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Community Bankers Trust Corporation Reports Results for Third Quarter of 2017

RICHMOND, Va., Oct. 26, 2017 /PRNewswire/ -- Community Bankers Trust Corporation (the "Company") (NASDAQ: ESXB), the holding company for Essex Bank (the "Bank"), today reported unaudited results for the third quarter and first nine months of 2017.

Income Statement - Three Months ended September 30, 2017 compared with Three Months ended June 30, 2017

  • Net income was $2.4 million for the third quarter of 2017 compared with $2.9 million in the second quarter of 2017.
  • Interest and fees on loans increased $175,000 on a linked quarter basis.
  • Income tax expense increased $227,000 in the third quarter of 2017, as the effective rate returned to a normalized basis, 27.6%, for the quarter compared with an effective rate of 19.1% in the prior quarter.
  • There was a provision for loan losses of $150,000 during the quarter versus none in the second quarter of 2017.

Income Statement - Nine Months ended September 30, 2017 compared with Nine Months ended September 30, 2016

  • Net income of $7.8 million for the first nine months of 2017 increased $647,000, or 9.0%, over the same period in 2016.
  • Basic earnings per share of $0.36 for the first nine months of 2017 compares with $0.33 for the first nine months of 2016. Fully diluted earnings per share were $0.35 for the first nine months of 2017.
  • Total interest and dividend income of $39.6 million increased $3.0 million, or 8.1%.
  • Interest and fees on loans increased 11.6%, or $3.1 million.
  • Net interest income increased $2.0 million, or 6.5%.

Income Statement - Three Months ended September 30, 2017 compared with Three Months ended September 30, 2016

  • Net income of $2.4 million for the third quarter of 2017 was a slight decrease of $42,000 from the same period in 2016 despite operating three additional branches for a full quarter in the third quarter of 2017.
  • Total interest and dividend income increased $982,000, or 7.9%, in the third quarter of 2017 over the same period in 2016, led by interest and fees on loans, which increased $971,000 or 10.6%.
  • Net interest income after provision for loan losses increased $623,000, or 6.1%, year-over-year.

Balance Sheet Highlights - September 30, 2017

  • Retail deposits grew $157.6 million, or 17.4%, year-over-year.
  • Loans, excluding purchased credit impaired ("PCI") loans, grew $78.2 million, or 9.6%, from $811.8 million at September 30, 2016 to $890.0 million at September 30, 2017.
  • Other real estate owned declined 44.8% year-over-year and totaled $2.7 million at September 30, 2017.
  • Noninterest bearing deposits grew $16.0 million, or 12.4%, year-over-year and totaled $145.3 million.
  • Deposit growth for the first nine months of 2017 was $41.1 million, or 4.0%. Strong retail deposit growth of $80.0 million, or 8.1%, allowed management to lower brokered deposit balances by $38.9 million.
  • On September 28, 2017, the Bank purchased an in-market adjustable rate mortgage loan pool of $15.7 million, which is expected to benefit interest income beginning in the fourth quarter of 2017.

MANAGEMENT COMMENTS

Rex L. Smith, III, President and Chief Executive Officer, stated, "The Bank continues to build value for shareholders, although the third quarter of 2017 produced mixed results. Overall, assets and non-interest bearing deposits have grown better than expected, thanks in part to increasing our branch network and building market share. This growth, coupled with our disciplined approach to pricing, keeps our balance sheet and overall long-term value strong."

Smith added, "Loan growth for the quarter was lower than expected, but our lenders have been working hard to offset some of the economic lull that banks experienced during the quarter. Our loan growth for the past 12 months, however, remained better than we had anticipated. Net income was also lower than expected, but that was the result of known factors, such as costs associated with branch expansion and digital banking enhancements. Our efforts in these areas will improve the overall position of the Bank in future quarters."

Smith concluded, "The Bank remains committed to its strategies for the fourth quarter and into 2018. We will continue to grow the types of loans and deposits that we need to improve the margin and remain ready for a rising rate environment. In addition, our focus on gaining market share, through both locations and delivery systems, will create strong returns for shareholders."

RESULTS OF OPERATIONS

Net income was $2.4 million for the third quarter of 2017, compared with net income of $2.9 million in the second quarter of 2017 and net income of $2.5 million in the third quarter of 2016. Earnings per common share, basic and fully diluted, were $0.11 per share, $0.13 per share and $0.11 per share for the three months ended September 30, 2017, June 30, 2017, and September 30, 2016, respectively.

Net income was $7.8 million for the nine months ended September 30, 2017 versus net income of $7.2 million for the same period in 2016. Basic earnings per common share were $0.36 per share and $0.33 per share for the nine months ended September 30, 2017 and September 30, 2016, respectively. Fully diluted earnings per common share were $0.35 per share and $0.33 per share for the nine months ended September 30, 2017 and September 30, 2016, respectively.

The following table presents summary income statements for the three months ended September 30, 2017, June 30, 2017 and September 30, 2016, and the nine months ended September 30, 2017 and September 30, 2016.

