10-Q 1 d399012d10q.htm FORM 10-Q Form 10-Q
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

 

 

FORM 10-Q

 

 

 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2012

or

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission File Number: 001-32590

 

 

COMMUNITY BANKERS TRUST CORPORATION

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   20-2652949

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

4235 Innslake Drive, Suite 200

Glen Allen, Virginia

  23060
(Address of principal executive offices)   (Zip Code)

(804) 934-9999

(Registrant’s telephone number, including area code)

n/a

(Former name, former address and former fiscal year, if changed since last report)

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer   ¨    Accelerated filer    ¨
Non-accelerated filer   ¨  (Do not check if a smaller reporting company)    Smaller reporting company    x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

At September 30, 2012, there were 21,656,951 shares of the Company’s common stock outstanding.

 

 

 


Table of Contents

COMMUNITY BANKERS TRUST CORPORATION

TABLE OF CONTENTS

FORM 10-Q

September 30, 2012

 

PART I — FINANCIAL INFORMATION

  

Item 1. Financial Statements

  

Consolidated Statements of Financial Condition

     3   

Consolidated Statements of Operations (Unaudited)

     4   

Consolidated Statements of Comprehensive Income (Unaudited)

     5   

Consolidated Statements of Stockholders’ Equity

     6   

Consolidated Statements of Cash Flows (Unaudited)

     7   

Notes to Unaudited Consolidated Financial Statements

     8   

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

     37   

Item 3. Quantitative and Qualitative Disclosures About Market Risk

     53   

Item 4. Controls and Procedures

     54   

PART II — OTHER INFORMATION

  

Item 1. Legal Proceedings

     55   

Item 1A. Risk Factors

     55   

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

     55   

Item 3. Defaults upon Senior Securities

     55   

Item 4. Mine Safety Disclosures

     55   

Item 5. Other Information

     55   

Item 6. Exhibits

     55   

SIGNATURES

     56   

 

2


Table of Contents

PART I — FINANCIAL INFORMATION

 

Item 1. Financial Statements

COMMUNITY BANKERS TRUST CORPORATION

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

AS OF SEPTEMBER 30, 2012 AND DECEMBER 31, 2011

(dollars in thousands)

 

     September 30, 2012     December 31, 2011  
     (Unaudited)     (Audited)  

ASSETS

  

Cash and due from banks

   $ 15,116      $ 11,078   

Interest-bearing bank deposits

     17,298        10,673   

Federal funds sold

     5,000        —     
  

 

 

   

 

 

 

Total cash and cash equivalents

     37,414        21,751   

Securities available for sale, at fair value

     256,394        232,764   

Securities held to maturity, at cost (fair value of $52,013 and $68,585, respectively)

     48,689        64,422   

Equity securities, restricted, at cost

     7,351        6,872   
  

 

 

   

 

 

 

Total securities

     312,434        304,058   

Loans held for resale

     1,736        580   

Loans not covered by FDIC shared loss agreement

     559,532        544,718   

Loans covered by FDIC shared loss agreement

     89,121        97,561   
  

 

 

   

 

 

 

Total loans

     648,653        642,279   

Allowance for loan losses (non-covered loans of $14,303 and $14,835, respectively; covered loans of $456 and $776, respectively)

     (14,759     (15,611
  

 

 

   

 

 

 

Net loans

     633,894        626,668   

FDIC indemnification asset

     36,191        42,641   

Bank premises and equipment, net

     34,002        35,084   

Other real estate owned, covered by FDIC shared loss agreement

     2,943        5,764   

Other real estate owned, non-covered

     11,896        10,252   

Bank owned life insurance

     15,008        14,592   

FDIC receivable under shared loss agreement

     715        1,780   

Core deposit intangibles, net

     10,863        12,558   

Other assets

     15,181        16,768   
  

 

 

   

 

 

 

Total assets

   $ 1,112,277      $ 1,092,496   
  

 

 

   

 

 

 

LIABILITIES

    

Deposits:

    

Noninterest-bearing

   $ 78,388      $ 64,953   

Interest-bearing

     862,368        868,538   
  

 

 

   

 

 

 

Total deposits

     940,756        933,491   

Federal Home Loan Bank advances

     50,000        37,000   

Trust preferred capital notes

     4,124        4,124   

Other liabilities

     4,259        6,701   
  

 

 

   

 

 

 

Total liabilities

     999,139        981,316   
  

 

 

   

 

 

 

Commitment and Contingencies (Note 12)

    

STOCKHOLDERS’ EQUITY

    

Preferred stock (5,000,000 shares authorized, $0.01 par value; 17,680 shares issued and outstanding)

     17,680        17,680   

Warrants on preferred stock

     1,037        1,037   

Discount on preferred stock

     (289     (454

Common stock (200,000,000 shares authorized, $0.01 par value; 21,656,951 and 21,627,549 shares issued and outstanding, respectively)

     217        216   

Additional paid in capital

     144,351        144,243   

Retained deficit

     (51,906     (53,761

Accumulated other comprehensive income

     2,048        2,219   
  

 

 

   

 

 

 

Total stockholders’ equity

     113,138        111,180   
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 1,112,277      $ 1,092,496   
  

 

 

   

 

 

 

See accompanying notes to unaudited consolidated financial statements

 

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COMMUNITY BANKERS TRUST CORPORATION

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011

(dollars and shares in thousands, except per share data)

 

    Three months ended     Nine months ended  
    September 30, 2012     September 30, 2011     September 30, 2012     September 30, 2011  

Interest and dividend income

       

Interest and fees on non-covered loans

  $ 7,710      $ 7,314      $ 22,971      $ 21,877   

Interest and fees on FDIC covered loans

    2,931        4,667        11,211        13,325   

Interest on federal funds sold

    —          1        4        5   

Interest on deposits in other banks

    9        28        40        53   

Interest and dividends on securities

       

Taxable

    2,103        2,058        6,219        6,055   

Nontaxable

    119        204        355        844   
 

 

 

   

 

 

   

 

 

   

 

 

 

Total interest and dividend income

    12,872        14,272        40,800        42,159   

Interest expense

       

Interest on deposits

    2,056        2,621        6,650        8,312   

Interest on federal funds purchased

    3        —          6        1   

Interest on other borrowed funds

    280        353        982        1,051   
 

 

 

   

 

 

   

 

 

   

 

 

 

Total interest expense

    2,339        2,974        7,638        9,364   
 

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

    10,533        11,298        33,162        32,795   

Provision for loan losses

    —          —          750        1,498   
 

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income after provision for loan losses

    10,533        11,298        32,412        31,297   
 

 

 

   

 

 

   

 

 

   

 

 

 

Noninterest income

       

Service charges on deposit accounts

    716        643        2,007        1,856   

FDIC indemnification asset amortization

    (1,579     (2,359     (5,444     (7,762

Gain on securities transactions, net

    1,180        1,725        1,354        2,563   

Loss on sale of other real estate, net

    (767     (1,671     (1,173     (2,532

Other

    602        1,000        1,647        2,377   
 

 

 

   

 

 

   

 

 

   

 

 

 

Total noninterest income

    152        (662     (1,609     (3,498
 

 

 

   

 

 

   

 

 

   

 

 

 

Noninterest expense

       

Salaries and employee benefits

    4,028        4,050        12,443        12,425   

Occupancy expenses

    708        687        2,024        2,234   

Equipment expenses

    266        289        831        938   

Legal fees

    3        241        42        381   

Professional fees

    74        68        307        457   

FDIC assessment

    368        580        1,448        2,212   

Data processing fees

    473        478        1,489        1,407   

Amortization of intangibles

    565        565        1,695        1,696   

Other operating expenses

    1,554        1,724        4,815        5,479   
 

 

