Community Bankers Trust Corporation Reports Results for First Quarter of 2016

RICHMOND, Va., April 29, 2016 /PRNewswire/ -- Community Bankers Trust Corporation (the "Company") (NASDAQ: ESXB), the holding company for Essex Bank (the "Bank"), today reported results for the first quarter of 2016.

OPERATING HIGHLIGHTS

• Loans, excluding purchased credit impaired loans (PCI), grew $16.8 million, or 2.2%, during the first quarter of 2016 and $88.1 million, or 13.0%, since March 31, 2015.
• Demand deposit account balances grew $8.0 million, or 8.3%, during the first quarter of 2016 and $13.6 million, or 15.0%, since March 31, 2015.
• Total criticized and classified assets declined $5.3 million during the first quarter of 2016 and $15.9 million since March 31, 2015.
• There was no provision for loan losses for the first quarter of 2016, and the ratio of the allowance for loan losses to total non-covered loans, excluding PCI loans, was 1.25% at March 31, 2016 versus 1.28% at December 31, 2015.
• Net interest margin increased on a linked quarter basis, from 3.76% in the fourth quarter of 2015 to 3.83% in the first quarter of 2016.

FINANCIAL HIGHLIGHTS

• Net income was $2.4 million for the quarter ended March 31, 2016, compared with $2.2 million and $1.3 million, respectively, for the quarters ended December 31, 2015 and March 31, 2015.
• Fully diluted earnings per common share was $0.11 for the quarter ended March 31, 2016, compared with $0.10 and $0.06, respectively, for the quarters ended December 31, 2015 and March 31, 2015. 
• At March 31, 2016, tangible book value per share was $4.87, as compared with $4.65 at December 31, 2015.

MANAGEMENT COMMENTS 

Rex L. Smith, III, President and Chief Executive Officer, stated, "The momentum of the Company continues as shown in our first quarter results.  Net income of $2.4 million for the first quarter of 2016 equates to 11 cents per share and is a $1.1 million, or 84.5%, increase over first quarter 2015 net income of $1.3 million and six cents per share.  We grew our core loan portfolio by $16.8 million in the first quarter after an amazing fourth quarter of loan growth of $55.7 million. As a result of this growth and improved securities yields, our linked quarter net interest margin increased at a time when many banks are struggling with squeezed margin pressure."

Smith added, "We also saw improvements on the retail side, with noninterest bearing demand deposits increasing by $8.0 million from the sequential quarter and by $13.6 million over the prior year.  Given our strategy and focus, we expect this growth to continue and, in March, we opened a new retail banking facility in the robust Fairfax, Virginia market."

Smith concluded, "None of this would be possible if it weren't for the continued improvement in our asset quality as we are able to focus ongoing efforts on providing our customers with quality service and increasing value for our shareholders.  Lastly, our allowance for loan losses is strong and the elimination of the FDIC indemnification asset last September is a great boost to our earnings now and in the quarters that lie ahead."

RESULTS OF OPERATIONS

Net income was $2.4 million for the first quarter of 2016, compared with $2.2 million in the fourth quarter of 2015 and $1.3 million in the first quarter of 2015.  Earnings per common share, basic and fully diluted, were $0.11 per share, $0.10 per share and $0.06 per share for the three months ended March 31, 2016, December 31, 2015, and March 31, 2015, respectively.

The increase in net income during the first quarter of 2016 compared with the fourth quarter of 2015 was due to a $238,000 decline in noninterest expense coupled with a $192,000 increase in interest income and an increase of $96,000 in total noninterest income.  These increases to net income, on a linked quarter basis, were offset by an increase of $41,000 in total interest expense and a $279,000 increase in income tax expense.  Within these changes, there were two main drivers that positively influenced net income in the first quarter of 2016 compared with the fourth quarter of 2015.  First, noninterest expense was reduced by $297,000 on a linked quarter basis due to gains of $152,000 on the sale of two bank owned properties, which resulted in a $102,000 credit to OREO for the quarter, compared with an expense of $195,000 in the fourth quarter of 2015.  Additionally, interest and fees on loans increased $313,000, or 3.8%, on a linked quarter basis due to increased loan volume.    