SUMMARY INCOME STATEMENT












(Dollars in thousands)


For the three months ended


For the nine months ended



30-Sep-17


30-Jun-17


30-Sep-16


30-Sep-17



30-Sep-16

Interest income

$

13,389

$

13,220

$

12,407

$

39,557


$

36,578

Interest expense


2,363


2,246


1,904


6,690



5,729

Net interest income


11,026


10,974


10,503


32,867



30,849

Provision for loan losses


150


-


250


150



450

Net interest income after provision for loan losses

10,876


10,974


10,253


32,717



30,399

Noninterest income


1,165


1,188


1,345


3,506



4,061

Noninterest expense


8,706


8,536


8,278


25,693



24,538

Income before income taxes


3,335


3,626


3,320


10,530



9,922

Income tax expense


919


692


862


2,687



2,726

Net income

$

2,416

$

2,934

$

2,458

$

7,843


$

7,196













EPS Basic

$

0.11

$

0.13

$

0.11

$

0.36


$

0.33

EPS Diluted

$

0.11

$

0.13

$

0.11

$

0.35


$

0.33













Return on average assets, annualized


0.75%


0.92%


0.82%


0.82%



0.81%

Return on average equity, annualized


7.80%


9.75%


8.60%


8.69%



8.65%

In this earnings release, the results reported for loans and loan growth do not include PCI loans, unless otherwise specifically stated.

Net Interest Income

Linked Quarter Basis

Net interest income was $11.0 million for each of the quarters ended September 30, 2017 and June 30, 2017. Interest income increased $169,000, or 1.3%, and interest expense increased $117,000, or 5.2%, resulting in a $52,000 increase in net interest income.

Interest and fees on loans on a linked quarter basis increased $175,000, or 1.8%, to $10.1 million for the third quarter of 2017. Interest income on PCI loans declined $30,000. Interest income on total loans of the combined portfolios was $11.6 million with a yield of 5.00% for the third quarter of 2017. The tax-equivalent yield of 4.51% on earning assets was a slight decrease of two basis points on a linked quarter basis.

Securities income equaled $1.8 million in each of the third and second quarters of 2017. On a tax equivalent basis, securities income was $2.1 million for each of the third and second quarters of 2017. The tax-equivalent rate of return on the portfolio was 3.10% in the third quarter of 2017 and 3.09% in the second quarter of 2017.

Interest expense increased $117,000, or 5.2%, on a linked quarter basis as the rates paid on interest bearing balances increased by three basis points, from 0.89% in the second quarter of 2017 to 0.92% in the third quarter of 2017. The Company's increase in funding costs was the result of replacing wholesale funding sources with retail deposits, some of which were from new branch promotions. The cost of FHLB and other borrowings was 1.57% for the third quarter of 2017 compared with 1.42% for the second quarter of 2017 while the cost of interest bearing deposits increased from 0.84% in the second quarter of 2017 to 0.87% in the third quarter of 2017. During the third quarter of 2017, the average balance of FHLB borrowings declined $7.1 million.

With the changes in net interest income noted above, the tax equivalent net interest margin was 3.74% in the third quarter of 2017 and 3.78% in the second quarter of 2017. Likewise, the interest spread was 3.59% and 3.64%, respectively, in the third and second quarters of 2017.

Year-Over-Year Nine Months

For the first nine months of 2017, net interest income increased $2.0 million, or 6.5%, and was $32.9 million. The tax-equivalent yield on earning assets was 4.55% for the first nine months of 2017 compared with 4.52% for the first nine months of 2016. Interest and fees on loans of $29.7 million was an increase of $3.1 million compared with $26.6 million for the same period in 2016. Interest and fees on PCI loans declined $349,000 over this same time frame. Securities income increased $156,000 for the first nine months of 2017 compared with the same period in 2016. The tax-equivalent yield on the securities portfolio was 3.14% for the first nine months of 2017 compared with 3.11% for the same time frame in 2016.

Interest expense of $6.7 million represented an increase of $961,000, or 16.8%, in the first nine months of 2017 compared with the same period in 2016. Total average interest bearing liabilities increased 6.2%, or $58.7 million, as loan growth has also been funded by an average balance increase of $21.1 million, or 18.9%, in noninterest bearing deposits.

The tax equivalent net interest margin was 3.80% for the first nine months of 2017 compared with 3.82% for the first nine months of 2016. The net interest spread was 3.66% for the first nine months of 2017 versus 3.72% for the first nine months of 2016.

Year-Over-Year Quarter

Net interest income increased $523,000, or 5.0%, from the third quarter of 2016 to the third quarter of 2017 and was $11.0 million. The yield on earning assets of 4.51% in the third quarter of 2017 was a slight increase from 4.50% in the third quarter of 2016. Yield on loans increased from 4.54% to 4.62%, and volume considerations increased the average balance by $68.5 million, or 8.5%. Interest income on loans was $10.1 million, an increase of $971,000 over third quarter 2016 interest income of $9.2 million. Interest on PCI loans was $1.4 million in the third quarter of 2017, a decrease of $126,000 year-over-year. The return on PCI loans increased over this time frame, from 11.32% to 11.76%. Income on securities of $1.8 million in the third quarter of 2017 represented an increase of $93,000 year-over-year as a result of an increase of $15.2 million in the average balances of securities. The tax-equivalent yield on securities was 3.10% in the third quarter of 2017 and 2016.

Interest expense increased $459,000, or 24.1%, when comparing the third quarter of 2017 and the third quarter of 2016. Interest expense on deposits increased $503,000, or 32.5%, as the average balance of interest bearing deposits increased $103.4 million, or 12.4%. Overall, the Bank's cost of interest bearing liabilities increased from 0.79% in the third quarter of 2016 to 0.92% in the third quarter of 2017. While average interest bearing deposit costs increased from 0.74% in the third quarter of 2016 to 0.87% in the third quarter of 2017, there was a decline of $34.1 million in the average balance of FHLB, other borrowings and long-term debt. Management is shifting from wholesale funding sources to retail deposits. The cost of FHLB advances for the Bank increased from 1.05% in the third quarter of 2016 to 1.57% in the third quarter of 2017. The lower average balance of FHLB advances, coupled with the higher rate, resulted in a $13,000 increase in interest expense, year-over-year.