 

   

 

 

   

 

 

   

 

 

 

Total noninterest expense

    8,039        8,682        25,094        27,229   
 

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

    2,646        1,954        5,709        570   

Income tax (expense) benefit

    (837     (532     (1,700     178   
 

 

 

   

 

 

   

 

 

   

 

 

 

Net income

    1,809        1,422        4,009        748   

Dividends paid on preferred stock

    221        —          663        —     

Accretion of discount on preferred stock

    55        51        165        155   

Accumulated preferred dividends

    —          221        —          663   
 

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) available to common stockholders

  $ 1,533      $ 1,150      $ 3,181      $ (70
 

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per share — basic

  $ 0.07      $ 0.05      $ 0.15      $ (0.00
 

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per share — diluted

  $ 0.07      $ 0.05      $ 0.15      $ (0.00
 

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average number of shares outstanding

       

basic

    21,651        21,628        21,640        21,544   

diluted

    21,743        21,628        21,691        21,544   

See accompanying notes to unaudited consolidated financial statements

 

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COMMUNITY BANKERS TRUST CORPORATION

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011

(dollars in thousands, except per share data)

 

    Three months ended     Nine months ended  
    September 30, 2012     September 30, 2011     September 30, 2012     September 30, 2011  

Net income

  $ 1,809      $ 1,422      $ 4,009      $ 748   
 

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income:

       

Change in unrealized gain in investment securities

    39        2,068        1,095        6,606   

Tax related to unrealized (gain) in investment securities

    (13     (703     (372     (2,246

Reclassification adjustment for (gain) in securities sold

    (1,180     (1,725     (1,354     (2,563

Tax related to realized gain in securities sold

    401        587        460        871   
 

 

 

   

 

 

   

 

 

   

 

 

 

Total other comprehensive income (loss)

    (753     227        (171     2,668   
 

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income

  $ 1,056      $ 1,649      $ 3,838      $ 3,416   
 

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to unaudited consolidated financial statements

 

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Table of Contents

COMMUNITY BANKERS TRUST CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012 AND

THE YEAR ENDED DECEMBER 31, 2011

(dollars and shares in thousands)

 

                                        Retained
Deficit
    Accumulated
Other
Comprehensive
Income
    Total  
                Discount
on  Preferred
Stock
                Additional
Paid in
Capital
       
    Preferred             Common Stock          
    Stock     Warrants       Shares     Amount          

Balance January 1, 2011

  $ 17,680      $ 1,037      $ (660     21,468      $ 215      $ 143,999      $ (54,999   $ (145   $ 107,127   

Amortization of preferred stock warrants

    —          —          206        —          —          —          (206     —          —     

Issuance of common stock

    —          —          —          160        1        182        —          —          183   

Issuance of stock options

    —          —          —          —          —          62        —          —          62   

Net income

    —          —          —          —          —          —          1,444        —          1,444   

Other comprehensive income

    —          —          —          —          —          —          —          2,364        2,364   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance December 31, 2011 (Audited)

  $ 17,680      $ 1,037      $ (454     21,628      $ 216      $ 144,243      $ (53,761   $ 2,219      $ 111,180   

Amortization of preferred stock warrants

    —          —          165        —          —          —          (165     —          —     

Issuance of common stock

    —          —          —          29        1        65        —          —          66   

Dividends paid on preferred stock

    —          —          —          —          —          —          (1,989     —          (1,989

Issuance of stock options

    —          —          —          —          —          43        —          —          43   

Net income

    —          —          —          —          —          —          4,009        —          4,009   

Other comprehensive (loss)

    —          —          —          —          —          —          —          (171     (171
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance September 30, 2012 (Unaudited)

  $ 17,680      $ 1,037      $ (289     21,657      $ 217      $ 144,351      $ (51,906   $ 2,048      $ 113,138   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to unaudited consolidated financial statements

 

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COMMUNITY BANKERS TRUST CORPORATION

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011

(dollars in thousands)

 

     September 30, 2012     September 30, 2011  

Operating activities:

    

Net income

   $ 4,009      $ 748   

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation and intangibles amortization

     2,981        3,046   

Issuance of common stock and stock options

     109        183   

Provision for loan losses

     750        1,498   

Provision for deferred income taxes

     1,700        —     

Amortization of security premiums and accretion of discounts, net

     2,414        1,370   

Net (gain) on sale of securities

     (1,354     (2,563

Net loss on sale and valuation of other real estate

     1,173        2,532   

Changes in assets and liabilities:

    

(Increase) in loans held for sale

     (1,156     —     

Decrease in other assets

     7,074        18,675   

Decrease in accrued expenses and other liabilities

     (2,441     (516
  

 

 

   

 

 

 

Net cash provided by operating activities

     15,259        24,973   
  

 

 

   

 

 

 

Investing activities:

    

Proceeds from securities sales, calls, maturities, and paydowns

     175,501        241,056   

Purchase of securities

     (185,198     (220,161

Proceeds from sale of other real estate

     7,709        6,438   

Improvements and additions of other real estate, net of insurance proceeds

     (791     (154

Net (decrease) increase in loans

     (17,160     13,915   

Principal recoveries of loans previously charged off

     2,270        548   

Purchase of premises and equipment, net

     (203     (499
  

 

 

   

 

 

 

Net cash (used in) provided by investing activities

     (17,872     41,143   
  

 

 

   

 

 

 

Financing activities:

    

Net increase (decrease) in noninterest-bearing and interest-bearing demand deposits

     7,265        (46,109

Net increase in Federal Home Loan Bank borrowings

     13,000        —     

Cash dividends paid

     (1,989     —     
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     18,276        (46,109
  

 

 

   

 

 

 

Net increase in cash and cash equivalents

     15,663        20,007   

Cash and cash equivalents:

    

Beginning of the period

   $ 21,751      $ 33,381   
  

 

 

   

 

 

 

End of the period

   $ 37,414      $ 53,388   
  

 

 

   

 

 

 
     September 30, 2012     September 30, 2011  

Supplemental disclosures of cash flow information:

    

Interest paid

   $ 8,149      $ 9,674   

Income taxes paid

     120        87   

Transfers of OREO property

     6,914        9,792   

Transfers of OREO to bank premises

     —          700   

See accompanying notes to unaudited consolidated financial statements

 

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COMMUNITY BANKERS TRUST CORPORATION

Notes to Unaudited Consolidated Financial Statements

1. NATURE OF BANKING ACITIVIES AND SIGNIFICANT ACCOUNTING POLICIES

Organization

Community Bankers Trust Corporation (the “Company”) is a bank holding company that was incorporated under Delaware law on April 6, 2005. The Company is headquartered in Glen Allen, Virginia and is the holding company for Essex Bank (the “Bank”), a Virginia state bank with 24 full-service offices in Virginia, Maryland and Georgia. The Bank also operates one loan production office.

The Bank engages in a general commercial banking business and provides a wide range of financial services primarily to individuals and small businesses, including individual and commercial demand and time deposit accounts, commercial and industrial loans, consumer and small business loans, real estate and mortgage loans, investment services, on-line and mobile banking products, and safe deposit box facilities. Thirteen offices are located in Virginia, from the Chesapeake Bay to just west of Richmond, seven are located in Maryland along the Baltimore-Washington corridor and four are located in the Atlanta, Georgia metropolitan market.

