Your Community Bankshares, Inc. Reports 2nd Quarter Net Income Available to Common Shareholders of $3.8 Million, or $0.68 Per Diluted Common Share and 3rd Quarter Dividend

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

Your Community Bankshares, Inc. YCB reported the results of operations for the three and six months ended June 30, 2016. The Company also announced that on July 19, 2016 its Board of Directors declared a quarterly cash dividend on the Company's common stock of $0.12 per share payable on August 25, 2016 to shareholders of record on August 8, 2016.

The following points summarize significant financial information for the second quarter of 2016:

  • Net income available to common shareholders for the second quarter of 2016 was $3.8 million, or $0.68 per diluted share, as compared $3.5 million, or $0.64 per diluted share, for the same quarter in 2015.
  • Non-performing assets to total assets declined to 0.45% at June 30, 2016 from 0.57% at March 31, 2016. Foreclosed and repossessed assets declined from $6.2 million to $4.2 million over the same period.
  • Tangible book value per common share was $23.54 as of June 30, 2016 as compared to $21.57 at December 31, 2015 and $19.72 at June 30, 2015.
  • Net interest income declined to $13.0 million from $13.9 million in the second quarter of 2015 due to both a decline in earning assets of $20.5 million and an increase in the cost of interest-bearing liabilities from 0.41% to 0.60%. The increase in the cost of interest-bearing liabilities was primarily attributable to the issuance of $25.0 million in subordinated debentures in the fourth quarter of 2015 at a rate of 6.25% to redeem $28.0 million in preferred stock issued under the U.S. Treasury's Small Business Lending Fund program.
  • Fully tax equivalent net interest margin was 3.90%, a decrease from 4.04% for the second quarter of 2015. The decline in the margin was attributable to the same factors that drove the decline in net interest income.
  • Provision for loan losses was $405,000, a decrease from $2.2 million for the same quarter in 2015.
  • Non-interest income increased to $3.6 million from $2.7 million for the same quarter in 2015. The increase was mostly attributable a gain on life insurance benefit of $621,000 and gain on branch divestiture of $422,000 during the second quarter of 2016.
  • Non-interest expense was $12.1 million as compared to $10.5 million for the second quarter of 2015, which was primarily caused by increases in incentive and stock-based compensation between periods.
  • The Company's effective tax rate was 7.7% during the quarter as compared to 14.5% for the first quarter of 2016 due to the gain on life insurance benefit of $621,000 which is tax exempt.
  • 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 as of June 30, 2016.

Selected performance ratios for the company are set out in the following table.

       
Three Months Ended Six Months Ended
June 30,     March 31,     December 31,     September 30,     June 30, June 30,     June 30,
2016     2016     2015     2015     2015     2016     2015
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
 
Return on average assets 0.98 % 0.95 % 0.98 % 0.99 % 0.89 % 0.97 % 0.33 %
Return on average assets, excluding merger and integration expenses, gain on recognition of life insurance benefit, net gain (loss) on sales of available-for-sale securities, gain on branch divestiture, and net loss on sale of loans, net of income taxes 0.78 % 0.95 % 1.05 % 1.01 % 0.92 % 0.91 % 0.64 %
Return on average equity 11.17 % 11.34 % 10.30 % 10.44 % 9.75 % 11.26 % 3.60 %
Return on average equity, excluding merger and integration expenses, gain on recognition of life insurance benefit, net gain (loss) on sales of available-for-sale securities, gain on branch divestiture, and net loss on sale of loans, net of income taxes 8.93 % 11.34 % 11.07 % 10.65 % 10.02 % 10.62 % 7.10 %
Net interest margin, fully tax equivalent 3.90 % 3.91 % 4.08 % 3.94 % 4.04 % 3.90 % 3.95 %
Net interest margin excluding accretion 3.67 % 3.66 % 3.67 % 3.61 % 3.60 % 3.65 % 3.56 %
Efficiency ratio (1) 69.63 % 68.76 % 64.63 % 64.56 % 58.85 % 68.36 % 70.18 %
 

(1) Net interest income on a fully taxable equivalent basis. Excludes gains or losses on sales of securities, foreclosed asset expenses, amortization of intangibles, gain on branch divestiture, gain on recognition of life insurance benefit, and merger and integration expenses.

