Community Bank Shares of Indiana, Inc. reports a 1st quarter net loss attributable to common shareholders of $1.0 million, or $0.19 per diluted common share

NEW ALBANY, Ind.--(BUSINESS WIRE)--

Community Bank Shares of Indiana, Inc.  CBIN reported first quarter net loss attributable to common shareholders of $1.0 million and loss per diluted common share of $0.19. Excluding merger and integration expenses resulting from the acquisition of First Financial Service Corporation of Elizabethtown, Kentucky ("FFKY"), net income available to common shareholders for the quarter would have been $1.4 million, or $0.27 per share, compared to $2.0 million, or $0.59 per share, for the same period in 2014 (for a reconciliation of non-GAAP financial information, see "Regulation G Disclosure" below).

"We expected a net loss in the first quarter because of the merger and integration charges associated with the acquisition of First Financial Service Corporation of Elizabethtown, Kentucky. The merger closed on January 1, 2015 and we completed our customer data conversion during the first quarter and now all of our customers are on the same data platforms," stated James Rickard, President and Chief Executive Officer. "We can now fully pursue the cultural integration and balance sheet restructuring that will be necessary to improve the combined Company's net interest margin and profitability. Based on our progress to date we remain confident that we can achieve our expected level of cost savings and earnings growth communicated at the announcement of the acquisition."

"We recently applied to close one of our transaction-oriented branches on July 17, 2015," Mr. Rickard continued. "We expect that this step will save the Company approximately $250,000 per year. While we don't have any specific plans to close additional branch locations, we understand that more and more transactions are migrating out of branches and that to remain competitive a community bank will have to look at the efficiency and profitability of all of its operations."

The following points summarize significant financial information for the first quarter of 2015:

• The Company completed its acquisition of FFKY and its subsidiary bank, First Federal Savings Bank, on January 1, 2015. FFKY had total assets on the date of acquisition of $773.7 million based on the Company's preliminary determination of their fair value. As part of the transaction, the Company issued 792,392 of its common shares to shareholders of First Financial and paid option holders $423,000. Based on the Company's stock price at December 31, 2014, the total amount of consideration paid was $21.9 million and $7.5 million was allocated to goodwill.
• Immediately after the acquisition, the Company purchased the outstanding preferred shares of FFKY plus accrued and unpaid dividends. The preferred shares were purchased for $12.3 million while the accrued and unpaid dividends totaled $5.7 million. Of the 20,000 preferred shares purchased, the holder of 3,309 shares converted their shares, plus accrued and unpaid dividends, into the Company's common stock while the remaining 16,691 shares were paid in cash. Commensurate with the transaction, the Company completed its private placement of common shares with institutional and accredited investors. The Company issued 1,120,950 of its common shares including the shares converted from the holder of 3,309 preferred shares described above. The total amount of common equity raised in the private placement, net of issuance costs, was $23.8 million.
• In total, the Company issued 1,913,342 of its common shares in conjunction with its acquisition of FFKY, including the associated private placement.
• Net loss for the first quarter of 2015 was $936,000 while net loss attributable to common shareholders was $1.0 million. Excluding merger and integration expenses of $3.8 million ($2.5 million, net of tax), net income would have been $1.6 million.
• Tangible book value per common share was $19.30 as of March 31, 2015 as compared to $20.55 at 12/31/2014 and $18.03 at 3/31/2014.
• Net interest income increased to $13.5 million from $7.5 million due to the increase in interest-earning assets, interest-bearing liabilities and non-interest bearing deposits resulting from the acquisition of FFKY. During the first quarter of 2015 the Company recognized in net interest income $1.2 million of accretion resulting from acquired assets and assumed liabilities.
• Fully tax equivalent net interest margin was 3.87%, a decrease from 4.13% for the same period in 2014. The decline in net interest margin was directly attributable to the acquisition of FFKY on January 1, 2015. FFKY had a lower yield on earning assets than the Company at the time of acquisition, in part because it held a higher proportion of its earning assets in securities. FFKY also had a higher cost of interest-bearing liabilities than the Company in large part because time deposits were a greater proportion of total deposits. These factors led to a lower net interest margin for the Company upon its acquisition of FFKY.
• Provision for loan losses was $106,000, a decrease from $282,000 for the same quarter in 2014.
• Non-interest income increased to $2.4 million for the first quarter of 2015 compared to $1.7 million in 2014. The increase was mostly attributable to the acquisition of FFKY on January 1, 2015.
• Non-interest expense was $17.9 million as compared to $6.6 million for the same quarter in 2014. The increase was due to the assumption of FFKY operating costs effective January 1, 2015 as well as merger and integration expenses of $3.8 million. Excluding merger and integration expenses non-interest expense would have been $14.2 million for the first quarter.
• Beginning March 31, 2015, the Company and its subsidiaries were subject to the new Basel III capital standards and met the definition of well-capitalized under the revised rules.
• Selected performance ratios for the company are set out in the following table.