Financial Statements

The consolidated statements presented include accounts of the Company and the Bank, its wholly-owned subsidiary. All material intercompany balances and transactions have been eliminated. The statements should be read in conjunction with the Company’s consolidated financial statements and the accompanying notes to consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011. The accounting and reporting policies of the Company conform to generally accepted accounting principles (GAAP) and to the general practices within the banking industry. The interim financial statements have not been audited; however, in the opinion of management, all adjustments, consisting of normal accruals, were made that are necessary to present fairly the financial position of the Company as of September 30, 2012, changes in stockholders’ equity and cash flows for the nine months ended September 30, 2012, and the results of operations for the three and nine months ended September 30, 2012. Results for the three and nine month periods ended September 30, 2012 are not necessarily indicative of the results that may be expected for the year ended December 31, 2012.

The financial information contained within the statements is, to a significant extent, financial information that is based on measures of the financial effects of transactions and events that have already occurred. A variety of factors could affect the ultimate value that is obtained when either earning income, recognizing an expense, recovering an asset or relieving a liability. The Company uses historical loss factors as one factor in determining the inherent loss that may be present in its loan portfolio. Actual losses could differ significantly from the historical factors that the Company uses. In addition, GAAP itself may change from one previously acceptable method to another method. Although the economics of the Company’s transactions would be the same, the timing of events that would impact its transactions could change.

Certain reclassifications have been made to prior period balances to conform to the current period presentation.

In preparing these financial statements, the Company has evaluated subsequent events and transactions for potential recognition or disclosure through the date the financial statements were issued.

Recent Accounting Pronouncements

In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS. This ASU represents the converged guidance of the FASB and the International Accounting Standards Board (the Boards) on fair value measurement. The collective efforts of the Boards have provided common requirements for measuring fair value and for disclosing information about fair value measurements, including a consistent meaning of the term “fair value” for both U.S. GAAP and IFRS (International Financial Reporting Standards) regulations. The Boards have concluded the common requirements will result in greater comparability of fair value measurements presented and disclosed in financial statements prepared in

 

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COMMUNITY BANKERS TRUST CORPORATION

Notes to Unaudited Consolidated Financial Statements

 

accordance with U.S. GAAP and IFRS. The amendments are effective during interim and annual periods beginning after December 15, 2011 and are to be applied prospectively. The Company adopted this guidance with no material impact on its consolidated financial statements.

In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income. The ASU eliminates the option to present other comprehensive income as a part of the statement of changes in stockholders’ equity and requires consecutive presentation of the statement of net income and other comprehensive income. The amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011 and are to be applied retrospectively. In December 2011, the topic was further amended to defer the effective date of presenting reclassification adjustments from other comprehensive income to net income on the face of the financial statements. Companies should continue to report reclassifications out of accumulated other comprehensive income consistent with the presentation requirements in effect prior to this ASU while FASB redeliberates future requirements. The Company adopted this guidance, except for the deferred items above, with no material impact on its consolidated financial statements. The Company does not expect the adoption of the deferred items to have a material impact on its consolidated financial statements.

In June 2012, the FASB issued ASU 2012-06, Business Combinations (Topic 805): Subsequent Accounting for an Indemnification Asset Recognized at the Acquisition Date as a Result of a Government-Assisted Acquisition of a Financial Institution. The objective of this ASU is to address the diversity in practice about how to interpret the terms on the same basis and contractual limitations when subsequently measuring an indemnification asset recognized in a government-assisted (Federal Deposit Insurance Corporation or National Credit Union Administration) acquisition of a financial institution that includes a loss-sharing agreement (indemnification agreement).

When a reporting entity recognizes an indemnification asset (in accordance with Subtopic 805-20) as a result of a government-assisted acquisition of a financial institution and subsequently a change in the cash flows expected to be collected on the indemnification asset occurs (as a result of a change in cash flows expected to be collected on the assets subject to indemnification), the reporting entity should subsequently account for the change in the measurement of the indemnification asset on the same basis as the change in the assets subject to indemnification. Any amortization of changes in value should be limited to the contractual term of the indemnification agreement (i.e., the lesser of the term of the indemnification agreement and the remaining life of the indemnified assets). The amendments are effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2012. Early adoption is permitted. The Company’s accounting policy for its indemnification asset conforms to the guidance above; therefore, no changes are necessary for adoption.

 

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COMMUNITY BANKERS TRUST CORPORATION

Notes to Unaudited Consolidated Financial Statements

 

2. SECURITIES

Amortized costs and fair values of securities available for sale and held to maturity at September 30, 2012 and December 31, 2011 were as follows (dollars in thousands):

 

     September 30, 2012  
            Gross Unrealized        
     Amortized
Cost
     Gains      Losses     Fair Value  

Securities Available for Sale

  

U.S. Treasury issue and other U.S. Gov’t agencies

   $ 111,523       $ 234       $ (858   $ 110,899   

U.S. Gov’t sponsored agencies

     501         8         —          509   

State, county and municipal

     100,847         5,253         (363     105,737   

Corporate and other bonds

     6,536         81         (9     6,608   

Mortgage backed – U.S. Gov’t agencies

     16,888         400         (51     17,237   

Mortgage backed – U.S. Gov’t sponsored agencies

     15,422         115         (133     15,404   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total Securities Available for Sale

   $ 251,717       $ 6,091       $ (1,414   $ 256,394   
  

 

 

    

 

 

    

 

 

   

 

 

 

Securities Held to Maturity

  

State, county and municipal

   $ 11,832       $ 1,222       $ —        $ 13,054   

Mortgage backed – U.S. Gov’t agencies

     10,099         721         —          10,820   

Mortgage backed – U.S. Gov’t sponsored agencies

     26,758         1,381         —          28,139   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total Securities Held to Maturity

   $ 48,689       $ 3,324       $ —        $ 52,013   
  

 

 

    

 

 

    

 

 

   

 

 

 
     December 31, 2011  
            Gross Unrealized        
     Amortized
Cost
     Gains      Losses     Fair Value  

Securities Available for Sale

  

U.S. Treasury issue and other U.S. Gov’t agencies

   $ 7,255       $ 159       $ —        $ 7,414   

U.S. Gov’t sponsored agencies

     1,005         28         —          1,033   

State, county and municipal

     58,183         3,867         (7     62,043   

Corporate and other bonds

     4,801         1         (171     4,631   

Mortgage backed – U.S. Gov’t agencies

     73,616         734         (257     74,093   

Mortgage backed – U.S. Gov’t sponsored agencies

     82,966         778         (194     83,550   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total Securities Available for Sale

   $ 227,826       $ 5,567       $ (629   $ 232,764   
  

 

 

    

 

 

    

 

 

   

 

 

 

Securities Held to Maturity

  

State, county and municipal

   $ 12,168       $ 1,311       $ —        $ 13,479   

Mortgage backed – U.S. Gov’t agencies

     12,743         822         —          13,565   

Mortgage backed – U.S. Gov’t sponsored agencies

     39,511         2,030         —          41,541   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total Securities Held to Maturity

   $ 64,422       $ 4,163       $ —        $ 68,585   
  

 

 

    

 

 

    

 

 

   

 

 

 

 

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COMMUNITY BANKERS TRUST CORPORATION

Notes to Unaudited Consolidated Financial Statements

 

The amortized cost and fair value of securities at September 30, 2012 by contractual maturity are shown below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations without any penalties.