 
 

Your Community Bankshares, Inc.

Consolidated Balance Sheets

                   
 

 

June 30,
2016

March 31,
2016

December 31,
2015

September 30,
2015 (1)

June 30,
2015 (1)

(Unaudited) (Unaudited) (Unaudited) (Unaudited)
(As Recast) (As Recast)
(In thousands)
ASSETS
Cash and due from financial institutions $ 44,417 $ 24,439 $ 30,425 $ 29,618 $ 28,947
Interest-bearing deposits in other financial institutions 9,676 20,726 13,365 10,814 32,383
Securities available for sale 287,436 348,068 378,978 403,486 398,292
Loans held for sale 851 234 1,015 19,386 390
Loans 1,076,576 1,047,508 1,016,314 992,622 1,008,724
Allowance for loan losses (6,561 ) (6,188 ) (6,851 ) (6,416 ) (8,045 )
Federal Home Loan Bank and Federal Reserve stock 4,233 3,882 3,890 3,891 3,807
Accrued interest receivable 5,359 5,124 5,328 5,151 5,083
Premises and equipment, net 31,916 32,576 33,270 30,314 31,462
Premises and equipment held for sale - - - 3,898 5,954
Company owned life insurance 32,931 33,381 33,127 32,828 33,348
Goodwill 4,945 4,945 4,945 4,945 4,945
Core deposit intangible 4,430 4,716 5,015 5,321 5,634
Foreclosed and repossessed assets 4,166 6,228 9,952 9,261 8,337
Other assets   23,953     24,828     27,242     27,568     29,804  
Total Assets $ 1,524,328   $ 1,550,467   $ 1,556,015   $ 1,572,687   $ 1,589,065  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Non-interest bearing $ 303,039 $ 283,518 $ 286,739 $ 275,350 $ 292,179
Interest-bearing   921,502     954,446     975,325     968,620     1,014,357  
Total deposits 1,224,541 1,237,964 1,262,064 1,243,970 1,306,536
Short-term borrowings 44,507 73,410 48,785 74,034 42,989
Other borrowings 106,927 97,551 108,347 93,974 84,737
Accrued interest payable 437 840 451 375 703
Other liabilities   9,223     7,785     9,282     8,832     8,741  
Total liabilities 1,385,635 1,417,550 1,428,929 1,421,185 1,443,706
 
SHAREHOLDERS' EQUITY
Preferred stock - - - 28,000 28,000
Common stock 578 578 578 578 578
Additional paid-in capital 91,773 91,159 90,869 90,459 89,791
Retained earnings 45,667 42,554 39,512 36,336 33,228
Accumulated other comprehensive income (loss) 5,555 4,183 2,089 2,489 150
Treasury stock   (4,880 )   (5,557 )   (5,962 )   (6,360 )   (6,388 )
Total shareholders' equity   138,693     132,917     127,086     151,502     145,359  
Total Liabilities and Shareholders' Equity $ 1,524,328   $ 1,550,467   $ 1,556,015   $ 1,572,687   $ 1,589,065  
 
Book value per common share $ 25.25   $ 24.36   $ 23.41   $ 22.84   $ 21.53  
Tangible book value per common share $ 23.54   $ 22.60   $ 21.57   $ 21.10   $ 19.72  
 
 

(1) Management obtained information subsequent to the issuance of the September 30, 2015 and June 30, 2015 financial statements about the fair value of assets acquired and liabilities assumed from First Financial Service Corporation which resulted in an adjustment to the initial fair values established. The table below details the adjustments to the September 30, 2015 and June 30, 2015 consolidated balance sheet; there were no adjustments to the consolidated statement of operations for the periods ending September 30, 2015 and June 30, 2015.

