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26.04.2018 12:05
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Community Bankers Trust Corporation Reports Results for First Quarter of 2018
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PR Newswire
RICHMOND, Va., April 26, 2018
RICHMOND, Va., April 26, 2018 /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 2018.
OPERATING HIGHLIGHTS
- Loans, excluding purchased credit impaired (PCI) loans, grew $22.3 million, or 2.4%, during the first quarter of 2018 and grew $112.1 million, or 13.2%, since March 31, 2017.
- Noninterest bearing deposits grew $21.0 million, or 16.3%, year-over-year.
- There was no provision for loan losses in the first quarter of 2018 compared with a provision of $400,000 in the fourth quarter of 2017.
- Net interest margin increased from 3.72% in the fourth quarter of 2017 to 3.76% in the first quarter of 2018, the result of higher yields and volumes on earning assets.
FINANCIAL HIGHLIGHTS
- Net income was $2.6 million for the quarter ended March 31, 2018, compared with a loss of $640,000 in the fourth quarter of 2017 and net income of $2.5 million in the first quarter of 2017.
- Fully diluted earnings per common share was $0.12 for the quarter ended March 31, 2018, compared with ($0.03) per share and $0.11 per share for the quarters ended December 31, 2017 and March 31, 2017, respectively.
- Interest and fees on loans was $10.9 million in the first quarter of 2018, an increase of $1.3 million, or 13.3%, over the first quarter of 2017.
MANAGEMENT COMMENTS
Rex L. Smith, III, President and Chief Executive Officer, stated, "The core operating metrics of the Company continue to show positive growth. We have structured the balance sheet to be risk averse for interest rate changes, as well as other economic factors. To that end, I am pleased with the diversity of the loan types in the portfolio and the continued growth rate of our variable rate loans, which increased our net interest margin for the quarter. Net interest income increased over $200,000 on a linked quarter basis."
Smith added, "As we move forward, I believe it is important for us to resist the temptation of growth for growth's sake, especially if it means irrational pricing on either side of the balance sheet, or relaxing our credit standards in any way. We can and will sustain an appropriate growth rate for the balance sheet that will translate to the earnings that we want to achieve for our shareholders."
Smith concluded, "Noninterest expense was up for the quarter, mainly due to a timing issue on our benefits cost. While this cost reduced earnings per share by two and a half cents on both a linked quarter and year-over-year basis, it will not be an on-going concern. Management is confident that we can continue to produce appropriate returns for the Company."
RESULTS OF OPERATIONS
Net income was $2.6 million for the first quarter of 2018, compared with a net loss of $640,000 in the fourth quarter of 2017 and net income of $2.5 million in the first quarter of 2017. Earnings per common share, basic and fully diluted, were $0.12 per share, ($0.03) per share and $0.11 per share for the three months ended March 31, 2018, December 31, 2017, and March 31, 2017, respectively.
The increase of $101,000, or 4.1%, in net income, for the first quarter of 2018 compared with the first quarter of 2017 was primarily the result of a $1.1 million increase in interest income and a reduction of $536,000 in income tax expense. Offsetting these increases was an increase of $531,000 in interest expense and an increase of $1.1 million in noninterest expenses, including an increase of $703,000 in group benefit costs. Details on the drivers of these year-over-year changes are presented below.
The increase of $3.2 million in net income on a linked quarter basis was driven by a decrease of $3.7 million in income tax expense. In the fourth quarter of 2017, the Company recorded a one-time charge of $3.5 million to income tax expense due to the re-measurement of its net deferred tax asset resulting from the new 21% tax rate established by the Tax Cuts and Jobs Act of 2017 enacted in December. Provision for loan losses improved net income on a linked quarter basis as no provision was recorded in the current quarter compared with $400,000 in the fourth quarter of 2017. Also, positively affecting net income was an increase in net interest income, which increased $218,000 on a linked quarter basis. Offsetting these increases to net income was an increase of $1.0 million, or 12.5%, in noninterest expenses, including an increase of $703,000 in group benefit costs. Linked quarter details are also provided below.
The following table presents summary income statements for the three months ended March 31, 2018, December 31, 2017 and March 31, 2017.
| SUMMARY INCOME STATEMENT | | | | | | |
| (Dollars in thousands) | | For the three months ended | ||||
| | | 31-Mar-18 | | 31-Dec-17 | | 31-Mar-17 |
| Interest income | $ | 14,079 | $ | 13,758 | $ | 12,948 |
| Interest expense | | 2,612 | | 2,509 | | 2,081 |
| Net interest income | | 11,467 | | 11,249 | | 10,867 |
| Provision for loan losses | | - | | 400 | | - |
| Net interest income after provision for loan losses | 11,467 | | 10,849 | | 10,867 | |
| Noninterest income | | 1,082 | | 1,093 | | 1,035 |
| Noninterest expense | | 9,415 | | 8,366 | | 8,333 |
| Income before income taxes | | 3,134 | | 3,576 | | 3,569 |
| Income tax expense | | 540 | | 4,216 | | 1,076 |
| Net income (loss) | $ | 2,594 | $ | (640) | $ | 2,493 |
| | | | | | | |
| EPS Basic | $ | 0.12 | $ | (0.03) | $ | 0.11 |
| EPS Diluted | $ | 0.12 | $ | (0.03) | $ | 0.11 |
| | | | | | | |
| Return on average assets, annualized | | 0.78% | | (0.19%) | | 0.80% |
| Return on average equity, annualized | | 8.30% | | (2.02%) | | 8.56% |
Net Interest Income
Linked Quarter Basis
Net interest income was $11.5 million for the quarter ended March 31, 2018 compared with $11.2 million for the quarter ended December 31, 2017. This is an increase of $218,000, or 1.9%.