 

     Held to Maturity      Available for Sale  
(dollars in thousands)    Amortized
Cost
     Fair Value      Amortized
Cost
     Fair Value  

Due in one year or less

   $ 3,588       $ 3,625       $ 5,454       $ 5,424   

Due after one year through five years

     38,843         41,281         42,554         43,030   

Due after five years through ten years

     6,258         7,107         121,187         125,589   

Due after ten years

     —           —           82,522         82,351   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total securities

   $ 48,689       $ 52,013       $ 251,717       $ 256,394   
  

 

 

    

 

 

    

 

 

    

 

 

 

Gains and losses on the sale of securities are recorded on the settlement date and are determined using the specific identification method. Gross realized gains and losses on sales and other than temporary impairments (OTTI) of securities available for sale during the periods were as follows (dollars in thousands):

 

     Three Months Ended     Nine Months Ended  
     September 30, 2012     September 30, 2011     September 30, 2012     September 30, 2011  

Gross realized gains

   $ 1,337      $ 1,791      $ 2,062      $ 2,645   

Gross realized losses

     (157     (66     (708     (82
  

 

 

   

 

 

   

 

 

   

 

 

 

Net securities gains

   $ 1,180      $ 1,725      $ 1,354      $ 2,563   
  

 

 

   

 

 

   

 

 

   

 

 

 

In estimating OTTI losses, management considers the length of time and the extent to which the fair value has been less than cost, the financial condition and short-term prospects for the issuer, and the intent and ability of management to hold its investment for a period of time to allow a recovery in fair value. There were no investments held that had impairment losses other than temporary in nature for the three and nine months ended September 30, 2012 and 2011.

 

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COMMUNITY BANKERS TRUST CORPORATION

Notes to Unaudited Consolidated Financial Statements

 

The fair value and gross unrealized losses for securities, segregated by the length of time that individual securities have been in a continuous gross unrealized loss position, at September 30, 2012 and December 31, 2011 were as follows (dollars in thousands):

 

    September 30, 2012  
    Less than 12 Months     12 Months or More     Total  
    Fair Value     Unrealized Loss     Fair Value     Unrealized Loss     Fair Value     Unrealized Loss  

U.S. Treasury issue and other U.S. Gov’t agencies

  $ 78,539      $ (858   $ —        $ —        $ 78,539      $ (858

U.S. Gov’t sponsored agencies

    —          —          —          —          —          —     

State, county and municipal

    23,615        (363     —          —          23,615        (363

Corporate and other bonds

    1,484        (8     501        (1     1,985        (9

Mortgage backed – U.S. Gov’t agencies

    3,420        (49     701        (2     4,121        (51

Mortgage backed – U.S. Gov’t sponsored agencies

    12,051        (133     —          —          12,051        (133
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 119,109      $ (1,411   $ 1,202      $ (3   $ 120,311      $ (1,414
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    December 31, 2011  
    Less than 12 Months     12 Months or More     Total  
    Fair Value     Unrealized Loss     Fair Value     Unrealized Loss     Fair Value     Unrealized Loss  

U.S. Treasury issue and other U.S. Gov’t agencies

  $ —        $ —        $ —        $ —        $ —        $ —     

U.S. Gov’t sponsored agencies

    —          —          —          —          —          —     

State, county and municipal

    1,242        (7     —          —          1,242        (7

Corporate and other bonds

    4,380        (171     —          —          4,380        (171

Mortgage backed – U.S. Gov’t agencies

    38,324        (257     —          —          38,324        (257

Mortgage backed – U.S. Gov’t sponsored agencies

    25,435        (194     —          —          25,435        (194
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 69,381      $ (629   $ —        $ —        $ 69,381      $ (629
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The unrealized losses in the investment portfolio at September 30, 2012 and December 31, 2011 are generally a result of market fluctuations that occur daily. The unrealized losses are from 75 securities at September 30, 2012. Of those, 72 are investment grade, U.S. government agency guarantees, or the full faith and credit of local municipalities throughout the United States. Investment grade corporate obligations comprise the remaining three securities with unrealized losses at September 30, 2012. The Company considers the reason for impairment, length of impairment and ability to hold until the full value is recovered in determining if the impairment is temporary in nature. Based on this analysis, the Company has determined these impairments to be temporary in nature. The Company does not intend to sell and it is more likely than not that the Company will not be required to sell these securities until they recover in value.

Market prices are affected by conditions beyond the control of the Company. Investment decisions are made by the management group of the Company and reflect the overall liquidity and strategic asset/liability objectives of the Company. Management analyzes the securities portfolio frequently and manages the portfolio to provide an overall positive impact to the Company’s income statement and balance sheet.

Securities with amortized costs of $80.5 million and $34.1 million at September 30, 2012 and December 31, 2011, respectively, were pledged to secure deposits and for other purposes required or permitted by law. At each of September 30, 2012 and December 31, 2011, there were no securities purchased from a single issuer, other than U.S. Treasury issue and other U.S. Government agencies, that comprised more than 10% of the consolidated shareholders’ equity.

 

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COMMUNITY BANKERS TRUST CORPORATION

Notes to Unaudited Consolidated Financial Statements

 

3. LOANS NOT COVERED BY FDIC SHARED LOSS AGREEMENT (NON-COVERED LOANS)

The Company’s non-covered loans at September 30, 2012 and December 31, 2011 were comprised of the following (dollars in thousands):

 

     September 30, 2012     December 31, 2011  
     Amount     % of Non-Covered
Loans
    Amount     % of Non-Covered
Loans
 

Mortgage loans on real estate:

        

Residential 1-4 family

   $ 131,192        23.44   $ 127,200        23.34

Commercial

     241,692        43.18        220,471        40.46   

Construction and land development

     64,304        11.49        75,691        13.89   

Second mortgages

     7,569        1.35        8,129        1.49   

Multifamily

     22,018        3.93        19,746        3.62   

Agriculture

     10,527        1.88        11,444        2.10   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total real estate loans

     477,302        85.27        462,681        84.90   

Commercial loans

     73,415        13.12        72,149        13.24   

Consumer installment loans

     7,442        1.33        8,461        1.55   

All other loans

     1,565        0.28        1,659        0.31   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross loans

     559,724        100.00     544,950        100.00
  

 

 

   

 

 

   

 

 

   

 

 

 

Less unearned income on loans

     (192       (232  
  

 

 

     

 

 

   

Non-covered loans, net of unearned income

   $ 559,532        $ 544,718     
  

 

 

     

 

 

   

The Company held $42.0 million and $36.5 million in balances of loans guaranteed by the United States Department of Agriculture (USDA), which are included in various categories in the table above, at September 30, 2012 and December 31, 2011, respectively. As these loans are 100% guaranteed by the USDA, no loan loss provision is required. These loan balances included an unamortized purchase premium of $3.7 million and $3.6 million at September 30, 2012 and December 31, 2011, respectively. Unamortized purchase premium is recognized as an adjustment of the related loan yield using the interest method.

At September 30, 2012 and December 31, 2011, the Company’s allowance for credit losses was comprised of the following: (i) specific valuation allowances calculated in accordance with FASB ASC 310, Receivables , (ii) general valuation allowances calculated in accordance with FASB ASC 450, Contingencies, based on economic conditions and other qualitative risk factors, and (iii) historical valuation allowances calculated using historical loan loss experience. Management identified loans subject to impairment in accordance with ASC 310.

At September 30, 2012 and December 31, 2011, a portion of the construction and land development loans presented above contained interest reserve provisions. The Company follows standard industry practice to include interest reserves and capitalized interest in a construction loan. This practice recognizes interest as an additional cost of the project and, as a result, requires the borrower to put additional equity into the project. In order to monitor the project throughout its life to make sure the property is moving along as planned to ensure appropriateness of continuing to capitalize interest, the Company coordinates an independent property inspection in connection with each disbursement of loan funds. Until completion, there is generally no cash flow from which to make the interest payment. The Company does not advance additional interest reserves to keep a loan from becoming nonperforming.

There were no significant amounts of interest reserves recognized as interest income on construction loans with interest reserves for the three and nine months ended September 30, 2012 and 2011. Nonperforming construction loans with interest reserves were $4.8 million at September 30, 2012 and December 31, 2011.

