. The primary reason for the decline was the termination of the FDIC shared-loss agreements and the resulting loss during the third quarter of 2015. Management anticipates that the earn-back period on the elimination of the indemnification assets is approximately two years.
ASSET QUALITY - excluding PCI loans
Nonaccrual loans were $10.7 million at December 31, 2015, compared with $16.6 million at December 31, 2014. The reduction of $5.9 million, or 35.6%, was primarily the result of a complete resolution and pay-out of a large commercial loan relationship placed on nonaccrual status in the fourth quarter of 2014. Other measurements of asset quality showed improvement during 2015. Internally designated criticized and classified assets declined collectively by $11.3 million. Criticized loans declined from $21.8 million at year-end 2014 to $21.5 million at December 31, 2015. Classified loans declined $8.7 million during 2015, from $22.2 million at December 31, 2014 to $13.5 million at December 31, 2015. Other real estate owned declined from $7.7 million at December 31, 2014 to $5.5 million at December 31, 2015.
The following chart shows the level of nonaccrual, classified, and criticized loans over the last five quarters:
ASSET QUALITY
(Dollars in thousands)
31-Dec-15 30-Sep-15 30-Jun-15 31-Mar-15 31-Dec-14
--------- --------- --------- --------- ---------
Nonaccrual loans $10,670 $10,795 $10,530 $17,196 $16,571
------- ------- ------- ------- -------
Criticized (special mention) loans 21,476 17,977 21,271 22,226 21,835
Classified (substandard) loans 13,471 13,610 12,306 22,024 22,181
Other real estate owned * 5,490 5,858 6,506 6,844 7,743
----- ----- ----- ----- -----
Total classified and criticized assets 40,437 $37,445 $40,083 $51,094 $51,759
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*Other real estate owned has been restated for all dates presented to include other real estate owned previously covered by the FDIC shared-loss agreements.
Total nonperforming assets totaled $16.2 million at December 31, 2015, decreasing $8.2 million since December 31, 2014. The decrease in the level of nonperforming assets since year-end 2014 is primarily due to the resolution and payoff of the large commercial loan relationship classified as nonaccrual at December 31, 2014. Nonaccrual loans declined $5.9 million during 2015, and other real estate owned decreased by $2.3 million. Charged-off loans were $300,000 in the fourth quarter of 2015 while recoveries of previously charged-off loans totaled $158,000. For the year ended December 31, 2015, loans charged-off totaled $1.4 million and recoveries of previously charged-off loans totaled $1.7 million.
The allowance for loan losses, excluding PCI loans, equaled 89.6% of nonaccrual loans at December 31, 2015, compared with 55.9% at December 31, 2014. The ratio of the allowance for loan losses to nonperforming assets was 62.2% at December 31, 2015, compared with 40.1% at December 31, 2014. Nonperforming assets to loans and other real estate, excluding PCI loans, was 2.1% at December 31, 2015, compared with 3.6% at December 31, 2014.
The following table reconciles the activity of the Company's allowance for loan losses, excluding PCI loans, by quarter, for the past five quarters. These numbers exclude the $484,000 in allowance for loan losses related to PCI loans.
ALLOWANCE FOR LOAN LOSSES
(Dollars in thousands) 2015 2014
---- ----
Fourth Third Second First Fourth
Quarter Quarter Quarter Quarter Quarter
------- ------- ------- ------- -------
Allowance for loan losses:
Beginning of period $9,701 $9,864 $9,011 $9,267 $9,764
Provision for loan losses - - - - -
Net recoveries (charge-offs) (142) (163) 853 (256) (497)
---- ---- --- ---- ----
End of period $9,559 $9,701 $9,864 $9,011 $9,267
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The following table sets forth selected asset quality data, excluding PCI loans, and ratios for the dates indicated:
ASSET QUALITY (excluding PCI loans)
(Dollars in thousands) 2015 2014
---- ----
