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Edited Transcript of ESXB.OQ earnings conference call or presentation 26-Jul-19 2:00pm GMT

Q2 2019 Community Bankers Trust Corp Earnings Call

RICHMOND Jul 30, 2019 (Thomson StreetEvents) -- Edited Transcript of Community Bankers Trust Corp earnings conference call or presentation Friday, July 26, 2019 at 2:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Bruce E. Thomas

Community Bankers Trust Corporation - Executive VP & CFO

* Rex L. Smith

Community Bankers Trust Corporation - President, CEO & Director

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Conference Call Participants

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* Austin Lincoln Nicholas

Stephens Inc., Research Division - VP and Research Analyst

* Charlie Hough

Sandler O'Neill + Partners, L.P., Research Division - Equity Research Associate

* John Lawrence Rodis

FIG Partners, LLC, Research Division - Former Senior VP & Research Analyst

* Stuart Lotz

Keefe, Bruyette, & Woods, Inc., Research Division - Research Analyst

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Presentation

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Operator [1]

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Good day and welcome to the Community Bankers Trust Corporation Second Quarter 2019 Earnings Conference Call. (Operator Instructions) Please note, this event is being recorded.

I would now like to turn the conference over to Rex Smith, President and CEO. Please go ahead.

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Rex L. Smith, Community Bankers Trust Corporation - President, CEO & Director [2]

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Good morning and thank you for your patience. Thanks for joining us today as we review the results of the second quarter and the first 6 months of 2019 for Community Bankers Trust Corporation, which is the holding company for Essex Bank.

Let me start with a reminder that during the course of our remarks today, we may make forward-looking statements within the meaning of applicable securities laws with respect to our operations, performance, future strategy and goals. I'll remind everyone that our actual results may differ materially from those included in the forward-looking statements due to a number of factors. These factors and additional risk and uncertainties are included in our earnings release and most recent Form 10-K and other reports of Community Bankers Trust Corporation files with or furnishes to the Securities and Exchange Commission. You can access all these documents through our website at www.cbtrustcorp.com.

I will start today's call with a quick overview of the quarter and the first half of the year, and then Bruce Thomas, our Chief Financial Officer will cover detailed -- selected financial highlights, and I will conclude with our thoughts and strategies for the rest of the year.

I am pleased to report that the company posted a 10.5% increase in 6 months earnings year-over-year. Earnings for the first 6 months of 2019 were $7 million or $0.32 per share. This is an increase of $671,000 over the same period of 2018. This increase is also after a provision expense of $125,000 for 2019 with no provision expense for the same period last year. The increase is attributable to numerous positive factors in the core operating metrics for the company. Loan growth, excluding PCI loans, increased approximately $57 million or just under 6% year-over-year. For the first 6 months, loans increased $30.5 million or just over 6% annualized. Additionally, the yield on loans increased 26 basis points from the second quarter of 2018 despite both the competitive nature of our markets and a change in loan mix to more adjustable rate loans. This performance exceeds both our projected growth rate and loan yield expectations for the first half of 2019.

The bank also increased its growth rate in demand deposits for the first half of 2019. Noninterest-bearing deposits grew $28.4 million or 18.7% year-over-year compared to 9.7% growth year-over-year for the same period from June 2017 to June 2018. Noninterest-bearing deposits are almost 15% of total deposits compared to 13.5% of total deposits this time last year. I believe, this shows that we can continue our double-digit growth in these accounts, which will continually decrease our cost of funds moving forward.

Unfortunately, our total deposit costs were up due to a significant amount of certificate of deposit maturities repricing when rates were comparatively high. But our weighted average life on most of those CDs was 6 months. And so if rates continue to drop, we will be able to reprice a fair amount of them by year-end.

The tax equivalent net interest margin was 3.69% for the second quarter, which was just slightly lower than the 3.73% for the same period in 2018. Despite the higher funding cost, net interest income increased $1 million or 4.4% for the 6 months period year-over-year.