Interest income on nonaccrual loans, if recognized, is recorded using the cash basis method of accounting. There were no significant amounts recognized during either of the three and nine months ended September 30, 2012 and 2011. For the three months ended September 30, 2012 and 2011, estimated interest income of $473,000 and $836,000, respectively, would have been recorded if all such loans had been accruing interest according to their original contractual terms. For the nine months ended September 30, 2012 and 2011, estimated interest income of $1.2 million and $2.3 million, respectively, would have been recorded if all such loans had been accruing interest according to their original contractual terms.

 

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COMMUNITY BANKERS TRUST CORPORATION

Notes to Unaudited Consolidated Financial Statements

 

The following table summarizes information related to impaired loans as of September 30, 2012 (dollars in thousands):

 

     Recorded
Investment  (1)
     Unpaid Principal
Balance (2)
     Related Allowance  

With an allowance recorded:

        

Mortgage loans on real estate:

        

Residential 1-4 family

   $ 4,703       $ 5,438       $ 819   

Commercial

     2,168         2,266         323   

Construction and land development

     10,028         12,117         1,683   

Second mortgages

     171         176         27   

Multifamily

     —           —           —     

Agriculture

     54         345        9   
  

 

 

    

 

 

    

 

 

 

Total real estate loans

     17,124         20,342         2,861   

Commercial loans

     631         698         92   

Consumer installment loans

     125         138         13   

All other loans

     —           —           —     
  

 

 

    

 

 

    

 

 

 

Subtotal impaired loans with valuation allowance

     17,880         21,178         2,966   
  

 

 

    

 

 

    

 

 

 

With no related allowance recorded:

        

Mortgage loans on real estate:

        

Residential 1-4 family

     1,678         1,716         —     

Commercial

     6,749         7,182         —     

Construction and land development

     465         508         —     

Second mortgages

     —           —           —     

Multifamily

     —           —           —     

Agriculture

     —           —           —     
  

 

 

    

 

 

    

 

 

 

Total real estate loans

     8,892         9,406         —     

Commercial loans

     71         76         —     

Consumer installment loans

     10         10         —     

All other loans

     —           —           —     
  

 

 

    

 

 

    

 

 

 

Subtotal impaired loans without valuation

     8,973         9,492         —     
  

 

 

    

 

 

    

 

 

 

Total:

        

Mortgage loans on real estate:

        

Residential 1-4 family

     6,381         7,154         819   

Commercial

     8,917         9,448         323   

Construction and land development

     10,493         12,625         1,683   

Second mortgages

     171         176         27   

Multifamily

     —           —           —     

Agriculture

     54         345         9   
  

 

 

    

 

 

    

 

 

 

Total real estate loans

     26,016         29,748         2,861   

Commercial loans

     702         774         92   

Consumer installment loans

     135         148         13   

All other loans

     —           —           —     
  

 

 

    

 

 

    

 

 

 

Total impaired loans

   $ 26,853       $ 30,670       $ 2,966   
  

 

 

    

 

 

    

 

 

 

 

(1) The amount of the investment in a loan, which is not net of a valuation allowance, but which does reflect any direct write-down of the investment
(2) The contractual amount due, which reflects paydowns applied in accordance with loan documents, but which does not reflect any direct write-downs

 

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COMMUNITY BANKERS TRUST CORPORATION

Notes to Unaudited Consolidated Financial Statements

 

The following table summarizes information related to impaired loans as of December 31, 2011 (dollars in thousands):

 

     Recorded
Investment  (1)
     Unpaid Principal
Balance (2)
     Related
Allowance
 

With an allowance recorded:

        

Mortgage loans on real estate:

        

Residential 1-4 family

   $ 3,432       $ 3,497       $ 1,000   

Commercial

     6,240         6,362         713   

Construction and land development

     3,541         6,611         653   

Second mortgages

     143         156         80   

Multifamily

     —           —           —     

Agriculture

     —           —           —     
  

 

 

    

 

 

    

 

 

 

Total real estate loans

     13,356         16,626         2,446   

Commercial loans

     868         874         306   

Consumer installment loans

     70         71         13   

All other loans

     —           —           —     
  

 

 

    

 

 

    

 

 

 

Subtotal impaired loans with valuation

allowance

     14,294         17,571         2,765   
  

 

 

    

 

 

    

 

 

 

With no related allowance recorded:

        

Mortgage loans on real estate:

        

Residential 1-4 family

     3,083         3,565         —     

Commercial

     7,972         8,454         —     

Construction and land development

     9,471         12,894         —     

Second mortgages

     59         59         —     

Multifamily

     —           —           —     

Agriculture

     53         53         —     
  

 

 

    

 

 

    

 

 

 

Total real estate loans

     20,638         25,025         —     

Commercial loans

     209         593         —     

Consumer installment loans

     17         17         —     

All other loans

     —           —           —     
  

 

 

    

 

 

    

 

 

 

Subtotal impaired loans without valuation

     20,864         25,635         —     
  

 

 

    

 

 

    

 

 

 

Total:

        

Mortgage loans on real estate:

        

Residential 1-4 family

     6,515         7,062         1,000   

Commercial

     14,212         14,816         713   

Construction and land development

     13,012         19,505         653   

Second mortgages

     202         215         80   

Multifamily

     —           —           —     

Agriculture

     53         53         —     
  

 

 

    

 

 

    

 

 

 

Total real estate loans

     33,994         41,651         2,446   

Commercial loans

     1,077         1,467         306   

Consumer installment loans

     87         88         13   

All other loans

     —           —           —     
  

 

 

    

 

 

    

 

 

 

Total impaired loans

   $ 35,158       $ 43,206       $ 2,765   
  

 

 

    

 

 

    

 

 

 

 

(1) The amount of the investment in a loan, which is not net of a valuation allowance, but which does reflect any direct write-down of the investment
(2) The contractual amount due, which reflects paydowns applied in accordance with loan documents, but which does not reflect any direct write-downs

 

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Table of Contents

COMMUNITY BANKERS TRUST CORPORATION

Notes to Unaudited Consolidated Financial Statements

 

The following table summarizes the average recorded investment of impaired loans for the three and nine months ended September 30, 2012 and September 30, 2011 (dollars in thousands):

 

     Three months ended      Nine months ended  
     September 30, 2012      September 30, 2011      September 30, 2012      September 30, 2011  
      Average
Recorded
Investment
     Average
Recorded
Investment
     Average
Recorded
Investment
     Average
Recorded
Investment
 

With an allowance recorded:

           

Mortgage loans on real estate:

           

Residential 1-4 family

   $ 4,570       $ 3,660       $ 4,240       $ 4,552   

Commercial

     3,581         3,406         4,871         4,586  

Construction and land development

     8,428         3,574         5,566         6,924   

Second mortgages

     117         155         153         185  

Multifamily

     —           —           —           —     

Agriculture

     27        53        14         99  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total real estate loans

     16,723         10,848         14,844         16,346   

Commercial loans

     434         1,192         579         1,466  

Consumer installment loans

     150         78         130         74  

All other loans

     —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Subtotal impaired loans with valuation allowance

     17,307         12,118         15,553         17,886   
  

 

 

    

 

 

    

 

 

    

 

 

 

With no related allowance recorded:

           

Mortgage loans on real estate:

           

Residential 1-4 family

     2,273         4,201         2,588         4,733   

Commercial

     6,050         9,023         6,806         7,125   

Construction and land development

     1,786         19,550         5,440         16,504   

Second mortgages

     39         40         34         93  

Multifamily

     —           —           —           —     

Agriculture

     27         —           40         13  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total real estate loans

