Your Community Bankshares, Inc. - FORM 8-K - EX-99.1

Attached files

file	filename
8-K - 8-K - Your Community Bankshares, Inc.	a15-16338_18k.htm

Exhibit 99.1

Your Community Bankshares, Inc. reports 2nd quarter net income available to common shareholders of $3.5 million, or $0.64 per diluted common share and 3rd quarter dividend

New Albany, Ind. (July 27, 2015) — Your Community Bankshares, Inc. (YCB) reported second quarter net income available to common shareholders of $3.5 million and earnings per diluted common share of $0.64. 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 $3.6 million, or $0.65 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). The Company also announced that on July 21, 2015 its board of directors declared a quarterly cash dividend on the Company’s common stock of $0.12 per share payable on August 27, 2015 to shareholders of record on August 10, 2015.

“We are pleased with the reduction in non-performing assets that our experienced credit administration team realized during the second quarter. Total acquired non-performing assets were down 48% during the second quarter while legacy non-performing assets were down 17%,” stated James Rickard, President and Chief Executive Officer. “We are very proud of the credit administration team we have in place and the job they have done in resolving both our legacy and acquired problem assets.”

“We recorded a larger provision for loan losses during the second quarter because of one large commercial relationship, which is one of the last large legacy problem loan situations remaining,” Mr. Rickard continued. “Negotiations with the borrower revealed new information that caused us to re-evaluate the collectability of the remaining loan principal. The results of this re-evaluation resulted in most of the $2.2 million in provision we recognized during the quarter.”

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

· Net income for the second quarter of 2015 was $3.6 million while net income available to common shareholders was $3.5 million. Excluding merger and integration expenses of $156,000 ($101,000, net of tax), net income would have been $3.7 million.

· Non-performing assets to total assets declined to 1.31% at June 30, 2015 from 2.06% at March 31, 2015. Non-accrual loans declined from $16.8 million at March 31, 2015 to $12.2 million at June 30, 2015. Foreclosed and repossessed assets declined from $15.8 million to $8.4 million over the same period.

· Tangible book value per common share was $19.31 as of June 30, 2015 as compared to $20.55 at 12/31/2014 and $18.99 at June 30, 2014.

· Net interest income increased to $13.9 million from $13.5 million in the first quarter of 2015 due primarily to a change in asset mix that resulted in an increase in the yield on earning assets from 4.22% in the first quarter of 2015 to 4.37% in the second quarter. Average tax-exempt securities and total loans increased by $15.2 million and $7.3 million respectively, while taxable securities and interest-bearing deposits with banks declined by $30.3 million and $15.1 million.

· Fully tax equivalent net interest margin was 4.04%, an increase from 3.87% for the first quarter of 2015. The increase in the margin was attributable to the same factors that drove the increase in net interest income.

· Provision for loan losses was $2.2 million, an increase from $190,000 for the same quarter in 2014. The increase in provision was mostly due to one large commercial borrower relationship. Non-interest income increased to $2.7 million compared to $2.4 million for the first quarter of 2015. The increase was mostly attributable to lower non-interest income in the first quarter caused by disruption related to the conversion of FFKY customer data to YCB systems.

· Non-interest expense was $10.5 million as compared to $17.9 million for the first quarter of 2015. The decrease was due to merger and integration expenses in the first quarter of $3.8 million compared to $156,000 in the second quarter of 2015 related to the acquisition of FFKY. In addition to the reduction in merger and integration expenses, salaries and benefits declined because of attrition in financial centers acquired from FFKY and the reduction of non-customer contact support staff. Due to higher than budgeted provision for loan losses, the Company reduced its incentive compensation, which is accrued for based on net income relative to its budget excluding incentive compensation expense.

· The Company’s effective tax rate was 9.43% during the quarter due to the recognition of $438,000 in low-income housing tax credits acquired from FFKY during the period, $219,000 of which were attributable to the first quarter. Excluding the amount attributable to the first quarter, the effective tax rate would have been 15.00%.

· 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, 2015.