				Three Months Ended															Twelve Months Ended
				March			December			September			June			March			December			December
				31,			31,			30,			30,			31,			31,			31,
				2015			2014			2014			2014			2014			2014			2013
				(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
	Return on average assets			(0.23	)%		1.11	%		1.07	%		1.00	%		1.00	%		1.04	%		1.04	%
	Return on average assets, excluding merger and integration expenses, net of income taxes			0.38	%		1.17	%		1.12	%		1.07	%		1.03	%		1.10	%		1.11	%
	Return on average equity			(2.26	)%		9.83	%		9.59	%		9.25	%		9.48	%		9.54	%		10.03	%
	Return on average equity, excluding merger and integration expenses, net of income taxes			3.75	%		10.46	%		10.11	%		9.88	%		9.61	%		10.03	%		10.72	%
	Net interest margin, fully tax equivalent			3.87	%		4.52	%		4.28	%		4.24	%		4.13	%		4.29	%		4.27	%
	Efficiency ratio (1)			82.07	%		57.15	%		66.15	%		62.02	%		67.09	%		63.75	%		60.18	%
	______________________
(1)	Net interest income on a fully taxable equivalent basis. Excludes gains or losses on sales of securities, foreclosed asset expenses, amortization of intangibles, and merger and integration expenses.