     10,175         32,814         14,908         28,468   

Commercial loans

     265         329         259         395  

Consumer installment loans

     10         10         20         31   

All other loans

     —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Subtotal impaired loans without valuation

     10,450         33,153         15,187         28,894   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total:

           

Mortgage loans on real estate:

           

Residential 1-4 family

     6,843         7,861         6,828         9,285   

Commercial

     9,631         12,429         11,677         11,711   

Construction and land development

     10,214         23,124         11,006         23,428   

Second mortgages

     156         195         187         278  

Multifamily

     —           —           —           —     

Agriculture

     54         53         54         112  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total real estate loans

     26,898         43,662         29,752         44,814   

Commercial loans

     699         1,521         838         1,861  

Consumer installment loans

     160         88         150         105   

All other loans

     —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total impaired loans

   $ 27,757       $ 45,271       $ 30,740       $ 46,780   
  

 

 

    

 

 

    

 

 

    

 

 

 

The majority of impaired loans are also nonaccruing, for which no interest income was recognized during each of the three and nine months ended September 30, 2012 and 2011. No significant amounts of interest income were recognized on accruing impaired loans for each of the three and nine months ended September 30, 2012 and 2011.

 

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COMMUNITY BANKERS TRUST CORPORATION

Notes to Unaudited Consolidated Financial Statements

 

The following table presents non-covered nonaccruals by loan category as of September 30, 2012 and December 31, 2011 (dollars in thousands):

 

     September 30, 2012      December 31, 2011  

Mortgage loans on real estate:

     

Residential 1-4 family

   $ 5,474       $ 5,320   

Commercial

     8,916         9,187   

Construction and land development

     10,318         12,718   

Second mortgages

     140         189   

Multifamily

     —           —     

Agriculture

     54         53   
  

 

 

    

 

 

 

Total real estate loans

     24,902         27,467   

Commercial loans

     703         1,003   

Consumer installment loans

     125         72   

All other loans

     —           —     
  

 

 

    

 

 

 

Total loans

   $ 25,730       $ 28,542   
  

 

 

    

 

 

 

Troubled debt restructures, some substandard, and doubtful loans still accruing interest are loans that management expects to ultimately collect all principal and interest due, but not under the terms of the original contract. A reconciliation of impaired loans to nonaccrual loans at September 30, 2012 and December 31, 2011, is set forth in the table below (dollars in thousands):

 

     September 30, 2012      December 31, 2011  

Nonaccruals

   $ 25,730       $ 28,542   

Trouble debt restructure and still accruing

     851         5,946   

Substandard and still accruing

     272         546   

Doubtful and still accruing

     —           124   
  

 

 

    

 

 

 

Total impaired

   $ 26,853       $ 35,158   
  

 

 

    

 

 

 

The following tables present an age analysis of past due status of non-covered loans by category as of September 30, 2012 and December 31, 2011 (dollars in thousands):

 

     September 30, 2012  
     30-89
Days
Past
Due
     Greater
than 90
Days
Past Due
     Total
Past

Due
     Current      Total
Loans
     Recorded
Investment
> 90 Days
Past Due
and
Accruing
 

Mortgage loans on real estate:

                 

Residential 1-4 family

   $ 1,200       $ 5,474       $ 6,674       $ 124,518       $ 131,192       $ —     

Commercial

     55         8,916         8,971         232,721         241,692         —     

Construction and land development

     350         10,355         10,705         53,599         64,304         37   

Second mortgages

     19         188         207         7,362         7,569         48  

Multifamily

     —           —           —           22,018         22,018         —     

Agriculture

     —           54         54         10,473         10,527         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total real estate loans

     1,624         24,987         26,611         450,691         477,302         85  

Commercial loans

     8         703         711         72,704         73,415         —     

Consumer installment loans

     51         125         176         7,266         7,442         —     

All other loans

     —           —           —           1,565         1,565         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $ 1,683       $ 25,815       $ 27,498       $ 532,226       $ 559,724       $ 85  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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COMMUNITY BANKERS TRUST CORPORATION

Notes to Unaudited Consolidated Financial Statements

 

     December 31, 2011  
     30-89
Days
Past
Due
     Greater
than 90
Days
Past Due
     Total
Past

Due
     Current      Total
Loans
     Recorded
Investment
> 90 Days
Past Due
and
Accruing
 

Mortgage loans on real estate:

                 

Residential 1-4 family

   $ 1,743       $ 5,320       $ 7,063       $ 120,137       $ 127,200       $ —     

Commercial

     1,085         11,192         12,277         208,194         220,471         2,005   

Construction and land development

     2,924         12,718         15,642         60,049         75,691         —     

Second mortgages

     709         189         898         7,231         8,129         —     

Multifamily

     —           —           —           19,746         19,746         —     

Agriculture

     —           53         53         11,391         11,444         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total real estate loans

     6,461         29,472         35,933         426,748         462,681         2,005   

Commercial loans

     87         1003         1,090         71,059         72,149         —     

Consumer installment loans

     93         72         165         8,296         8,461         —     

All other loans

     —           —           —           1,659         1,659         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $ 6,641       $ 30,547       $ 37,188       $ 507,762       $ 544,950       $ 2,005   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Activity in the allowance for loan losses on non-covered loans for the nine months ended September 30, 2012 and the year ended December 31, 2011 was comprised of the following (dollars in thousands):

 

     December 31, 2011      Provision
Allocation
    Charge
offs
    Recoveries      September 30, 2012  

Mortgage loans on real estate:

            

Residential 1-4 family

   $ 3,451       $ 2,095      $ (1,451   $ 3      $ 4,098   

Commercial

     3,048         403        (639     68         2,880   

Construction and land development

     5,729         (1,744     (923     1,628         4,690   

Second mortgages

     296         (91     0       56         261   

Multifamily

     224         48        0          272   

Agriculture

     25         19        0       0         44   
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Total real estate loans

     12,773         730        (3,013     1,755         12,245   

Commercial loans

     1,810         216        (396     182         1,812   

Consumer installment loans

     241         50        (114     54         231   

All other loans

     11         4        0        0         15   
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Total loans

   $ 14,835       $ 1,000      $ (3,523   $ 1,991       $ 14,303   
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

 

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COMMUNITY BANKERS TRUST CORPORATION

Notes to Unaudited Consolidated Financial Statements

 

     December 31, 2010      Provision
Allocation
    Charge offs     Recoveries      December 31, 2011  

Mortgage loans on real estate:

            

Residential 1-4 family

   $ 6,262       $ (998   $ (1,831   $ 18       $ 3,451   

Commercial

     5,287         563        (2,856     54         3,048   

Construction and land development

     10,039         (288     (4,123     101         5,729   

Second mortgages

     406         (32     (81     3         296   

Multifamily

     260        (36     —          —           224   

Agriculture

     266         (241     —          —           25   
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Total real estate loans

     22,520         (1,032     (8,891     176         12,773   

Commercial loans

     2,691         2,527        (3,615     207         1,810   

Consumer installment loans

     257         67        (288     205         241   

All other loans

     75        (64     —          —           11   
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Total loans

   $ 25,543       $ 1,498      $ (12,794   $ 588       $ 14,835   
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

The following tables present information on the non-covered loans evaluated for impairment in the allowance for loan losses as of September 30, 2012 and December 31, 2011 (dollars in thousands):

 

     September 30, 2012  
     Allowance for Loan Losses      Recorded Investment in Loans  
     Individually
Evaluated for
Impairment (1)
     Collectively
Evaluated for
Impairment
     Total      Individually
Evaluated for
Impairment (1)
     Collectively
Evaluated for
Impairment
     Total  