31-Dec-15 30-Sep-15 30-Jun-15 31-Mar-15 31-Dec-14
Nonaccrual loans $10,670 $10,795 $10,530 $17,196 $16,571
Loans past due over 90 days and accruing interest - - - - -
--- --- --- --- ---
Total nonperforming loans 10,670 10,795 10,530 17,196 16,571
Other real estate owned 5,490 5,858 6,506 6,844 7,743
----- ----- ----- ----- -----
Total nonperforming assets $16,160 $16,653 $17,036 $24,040 $24,314
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Allowance for loan losses, excluding PCI loans, to loans 1.28% 1.40% 1.45% 1.33% 1.40%
Allowances for loan losses to nonperforming assets 62.15% 61.16% 60.74% 39.50% 40.10%
Allowance for loan losses, excluding PCI loans, to nonaccrual loans 89.59% 89.87% 93.68% 52.40% 55.92%
Nonperforming assets to loans, excluding PCI loans, and other real estate 2.14% 2.38% 2.48% 3.51% 3.64%
Net charge-offs/(recoveries) for quarter to average loans, annualized 0.08% 0.09% (0.50%) 0.15% 0.31%
A further breakout of nonaccrual loans, excluding PCI loans, at September 30, 2015, December 31, 2014 and September 30, 2014 is below:
NONACCRUAL LOANS (excluding PCI loans)
(Dollars in thousands) 31-Dec-15 30-Sep-15 31-Dec-14
--------- --------- ---------
Amount % of Loans Amount % of Loans Amount % of Loans
------ ---------- ------ ---------- ------ ----------
Mortgage loans on real estate:
Residential 1-4 family $4,562 0.61% $4,664 0.68% $3,342 0.51%
Commercial 1,508 0.20% 1,524 0.22% 607 0.09%
Construction and land development 4,509 0.60% 4,511 0.65% 4,920 0.74%
Second mortgages 13 0.00% 13 0.00% 61 0.01%
--- --- ---
Total real estate loans 10,592 1.41% 10,712 1.55% 8,930 1.35%
Commercial loans $ - 0.00% $2 0.00% $7,521 1.14%
Consumer installment loans 78 0.01% 81 0.01% 120 0.02%
--- ---- --- ---- --- ----
Gross loans 10,670 1.42% 10,795 1.56% 16,571 2.51%
===== ===== =====
Capital Requirements
The Company's ratio of total risk-based capital was 13.3% at December 31, 2015, compared with 14.7% at December 31, 2014. The tier 1 risk-based capital ratio was 12.2% at December 31, 2015 and 13.5% at December 31, 2014. The Company's tier 1 leverage ratio was 9.5% at December 31, 2015 and 9.4% at December 31, 2014. All capital ratios exceed regulatory minimums to be considered well capitalized.
The December 31, 2015 ratios reflect changes to the capital and asset risk-weighting of BASEL III, which became effective January 1, 2015. BASEL III introduced the common equity tier 1 capital ratio, which was 12.2% at December 31, 2015.
Earnings Conference Call and Webcast
The Company will host a conference call for interested parties on January 29, 2016, at 10:00 a.m. Eastern Time to discuss the financial results for the fourth quarter and 2015 fiscal year. The public is invited to listen to this conference call by dialing 866-374-8379 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, 2016, until 9:00 a.m. Eastern Time on February 5, 2016. The replay will be available by dialing 877-344-7529 and entering access code 10079329 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 22 full-service offices, 15 of which are in Virginia and seven of which are in Maryland. The Bank also operates two loan production offices in Virginia. The Bank plans to close its branch office in Catonsville, Maryland on March 4, 2016.
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, dispositions and similar transactions; the realization of gains and expense savings from acquisitions, dispositions and similar transactions; 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, 2014 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.
COMMUNITY BANKERS TRUST CORPORATION
CONSOLIDATED BALANCE SHEETS
UNAUDITED CONDENSED
(Dollars in thousands)
31-Dec-15 30-Sep-15 31-Dec-14
--------- --------- ---------
Assets
------
Cash and due from banks $7,393 $10,032 $8,329
Interest bearing bank deposits 9,576 2,405 14,024
----- ----- ------
Total cash and cash equivalents 16,969 12,437 22,353
Securities available for sale, at fair value 243,270 266,961 274,568
Securities held to maturity, at cost 36,478 38,732 36,197