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

	Three Months Ended										Six Months Ended
	June		March		December		September		June		June		June
	30,		31,		31,		30,		30,		30,		31,
	2015		2015		2014		2014		2014		2015		2014
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)

Return on average assets	0.89	%	(0.23	)%	1.11	%	1.07	%	1.00	%	0.33	%	1.01	%
Return on average assets, excluding merger and integration expenses, net of income taxes	0.92	%	0.37	%	1.17	%	1.12	%	1.07	%	0.64	%	1.05	%
Return on average equity	9.75	%	(2.57	)%	9.83	%	9.59	%	9.25	%	3.60	%	9.36	%
Return on average equity, excluding merger and integration expenses, net of income taxes	10.02	%	4.16	%	10.46	%	10.11	%	9.88	%	7.10	%	9.75	%
Net interest margin, fully tax equivalent	4.04	%	3.87	%	4.52	%	4.28	%	4.24	%	3.95	%	4.18	%
Efficiency ratio (1)	58.85	%	82.07	%	57.15	%	66.15	%	62.02	%	70.18	%	64.48	%

(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.

Your Community Bankshares, Inc.

Consolidated Balance Sheets

	June 30, 2015			March 31, 2015 (1)			December 31, 2014			September 30, 2014			June 30, 2014
	(Unaudited)			(Unaudited)			(In thousands)			(Unaudited)			(Unaudited)
				(As Recast)
ASSETS
Cash and due from financial institutions	$	28,947		$	45,784		$	12,872		$	14,540		$	19,350
Interest-bearing deposits in other financial institutions	32,383			56,290			6,808			5,655			18,727
Securities available for sale	398,292			385,498			202,177			202,174			199,071
Loans held for sale	390			221			—			—			246
Loans	1,005,016			1,001,708			603,575			593,124			588,160
Allowance for loan losses	(8,045		)	(7,120		)	(6,465		)	(7,784		)	(8,481		)
Federal Home Loan Bank and Federal Reserve stock	3,807			5,451			4,964			5,964			5,964
Accrued interest receivable	5,083			4,802			3,152			3,028			3,144
Premises and equipment, net	31,462			31,793			18,124			17,986			18,204
Premises and equipment held for sale	5,635			5,655			—			—			—
Company owned life insurance	33,348			33,095			22,058			21,887			21,718
Goodwill	6,375			6,375			—			—			—
Core deposit intangible	5,634			5,951			682			759			839
Foreclosed and repossessed assets	8,354			15,945			4,431			4,677			6,029
Other assets	30,647			29,170			16,368			3,945			2,945
Total Assets	$	1,587,328		$	1,620,618		$	888,746		$	865,955		$	875,916

LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits
Non-interest bearing	$	293,179		$	285,634		$	200,142		$	187,592		$	201,259
Interest-bearing	1,014,357			1,052,089			450,802			467,619			482,356
Total deposits	1,307,536			1,337,723			650,944			655,211			683,615
Short-term borrowings	42,989			39,228			45,818			37,070			37,459
Subscription agreement proceeds in escrow	—			—			20,774			—			—
Other borrowings	83,000			83,874			67,000			72,000			57,000
Accrued interest payable	703			462			158			87			87
Other liabilities	8,741			14,059			4,504			5,099			3,566
Total liabilities	1,442,969			1,475,346			789,198			769,467			781,727

SHAREHOLDERS’ EQUITY
Preferred stock (2)	28,000			28,000			28,000			28,000			28,000
Common stock	578			578			386			386			386
Additional paid-in capital	89,791			89,342			44,421			44,085			43,948
Retained earnings	32,228			30,419			32,110			30,196			28,403
Accumulated other comprehensive income	150			3,788			1,809			1,035			754
Treasury stock	(6,388		)	(6,855		)	(7,178		)	(7,214		)	(7,302		)
Total shareholders’ equity	144,359			145,272			99,548			96,488			94,189
Total Liabilities and Shareholders’ Equity	$	1,587,328		$	1,620,618		$	888,746		$	865,955		$	875,916

Book value per common share	$	21.53		$	21.81		$	20.75		$	19.88		$	19.24
Tangible book value per common share	$	19.31		$	19.51		$	20.55		$	19.66		$	18.99

(1) Management obtained information subsequent to the issuance of the March 31, 2015 financial statements about the fair value of assets acquired from First Financial Service Corporation which resulted in an adjustment to the initial fair values established. The table below details the adjustments to the March 31, 2015 consolidated balance sheet; there were no adjustments to the consolidated statement of operations for the period ending March 31, 2015.