Mortgage loans on real estate:

                 

Residential 1-4 family

   $ 917       $ 3,181       $ 4,098       $ 9,747       $ 121,445       $ 131,192   

Commercial

     438         2,442         2,880         16,383         225,309         241,692   

Construction and land development

     2,189         2,501         4,690         15,806         48,498         64,304   

Second mortgages

     39         222         261         282         7,287         7,569   

Multifamily

     —           272         272         —           22,018         22,018   

Agriculture

     8         36         44         55         10,472         10,527   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total real estate loans

     3,591         8,654         12,245         42,273         435,029         477,302   

Commercial loans

     104         1,708         1,812         971         72,444         73,415   

Consumer installment loans

     14         217         231         142         7,300         7,442   

All other loans

     —           15         15         —           1,565         1,565   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $ 3,709       $ 10,594       $ 14,303       $ 43,386       $ 516,338       $ 559,724   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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COMMUNITY BANKERS TRUST CORPORATION

Notes to Unaudited Consolidated Financial Statements

 

     December 31, 2011  
     Allowance for Loan Losses      Recorded Investment in Loans  
     Individually
Evaluated for
Impairment (1)
     Collectively
Evaluated for
Impairment
     Total      Individually
Evaluated for
Impairment (1)
     Collectively
Evaluated for
Impairment
     Total  

Mortgage loans on real estate:

                 

Residential 1-4 family

   $ 1,088       $ 2,363       $ 3,451       $ 8,921       $ 118,279       $ 127,200   

Commercial

     829         2,219         3,048         20,780         199,691         220,471   

Construction and land development

     1,792         3,937         5,729         22,538         53,153         75,691   

Second mortgages

     105         191         296         418         7,711         8,129   

Multifamily

     —           224         224         —           19,746         19,746   

Agriculture

     2        23         25         330         11,114         11,444   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total real estate loans

     3,816         8,957         12,773         52,987         409,694         462,681   

Commercial loans

     308         1,502         1,810         1,250         70,899         72,149   

Consumer installment loans

     32         209         241         348         8,113         8,461   

All other loans

     1         10         11         127         1,532         1,659   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $ 4,157       $ 10,678       $ 14,835       $ 54,712       $ 490,238       $ 544,950   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) 

The category “Individually Evaluated for Impairment” includes loans individually evaluated for impairment and determined not to be impaired. These loans total $16.5 million and $19.6 million at September 30, 2012 and December 31, 2011, respectively. The allowance for loans losses allocated to these loans is $743,000 and $1.4 million at September 30, 2012 and December 31, 2011, respectively.

Non-covered loans are monitored for credit quality on a recurring basis. These credit quality indicators are defined as follows:

Pass - A pass loan is not adversely classified, as it does not display any of the characteristics for adverse classification. This category includes purchased loans that are 100% guaranteed by U.S. Government agencies of $42.0 million and $36.5 million at September 30, 2012 and December 31, 2011, respectively.

Special Mention - A special mention loan has potential weaknesses that deserve management’s close attention. If left uncorrected, such potential weaknesses may result in deterioration of the repayment prospects or collateral position at some future date. Special mention loans are not adversely classified and do not warrant adverse classification.

Substandard - A substandard loan is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified as substandard generally have a well defined weakness, or weaknesses, that jeopardize the liquidation of the debt. These loans are characterized by the distinct possibility of loss if the deficiencies are not corrected.

Doubtful - A doubtful loan has all the weaknesses inherent in a loan classified as substandard with the added characteristics that the weaknesses make collection or liquidation in full highly questionable and improbable, on the basis of currently existing facts, conditions, and values.

 

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COMMUNITY BANKERS TRUST CORPORATION

Notes to Unaudited Consolidated Financial Statements

 

The following tables present the composition of non-covered loans by credit quality indicator at September 30, 2012 and December 31, 2011 (dollars in thousands):

 

     September 30, 2012  
     Pass      Special
Mention
     Substandard      Doubtful      Total  

Mortgage loans on real estate:

              

Residential 1-4 family

   $ 113,504       $ 8,235       $ 9,453       $ —         $ 131,192   

Commercial

     203,939         21,372         16,381         —           241,692   

Construction and land development

     37,663         10,835         15,806         —           64,304   

Second mortgages

     6,890         397         282         —           7,569   

Multifamily

     20,841         1,177         —           —           22,018   

Agriculture

     10,473         —           54         —           10,527   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total real estate loans

     393,310         42,016         41,976         —           477,302   

Commercial loans

     71,254         1,189         972         —           73,415   

Consumer installment loans

     7,083         217         142         —           7,442   

All other loans

     1,565         —           —           —           1,565   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $ 473,212       $ 43,422       $ 43,090       $ —         $ 559,724   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     December 31, 2011  
     Pass      Special
Mention
     Substandard      Doubtful      Total  

Mortgage loans on real estate:

              

Residential 1-4 family

   $ 107,926       $ 10,519       $ 8,688       $ 67       $ 127,200   

Commercial

     162,744         39,506         18,221         —           220,471   

Construction and land development

     34,391         18,876         22,424         —           75,691   

Second mortgages

     7,135         576         418         —           8,129   

Multifamily

     16,199         3,547         —           —           19,746   

Agriculture

     10,897         494         53         —           11,444   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total real estate loans

     339,292         73,518         49,804         67         462,681   

Commercial loans

     68,511         1,983         1,597         58         72,149   

Consumer installment loans

     7,878         235         343         5         8,461   

All other loans

     1,659         —           —           —           1,659   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $ 417,340       $ 75,736       $ 51,744       $ 130       $ 544,950   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents

COMMUNITY BANKERS TRUST CORPORATION

Notes to Unaudited Consolidated Financial Statements

 

In accordance with ASU 2011-02, the Company assesses all loan modifications to determine whether they are considered troubled debt restructurings (TDRs) under the guidance. During the three months ended September 30, 2012, the Company modified two loans that were considered to be TDRs. The Company extended the terms for one of these loans and lowered the interest rate for one of these loans. The following table presents information relating to loans modified as TDRs during the three months ended September 30, 2012 (dollars in thousands):

 

    Three months ended September 30, 2012  
    Number
of
Contracts
    Pre-Modification Outstanding
Recorded Investment
    Post-Modification Outstanding
Recorded Investment
 

Mortgage loans on real estate:

     

Residential 1-4 family

    1      $ 294      $ 294   

Commercial

    1        2,979        2,777   
 

 

 

   

 

 

   

 

 

 

Total real estate loans

    2        3,273        3,071   

Total loans

    2      $ 3,273      $ 3,071   
 

 

 

   

 

 

   

 

 

 

During the nine months ended September 30, 2012, the Company modified seven loans that were considered to be TDRs. The Company extended the terms for three of these loans and lowered the interest rate for six of these loans. The following table presents information relating to loans modified as TDRs during the nine months ended September 30, 2012 (dollars in thousands):

 

    Nine months ended September 30, 2012  
    Number
of
Contracts
    Pre-Modification Outstanding
Recorded Investment
    Post-Modification Outstanding
Recorded Investment
 

Mortgage loans on real estate:

     

Residential 1-4 family

    3      $ 765      $ 765   

Commercial

    2        4,150        3,948   

Construction and land development

    1        675        675   
 

 

 

   

 

 

   

 

 

 

Total real estate loans

    6        5,590        5,388   

Commercial loans

    1        74        74   

Total loans

    7      $ 5,664      $ 5,462   
 

 

 

   

 

 

   

 

 

 