	Community Bank Shares of Indiana, Inc. Consolidated Balance Sheets
				March 31, 2015				December 31, 2014				September 30, 2014				June 30, 2014				March 31, 2014
				(Unaudited)								(Unaudited)				(Unaudited)				(Unaudited)
				(In thousands)
	ASSETS
	Cash and due from financial institutions			$	45,784			$	12,872			$	14,540			$	19,350			$	18,197
	Interest-bearing deposits in other financial institutions			56,290				6,808				5,655				18,727				4,403
	Securities available for sale			385,498				202,177				202,174				199,071				194,506
	Loans held for sale			221				—				—				246				—
	Loans			999,906				603,575				593,124				588,160				573,643
	Allowance for loan losses			(7,120		)		(6,465		)		(7,784		)		(8,481		)		(8,378		)
	Federal Home Loan Bank and Federal Reserve stock			5,451				4,964				5,964				5,964				5,955
	Accrued interest receivable			4,802				3,152				3,028				3,144				2,990
	Premises and equipment, net			31,793				18,124				17,986				18,204				18,431
	Premises and equipment held for sale			6,155				—				—				—				—
	Company owned life insurance			33,095				22,058				21,887				21,718				21,550
	Goodwill			7,544				—				—				—				—
	Core deposit intangible			5,951				682				759				839				920
	Foreclosed and repossessed assets			15,818				4,431				4,677				6,029				6,334
	Settlement receivable for security sales			—				—				—				—				3,400
	Other assets			29,430				16,368				3,945				2,945				4,131
	Total Assets			$	1,620,618			$	888,746			$	865,955			$	875,916			$	846,082
	LIABILITIES AND SHAREHOLDERS' EQUITY
	Deposits
	Non-interest bearing			$	285,634			$	200,142			$	187,592			$	201,259			$	192,749
	Interest-bearing			1,052,089				450,802				467,619				482,356				462,327
	Total deposits			1,337,723				650,944				655,211				683,615				655,076
	Short-term borrowings			39,228				45,818				37,070				37,459				41,056
	Subscriptions agreement proceeds in escrow			—				20,774				—				—				—
	Other borrowings			83,874				67,000				72,000				57,000				57,000
	Accrued interest payable			462				158				87				87				94
	Other liabilities			14,059				4,504				5,099				3,566				1,964
	Total liabilities			1,475,346				789,198				769,467				781,727				755,190
	SHAREHOLDERS' EQUITY
	Preferred stock (1)			28,000				28,000				28,000				28,000				28,000
	Common stock			578				386				386				386				386
	Additional paid-in capital			89,342				44,421				44,085				43,948				43,752
	Retained earnings			30,419				32,110				30,196				28,403				26,777
	Accumulated other comprehensive income (loss)			3,788				1,809				1,035				754				(661		)
	Treasury stock			(6,855		)		(7,178		)		(7,214		)		(7,302		)		(7,362		)
	Total shareholders' equity			145,272				99,548				96,488				94,189				90,892
	Total Liabilities and Shareholders' Equity			$	1,620,618			$	888,746			$	865,955			$	875,916			$	846,082
	Book value per common share			$	21.81			$	20.75			$	19.88			$	19.24			$	18.30
	Tangible book value per common share			$	19.30			$	20.55			$	19.66			$	18.99			$	18.03
______________________
(1)	On September 15, 2011, as part of the Small Business Lending Fund ("SBLF") program, the Company sold $28.0 million of Non-Cumulative Perpetual Preferred Stock, Series B (the "SBLF Preferred Stock"), to the Secretary of the Treasury (the "Secretary"), and used the proceeds from the sale of the SBLF Preferred Stock to redeem the 19,468 shares of the Company's Fixed Rate Cumulative Perpetual Preferred Stock, Series A (the "CPP Preferred Stock"), issued in 2009 to the Treasury under the CPP, plus the accrued and unpaid dividends owed on the CPP Preferred Stock. The Company will be subject to all terms, conditions and other requirements for participation in SBLF for as long as any SBLF Preferred Stock remains outstanding.