The increase in net income when comparing the first quarter of 2016 with the same period in 2015 was the result of a $1.5 million decline in total noninterest expense combined with a $328,000 increase in net interest income after provision for loan losses.  The 15.6% decline in total noninterest expense was primarily due to a reduction of $1.2 million in FDIC indemnification amortization expense.  Also, other operating expenses declined $117,000, or 7.2%, year over year. Partially offsetting these decreases was an increase of $116,000 in salaries and employee benefits due to an increase in the number of full-time equivalent employees. In September 2015, the Company and the FDIC mutually terminated their shared-loss agreements, which resulted in the elimination of this expense in future periods.

The following table presents summary income statements for the three months ended March 31, 2016, December 31, 2015 and March 31, 2015.

Net Interest Income

Linked Quarter Basis
Net interest income was $10.1 million for the quarter ended March 31, 2016 compared with $10.0 million for the quarter ended December 31, 2015.  This is an increase of 1.5%, or $151,000.

Interest income on a linked quarter basis increased $192,000, or 1.62%, to $12.0 million for the first quarter of 2016.  Interest income with respect to loans, excluding PCI loans, increased $313,000, or 3.8%, during the first quarter when compared with the fourth quarter of 2015.  This increase, quarter over quarter, was partially attributed to a full quarter of earnings from the $55.7 million, or 8.0%, in loan growth, excluding PCI loans, in the fourth quarter of 2015 coupled with solid loan growth, excluding PCI loans, of $16.8 million, or 2.2%, in the first quarter of 2016.  Interest income with respect to PCI loans declined $55,000, or 3.3%, during the first quarter, due to lower average balances on the loan portfolio precipitated by continued repayments. 

Securities income equaled $2.2 million on a tax equivalent basis for the first quarter of 2016, which represented a $71,000 decline from the fourth quarter of 2015.  The decline in income was volume driven as average securities balances were down $32.4 million on a linked quarter basis.  This decline in securities balances was created over the last two quarters to fund higher yielding loans.  The overall tax equivalent yield on the securities portfolio improved 25 basis points from 2.96% for the fourth quarter of 2015 to 3.21% for the first quarter of 2016.

Interest expense increased $41,000, or 2.2%, on a linked quarter basis as average interest bearing liability balances increased by $3.4 million.  The Company's cost of interest bearing liabilities increased two basis points in the first quarter of 2016 from 0.79% to 0.81% in the prior quarter.  The cost of FHLB borrowings was 1.18% for the first quarter of 2016, up from 1.11% for the fourth quarter of 2015.  During the first quarter, the average balance of FHLB borrowings increased by $4.1 million. 

With the changes in interest income noted above, the tax equivalent net interest margin improved seven basis points from 3.76% in the fourth quarter of 2015 to 3.83% in the first quarter of 2016. Likewise, the interest spread increased from 3.66% to 3.72% on a linked quarter basis.

Year-Over-Year
Net interest income increased $328,000, or 3.4%, from the first quarter of 2015 to the first quarter of 2016.  Interest income increased $388,000, or 3.3%, over this time period.  The average balance of loans, excluding PCI loans, increased $86.2 million, or 12.9%, from $667.5 million in the first quarter of 2015 to $753.6 million in the first quarter of 2016.  Interest income on securities on a tax equivalent basis increased by $130,000, year-over-year, from $2.0 million in the first quarter of 2015 to $2.2 million in the first quarter of 2016.  These increases to interest income were offset by a year-over-year decline in interest and fees on PCI loans of $474,000, which were $1.6 million for the first quarter of 2016.  The yield on the PCI portfolio was 11.1% in the first quarter of 2016, down from 12.5% in the first quarter of 2015.  The average balance of the PCI portfolio declined $9.2 million during the year-over-year comparison period.