The tax equivalent net interest margin decreased 8 basis points, from 3.82% in the third quarter of 2016 to 3.74% in the third quarter of 2017. Likewise, the interest spread decreased from 3.71% to 3.59% over the same time period. The decrease in the margin was precipitated by an increase of 16.5% in the cost of interest bearing liabilities.

The following table compares the Company's net interest margin, on a tax-equivalent basis, for the three months ended September 30, 2017, June 30, 2017, and September 30, 2016 and nine months ended September 30, 2017 and September 30, 2016.

NET INTEREST MARGIN










(Dollars in thousands)


For the three months ended




30-Sep-17



30-Jun-17



30-Sep-16


Average interest earning assets

$

1,204,106


$

1,197,207


$

1,118,806


Interest income

$

13,389


$

13,220


$

12,407


Interest income - tax-equivalent

$

13,699


$

13,532


$

12,689


Yield on interest earning assets


4.51

%


4.53

%


4.50

%

Average interest bearing liabilities

$

1,016,825


$

1,017,342


$

953,750


Interest expense

$

2,363


$

2,246


$

1,904


Cost of interest bearing liabilities


0.92

%


0.89

%


0.79

%

Net interest income

$

11,026


$

10,974


$

10,503


Net interest income - tax-equivalent

$

11,336


$

11,286


$

10,785


Interest spread


3.59

%


3.64

%


3.71

%

Net interest margin


3.74

%


3.78

%


3.82

%






















For the nine months ended






30-Sep-17



30-Sep-16





Average interest earning assets

$

1,189,607


$

1,104,985





Interest income

$

39,557


$

36,578





Interest income - tax-equivalent

$

40,487


$

37,453





Yield on interest earning assets


4.55

%


4.52

%




Average interest bearing liabilities

$

1,010,523


$

951,808





Interest expense

$

6,690


$

5,729





Cost of interest bearing liabilities


0.89

%


0.80

%




Net interest income

$

32,867


$

30,849





Net interest income - tax-equivalent

$

33,797


$

31,724





Interest spread


3.66

%


3.72

%




Net interest margin


3.80

%


3.82

%




Provision for Loan Losses

The Company records a provision for loan losses for its loan portfolio, excluding PCI loans, and a separate provision for the PCI loan portfolio. There was a $150,000 provision for loan losses, excluding PCI loans, recorded during the third quarter of 2017. There was a $250,000 provision for loan losses, excluding PCI loans, recorded during the third quarter of 2016. There was no provision for loan losses on the PCI loan portfolio during the first three quarters of 2017 or 2016. The $150,000 provision for loan losses in the third quarter of 2017 was to provide the required level of reserve needed when considering the existing loan portfolio and charge-off activity of $972,000 and to support loan growth during the quarter. Additional discussion of loan quality is presented below.

Noninterest Income

Linked Quarter Basis

Noninterest income was $1.2 million for each of the third and second quarters of 2017. The nominal decrease of $23,000, or 1.9%, in noninterest income on a linked quarter basis was the result of a decline of $12,000 in mortgage loan income, $12,000 in service charges on deposit accounts and $10,000 in other noninterest income. These declines were partially offset by an increase of $11,000 in gains on securities transactions, on a linked quarter basis.

Year-Over-Year Nine Months

Noninterest income was $3.5 million for the first nine months of 2017 compared with $4.1 million for the first nine months of 2016, a decrease of $555,000, or 13.7%. Mortgage loan income decreased $436,000, from $599,000 in the first nine months of 2016 to $163,000 for the same period in 2017. The Company discontinued a wholesale mortgage operation at the end of the third quarter of 2016 and shifted to a platform that requires lower overhead but has equivalent or better net revenue potential. Securities gains of $180,000 in the first three quarters of 2017 compared with $608,000 for the same period in 2016. Securities were sold during 2016 to fund a portion of the Bank's loan growth, while in 2017 much of the loan growth has been funded with deposit balance growth. Offsetting these decreases for the first nine months of 2017 compared with the same period in 2016 were increases of $226,000 in service charges on deposit accounts, $74,000 in income on bank owned life insurance and $9,000 in other noninterest income.

Year-Over-Year Quarter

Noninterest income decreased $180,000, or 13.4%, from the third quarter of 2016 to the third quarter of 2017. Mortgage loan income decreased $193,000. Gains on securities transactions were $48,000 in the third quarter of 2017, as compared with $88,000 in the third quarter of 2016, a decrease of $40,000. Offsetting these decreases was an increase of $61,000 in service charge income.

Noninterest Expense

Linked Quarter Basis

Noninterest expenses totaled $8.7 million for the third quarter of 2017, as compared with $8.5 million for the second quarter of 2017, an increase of $170,000, or 2.0%. Notable differences between the third quarter of 2017 and the second quarter of 2017 included occupancy expenses, which were $117,000 higher on a linked quarter basis, the result of a full quarter of operating two new offices, which also drove a linked quarter increase of $112,000 in salaries and employee benefit costs. Additionally, other operating expenses increased $125,000, or 7.6%, as credit expenses increased $91,000 on a linked quarter basis, primarily from the resolution of one nonperforming loan. Partially offsetting these increases was a decline of $277,000 in amortization of intangibles, as the core deposit intangibles related to previous acquisitions are expiring in 2017.