Community Bank Shares of Indiana, Inc. Consolidated Statements of Operations
			Three Months Ended																				Twelve Months Ended
			March				December				September				June				March				December				December
			31,				31,				30,				30,				31,				31,				31,
			2015				2014				2014				2014				2014				2014				2013
			(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
			(In Thousands)
Interest and dividend income
Loans, including fees			$	12,523			$	7,911			$	7,317			$	7,098			$	6,624			$	28,950			$	27,377
Investment securities and other			2,233				1,322				1,313				1,312				1,377				5,324				5,876
Interest and dividend income			14,756				9,233				8,630				8,410				8,001				34,274				33,253
Interest expense
Deposits			574				245				255				267				253				1,020				1,191
Borrowed Funds			698				291				201				206				223				921				1,036
Total interest expense			1,272				536				456				473				476				1,941				2,227
Net interest income			13,484				8,697				8,174				7,937				7,525				32,333				31,026
Provision for loan losses			106				637				166				190				282				1,275				3,410
Net interest income after provision for loan losses			13,378				8,060				8,008				7,747				7,243				31,058				27,616
Non-interest income
Service charges on deposit accounts			1,391				854				874				835				792				3,355				3,394
Interchange income			444				287				281				330				270				1,168				1,092
Earnings on company owned life insurance			252				170				169				168				164				672				678
Net gain on sales of available for sale securities			51				—				172				1				295				468				742
Mortgage banking income			117				42				40				28				16				126				217
Commission income			47				48				50				48				48				194				173
Bargain purchase gain			—				—				—				—				—				—				1,879
Other income			110				128				113				130				92				462				509
Non-interest income			2,412				1,529				1,699				1,540				1,677				6,445				8,684
Non-interest expense
Salaries and employee benefits			9,119				3,276				3,869				3,366				3,367				13,878				13,381
Occupancy & equipment			2,208				966				971				850				1,027				3,814				3,511
Data processing			1,814				670				618				663				666				2,617				2,794
Core deposit intangible amortization			397				78				80				81				83				322				302
Foreclosed assets, net			344				118				(148		)		53				138				162				644
Other expense			4,042				1,444				1,467				1,516				1,270				5,696				5,439
Total non-interest expense			17,924				6,552				6,857				6,529				6,551				26,489				26,071
Income (loss) before income taxes			(2,134		)		3,037				2,850				2,758				2,369				11,014				10,229
Income tax expense (benefit)			(1,198		)		600				534				610				257				2,001				_1,562
Net income (loss)			(936		)		2,437				2,316				2,148				2,112				9,013				8,667
Preferred stock dividend			(110		)		(110		)		(110		)		(109		)		(110		)		(439		)		(802		)
Net income (loss) available (attributable) to common shareholders			$	(1,046	)		$	2,327			$	2,206			$	2,039			$	2,002			$	8,574			$	7,865
Earnings (loss) per basic share			$	(0.19	)		$	0.68			$	0.64			$	0.59			$	0.59			$	2.49			$	2.32
Earnings (loss) per diluted share			$	(0.19	)		$	0.66			$	0.63			$	0.59			$	0.59			$	2.46			$	2.32
Dividend per common share			$	0.12			$	0.12			$	0.12			$	0.12			$	0.12			$	0.48			$	0.43
Average number of basic shares			5,374,819				3,446,486				3,443,787				3,483,794				3,421,157				3,437,643				3,387,906
Average number of dilutive shares			5,374,819				3,499,951				3,480,816				3,468,424				3,437,943				3,487,117				3,387,906
Merger and integration expenses contained in:
Salaries and employee benefits			2,105				—				—				—				—				—				543
Occupancy & equipment			310				—				—				—				—				—				—
Data processing			719				—				—				—				—				—				—
Other expense			633				238				190				223				46				697				366
Total merger and integration expenses			3,767				238				190				223				46				697				909
Total merger and integration expenses, net of income taxes			2,486				157				125				147				30				460				600

Community Bank Shares of Indiana, Inc. Average Balances, Interest Yields and Costs
			Three Months Ending,
			03/31/15							12/31/14							09/30/14							06/30/14							03/31/14
			Average Balance				Average Yield/ Cost			Average Balance				Average Yield/ Cost			Average Balance				Average Yield/ Cost			Average Balance				Average Yield/ Cost			Average Balance				Average Yield/ Cost
ASSETS
Earning assets:
Interest-bearing deposits with banks			$	63,092			0.36	%		$	6,113			0.39	%		$	14,424			0.51	%		$	13,433			0.26	%		$	13,173			0.80	%
Taxable securities			318,695				1.70			117,961				1.78			109,297				1.76			112,139				1.75			121,285				1.88
Tax-exempt securities			83,217				5.49			80,416				5.49			80,809				5.50			81,619				5.59			78,968				5.73
Total loans and fees			993,536				5.15			595,578				5.34			592,327				4.97			583,345				4.94			564,635				4.81
FHLB and Federal Reserve stock			6,484				5.94			5,768				3.71			5,964				4.78			5,962				4.24			5,955				3.60
Total earning assets			1,465,024				4.22			805,836				4.78			802,621				4.50			796,498				4.47			784,016				4.38
Less: Allowance for loan losses			(6,838		)					(7,743		)					(8,505		)					(8,501		)					(8,480		)
Non-earning assets:
Cash and due from banks			38,987							22,388							16,032							16,788							10,068
Bank premises and equipment, net			38,136							17,959							18,143							18,376							18,474
Other assets			124,855							40,034							38,889							39,963							41,563
Total assets			$	1,660,164						$	878,474						$	867,180						$	863,124						$	845,641
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Savings and other			$	697,094			0.15	%		$	338,104			0.18	%		$	338,092			0.18	%		$	329,190			0.20	%		$	309,676			0.19	%
Time deposits			377,230				0.33			133,684				0.28			138,573				0.28			144,331				0.29			148,458				0.30
Short-term borrowings			38,253				0.23			42,819				0.24			35,879				0.21			39,813				0.23			45,390				0.27
Other borrowings			87,999				3.12			71,837				1.46			57,707				1.25			60,187				1.22			64,333				1.22
Total interest-bearing liabilities			1,200,576				0.43			586,444				0.36			570,251				0.32			573,521				0.33			567,587				0.34
Non-interest bearing liabilities:
Non-interest demand deposits			279,879							185,844							195,011							191,466							183,084
Accrued interest payable and other liabilities			12,026							7,800							6,127							4,968							4,328
Shareholders' equity			167,683							98,386							95,791							93,169							90,372
Total liabilities and shareholders' equity			$	1,660,164						$	878,474						$	867,180						$	863,124						$	845,641
Net interest spread							3.79	%						4.42	%						4.18	%						4.14	%						4.04	%
Net interest margin							3.87							4.52							4.28							4.24							4.13