Interest expense increased $60,000, or 3.2%, when comparing the first quarter of 2015 and the first quarter of 2016. Interest expense on deposits increased $103,000, or 7.1%, as the average balance of interest bearing deposits increased $12.5 million, or 1.5%.  The increase in deposit cost was driven by higher cost time deposits to fund the loan growth noted above. Overall the Bank's cost of interest bearing liabilities remained the same as the first quarter of 2015.  While average interest bearing deposit costs increased from 0.71% in the first quarter of 2015 to 0.74% in the first quarter of 2016, a decline in the cost of FHLB and other borrowings from 1.30% to 1.18% occurred, thus offsetting higher deposit costs.

The tax equivalent net interest margin declined seven basis points from 3.90% in the first quarter of 2015 to 3.83% in the first quarter of 2016.  Likewise, the interest spread decreased from 3.82% to 3.72% over the same time period.  The decline in the margin was precipitated by a reduction in earning asset yields of 10 basis points.

The following table compares the Company's net interest margin, on a tax-equivalent basis, for the three months ended March 31, 2016, December 31, 2015 and March 31, 2015.

Provision for Loan Losses

The Company records a separate provision for loan losses for its loan portfolio, excluding PCI loans, and the PCI loan portfolio.  There was no provision for loan losses on the loan portfolio, excluding PCI loans, during the first quarter of 2016 or the fourth and first quarters of 2015.  Likewise, there was no provision for loan losses on the PCI loan portfolio during the first quarter of 2016 or the fourth and first quarters of 2015.  With respect to the loan portfolio, excluding PCI loans, the absence of a provision was the direct result of nominal charge-offs and the ongoing stabilization of asset quality.  Additional discussion of loan quality is presented below.

Noninterest Income

Linked Quarter Basis
Noninterest income was $1.3 million for the first quarter of 2016, compared with $1.2 million for the fourth quarter of 2015.  The $96,000, or 7.8%, increase in noninterest income on a linked quarter basis was primarily the result of greater gains on the sales of securities.  During the first quarter of 2016, the Bank realized $259,000 in securities gains.  Management was able to sell lower yielding securities at a gain and used the proceeds to fund loan growth, at higher yields.  At the same time, the yield on the portfolio increased 25 basis points to 3.21% from the fourth quarter of 2015 to the first quarter of 2016. Mortgage loan fees increased by $29,000 on a linked quarter basis.  Offsetting these increases to noninterest income on a linked quarter basis were a decline of $50,000 in other noninterest income and a decline of $32,000 in service charges on deposit accounts.

Year-Over-Year
Noninterest income decreased $76,000, or 5.4%, from the first quarter of 2015 to the first quarter of 2016.  Other income decreased $60,000 year-over-year, or 31.3%, to $132,000 for the first quarter of 2016.  Miscellaneous income, which is within other income, decreased by $56,000 year-over-year as there were reimbursements received from the FDIC in the first quarter of 2015.  Also decreasing year-over-year was gain on sale of other loans, by $46,000, and gain on sale of securities, by $38,000.  Offsetting these decreases were an increase of $41,000 in service charge income, which was $569,000 in the first quarter of 2016, and an increase of $25,000 in mortgage loan fees, which were $173,000 in the first quarter of 2016.

Noninterest Expenses

Linked Quarter Basis
Noninterest expenses totaled $8.0 million for the first quarter of 2016, as compared with $8.3 million for the fourth quarter of 2015, a decrease of $238,000, or 2.9%.  OREO expenses decreased $297,000 on a linked quarter basis and was a credit of $102,000 in the first quarter of 2016, the result of a gain of $152,000 in bank owned property sales.  Fourth quarter 2015 OREO expenses also included real estate taxes paid, a $41,000 loss of an OREO sale, and a $65,000 OREO write-down. Other notable linked quarter noninterest expense decreases occurred in professional fees ($88,000), FDIC assessment ($43,000), and data processing ($39,000).  Offsetting these decreases was an increase in salaries and employee benefits, which increased $174,000, or 3.9%, to equal $4.6 million for the first quarter of 2016.   Credit expense increased $72,000 on a linked quarter basis and was $146,000 for the first quarter of 2016 as compared with $74,000 for the fourth quarter of 2015. 