Interest income on a linked quarter basis increased $321,000, or 2.3%, to $14.1 million for the first quarter of 2018. Interest income with respect to loans, excluding PCI loans, increased $251,000, or 2.4%, during the first quarter when compared with the fourth quarter of 2017. This increase was partially attributed to continued loan growth, excluding PCI loans, coupled with higher rates. The yield on loans increased from 4.63% in the fourth quarter of 2017 to 4.68% in the first quarter of 2018. The average balance of loans, excluding PCI loans, increased $32.2 million, or 3.5%, on a linked quarter basis. Interest income with respect to PCI loans was $1.4 million in each of the fourth quarter of 2017 and the first quarter of 2018. Interest income on securities increased $62,000 on a linked quarter basis.
Securities income equaled $1.9 million on a tax-equivalent basis for the first quarter of 2018, which was a decrease of $90,000 from the fourth quarter of 2017. Actual income increased $62,000 while tax-equivalent income decreased $90,000 as a result of the decreased tax benefit derived from bank-qualified tax-exempt municipal securities from the implementation of the Tax Cut and Jobs Act. The overall tax-equivalent yield on the securities portfolio was 2.98% in the first quarter of 2018, based on a 21% tax rate, and 3.07% in the fourth quarter of 2017, based on a 34% tax rate.
Interest expense of $2.6 million in the first quarter of 2018 was an increase of $103,000 on a linked quarter basis. Interest on deposits only increased $22,000, or 1.0%. However, interest on borrowed funds increased by $81,000, or 20.9%. Average interest bearing balances of Federal Home Loan Bank and other borrowings increased by $17.3 million from the fourth quarter of 2017 to the first quarter of 2018. The cost on these borrowings increased from 1.68% in the fourth quarter of 2017 to 1.74% in the first quarter of 2018. The Company's cost of interest bearing liabilities of 1.00% in the first quarter of 2018 was an increase of four basis points from the prior quarter.
With the changes in interest income noted above, the tax-equivalent net interest margin improved from 3.72% in the fourth quarter of 2017 to 3.76% in the first quarter of 2018. Likewise, the interest spread increased from 3.56% to 3.60% on a linked quarter basis.
Year-Over-Year
Net interest income increased $600,000, or 5.5%, from the first quarter of 2017 to the first quarter of 2018. Net interest income was $11.5 million in the first quarter of 2018 compared with $10.9 million for the same period in 2017. Interest income increased $1.1 million, or 8.7%, over this time period. The increase in interest income was generated by an increase of $86.7 million, or 7.4%, in the level of earning assets. The yield on earning assets decreased from 4.61% in the first quarter of 2017 to 4.60% in the first quarter of 2018. The average balance of loans, excluding PCI loans, increased $104.2 million, or 12.4%, from $839.2 million in the first quarter of 2017 to $943.4 million in the first quarter of 2018. Interest income on securities was $1.8 million in each of the first quarter of 2018 and first quarter of 2017. On a tax-equivalent basis, the yield on investment securities was 2.98% in the first quarter of 2018, based on a 21% tax rate, and 3.22% in the first quarter of 2017, based on a 34% tax rate.
Interest on PCI loans was $1.4 million in the first quarter of 2018 compared with $1.5 million in the first quarter of 2017. The average balance of the PCI portfolio declined $7.4 million during the year-over-year comparison period.
Interest expense increased $531,000, or 25.5%, when comparing the first quarter of 2017 and the first quarter of 2018. Interest expense on deposits increased $364,000, or 20.5%, as the average balance of interest bearing deposits increased $41.3 million, or 4.6%. The increase in deposit cost was driven by an increase in NOW and MMDA average balances, which increased a combined $62.5 million year-over-year. Likewise, the cost of these balances increased $189,000, from 0.24% to 0.45%, over the same time frame. Higher cost time deposit balances declined over the comparison period by $22.4 million; however, expense on this category increased by $176,000, resulting in an increase in cost from 1.11% to 1.29%. FHLB and other borrowings increased, on average, $15.6 million year-over-year, and there was an increase in the rate paid, from 1.33% in the first quarter of 2017 to 1.74% in the first quarter of 2018. This resulted in an increase in the expense of $162,000, to $458,000 in the first quarter of 2018. The average balance of FHLB and other borrowings was $105.5 million in the first quarter of 2018. Overall, the Bank's cost of interest bearing liabilities increased 15 basis points, from 0.85% in the first quarter of 2017 to 1.00% in the first quarter of 2018.
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