Equity securities, restricted, at cost 8,423 8,610 8,816
----- ----- -----
Total securities 288,171 314,303 319,581
Loans held for resale 2,101 673 200
Loans 748,724 693,002 660,020
Purchased credit impaired (PCI) loans 58,955 61,073 67,460
Allowance for loan losses (9,559) (9,701) (9,267)
Allowance for loan losses - PCI (484) (484) (484)
---- ---- ----
Net loans 797,636 743,890 717,729
Bank premises and equipment, net 27,378 27,583 29,702
Bank premises and equipment held for sale 110 2,228 465
Other real estate owned 5,490 5,858 7,743
FDIC receivable under shared loss agreement - - 669
Bank owned life insurance 21,620 21,466 21,004
Core deposit intangibles, net 2,805 3,282 4,713
FDIC indemnification asset - - 18,609
Other assets 17,066 17,465 12,966
------ ------ ------
Total assets $1,179,346 $1,149,185 $1,155,734
========== ========== ==========
Liabilities
-----------
Deposits:
Noninterest bearing $96,216 $99,549 $84,564
Interest bearing 849,303 834,016 834,381
------- ------- -------
Total deposits 945,519 933,565 918,945
Federal funds purchased and securities sold under agreements to repurchase 18,921 958 14,500
Federal Home Loan Bank advances 95,656 95,844 96,401
Long term debt 5,675 6,476 9,680
Trust preferred capital notes 4,124 4,124 4,124
Other liabilities 4,873 5,263 4,434
----- ----- -----
Total liabilities 1,074,768 1,046,230 1,048,084
Shareholders' Equity
--------------------
Common stock (200,000,000 shares authorized $0.01 par value; 21,866,944, 21,848,489,
21,791,523 shares issued and outstanding, respectively) 219 218 218
Additional paid in capital 145,907 145,751 145,321
(Accumulated deficit) (41,050) (43,264) (38,553)
Accumulated other comprehensive (loss) income (498) 250 664
---- --- ---
Total shareholders' equity 104,578 102,955 107,650
------- ------- -------
Total liabilities and shareholders' equity $1,179,346 $1,149,185 $1,155,734
========== ========== ==========
COMMUNITY BANKERS TRUST CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED CONDENSED
(Dollars in thousands)
YTD YTD YTD
--- --- ---
2015 2014 2013
---- ---- ----
Interest and dividend income
Interest and fees on loans $31,990 $29,635 $29,696
Interest and fees on PCI loans 7,875 11,228 11,936
Interest on federal funds sold 2 - 3
Interest on deposits in other banks 59 61 58
Interest and dividends on securities
Taxable 5,469 6,835 7,693
Nontaxable 2,157 966 659
----- --- ---
Total interest and dividend income 47,552 48,725 50,045
Interest expense
Interest on deposits 5,983 5,858 6,370
Interest on borrowed funds 1,514 1,075 708
----- ----- ---
Total interest expense 7,497 6,933 7,078
Net interest income 40,055 41,792 42,967
Provision for loan losses - - -
--- --- ---
Net interest income after provision for loan losses 40,055 41,792 42,967
Noninterest income
Service charges on deposit accounts 2,269 2,200 2,739
Gain on securities, net 472 1,089 518
Gain(loss) on sale of loans, net 69 201 (359)
Income on bank owned life insurance 751 769 747
Mortgage loan income 784 211 313
Other 736 799 766
--- ---
Total noninterest income 5,081 5,269 4,724
Noninterest expense
Salaries and employee benefits 18,141 16,136 15,981
Occupancy expenses 2,592 2,597 2,717
Equipment expenses 1,035 957 1,038
FDIC assessment 938 805 843
Data processing fees 1,709 1,732 2,078
Indemnification asset amortization 16,195 5,795 6,449
Amortization of intangibles 1,908 1,908 2,202
Other real estate expenses 1,275 540 2,034
Other operating expenses 6,467 6,347 5,946
----- -----
Total noninterest expense 50,260 36,817 39,288
Net (loss) income before income taxes (5,124) 10,244 8,403
Income tax (benefit) expense (2,627) 2,728 2,497
----- -----
Net (loss) income (2,497) 7,516 5,906
Dividends paid on preferred stock - 247 885
--- --- ---
Accretion of discount on preferred stock - - 234
Net (loss) income available to common shareholders $(2,497) $7,269 $4,787
======= ====== ======
COMMUNITY BANKERS TRUST CORPORATION
INCOME STATEMENT TREND ANALYSIS
UNAUDITED
(Dollars in thousands) Three months ended
------------------
31-Dec-15 30-Sep-15 30-Jun-15 31-Mar-15 31-Dec-14