	March 31, 2015
	As Previously Reported		Recast Adjustments			As Recast
	(In thousands)
Loans	$	999,906	$	1,802		$	1,001,708
Premises and equipment held for sale	6,155		(500		)	5,655
Foreclosed and repossessed assets	15,818		127			15,945
Other assets (deferred tax asset)	29,430		(260		)	29,170
Goodwill	7,544		(1,169		)	6,375

(2) 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.

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,
	2015			2015			2014			2014			2014			2015			2014
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
	(In thousands)
Interest and dividend income
Loans, including fees	$	12,787		$	12,523		$	7,911		$	7,317		$	7,098		$	25,310		$	13,722
Investment securities and other	2,319			2,233			1,322			1,313			1,312			4,552			2,689
Interest and dividend income	15,106			14,756			9,233			8,630			8,410			29,862			16,411

Interest expense
Deposits	580			574			245			255			267			1,154			520
Borrowed funds	612			698			291			201			206			1,310			429
Total interest expense	1,192			1,272			536			456			473			2,464			949
Net interest income	13,914			13,484			8,697			8,174			7,937			27,398			15,462
Provision for loan losses	2,155			106			637			166			190			2,261			472
Net interest income after provision for loan losses	11,759			13,378			8,060			8,008			7,747			25,137			14,990

Non-interest income
Service charges on deposit accounts	1,669			1,391			854			874			835			3,060			1,627
Interchange income	476			444			287			281			330			920			600
Earnings on company owned life insurance	253			252			170			169			168			505			332
Net gain on sales of available for sale securities	—			51			—			172			1			51			296
Mortgage banking income	74			117			42			40			28			191			44
Commission income	50			47			48			50			48			97			96
Other income	130			110			128			113			130			240			222
Non-interest income	2,652			2,412			1,529			1,699			1,540			5,064			3,217

Non-interest expense
Salaries and employee benefits	5,086			9,119			3,276			3,869			3,366			14,205			6,733
Occupancy & equipment	1,672			2,208			966			971			850			3,880			1,877
Data processing	921			1,814			670			618			663			2,735			1,329
Core deposit intangible amortization	318			397			78			80			81			715			164
Foreclosed assets, net	(95		)	344			118			(148		)	53			249			191
Other expense	2,573			4,042			1,444			1,467			1,516			6,615			2,786
Total non-interest expense	10,475			17,924			6,552			6,857			6,529			28,399			13,080

Income (loss) before income taxes	3,936			(2,134		)	3,037			2,850			2,758			1,802			5,127

Income tax expense (benefit)	371			(1,198		)	600			534			610			(827		)	867
Net income (loss)	3,565			(936		)	2,437			2,316			2,148			2,629			4,260

Preferred stock dividend	(109		)	(110		)	(110		)	(110		)	(109		)	(219		)	(219		)
Net income (loss) available (attributable) to common shareholders	$	3,456		$	(1,046	)	$	2,327		$	2,206		$	2,039		$	2,410		$	4,041

Earnings (loss) per basic share	$	0.64		$	(0.19	)	$	0.68		$	0.64		$	0.59		$	0.45		$	1.18
Earnings (loss) per diluted share	$	0.64		$	(0.19	)	$	0.66		$	0.63		$	0.59		$	0.44		$	1.17
Dividend per common share	$	0.12		$	0.12		$	0.12		$	0.12		$	0.12		$	0.24		$	0.24
Average number of basic shares	5,383,887			5,374,819			3,446,486			3,443,787			3,438,794			5,379,379			3,430,025
Average number of dilutive shares	5,437,602			5,374,819			3,499,951			3,480,816			3,468,424			5,426,509			3,461,288

Merger and integration expenses contained in:
Salaries and employee benefits	60			2,105			—			—			—			2,165			—
Occupancy & equipment	—			310			—			—			—			310			—
Data processing	27			719			—			—			—			746			—
Other expense	69			633			238			190			223			702			269
Total merger and integration expenses	156			3,767			238			190			223			3,923			269
Total merger and integration expenses, net of income taxes	101			2,486			157			125			147			2,550			177

Your Community Bankshares, Inc.