Accretion and Amortization of Fair Value Adjustments
			Three Months Ending,
			03/31/15							12/31/14							09/30/14							06/30/14							03/31/14
			Fair Value Accretion				Impact on Net Interest Margin			Fair Value Accretion				Impact on Net Interest Margin			Fair Value Accretion				Impact on Net Interest Margin			Fair Value Accretion				Impact on Net Interest Margin			Fair Value Accretion				Impact on Net Interest Margin
Loans			$	601			0.17	%		$	775			0.21	%		$	126			0.03	%		$	61			0.02	%		$	45			0.01	%
Interest-bearing deposits			542				0.15			—				0.00			—				0.00			—				0.00			—				0.00
FHLB advances			62				0.02			—				0.00			—				0.00			—				0.00			—				0.00
Subordinated debentures			33				0.01			—				0.00			—				0.00			—				0.00			—				0.00
Total fair value accretion			$	1,238			0.34	%		$	775			0.21	%		$	126			0.03	%		$	61			0.02	%		$	45			0.01	%

Community Bank Shares of Indiana, Inc. Selected Loan Information
			March 31, 2015				December 31, 2014				September 30, 2014				June 30, 2014				March 31, 2014
			(Unaudited)								(Unaudited)				(Unaudited)				(Unaudited)
			(In thousands)
ACQUIRED LOANS
Loans on non-accrual status			$	9,401			$	96			$	178			$	400			$	304
Loans past due 90 days or more and still accruing			—				—				—				—				—
Foreclosed and repossessed assets			12,282				254				126				820				1,268
Total non-performing assets			21,683				350				304				1,220				1,572
Non-accretable yield on acquired loans			18,554				571				849				878				1,308
LEGACY LOANS
Loans on non-accrual status			7,354				7,439				9,031				9,189				9,334
Loans past due 90 days or more and still accruing			803				—				55				—				—
Foreclosed and repossessed assets			3,535				4,177				4,551				5,209				5,066
Total non-performing assets			11,692				11,616				13,637				14,398				14,400
Total Legacy Loans			588,076				570,864				556,525				549,192				531,446
Allowance for loan losses			7,120				6,465				7,784				8,481				8,378
Allowance for loan losses to legacy loans			1.21		%		1.13		%		1.40		%		1.54		%		1.58		%
TOTAL LOANS
Loans on non-accrual status			16,755				7,535				9,209				9,589				9,638
Loans past due 90 days or more and still accruing			803				—				55				—				—
Foreclosed and repossessed assets			15,817				4,431				4,677				6,029				6,334
Total non-performing assets			$	33,375			$	11,966			$	13,941			$	15,618			$	15,972
Non-performing assets to total assets			2.06		%		1.35		%		1.60		%		1.78		%		1.89		%
Allowance for loan losses to total loans			0.71		%		1.07		%		1.31		%		1.44		%		1.46		%