Year-Over-Year Nine Months

Noninterest expenses were $25.7 million for the first nine months of 2017, as compared with $24.5 million for the same period in 2016. This is an increase of $1.2 million, or 4.7%. Salaries and employee benefits increased $718,000, or 5.2%, in the first nine months of 2017 compared with the same period in 2016. Other operating expenses increased $366,000 over the comparison period. Occupancy expenses increased $286,000, data processing fees increased $236,000, other real estate expenses increased $187,000 and equipment expenses increased $120,000. Offsetting these increases were decreases in amortization of intangibles, which declined $552,000, and FDIC assessment, which declined $206,000.

The increases in noninterest expenses in the first nine months of 2017 compared with the same period in 2016 are primarily a reflection of the branch expansion activity that has occurred in 2016 and 2017. The Bank has opened four new branches over the course of 2016 and 2017.

Year-Over-Year Quarter

Noninterest expenses increased $428,000, or 5.2%, when comparing the third quarter of 2017 to the same period in 2016. Other operating expenses increased $325,000. Salaries and employee benefits increased $322,000, occupancy expenses increased $101,000, and data processing expenses increased $91,000. Offsetting these increases was a decrease year-over-year of $415,000 in amortization of intangibles.

Again, the increases in noninterest expenses in the third quarter of 2017 compared with the same period in 2016 are primarily a reflection of the branch expansion activity that has occurred in 2016 and 2017. The Bank has opened two new branches since the end of the 2016 comparison period.

Income Taxes

Income tax expense was $919,000 for the three months ended September 30, 2017 compared with income tax expense of $692,000 in the second quarter of 2017 and an income tax expense of $862,000 for the third quarter of 2016. The effective tax rate was 27.6% for the third quarter of 2017 compared with 19.1% for the second quarter of 2017 and 26.0% for the third quarter of 2016. The lower rate in the second quarter of 2017 was primarily the result of the exercise of stock options by employees, which reduced income tax expense. For the first three quarters of 2017, income tax expense of $2.7 million represented an effective tax rate of 25.5%. For the first three quarters of 2016, income tax expense was $2.7 million, or an effective rate of 27.5%.

FINANCIAL CONDITION

Total assets increased $44.3 million, or 3.5%, to $1.294 billion at September 30, 2017 as compared with $1.250 billion at December 31, 2016. Total assets increased $89.9 million, or 7.5%, since September 30, 2016. Total loans were $890.0 million at September 30, 2017, increasing $53.7 million, or 6.4%, from year end 2016 and $78.2 million, or 9.6%, from September 30, 2016. Total PCI loans were $45.5 million at September 30, 2017 versus $52.0 million and $53.5 million at year end 2016 and September 30, 2016, respectively.

During the first nine months of 2017, residential 1-4 family loans grew $21.9 million, or 10.5%, multifamily loans grew $14.6 million, or 37.2%, commercial loans grew $7.3 million, or 5.7%, commercial mortgage loans on real estate grew $6.0 million, or 1.8%, and construction and land development loans grew by $4.3 million, or 4.4%. Comparing September 30, 2017 and September 30, 2016, residential 1-4 family loans grew $22.3 million, commercial loans grew $17.9 million, commercial mortgage loans on real estate grew $14.6 million and construction and land development loans grew $14.1 million.

The following table shows the composition of the Company's loan portfolio at September 30, 2017, June 30, 2017, December 31, 2016 and September 30, 2016.

LOANS (excluding PCI loans)

















(Dollars in thousands)

30-Sep-17


30-Jun-17


31-Dec-16


30-Sep-16




Amount

% of Loans


Amount

% of Loans


Amount

% of Loans


Amount

% of Loans


Mortgage loans on real estate:


















Residential 1-4 family

$

229,745

25.82

%

$

212,502

24.59

%

$

207,863

24.86

%

$

207,422

25.55

%


Commercial


345,759

38.85



341,182

39.49



339,804

40.63



331,120

40.79



Construction and land development


102,594

11.53



100,677

11.65



98,282

11.75



88,543

10.91



Second mortgages


7,399

0.83



7,537

0.87



7,911

0.95



8,378

1.03



Multifamily


53,642

6.03



50,511

5.85



39,084

4.67



43,137

5.31



Agriculture


7,588

0.85



7,985

0.92



7,185

0.86



7,910

0.98



Total real estate loans


746,727

83.91



720,394

83.37



700,129

83.72



686,510

84.57


Commercial loans


136,643

15.35



137,261

15.89



129,300

15.46



118,770

14.63


Consumer installment loans


5,331

0.60



5,107

0.59



5,627

0.67



5,226

0.64


All other loans


1,279

0.14



1,287

0.15



1,243

0.15



1,292

0.16



Gross loans


889,980

100.00

%


864,049

100.00

%


836,299

100.00

%


811,798

100.00

%

Allowance for loan losses


(8,667)




(9,489)




(9,493)




(9,480)



Loans, net of unearned income

$

881,313



$

854,560



$

826,806



$

802,318



The Company's securities portfolio, excluding equity securities, declined $5.8 million, or 2.2%, from $262.7 million at December 31, 2016 to $256.9 million at September 30, 2017. Net realized gains of $180,000 were recognized during the first nine months of 2017 through sales and call activity, as compared with $608,000 recognized during the first nine months of 2016. The decline in the volume of securities was a strategic decision by management to fund strong loan growth with securities sales. Also, there were normal securities amortization, call activity, sales and maturities.

The Company had cash and cash equivalents of $22.6 million, $21.1 million and $22.0 million at September 30, 2017, December 31, 2016 and September 30, 2016, respectively. There were federal funds sold of $144,000 at September 30, 2017, federal funds purchased of $4.7 million at December 31, 2016 and federal funds sold of $99,000 at September 30, 2016.