Average Balances, Interest Yields and Costs

	Three Months Ending,
	6/30/2015					03/31/2015					12/31/2014					09/30/2014					06/30/2014
	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
	(In thousands)
ASSETS
Earning assets:
Interest-bearing deposits with banks	$	48,008		0.41	%	$	63,092		0.36	%	$	6,113		0.39	%	$	14,424		0.51	%	$	13,433		0.26	%
Taxable securities	288,420			1.84		318,695			1.71		117,961			1.78		109,297			1.76		112,139			1.75
Tax-exempt securities	98,423			5.52		83,217			5.57		80,416			5.49		80,809			5.50		81,619			5.59
Total loans and fees	1,000,865			5.17		993,536			5.15		595,578			5.34		592,327			4.97		583,345			4.94
FHLB and Federal Reserve stock	4,860			5.69		6,484			5.94		5,768			3.71		5,964			4.78		5,962			4.24
Total earning assets	1,440,576			4.37		1,465,024			4.22		805,836			4.78		802,621			4.50		796,498			4.47
Less: Allowance for loan losses	(7,532		)			(6,838		)			(7,743		)			(8,505		)			(8,501		)
Non-earning assets:
Cash and due from banks	35,902					38,987					22,388					16,032					16,788
Bank premises and equipment, net	37,778					38,135					17,959					18,143					18,376
Other assets	96,967					124,855					40,034					38,889					39,963

Total assets	$	1,603,691				$	1,660,163				$	878,474				$	867,180				$	863,124

LIABILITIES AND SHAREHOLDERS’ EQUITY

Interest-bearing liabilities:
Savings and other	$	688,831		0.15	%	$	697,094		0.15	%	$	338,104		0.18	%	$	338,092		0.18	%	$	329,190		0.20	%
Time deposits	352,394			0.36		377,230			0.33		133,684			0.28		138,573			0.28		144,331			0.29
Short-term borrowings	39,033			0.24		38,253			0.23		42,819			0.24		35,879			0.21		39,813			0.23
Other borrowings	83,170			2.84		87,999			3.12		71,837			1.46		57,707			1.25		60,187			1.22
Total interest-bearing liabilities	1,163,428			0.41		1,200,576			0.43		586,444			0.36		570,251			0.32		573,521			0.33

Non-interest bearing liabilities:
Non-interest demand deposits	283,101					279,879					185,844					195,011					191,466
Accrued interest payable and other liabilities	10,453					32,251					7,800					6,127					4,968
Shareholders’ equity	146,709					147,457					98,386					95,791					93,169

Total liabilities and shareholders’ equity	$	1,603,691				$	1,660,163				$	878,474				$	867,180				$	863,124

Net interest spread				3.96	%				3.79	%				4.42	%				4.18	%				4.14	%
Net interest margin				4.04					3.87					4.52					4.28					4.24

Accretion and Amortization of Fair Value Adjustments

	Three Months Ending,
	6/30/2015				03/31/2015				12/31/2014				09/30/2014				06/30/2014
	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
	(In thousands)
Loans	$	1,016	0.28	%	$	601	0.17	%	$	775	0.38	%	$	126	0.06	%	$	61	0.03	%
Interest-bearing deposits	475		0.13		542		0.15		—		0.00		—		0.00		—		0.00
FHLB advances	62		0.02		62		0.02		—		0.00		—		0.00		—		0.00
Subordinated debentures	36		0.01		33		0.01		—		0.00		—		0.00		—		0.00
Total fair value accretion	$	1,589	0.44	%	$	1,238	0.34	%	$	775	0.38	%	$	126	0.06	%	$	61	0.03	%

Your Community Bankshares, Inc.