No loans were modified during the three months ended September 30, 2011. During the nine months ended September 30, 2011, the Company modified six loans that were considered to be TDRs. The Company extended the terms for five of these loans and lowered the interest rates for six of these loans. The following table presents information relating to loans modified as TDRs during the nine months ended September 30, 2011 (dollars in thousands):

 

    Nine months ended September 30, 2011  
    Number
of
Contracts
    Pre-Modification Outstanding
Recorded Investment
    Post-Modification Outstanding
Recorded Investment
 

Mortgage loans on real estate:

     

Residential 1-4 family

    3      $ 722      $ 679   

Commercial

    2        5,518        4,132   
 

 

 

   

 

 

   

 

 

 

Total real estate loans

    5        6,240        4,811   

Commercial loans

    1        560        531   

Total loans

    6      $ 6,800      $ 5,342   
 

 

 

   

 

 

   

 

 

 

 

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COMMUNITY BANKERS TRUST CORPORATION

Notes to Unaudited Consolidated Financial Statements

 

A loan is considered to be in default if it is 90 days or more past due. There were two TDRs that resulted in default during each of the three and nine months ended September 30, 2012 that had been restructured during the previous 12 months. The following table presents information relating to TDRs that resulted in default during the three and nine months ended September 30, 2012 (dollars in thousands):

 

     Three and nine months ended September 30, 2012  
     Number
of
Contracts
     Recorded Investment  

Mortgage loans on real estate:

     

Construction and land development

     1       $ 668   
  

 

 

    

 

 

 

Total real estate loans

     1         668   

Commercial loans

     1         74   

Total loans

     2       $ 742   
  

 

 

    

 

 

 

There was one TDR that resulted in default during the three months ended September 30, 2011 that had been restructured during the previous 12 months. This commercial real estate loan had a recorded investment of $1.4 million at September 30, 2011.

There were four TDRs that resulted in default during the nine months ended September 30, 2011 that had been restructured during the previous 12 months. The following table presents information relating to TDRs that resulted in default during the nine months ended September 30, 2011 (dollars in thousands):

 

     Nine months ended September 30, 2011  
     Number
of
Contracts
     Recorded Investment  

Mortgage loans on real estate:

     

Residential 1-4 family

     2       $ 406   

Commercial

     1         1,416   
  

 

 

    

 

 

 

Total real estate loans

     3         1,822   

Commercial loans

     1         525   

Total loans

     4       $ 2,347   
  

 

 

    

 

 

 

In the determination of the allowance for loan losses, management considers TDRs and subsequent defaults in these restructures by reviewing for impairment in accordance with ASC 310-10-35, Receivables, Subsequent Measurement.

At September 30, 2012, the Company had 1-4 family mortgages in the amount of $157.4 million pledged as collateral to the Federal Home Loan Bank for a total borrowing capacity of $101.4 million.

4. LOANS COVERED BY FDIC SHARED LOSS AGREEMENT (COVERED LOANS)

On January 30, 2009, the Company entered into a Purchase and Assumption Agreement with the Federal Deposit Insurance Corporation (FDIC) to assume all of the deposits and certain other liabilities and acquire substantially all assets of Suburban Federal Savings Bank (SFSB).  The Company is applying the provisions of FASB ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality, to all loans acquired in the SFSB transaction (the “covered loans”). Of the total $198.3 million in loans acquired, $49.1 million met the criteria of ASC 310-30. These loans, consisting mainly of construction loans, were deemed impaired at the acquisition date. The remaining $149.1 million of loans acquired, comprised mainly of residential 1-4 family, were analogized to meet the criteria of ASC 310-30. Analysis of this portfolio revealed that SFSB utilized weak underwriting and documentation standards, which led the Company to believe that significant losses were probable given the economic environment at the time.

 

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COMMUNITY BANKERS TRUST CORPORATION

Notes to Unaudited Consolidated Financial Statements

 

As of September 30, 2012 and December 31, 2011, the outstanding contractual balance of the covered loans was $143.5 million and $160.0 million, respectively. The carrying amount, by loan type, as of these dates is as follows (dollars in thousands):

 

     September 30, 2012     December 31, 2011  
     Amount      % of
Covered
Loans
    Amount      % of
Covered
Loans
 

Mortgage loans on real estate:

          

Residential 1-4 family

   $ 78,133         87.67   $ 84,734         86.85

Commercial

     2,030         2.28        2,170         2.22   

Construction and land development

     3,328         3.73        4,260         4.38   

Second mortgages

     5,148         5.78        5,894         6.04   

Multifamily

     308         0.35        316         0.32   

Agriculture

     172         0.18        179         0.18   
  

 

 

    

 

 

   

 

 

    

 

 

 

Total real estate loans

     89,119         99.99        97,553         99.99   

Commercial loans

     —           —          —           —     

Consumer installment loans

     2         0.01        8         0.01   

All other loans

     —           —          —           —     
  

 

 

    

 

 

   

 

 

    

 

 

 

Total covered loans

   $ 89,121         100.00   $ 97,561         100.00
  

 

 

    

 

 

   

 

 

    

 

 

 

Activity in the allowance for loan losses on covered loans for the nine months ended September 30, 2012 and the year ended December 31, 2011 was comprised of the following (dollars in thousands):

 

     December 31, 2011      Provision
Allocation
    Charge
offs
    Recoveries      September 30, 2012  

Mortgage loans on real estate:

            

Residential 1-4 family

   $ 473       $ (274   $ (12   $ 9       $ 196   

Commercial

     303         (43     —          —           260   

Construction and land development

     —           4        (22     18         —     

Second mortgages

     —           —          —          —           —     

Multifamily

     —           63        (315     252         —     

Agriculture

     —           —          —          —           —     
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Total real estate loans

     776         (250     (349     279         456   

Commercial loans

     —           —          —          —           —     

Consumer installment loans

     —           —          —          —           —     

All other loans

     —           —          —          —           —     
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Total covered loans

   $ 776       $ (250   $ (349   $ 279       $ 456   
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

 

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COMMUNITY BANKERS TRUST CORPORATION

Notes to Unaudited Consolidated Financial Statements

 

     December 31, 2010      Provision
Allocation
     Charge
offs
    Recoveries      December 31, 2011  

Mortgage loans on real estate:

             

Residential 1-4 family

   $ 526       $ —         $ (53   $ —         $ 473   

Commercial

     303         —           —          —           303   

Construction and land development

     —           —           —          —           —     

Second mortgages

     —           —           —          —           —     

Multifamily

     —           —           —          —           —     

Agriculture

     —           —           —          —           —     
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total real estate loans

     829         —           (53     —           776   

Commercial loans

     —           —           —          —           —     

Consumer installment loans

     —           —           —          —           —     

All other loans

     —           —           —          —           —     
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total covered loans

   $ 829       $ —         $ (53   $ —         $ 776   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

The following table presents information on the covered loans collectively evaluated for impairment in the allowance for loan losses at September 30, 2012 and December 31, 2011 (dollars in thousands):

 

     September 30, 2012      December 31, 2011  
     Allowance for
loan losses
     Recorded
investment
in loans
     Allowance for
loan losses
     Recorded
investment
in loans
 

Mortgage loans on real estate:

           

Residential 1-4 family

   $ 196       $ 78,133       $ 473       $ 84,734   

Commercial

     260         2,030         303         2,170   

Construction and land development

     —           3,328         —           4,260   

Second mortgages

     —           5,148         —           5,894   

Multifamily

     —           308         —           316   

Agriculture

     —           172         —           179   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total real estate loans

     456         89,119         776         97,553   

Commercial loans

     —           —           —           —     

Consumer installment loans

     —           2         —           8   

All other loans

     —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total covered loans

   $ 456       $ 89,121       $