Reconciliation of Fully Tax Equivalent Adjustments to GAAP Net Interest Income
			3/31/2015							12/31/2014							9/30/2014							6/30/2014							3/31/2014
			Net Interest Income				Yield			Net Interest Income				Yield			Net Interest Income				Yield			Net Interest Income				Yield			Net Interest Income				Yield
GAAP net interest income			$	13,484			3.73	%		$	8,697			4.28	%		$	8,174			4.04	%		$	7,937			4.00	%		$	7,525			3.89	%
Tax equivalent adjustment
Investment securities			382				0.11			379				0.19			381				0.19			387				0.20			379				0.20
Loans			98				0.03			100				0.05			100				0.05			88				0.04			79				0.04
Total tax equivalent adjustment			480				0.14			479				0.24			481				0.24			475				0.24			458				0.24
Tax equivalent net interest income			13,965				3.87	%		9,176				4.52	%		8,655				4.28	%		8,412				4.24	%		7,983				4.13	%

Regulation G Disclosure

This press release contains non-GAAP financial measures within the meaning of Regulation G promulgated by the Securities and Exchange Commission (the "SEC"). The Company believes that these non-GAAP financial measures provide information that is useful to the users of its financial information regarding the Company's financial condition and results of operations. Additionally, the Company uses these non-GAAP measures to evaluate its past performance and prospects for future performance. The Company believes that this non-GAAP financial information is helpful in understanding the results of operations separate and apart from items that may, or could, have a disproportional positive or negative impact in any particular period.

While the Company believes that these non-GAAP financial measures are useful in evaluating Company performance, this information should be considered as supplemental in nature and not as a substitute for or superior to the related financial information prepared in accordance with U.S. GAAP. Further, these non-GAAP financial measures may differ from similar measures presented by other companies.

The Company recognized expenses associated with its acquisition of First Financial Service Corporation during the three months ended March 31, 2015 and for the year ended December 31, 2014 which substantially impacts the reported financial results for those periods. The Company believes excluding the charge provides investors and other interested parties with an additional meaningful measure to evaluate the Company's results of operations.

					Three Months Ended March 31, 2015					Earnings (loss) per common share impact
Net loss attributable to common shareholders reconciliation:
Net loss attributable to common shareholders as reported					$	(1,046	)			$	(0.19	)
Less: Merger and integration expenses reported in non-interest expense					(3,767		)			(0.70		)
Less: Tax effect of merger and integration charges					1,281					0.24
Net income available to common shareholders excluding merger and integration expense and related tax effect					$	1,440				$	0.27
Net loss reconciliation:
Net loss as reported					$	(936	)
Less: Merger and integration expenses reported in non-interest expense					(3,767		)
Less: Tax effect of merger and integration charges					1,281
Net income excluding merger and integration expense and related tax effect					$	1,550
Non-interest expense reconciliation:
Non-interest expenses as reported					$	17,924
Less: Merger and integration charges					(3,767		)
Non-interest expense excluding merger and integration expense and related tax effect					$	14,157

About Community Bank Shares of Indiana, Inc.

Community Bank Shares of Indiana, Inc. is a bank holding company headquartered in New Albany, Indiana. It includes two wholly owned, state-chartered subsidiary banks, Your Community Bank and The Scott County State Bank. The Company operates 41 financial centers in Indiana and Kentucky. The Banks are engaged primarily in the business of attracting deposits from the general public and using such funds for the origination of commercial business and real estate loans and secured consumer loans such as home equity lines of credit, automobile loans, and recreational vehicle loans. Additionally, the Banks originate and sell into the secondary market mortgage loans for the purchase of single-family homes. For more information visit www.yourcommunitybank.com and www.scottcountystatebank.com.

Statements in this press release relating to the Company's plans, objectives, or future performance are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are based on management's current expectations. The Company's actual strategies and results in future periods may differ materially from those currently expected due to various risks and uncertainties, including those discussed in the Company's 2014 Form 10-K filed with the Securities and Exchange Commission.