Selected Loan Information

	June 30, 2015			March 31, 2015 (1)			December 31, 2014			September 30, 2014			June 30, 2014
	(Unaudited)			(Unaudited)			(In thousands)			(Unaudited)			(Unaudited)
				(As recast)
ACQUIRED LOANS
Loans on non-accrual status	$	6,168		$	10,368		$	96		$	178		$	400
Loans past due 90 days or more and still accruing	—			—			—			—			—
Foreclosed and repossessed assets	4,849			12,409			254			126			820
Total non-performing assets	11,017			22,777			350			304			1,220

Non-accretable yield on acquired loans	16,246			16,752			571			849			878

LEGACY LOANS
Loans on non-accrual status	6,016			7,354			7,439			9,031			9,189
Loans past due 90 days or more and still accruing	220			803			—			55			—
Foreclosed and repossessed assets	3,505			3,535			4,177			4,551			5,209
Total non-performing assets	9,741			11,692			11,616			13,637			14,398

Total Legacy Loans	625,624			588,076			570,864			556,525			549,192
Allowance for loan losses	8,045			7,120			6,465			7,784			8,481

Allowance for loan losses to legacy loans	1.29		%	1.21		%	1.13		%	1.40		%	1.54		%

TOTAL LOANS
Loans on non-accrual status	$	12,184		$	17,722		$	7,535		$	9,209		$	9,589
Loans past due 90 days or more and still accruing	220			803			—			55			—
Foreclosed and repossessed assets	8,354			15,944			4,431			4,677			6,029
Total non-performing assets	20,759			34,469			11,966			13,941			15,618

Non-performing assets to total assets	1.31		%	2.13		%	1.35		%	1.60		%	1.78		%
Allowance for loan losses to total loans	0.81		%	0.72		%	1.07		%	1.31		%	1.44		%

(1) Management obtained information subsequent to the issuance of the March 31, 2015 financial statements about the fair value of assets acquired from First Financial Service Corporation which resulted in an adjustment to the initial fair values established. The adjustments are reflected in the selected loan information reported as March 31, 2015 above.

Reconciliation of Fully Tax Equivalent Adjustments to GAAP Net Interest Income

	6/30/2015				3/31/2015				12/31/2014				9/30/2014				6/30/2014
	Net Interest Income		Yield		Net Interest Income		Yield		Net Interest Income		Yield		Net Interest Income		Yield		Net Interest Income		Yield
	(In thousands)
GAAP net interest income	$	13,914	3.87	%	$	13,484	3.73	%	$	8,697	4.28	%	$	8,174	4.04	%	$	7,937	4.00	%

Tax equivalent adjustment
Investment securities	474		0.14		400		0.11		379		0.19		381		0.19		387		0.20
Loans	115		0.03		102		0.03		100		0.05		100		0.05		88		0.04
Total tax equivalent adjustment	589		0.17		502		0.14		479		0.24		481		0.24		475		0.24

Tax equivalent net interest income	14,503		4.04	%	13,986		3.87	%	9,176		4.52	%	8,655		4.28	%	8,412		4.24	%

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 June 30, 2015 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 June 30, 2015			Earnings per common share impact
	(In thousands)
Net income available to common shareholders reconciliation:
Net income available to common shareholders as reported	$	3,456		$	0.64
Less: Merger and integration expenses reported in non-interest expense	156			0.02
Less: Tax effect of merger and integration charges	(55		)	(0.01		)
Net income available to common shareholders excluding merger and integration expense and related tax effect	$	3,557		$	0.65

Net income reconciliation:
Net income as reported	$	3,565
Less: Merger and integration expenses reported in non-interest expense	156
Less: Tax effect of merger and integration charges	(55		)
Net income excluding merger and integration expense and related tax effect	$	3,776

Non-interest expense reconciliation:
Non-interest expenses as reported	$	10,475
Less: Merger and integration charges	(156		)
Non-interest expense excluding merger and integration expense and related tax effect	$	10,319

About Your Community Bankshares, Inc.

Your Community Bankshares, 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 and subsequent 10-Q filed with the Securities and Exchange Commission.

###

CONTACT:

Paul Chrisco
CFO

Your Community Bankshares, Inc.

812-981-7375

Attached files

Stock widget

Investing forum

Your Community Bankshares, Inc. Reports