--------- --------- --------- --------- ---------
Interest and dividend income
Interest and fees on loans $8,240 $7,986 $8,017 $7,747 $7,556
Interest and fees on PCI loans 1,654 1,730 2,418 2,073 2,170
Interest on federal funds sold - - 1 1 -
Interest on deposits in other banks 13 12 17 17 15
Interest and dividends on securities
Taxable 1,350 1,396 1,355 1,368 1,614
Nontaxable 589 599 525 444 371
--- --- --- --- ---
Total interest and dividend income 11,846 11,723 12,333 11,650 11,726
Interest expense
Interest on deposits 1,526 1,523 1,486 1,448 1,493
Interest on borrowed funds 358 355 384 417 390
--- --- --- --- ---
Total interest expense 1,884 1,878 1,870 1,865 1,883
Net interest income 9,962 9,845 10,463 9,785 9,843
Provision for loan losses - - - - -
--- --- --- --- ---
Net interest income after provision for loan losses 9,962 9,845 10,463 9,785 9,843
Noninterest income
Service charges on deposit accounts 601 583 557 528 566
Gain/(loss) on securities, net 109 74 (8) 297 595
Gain on sale of loans, net - - 23 46 48
Income on bank owned life insurance 189 188 188 186 191
Mortgage loan income 144 230 262 148 96
Other 182 178 184 192 336
--- --- --- --- ---
Total noninterest income 1,225 1,253 1,206 1,397 1,832
Noninterest expense
Salaries and employee benefits 4,437 4,803 4,406 4,495 4,113
Occupancy expenses 616 669 619 688 631
Equipment expenses 253 282 260 240 223
FDIC assessment 294 187 220 237 194
Data processing fees 454 401 412 442 420
FDIC indemnification asset amortization - 13,803 1,153 1,239 1,380
Amortization of intangibles 477 477 477 477 477
Other real estate expenses 195 858 137 85 (235)
Other operating expenses 1,543 1,549 1,759 1,616 1,540
----- ----- ----- ----- -----
Total noninterest expense 8,269 23,029 9,443 9,519 8,743
Net income (loss) before income taxes 2,918 (11,931) 2,226 1,663 2,932
Income tax (benefit) expense 704 (4,215) 533 351 673
--- ------ --- --- ---
Net income(loss) 2,214 (7,716) 1,693 1,312 2,259
Dividends on preferred stock - - - - -
--- --- --- --- ---
Net income(loss) available to common shareholders $2,214 $(7,716) $1,693 $1,312 $2,259
====== ======= ====== ====== ======
COMMUNITY BANKERS TRUST CORPORATION
NET INTEREST MARGIN ANALYSIS
AVERAGE BALANCE SHEETS
(Dollars in thousands)
Three months ended December 31, 2015 Three months ended December 31, 2014
------------------------------------ ------------------------------------
Average Interest Average Average Balance Interest Average Rates Earned /
Income / Rates Sheet Income / Paid
Expense Earned / Expense
Paid
Balance
Sheet
-----
ASSETS:
$711,797 $8,240 4.59% $646,266 $7,556 4.64%
Loans, including fees
59,835 1,654 10.97 68,225 2,170 12.62
PCI loans, including fees
771,632 9,894 5.09 714,491 9,726 5.40
Total loans
Interest bearing bank balances 8,284 13 0.64 17,161 15 0.33
- - - - - -
Federal funds sold
218,957 1,350 2.47 258,366 1,614 2.50
Securities (taxable)
84,143 892 4.24 49,792 562 4.51
Securities (tax exempt)(1)
1,083,016 12,149 4.45 1,039,810 11,917 4.55
Total earning assets
(10,182) (10,548)
Allowance for loan losses
81,908 112,619
Non-earning assets
$1,154,742 $1,141,881
Total assets
LIABILITIES AND
SHAREHOLDERS'
EQUITY
$237,303 $1867 0.31 $219,486 $154 0.28
Demand - interest bearing
83,744 66 0.31 78,572 61 0.31
Savings
519,028 1,273 0.97 540,230 1,278 0.94
Time deposits
840,075 1,526 0.72 838,288 1,493 0.71
Total interest bearing deposits
2,865 7 0.97 4,433 7 0.58
Short-term borrowings
99,952 281 1.11 94,660 283 1.19
FHLB and other borrowings
6,467 70 4.26 9,680 100 4.04
Long- term debt
949,359 1,884 0.79 947,061 1,883 0.79
Total interest bearing liabilities
99,987 84,091
Noninterest bearing deposits
1,147 4,178
Other liabilities
1,050,493 1,035,330
Total liabilities
104,249 106,551
Shareholders' equity
Total liabilities and
$1,154,742 $1,141,881
shareholders' equity
$10,265 $10,034
Net interest earnings
3.66% 3.76%
Interest spread
3.76% 3.83%
Net interest margin
(1) Income and yields are reported on a tax-equivalent basis assuming a federal tax rate of 34%.