The following table shows the composition of the Company's securities portfolio, excluding equity securities, at September 30, 2017, June 30, 2017, December 31, 2016 and September 30, 2016.

SECURITIES PORTFOLIO

















(Dollars in thousands)


30-Sep-17


30-Jun-17


31-Dec-16


30-Sep-16



Amortized
Cost


Fair
Value


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

$

46,919

$

46,387

$

47,450

$

46,829

$

58,724

$

57,976

$

33,033

$

32,629

U.S Government sponsored agencies


2,779


2,743


2,844


2,790


3,452


3,336


-


-

State, county, and municipal


122,318


124,329


123,625


125,833


121,686


122,773


118,620


124,220

Corporate and other bonds


14,947


15,022


16,087


16,090


15,936


15,503


15,784


15,323

Mortgage backed securities - U.S. Government agencies


5,659


5,583


4,372


4,254


3,614


3,495


3,623


3,618

Mortgage backed securities - U.S. Government sponsored agencies


16,625


16,383


16,784


16,547


13,330


13,038


18,062


18,105

Total securities available for sale

$

209,247

$

210,447

$

211,162

$

212,343

$

216,742

$

216,121

$

189,122

$

193,895




















30-Sep-17


30-Jun-17


31-Dec-16


30-Sep-16



Amortized
Cost


Fair
Value


Amortized
Cost


Fair
Value


Amortized
Cost


Fair
Value


Amortized
Cost


Fair
Value

Securities Held to Maturity

















U.S Government sponsored agencies

$

10,000

$

9,922

$

10,000

$

9,921

$

10,000

$

9,846

$

10,000

$

10,001

State, county, and municipal


35,965


36,897


36,392


37,310


35,847


36,230


34,770


36,496

Mortgage backed securities - U.S. Government agencies


495


506


522


533


761


782


846


865

Total securities held to maturity

$

46,460

$

47,325

$

46,914

$

47,764

$

46,608


46,858

$

45,616

$

47,362

Interest bearing deposits at September 30, 2017 were $933.1 million, an increase of $24.6 million, or 2.7%, from $908.4 million at December 31, 2016. MMDA balances have increased $33.1 million, or 29.7%, during 2017, the result of specials run at new branches. This growth has enabled management to allow brokered deposit balances of $38.9 million to mature and run-off. As a result, time deposits over $250,000 have declined $9.9 million, or 7.7%.

The following table compares the mix of interest bearing deposits at September 30, 2017, June 30, 2017, December 31, 2016 and September 30, 2016.

INTEREST BEARING DEPOSITS









(Dollars in thousands)











30-Sep-17


30-Jun-17


31-Dec-16


30-Sep-16

NOW

$

137,559

$

142,838

$

137,332

$

118,264

MMDA


144,409


119,582


111,346


109,842

Savings


91,642


90,224


90,340


89,336

Time deposits less than or equal to $250,000


440,607


451,352


440,699


398,295

Time deposits over $250,000


118,837


140,418


128,690


122,258

Total interest bearing deposits

$

933,054

$

944,414

$

908,407

$

837,995

FHLB advances were $81.3 million at September 30, 2017, compared with $81.9 million at December 31, 2016 and $109.1 million at September 30, 2016. Long term debt was $0 at September 30, 2017 but totaled $1.7 million at December 31, 2016 and $2.7 million at September 30, 2016. 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 then remaining outstanding TARP preferred stock. The Company fully paid this debt during the first quarter of 2017.

Shareholders' equity was $124.4 million at September 30, 2017, $114.5 million at December 31, 2016, and $114.7 million at September 30, 2016. Shareholders' equity increased $9.9 million, or 8.6%, from year end 2016 due to an increase in other comprehensive income related to net unrealized gains of $1.3 million in the investment portfolio, an increase of $786,000 in additional paid in capital and net income of $7.8 million in the first nine months of 2017.

Asset Quality – non-covered assets

Nonaccrual loans were $12.7 million at September 30, 2017, increasing $2.4 million from December 31, 2016 and $1.5 million from September 30, 2016. The level of total classified and criticized assets has improved over the last five quarters, and the $150,000 provision for loan losses recognized in the current quarter is to provide the required level of reserve needed when considering the existing loan portfolio and charge-off activity of $972,000 and to support loan growth.

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

ASSET QUALITY






(Dollars in thousands)


2017


2016



30-Sep-17


30-Jun-17


31-Mar-17


31-Dec-16


30-Sep-16

Nonaccrual loans

$

12,677

$

11,514

$

9,091

$

10,243

$

11,213

Criticized (special mention) loans


8,200


10,523


13,416


14,468


15,362

Classified (substandard) loans


16,885


17,191


18,500


18,501


21,366

Other real estate owned


2,710


2,387


3,569


4,427


4,905

Total classified and criticized assets

$

27,795

$

30,101

$

35,485

$

37,396

$

41,633

The following table reconciles the activity in the Company's allowance for loan losses, excluding PCI loans, by quarter, for the past five quarters.

ALLOWANCE FOR LOAN LOSSES












(Dollars in thousands)

2017


2016



Third


Second


First



Fourth


Third



Quarter


Quarter


Quarter



Quarter


Quarter

Allowance for loan losses:












Beginning of period

$

9,489

$

9,513

$

9,493


$

9,480

$

9,434

Provision for loan losses


150


-


-



-


250

Net (charge-offs) recoveries


(972)


(24)


20



13


(204)

End of period

$

8,667

$

9,489

$

9,513


$

9,493

$

9,480

Total nonperforming assets totaled $15.4 million at September 30, 2017 compared with $14.7 million at December 31, 2016. Total nonperforming assets decreased $731,000 since September 30, 2016. There were net charge-offs of $972,000 in the third quarter of 2017 compared with $24,000 in the second quarter of 2017. The increase in charge-offs for the third quarter of 2017 was driven by one large credit and two letters of credit related to previously charged-off loans. Year-to-date 2017 net charge-offs equaled $976,000.