 
       
September 30, 2015 June 30, 2015

As Previously
Reported

   

Recast
Adjustments

   

As Recast

As Previously
Reported

   

Recast
Adjustments

   

As Recast

(In thousands)
Loans $ 992,662 $ - $ 992,662 $ 1,005,016 $ 3,708 $ 1,008,724
Loans held for sale 20,896 (1,510 ) 19,386 390 - 390
Premises and equipment held for sale 3,898 - 3,898 5,635 319 5,954
Foreclosed and repossessed assets 9,028 233 9,261 8,354 (17 ) 8,337
Other assets (deferred tax asset) 27,121 447 27,568 30,647 (843 ) 29,804
Goodwill 4,115 830 4,945 6,375 (1,430 ) 4,945
Other borrowings (subordinated debt) 93,974 - 93,974 83,000 1,737 84,737
 
 
       

Your Community Bankshares, Inc.

Consolidated Statements of Operations

 
 
Three Months Ended Six Months Ended
June     March     December     September     June June     June
30, 31, 31, 30, 30, 30, 30,
2016 2016 2015 2015 2015 2016 2015
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
 
Interest and dividend income
Loans, including fees $ 12,639 $ 12,373 $ 12,956 $ 12,361 $ 12,787 $ 25,012 $ 25,310
Investment securities and other   2,001     2,268     2,307     2,334     2,319     4,269     4,552  
Interest and dividend income   14,640     14,641     15,263     14,695     15,106     29,281     29,862  
 
Interest expense
Deposits 551 560 575 570 580 1,111 1,154
Borrowed funds   1,110     1,085     795     731     612     2,195     1,310  
Total interest expense   1,661     1,645     1,370     1,301     1,192     3,306     2,464  
Net interest income 12,979 12,996 13,893 13,394 13,914 25,975 27,398
Provision for loan losses   405     -     330     -     2,155     405     2,261  
Net interest income after provision for loan losses   12,574     12,996     13,563     13,394     11,759     25,570     25,137  
 
Non-interest income
Service charges on deposit accounts 1,471 1,478 1,634 1,655 1,669 2,949 3,060
Interchange income 710 572 700 575 476 1,282 920
Earnings on company owned life insurance 253 254 298 226 253 507 505
Net gain (loss) on sales of available for sale

securities

89 297 204 (1 ) - 386 51
Net loss on sale of loans - - (316 ) - - - -
Mortgage banking income 121 78 104 70 74 199 191
Commission income 45 46 46 48 50 91 97
Gain on recognition of life insurance benefit 621 - - 835 - 621 -
Amortization of tax credit investments (350 ) (350 ) (63 ) (119 ) (92 ) (700 ) (178 )
Gain on branch divestiture 422 - - - - 422 -
Other income   238     189     136     220     222     427     240  
Non-interest income   3,620     2,564     2,806     3,509     2,652     6,184     5,064  
 
Non-interest expense
Salaries and employee benefits 6,281 6,026 6,065 5,619 5,086 12,307 14,205
Occupancy & equipment 1,562 1,752 1,681 2,640 1,672 3,314 3,880
Data processing 1,105 1,089 1,152 1,567 921 2,194 2,735
Amortization of intangible assets 285 299 307 312 318 584 715
Foreclosed assets, net 210 (110 ) 90 119 (95 ) 100 249
Other expense   2,664     2,180     2,589     2,395     2,573     4,844     6,615  
Total non-interest expense   12,107     11,236     11,884     12,652     10,475     23,343     28,399  
 

Income (loss) before income taxes

4,087 4,324 4,485 4,251 3,936 8,411 1,802
Income tax expense (benefit)   318     629     627     334     371     947     (827 )
Net income (loss) 3,769 3,695 3,858 3,917 3,565 7,464 2,629
Preferred stock dividend   -     -     (91 )   (110 )   (109 )   -     (219 )
Net income available to common shareholders $ 3,769   $ 3,695   $ 3,767   $ 3,807   $ 3,456   $ 7,464   $ 2,410  
 