COMMUNITY BANKERS TRUST CORPORATION
NET INTEREST MARGIN ANALYSIS
AVERAGE BALANCE SHEETS
(Dollars in thousands)
Year ended December 31, 2015 Year ended December 31, 2014
---------------------------- ----------------------------
Average Interest Income Average Rates Average Interest Income Average
/Expense Earned / /Expense Rates
Paid Earned /
Paid
Balance Balance
Sheet Sheet
----- -----
ASSETS:
$687,463 $31,990 4.65% $621,213 $29,635 4.77%
Loans, including fees
63,552 7,875 12.39 70,421 11,228 15.94
PCI loans, including fees
751,015 39,865 5.31 691,634 40,863 5.91
Total loans
14,551 59 0.41 19,103 61 0.32
Interest bearing bank balances
1,852 2 0.10 389 0 0.10
Federal funds sold
220,525 5,469 2.48 268,324 6,835 2.55
Securities (taxable)
76,644 3,268 4.26 32,237 1,463 4.54
Securities (tax exempt)(1)
1,064,587 48,663 4.57 1,011,687 49,222 4.87
Total earning assets
(9,981) (10,742)
Allowance for loan losses
94,122 114,545
Non-earning assets
$1,148,728 $1,115,490
Total assets
LIABILITIES AND
SHAREHOLDERS'
EQUITY
$229,220 $698 0.30 $204,386 $595 0.29
Demand - interest bearing
83,614 260 0.31 77,138 253 0.33
Savings
523,726 5,025 0.96 552,709 5,010 0.91
Time deposits
836,560 5,983 0.72 834,233 5,858 0.70
Total interest bearing deposits
1,516 12 0.76 1,855 11 0.59
Short-term borrowings
96,937 1,179 1.22 85,661 776 0.91
FHLB and other borrowings
7,707 323 4.20 7,077 288 4.07
Long- term debt
942,720 7,497 0.80 928,826 6,933 0.75
Total interest bearing liabilities
94,476 76,515
Noninterest bearing deposits
3,422 4,184
Other liabilities
1,040,618 1,009,525
Total liabilities
108,110 105,965
Shareholders' equity
Total liabilities and shareholders'
$1,148,728 $1,115,490
equity
$41,166 $42,289
Net interest earnings
3.77% 4.12%
Interest spread
3.87% 4.18%
Net interest margin
(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). 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.
Common tangible book value equals total shareholders' 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.
The following table reconciles these non-GAAP measures from their respective GAAP basis measures.
Common Tangible Book Value
(Dollars in thousands) 31-Dec-15 30-Sep-15 31-Dec-14
--------- --------- ---------
Total shareholders' equity $104,578 $102,955 $107,650
Core deposit intangible (net) 2,805 3,282 4,713
----- ----- -----
Common tangible book value $101,773 $99,673 $102,937
======== ======= ========
Shares outstanding 21,867 21,848 21,792
Common tangible book value per share $4.65 $4.56 $4.72
Stock price $5.37 $5.01 $4.42
Price/common tangible book 115.48% 109.87% 93.64%
Common tangible book/common tangible assets
Total assets $1,179,346 $1,149,185 $1,155,734
Core deposit intangible 2,805 3,282 4,713
----- ----- -----
Common tangible assets $1,176,541 $1,145,903 $1,151,021
========== ========== ==========
Common tangible book $101,773 $99,673 $102,937
======== ======= ========
Common tangible equity to common tangible assets 8.65% 8.70% 8.94%
One time charge due to termination of FDIC shared-loss agreements
During the third quarter of 2015, the Company charged off its outstanding indemnification asset in connection with its termination of the FDIC shared-loss agreements. Such charge-off was a one-time event and created both a net loss before income tax expense for each of the three months ended September 30, 2015 and the twelve months ended December 31, 2015. This also created a corresponding income tax benefit for such periods, as reflected in the Company's Consolidated Statements of Operations presented above. The following table presents net income before income tax expense and the corresponding income tax expense and net income after income tax expense, without giving effect to the impact of the indemnification asset charge-off, for each of the three months ended September 30, 2015 and the twelve months ended December 31, 2015. The Company believes that this non-GAAP information is useful to investors because it presents net income for the applicable periods without the significant one-time charge and thus presents more accurately this financial statement item as it relates to the Company's core operations.
(dollars in thousands) Twelve months ended Three months ended
December 31, 2015 September 30, 2015
----------------- ------------------
Net (loss) before income taxes $(2,497) $(11,931)
FDIC shared-loss agreement charge 13,084 13,084
------ ------
Net income, before tax, without effect of FDIC charge 10,587 1,153
Income tax expense, without effect of FDIC charge 4,449 300
Net income, without effect of FDIC charge $$6,138 $$853
======= =====
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