The allowance for loan losses equaled 68.4% of nonaccrual loans at September 30, 2017, compared with 92.7% at December 31, 2016 and 84.5% at September 30, 2016. The ratio of the allowance for loan losses to total nonperforming assets was 57.6% at September 30, 2017 compared with 66.1% at December 31, 2016 and 61.8% at September 30, 2016. The ratio of nonperforming assets to loans and OREO was 1.7% at September 30, 2017 compared with 1.7% at December 31, 2016 and 2.0% at September 30, 2016.

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

ASSET QUALITY (excluding PCI loans)

















(Dollars in thousands)







30-Sep-17

30-Jun-17

31-Mar-17


31-Dec-16

30-Sep-16

Nonaccrual loans

$

12,677


$

11,514


$

9,091



$

10,243


$

11,213


Loans past due over 90 days and accruing interest


-



-



112




-



-


Total nonperforming loans


12,677



11,514



9,203




10,243



11,213


Other real estate owned


2,710



2,387



3,569




4,427



4,905


Total nonperforming assets

$

15,387


$

13,901


$

12,772



$

14,670


$

16,118



















Allowance for loan losses to loans


0.97

%


1.10

%


1.12

%



1.14

%


1.17

%

Allowances for loan losses to nonperforming assets


57.63



69.70



76.05




66.07



61.82


Allowance for loan losses excluding PCI loans, to nonaccrual loans


68.37



82.41



104.64




92.68



84.54


Nonperforming assets to loans and other real estate


1.72



1.60



1.49




1.74



1.97


Net charge-offs/(recoveries) for quarter to average loans, annualized


0.45

%


0.01

%


(0.01)

%



(0.01)

%


0.10

%



















A further breakout of nonaccrual loans at September 30, 2017, December 31, 2016 and September 30, 2016 is below.

NONACCRUAL LOANS (excluding PCI loans)






(Dollars in thousands)


30-Sep-17


31-Dec-16


30-Sep-16




Amount


Amount


Amount

Mortgage loans on real estate:











Residential 1-4 family


$

2,140


$

2,893


$

3,665


Commercial



3,492



1,758



1,599


Construction and land development



4,283



5,495



5,684


Second mortgages



-



-



135


Agriculture



66



-



-


Total real estate loans


$

9,981


$

10,146


$

11,083

Commercial loans



2,666



53



53

Consumer installment loans



30



44



77


Gross loans


$

12,677


$

10,243


$

11,213

Capital Requirements

The Company's ratio of total risk-based capital was 13.4% at September 30, 2017 compared with 13.2% at December 31, 2016. The tier 1 risk-based capital ratio was 12.6% at September 30, 2017 and 12.2% at December 31, 2016. The Company's tier 1 leverage ratio was 10.0% at September 30, 2017 and 9.6% at December 31, 2016. All capital ratios exceed regulatory minimums to be considered well capitalized. BASEL III introduced the common equity tier 1 capital ratio, which was 12.2% at September 30, 2017 and 11.8% at December 31, 2016.

Earnings Conference Call and Webcast

The Company will host a conference call for interested parties on Thursday, October 26, 2017, at 10:00 a.m. Eastern Time to discuss the financial results for the third quarter of 2017. 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 October 26, 2017, until 9:00 a.m. Eastern Time on November 9, 2017. The replay will be available by dialing 877-344-7529 and entering access code 10112892 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 25 full-service offices, 19 of which are in Virginia and six of which are in Maryland. The Bank also operates one loan production office in Virginia.

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, 2016 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)










30-Sep-17


31-Dec-16


30-Sep-16


Assets








Cash and due from banks

$

9,750

$

13,828

$

11,667


Interest bearing bank deposits


12,656


7,244


10,201


Federal funds sold


144


-


99


Total cash and cash equivalents


22,550


21,072


21,967










Securities available for sale, at fair value


210,447


216,121


193,895


Securities held to maturity, at cost


46,460


46,608


45,616


Equity securities, restricted, at cost


8,356


8,290


9,289


Total securities


265,263


271,019


248,800


















Loans


889,980


836,299


811,798


Purchased credit impaired (PCI) loans


45,451


51,964


53,462


Allowance for loan losses


(8,667)


(9,493)


(9,480)


Allowance for loan losses – PCI loans


(200)


(200)


(484)


Net loans


926,564


878,570


855,296










Bank premises and equipment, net


29,469


28,357


27,805


Other real estate owned


2,710


4,427


4,905


Bank owned life insurance


27,911


27,339


27,140


Core deposit intangibles, net


20


898


1,375


Other assets


19,643


18,134


16,943


Total assets

$

1,294,130

$

1,249,816

$

1,204,231










Liabilities








Deposits:








Noninterest bearing

$

145,328

$

128,887

$

129,329


Interest bearing


933,054


908,407


837,995


Total deposits


1,078,382


1,037,294


967,324










Federal funds purchased


-


4,714


-


Federal Home Loan Bank advances


81,296


81,887


109,082


Long term debt


-


1,670


2,738


Trust preferred capital notes


4,124


4,124


4,124


Other liabilities


5,905


5,591


6,234


Total liabilities


1,169,707


1,135,280


1,089,502










Shareholders' Equity








Common stock (200,000,000 shares authorized $0.01 par value; 22,047,833, 21,959,648, 21,947,466, shares issued and outstanding, respectively)