Earnings per basic share $ 0.69 $ 0.68 $ 0.70 $ 0.70 $ 0.64 $ 1.37 $ 0.45
Earnings per diluted share $ 0.68 $ 0.67 $ 0.68 $ 0.70 $ 0.64 $ 1.34 $ 0.44
Dividend per common share $ 0.12 $ 0.12 $ 0.12 $ 0.12 $ 0.12 $ 0.24 $ 0.24
Average number of basic shares 5,467,982 5,449,364 5,413,914 5,405,691 5,383,887 5,458,672 5,379,379
Average number of dilutive shares 5,566,364 5,548,210 5,505,757 5,470,557 5,437,602 5,551,944 5,426,509
 
Merger and integration expenses contained in:
Salaries and employee benefits $ - $ - $ - $ - $ 60 $ - $ 2,165
Occupancy & equipment - - 21 972 - - 310
Data processing - - 59 413 27 - 746
Other expense   302     -     44     20     69     302     702  
Total merger and integration expenses 302 - 124 1,405 156 302 3,923
Total merger and integration expenses, net of income taxes 196 - 81 913 101 196 2,550
 
   

Your Community Bankshares, Inc.

Average Balances, Interest Yields and Costs

 
 

Three Months Ending,

6/30/2016

   

3/31/2016

   

12/31/2015

   

9/30/2015

   

6/30/2015

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 $ 28,946 0.35 % $ 12,327 1.24 % $ 24,233 0.36 % $ 17,489 0.73 % $ 48,008 0.41 %
Taxable securities 200,447 1.83 244,685 1.90 261,870 1.86 283,885 1.78 288,420 1.84
Tax-exempt securities 118,342 5.33 118,927 5.34 117,447 5.27 112,408 5.35 98,423 5.52
Total loans and fees 1,068,274 4.84 1,037,140 4.89 1,019,794 5.13 1,001,041 4.96 1,000,865 5.17
FHLB and Federal Reserve stock   4,048   4.67   3,886   5.07   3,890   4.18   3,837   4.65   4,860   5.69
Total earning assets 1,420,057 4.37 1,416,965 4.38 1,427,234 4.46 1,418,660 4.30 1,440,576 4.37
Less: Allowance for loan losses (6,166 ) (6,318 ) (7,301 ) (7,757 ) (7,532 )
Non-earning assets:
Cash and due from banks 16,799 27,396 28,007 32,263 35,902
Bank premises and equipment, net 32,253 33,078 33,712 36,869 37,778
Other assets   87,094     90,794     87,095     92,150     96,967  
Total assets $ 1,550,037   $ 1,561,915   $ 1,568,747   $ 1,572,185   $ 1,603,691  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
Interest-bearing liabilities:
Savings and other $ 651,192 0.17 % $ 653,364 0.16 % $ 656,227 0.16 % $ 652,860 0.15 % $ 688,831 0.15 %
Time deposits 286,858 0.39 307,936 0.38 324,026 0.38 339,480 0.37 352,394 0.36
Short-term borrowings 62,256 0.43 62,788 0.43 59,004 0.34 50,067 0.32 39,033 0.24
Other borrowings   117,783   3.56   111,685   3.67   92,274   3.20   86,752   3.16   83,170   2.84
Total interest-bearing liabilities 1,118,089 0.60 1,135,773 0.58 1,131,531 0.48 1,129,159 0.46 1,163,428 0.41
 
Non-interest bearing liabilities:
Non-interest demand deposits 287,720 283,859 277,333 285,743 283,101
Accrued interest payable and other liabilities 8,524 11,288 11,366 8,478 10,453
Shareholders' equity   135,704     130,995     148,517     148,805     146,709  
Total liabilities and shareholders' equity $ 1,550,037   $ 1,561,915   $ 1,568,747   $ 1,572,185   $ 1,603,691  
 
Net interest spread 3.77 % 3.80 % 3.98 % 3.84 % 3.96 %
Net interest margin 3.90 3.91 4.08 3.94 4.04
 
   

Accretion and Amortization of Fair Value Adjustments

 
 

Three Months Ending,

6/30/2016

   

3/31/2016

   

12/31/2015

   

9/30/2015

   

6/30/2015

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 $ 432 0.11 % $ 417 0.12 % $ 984 0.27 % $ 648 0.18 % $ 1,016 0.28 %
Interest-bearing deposits 340 0.09 359 0.10 397 0.11 432 0.12 475 0.13
FHLB advances 64 0.02 63 0.02 63 0.02 63 0.02 62 0.02
Subordinated debentures   39 0.01   38 0.01   38 0.01   40 0.01   36 0.01
Total fair value accretion $ 875 0.23 % $ 877 0.25 % $ 1,482 0.41 % $ 1,183 0.33 % $ 1,589 0.44 %
 
                   

Your Community Bankshares, Inc.