Year-Over-Year
Noninterest expenses decreased $1.5 million, or 15.6%, when comparing the first quarter of 2016 to the same period in 2015.  Indemnification asset amortization expense decreased by $1.2 million and was $0 for the first quarter of 2016.  In September 2015, the Bank and the FDIC mutually agreed to terminate the shared-loss agreements, which resulted in the elimination of the FDIC indemnification asset and the corresponding amortization expense, which was $1.2 million in the first quarter of 2015.  Other notable decreases year-over-year were OREO expenses, which decreased by $187,000, occupancy expenses, which decreased $47,000, and professional fees, which decreased by $40,000.  The only meaningful dollar increase was to salaries and employee benefits, which increased $116,000, or 2.6%, year-over-year due to an increase in the number of full-time equivalent employees.  

Income Taxes

Income tax expense was $983,000 for the three months ended March 31, 2016, compared with income tax expense of $704,000 and $351,000 for the fourth and first quarters of 2015, respectively.   The effective tax rate for the first quarter of 2016 was 28.9% versus 24.1% and 21.1% for the fourth and first quarters of 2015, respectively.    

FINANCIAL CONDITION

Total assets declined $20.5 million, or 1.7%, to $1.160 billion at March 31, 2016 as compared to December 31, 2015.  Total assets increased $22.4 million, or 2.0%, since March 31, 2015.  Total loans, excluding PCI loans, were $765.5 million at March 31, 2016, increasing $16.8 million, or 2.2%, from year end 2015 and $88.1 million, or 13.0%, from March 31, 2015.   Total PCI loans were $56.7 million at March 31, 2016 versus $59.0 million at the prior quarter end and $66.2 million at March 31, 2015.

During the first quarter of 2016 construction and land development loans grew $5.5 million, or 8.1%, commercial loans grew $3.8 million, or 3.7%, residential 1-4 family loans grew $2.8 million, or 1.4%, and commercial mortgage loans on real estate grew by $2.5 million, or 0.8%.  In comparing March 31, 2016 and March 31, 2015, commercial mortgage loans on real estate grew by $36.0 million, residential 1-4 family loans grew by $25.8 million, construction and land development loans grew by $16.0 million, multifamily loans grew by $5.7 million, and commercial loans grew by $4.0 million.

The following table shows the composition of the Company's loan portfolio, excluding PCI loans, at March 31, 2016, December 31, 2015 and March 31, 2015.

The Company's securities portfolio, excluding equity securities, declined $28.8 million, or 10.3%, from $279.7 million at December 31, 2015 to $250.9 million at March 31, 2016.  Net realized gains of $259,000 were recognized during the first quarter of 2016 through sales and call activity, as compared with $109,000 taken during the fourth quarter of 2015 and $297,000 taken during the first quarter of 2015.  The decline in the volume of securities was a strategic decision by management to let brokered funding mature and fund solid loan growth with normal securities amortization, call activity, sales and maturities.

The Company had cash and cash equivalents of $14.2 million, $17.0 million and $21.7 million at March 31, 2016, December 31, 2015, and March 31, 2015, respectively.  There were federal funds purchased at March 31, 2016 of $11.0 million versus $18.9 million at December 31, 2015 and none at March 31, 2015.

The following table shows the composition of the Company's securities portfolio, excluding equity securities, at March 31, 2016, December 31, 2015, and March 31, 2015.

Interest bearing deposits at March 31, 2016 were $829.9 million, a decline of $19.4 million, or 2.3%, from December 31, 2015.  NOW account balances declined $9.6 million, or 7.5%, from December 31, 2015, while time deposits less than or equal to $250,000 decreased $4.5 million, MMDA balances declined $3.8 million and savings account balances declined $1.3 million.

Interest bearing deposits increased $5.4 million from March 31, 2015 to March 31, 2016.  While time deposits less than or equal to $250,000 decreased by $10.1 million, or 2.4%, NOW, MMDA and savings account balances grew collectively $7.4 million.  Time deposits over $250,000 increased by $8.1 million, or 7.4%. 