220


220


219


Additional paid in capital


147,453


146,667


146,504


Retained deficit


(23,285)


(31,128)


(33,854)


Accumulated other comprehensive income (loss)


35


(1,223)


1,860


Total shareholders' equity


124,423


114,536


114,729


Total liabilities and shareholders' equity

$

1,294,130

$

1,249,816

$

1,204,231



























COMMUNITY BANKERS TRUST CORPORATION








CONSOLIDATED STATEMENTS OF OPERATIONS








UNAUDITED CONDENSED















(Dollars in thousands)

YTD


Three months
ended


YTD


Three months ended



2017


30-Sep-17

30-Jun-17


2016


30-Sep-16


Interest and dividend income















Interest and fees on loans

$

29,676


$

10,127

$

9,952


$

26,582


$

9,156


Interest and fees on PCI loans


4,355



1,423


1,453



4,704



1,549


Interest on federal funds sold


1



1


-



-



-


Interest on deposits in other banks


143



65


52



66



22


Interest and dividends on securities















Taxable


3,577



1,171


1,157



3,528



1,133


Nontaxable


1,805



602


606



1,698



547


Total interest and dividend income


39,557



13,389


13,220



36,578



12,407


Interest expense















Interest on deposits


5,776



2,053


1,944



4,638



1,550


Interest on borrowed funds


914



310


302



1,091



354


Total interest expense


6,690



2,363


2,246



5,729



1,904

















Net interest income


32,867



11,026


10,974



30,849



10,503

















Provision for loan losses


150



150


-



450



250


Net interest income after provision for loan losses


32,717



10,876


10,974



30,399



10,253

















Noninterest income















Service charges on deposit accounts


2,011



678


690



1,785



617


Gain on securities transactions, net


180



48


37



608



88


Income on bank owned life insurance


704



235


235



630



238


Mortgage loan income


163



59


71



599



252


Other


448



145


155



439



150


Total noninterest income


3,506



1,165


1,188



4,061



1,345

















Noninterest expense















Salaries and employee benefits


14,566



4,998


4,886



13,848



4,676


Occupancy expenses


2,329



857


740



2,043



756


Equipment expenses


849



305


260



729



242


FDIC assessment


550



185


164



756



253


Data processing fees


1,466



501


477



1,230



410


Amortization of intangibles


878



62


339



1,430



477


Other real estate expenses (income) , net


98



37


34



(89)



28


Other operating expenses


4,957



1,761


1,636



4,591



1,436


Total noninterest expense


25,693



8,706


8,536



24,538



8,278

















Income before income taxes


10,530



3,335


3,626



9,922



3,320


Income tax expense


2,687



919


692



2,726



862


Net income

$

7,843


$

2,416

$

2,934


$

7,196


$

2,458





COMMUNITY BANKERS TRUST CORPORATION







CONSOLIDATED STATEMENTS OF OPERATIONS







UNAUDITED CONDENSED











(Dollars in thousands)

Three months ended


30-Sep-17

30-Jun-17

31-Mar-17

31-Dec-16

30-Sep-16

Interest and dividend income











Interest and fees on loans

$

10,127

$

9,952

$

9,597

$

9,416

$

9,156

Interest and fees on PCI loans


1,423


1,453


1,479


1,526


1,549

Interest on federal funds sold


1


-


-


-


-

Interest on deposits in other banks


65


52


26


56


22

Interest and dividends on securities











Taxable


1,171


1,157


1,249


1,168


1,133

Nontaxable


602


606


597


551


547

Total interest and dividend income


13,389


13,220


12,948


12,717


12,407

Interest expense











Interest on deposits


2,053


1,944


1,779


1,744


1,550

Interest on borrowed funds


310


302


302


347


354

Total interest expense


2,363


2,246


2,081


2,091


1,904












Net interest income


11,026


10,974


10,867


10,626


10,503












Provision (credit) for loan losses


150


-


-


(284)


250

Net interest income after provision for loan losses


10,876


10,974


10,867


10,910


10,253












Noninterest income











Service charges on deposit accounts


678


690


643


635


617

Gain on securities transactions, net


48


37


95


26


88

Income on bank owned life insurance


235


235


234


240


238

Mortgage loan income


59


71


33


7


252

Other


145


155


148


210


150

Total noninterest income


1,165


1,188


1,153


1,118


1,345












Noninterest expense











Salaries and employee benefits


4,998


4,886


4,682


4,564


4,676

Occupancy expenses


857


740


732


694


756

Equipment expenses


305


260


284


270


242

FDIC assessment


185


164


201


67


253

Data processing fees


501


477


488


444


410

Amortization of intangibles


62


339


477


477


477

Other real estate expenses net


37


34


27


264


28

Other operating expenses


1,761


1,636


1,560


1,432


1,436

Total noninterest expense


8,706


8,536


8,451


8,212


8,278












Income before income taxes


3,335


3,626


3,569


3,816


3,320

Income tax expense


919


692


1,076


1,090


862

Net income

$

2,416

$

2,934

$

2,493

$

2,726

$

2,458

































COMMUNITY BANKERS TRUST CORPORATION

NET INTEREST MARGIN ANALYSIS

AVERAGE BALANCE SHEETS

(Dollars in thousands)





















Three months ended September 30, 2017



Three months ended September 30, 2016





Average
Balance
Sheet


Interest
Income / Expense


Average Rates Earned / Paid



Average
Balance
Sheet


Interest
Income / Expense


Average Rates Earned / Paid



ASSETS:




