Selected Loan Information

 
 

 

June 30,
2016

March 31,
2016

December 31,
2015

September 30,
2015

June 30,
2015

(Unaudited) (Unaudited) (Unaudited)
(As recast) (As recast)
(In thousands)
ACQUIRED LOANS
Loans on non-accrual status $ 1,117 $ 963 $ 1,323 $ 2,257 $ 5,922
Loans past due 90 days or more and still accruing 53 - 68 - -
Foreclosed and repossessed assets   2,265     3,867     7,825     6,023     4,849  
Total non-performing assets 3,435 4,830 9,216 8,047 10,771
 
Allowance for loan losses 79 72 59 205 -
Non-accretable yield on acquired loans 4,845 5,063 5,293 10,949 16,246
 
LEGACY LOANS
Loans on non-accrual status 1,535 1,609 2,694 2,229 6,016
Loans past due 90 days or more and still accruing - - - - 220
Foreclosed and repossessed assets   1,901     2,361     2,127     3,238     3,505  
Total non-performing assets 3,436 3,969 4,821 5,467 9,741
 
Total Legacy Loans 795,699 751,202 704,549 667,281 625,624
Allowance for loan losses 6,482 6,116 6,792 6,211 8,045
 
Allowance for loan losses to legacy loans 0.82 % 0.81 % 0.96 % 0.93 % 1.29 %
 
TOTAL LOANS
Loans on non-accrual status $ 2,652 $ 2,572 $ 4,017 $ 4,486 $ 11,938
Loans past due 90 days or more and still accruing 53 - 68 - 220
Foreclosed and repossessed assets   4,166     6,228     9,952     9,261     8,354  
Total non-performing assets $ 6,871 $ 8,800 $ 14,037 $ 13,747 $ 20,512
 
Non-performing assets to total assets 0.45 % 0.57 % 0.90 % 0.87 % 1.29 %
Allowance for loan losses to total loans 0.61 % 0.59 % 0.65 % 0.80 % 0.71 %
 
                   

Reconciliation of Fully Tax Equivalent Adjustments to GAAP Net Interest Income

 
 

6/30/2016

3/31/2016

12/31/2015

9/30/2015

6/30/2015

Net
Interest
Income

   

Yield

Net
Interest
Income

   

Yield

Net
Interest
Income

   

Yield

Net
Interest
Income

   

Yield

Net
Interest
Income

   

Yield

GAAP net interest income $ 12,979 3.68 % $ 12,996 3.69 % $ 13,893 3.86 % $ 13,394 3.75 % $ 13,914 3.87 %
 
Tax equivalent adjustment
Investment securities 548 0.16 552 0.16 546 0.15 530 0.15 474 0.14
Loans   227 0.06     226 0.06     225 0.07     154 0.04     115 0.03  
Total tax equivalent adjustment 775 0.22 778 0.22 771 0.21 684 0.19 589 0.17
 
Tax equivalent net interest income $ 13,754 3.90 % $ 13,774 3.91 % $ 14,664 4.08 % $ 14,078 3.94 % $ 14,503 4.04 %
 

About Your Community Bankshares, Inc.

Your Community Bankshares, Inc. is a bank holding company headquartered in New Albany, Indiana and includes its wholly owned, state-chartered subsidiary bank, Your Community Bank. The Company operates 36 financial centers in Indiana and Kentucky. The Bank is 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 and automobile loans. Additionally, the Bank originates and sells into the secondary market mortgage loans for the purchase of single-family homes. For more information visit www.yourcommunitybank.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 2015 Form 10-K and subsequent 10-Q filed with the Securities and Exchange Commission.

Your Community Bankshares, Inc.
Paul Chrisco, 812-981-7375
CFO

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