FHLB advances were $91.5 million at March 31, 2016, compared with $95.7 million at December 31, 2015 and $96.2 million at March 31, 2015.  Long term debt totaled $4.9 million at March 31, 2016, declining by $801,000, or 14.1%, since December 31, 2015.  This borrowing, initially in the amount of $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 amortized this debt $5.8 million within two years and anticipates that the loan will be fully paid in April 2017.

The following table compares the mix of interest bearing deposits at March 31, 2016, December 31, 2015, and March 31, 2015.

Shareholders' equity was $108.9 million at March 31, 2016, $104.5 million at December 31, 2015, and $109.8 million at March 31, 2015.  In September 2015, equity was reduced by the net loss generated in the quarter from the pre-tax write-off of $13.1 million from the termination of the FDIC shared-loss agreements.  Shareholders' equity increased $4.4 million, or 4.2%, from year end 2015 due to an increase in other comprehensive income related to net gains in the investment portfolio of $1.8 million and net income of $2.4 million in the first quarter of 2016.  Year-over-year, shareholders' equity declined only $959,000 despite the FDIC write-off mentioned above. Earnings retention mitigated the loss in the level of capital, year-over-year.

Asset Quality – non-covered assets

Nonaccrual loans were $10.9 million at March 31, 2016, increasing $262,000 from December 31, 2015 and decreasing $6.3 million from March 31, 2015.  The decrease from March 31, 2015 to March 31, 2016 is 36.4%.  The level of both internally classified substandard and special mention loans, excluding PCI loans, has improved over the last five quarters, demonstrating continued improvement in asset quality.

The following chart shows the level of nonaccrual loans, classified loans and criticized loans over the last five quarters.

Total non-performing assets totaled $16.0 million at March 31, 2016 compared with $16.2 million at December 31, 2015. Total nonperforming assets decreased $8.0 million, or 33.3%, since March 31, 2015.  There were net recoveries of $35,000 in the first quarter of 2016 compared with net charge-offs of $142,000 in the fourth quarter of 2015 and $256,000 in the first quarter of 2015.

The allowance for loan losses equaled 87.8% of nonaccrual loans at March 31, 2016, compared with 89.6% at December 31, 2015 and 52.4% at March 31, 2015. The ratio of the allowance for loan losses to total nonperforming assets was 62.9% at March 31, 2016 compared with 62.2% at December 31, 2015 and 40.0% at March 31, 2015.  The ratio of nonperforming assets to loans and OREO was 2.1% at March 31, 2016 compared with 2.1% at December 31, 2015 and 3.5% at March 31, 2015.

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

The following table sets forth selected asset quality data, excluding PCI loans, and ratios for the dates indicated.

A further breakout of nonaccrual loans, excluding PCI loans, at March 31, 2016, December 31, 2015, and March 31, 2015 is below.

Capital Requirements

The Company's ratio of total risk-based capital was 13.4% at March 31, 2016 compared with 13.2% at December 31, 2015.  The tier 1 risk-based capital ratio was 12.3% at March 31, 2016 and 12.1% at December 31, 2015. The Company's tier 1 leverage ratio was 9.6% at March 31, 2016 and 9.4% at December 31, 2015.  All capital ratios exceed regulatory minimums to be considered well capitalized. BASEL III introduced the common equity tier 1 capital ratio, which was 11.8% at March 31, 2016 and 11.6% at December 31, 2015.

Earnings Conference Call and Webcast

The Company will host a conference call for interested parties on Friday, April 29, 2016, at 10:00 a.m. Eastern Time to discuss the financial results for the first quarter of 2016. 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 April 29, 2016, until 9:00 a.m. Eastern Time on May 13, 2016. The replay will be available by dialing 877-344-7529 and entering access code 10084406 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, 16 of which are in Virginia and six of which are in Maryland.  The Bank also operates one loan production office in Virginia.  The Bank closed its branch office in Catonsville, Maryland on March 4, 2016, and the Bank opened a new branch office in Fairfax, Virginia on March 30, 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, 2015 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.

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 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.

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.

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SOURCE Community Bankers Trust Corporation

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http://www.cbtrustcorp.com