Loans, including fees

$

869,501


$

10,127


4.62

%


$

801,017


$

9,156


4.54

%



PCI loans, including fees


47,358



1,423


11.76




54,301



1,549


11.32




Total loans


916,859



11,550


5.00




855,318



10,705


4.97




Interest bearing bank balances


18,333



65


1.40




9,876



22


0.88




Federal funds sold


105



1


1.21




14



-


0.50




Securities (taxable)


182,703



1,171


2.56




172,591



1,133


2.63




Securities (tax exempt)(1)


86,106



912


4.24




81,007



829


4.09




Total earning assets


1,204,106



13,699


4.51




1,118,806



12,689


4.50




Allowance for loan losses


(9,523)









(9,861)









Non-earning assets


89,935









87,419









Total assets

$

1,284,518








$

1,196,364




























LIABILITIES AND




















SHAREHOLDERS'
EQUITY




















Demand - interest bearing

$

280,253


$

284


0.40



$

234,828


$

156


0.26




Savings


90,774



60


0.26




86,327



58


0.27




Time deposits


567,800



1,709


1.19




514,312



1,336


1.03




Total interest bearing deposits


938,827



2,053


0.87




835,467



1,550


0.74




Short-term borrowings


381



2


1.67




2,731



6


0.93




FHLB and other borrowings


77,617



308


1.57




111,757



295


1.05




Long- term debt


-



-


-




3,795



53


5.50




Total interest bearing liabilities


1,016,825



2,363


0.92




953,750



1,904


0.79




Noninterest bearing deposits


138,330









122,571









Other liabilities


5,395









5,753









Total liabilities


1,160,550









1,082,074









Shareholders' equity


123,968









114,290









Total liabilities and




















Shareholders' equity

$

1,284,518








$

1,196,364









Net interest earnings




$

11,336








$

10,785






Interest spread







3.59

%








3.71

%



Net interest margin







3.74

%








3.82

%























Tax-equivalent adjustment:




















Securities




$

310








$

282

























(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)



Nine months ended September 30, 2017



Nine months ended September 30, 2016




Average
Balance
Sheet


Interest
Income /
Expense


Average Rates

Earned / Paid



Average
Balance
Sheet


Interest

Income /

Expense


Average Rates

Earned / Paid



ASSETS:




















Loans, including fees

$

856,465


$

29,676


4.63

%


$

776,491


$

26,582


4.56

%



PCI loans, including fees


49,117



4,355


11.69




55,974



4,704


11.20




Total loans


905,582



34,031


5.02




832,465



31,286


5.01




Interest bearing bank balances


15,597



143


1.22




11,065



66


0.80




Federal funds sold


97



1


1.08




5



-


0.50




Securities (taxable)


182,724



3,577


2.61




178,700



3,528


2.63




Securities (tax exempt)(1)


85,607



2,735


4.26




82,750



2,573


4.15




Total earning assets


1,189,607



40,487


4.55




1,104,985



37,453


4.52




Allowance for loan losses


(9,647)









(9,985)









Non-earning assets


89,261









84,712









Total assets

$

1,269,221








$

1,179,712




























LIABILITIES AND




















SHAREHOLDERS' EQUITY




















Demand - interest bearing

$

253,638


$

579


0.31



$

233,186


$

481


0.27




Savings


91,473



181


0.27




84,661



176


0.28




Time deposits


580,346



5,016


1.16




520,306



3,981


1.02




Total interest bearing deposits


925,457



5,776


0.83




838,153



4,638


0.74




Short-term borrowings


994



9


1.21




2,313



14


0.85




FHLB and other borrowings


84,072



905


1.44




106,571



903


1.13




Long- term debt


-



-


-




4,771



174


4.80




Total interest bearing liabilities


1,010,523



6,690


0.89




951,808



5,729


0.80




Noninterest bearing deposits


132,868









111,751









Other liabilities


5,487









5,297









Total liabilities


1,148,878









1,068,856









Shareholders' equity


120,343









110,856









Total liabilities and




















shareholders' equity

$

1,269,221








$

1,179,712









Net interest earnings




$

33,797








$

31,724






Interest spread







3.66

%








3.72

%



Net interest margin







3.80

%








3.82

%























Tax-equivalent adjustment:




















Securities




$

930








$

875

























(1) Income and yields are reported on a tax-equivalent basis assuming a federal tax rate of 34%.


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 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 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.

Common Tangible Book Value









(Dollars and shares outstanding in thousands)


30-Sep-17


30-Jun-17


31-Dec-16


30-Sep-16










Total shareholders' equity

$

124,423

$

121,757

$

114,536

$

114,729

Core deposit intangible (net)


20


82


898


1,375

Common tangible book value

$

124,403

$

121,675

$

113,638

$

113,354

Shares outstanding


22,048


22,037


21,960


21,947

Common tangible book value per share

$

5.64

$

5.52

$

5.17

$

5.16










Stock price

$

9.20

$

8.25

$

7.25

$

5.42










Price/common tangible book


163.12%


149.46%


140.23%


105.04%










Common tangible equity/common tangible assets









Total assets

$

1,294,130

$

1,290,507

$

1,249,816

$

1,204,231

Core deposit intangible


20


82


898


1,375

Common tangible assets

$

1,294,110

$

1,290,425

$

1,248,918

$

1,202,856

Common tangible equity

$

124,403

$

121,675

$

113,638

$

113,354










Common tangible equity to common tangible assets


9.61%


9.43%


9.10%


9.42%

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SOURCE Community Bankers Trust Corporation