Noninterest income also continued to improve with a 43.1% increase on a linked-quarter basis. Much of the increase was due to gains on sales of securities, but it was also a result of increases in service charges on deposit accounts, increases in mortgage loan income and increases in financial services fees. Noninterest expense was slightly up, but that includes some onetime termination expenses associated with the closing of a nonperforming branch and a pension expense from the retirement of a long-time senior officer.

I will now turn the call over to our Chief Financial Officer, Bruce Thomas, to discuss the details on the financial results of the quarter.

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Bruce E. Thomas, Community Bankers Trust Corporation - Executive VP & CFO [3]

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Thank you, Rex, and thank you to all of you for taking time out to listen about our second quarter of 2019 results and our thoughts about the future of the company.

Net income of $3.5 million in the second quarter 2019 equates to basic and fully diluted earnings per share of $0.16. The annualized return on assets was 1.01%, and the annualized return on equity was 9.79%. For the 6 months ended June 30, 2019, net income of $7 million equates to basic earnings per share of $0.32 and fully diluted earnings per share of $0.31. The annualized return on assets was 1.01%, and the annualized return on equity was 9.90%.

The second quarter of 2019 was affected by onetime cost of $254,000. These costs decreased net income by $201,000 for the quarter, which when annualized, had a meaningful negative impact on ROA and ROE, but will improve our run rate in future quarters. $210,000 of these costs were from the closing of the Fairfax office, and $44,000 was a onetime pension expense from a retirement of a senior officer of the bank. Excluding these onetime charges, our ROA would have been 1.06%, and ROE would've been 10.34% for the second quarter of 2019.

Next, we recorded a provision for loan losses of $125,000 in the second quarter of 2019. As a result of improving asset quality throughout 2018, there was no provision recorded during that year. Given that virtually all of our allowance is allocated to various portions of the loan portfolio, loan growth and even the slightest deterioration in credit will warrant additional provision in future quarters.

Competition for funding was fierce among all banks for most of the second quarter. The second quarter started with thoughts of higher rates and ended with the forward interest rate curve making a 100% estimate of lowered rates in July. Our cost of interest-bearing liabilities increased from 1.38% in the first quarter of 2019 to 1.45% in the second quarter of 2019. The second quarter versus second quarter year-over-year increase was from 1.08% to 1.45%.

In spite of this, our margin has held up remarkably well. The net interest margin was 3.69% in the second quarter of 2019 and 3.75% for the first 6 months of 2019. The 6-month 2019 margin is unchanged from that of the first 6 months of 2018. That is in spite of a decline in the net interest spread from 3.58% for the first 6 months of 2018 to 3.51% in the first 6 months of 2019. The reason that our margin has remained constant even with the lower interest spread is because of several factors.

First, the average balance of noninterest-bearing deposits grew $15.2 million year-over-year. Additionally, the average balance of shareholder's equity increased $16.4 million. 2019 totals for shareholder's equity include the payment of a dividend to common shareholders that did not happen in 2018. In total, the average balance of total assets grew by $59.8 million year-over-year. 63.8% of that growth was funded by noninterest-bearing sources. This has enabled us to maintain our margin in spite of the higher increase in the cost of funds than in the yield on assets, which resulted in the decreased interest spread.

The margin has held up over the course of the last year. The question is, how are they going to hold up now that it looks as if rates will be headed lower? And we will continue to operate in a very flat yield curve. Intensifying this situation is the effect from the yield curve having its lowest points at the 3- and 5-year spots, where many banks make their loan pricing decisions.

Analyzing our loans at June 30, 2019, we find that 61.7% of our loan portfolio is adjustable rate. That is $625 million. Of that total, $494 million or 79.1% of those loans have an interest rate floor. Drilling down further, we see that $269 million or 43% of the total adjustable rate loan portfolio are 50 basis points or less from their floor. This will help our yield on earning assets if, as predicted, rates go appreciably lower.

I'm happy with some of the measures we undertook during the quarter that will give us flexibility and allow us to reprice our liabilities in a quick time frame. Of our maturing CDs starting on July 1, 2019, $261.9 million or 40.6% of CDs are repriceable by year-end 2019. Another $240.3 million or 37.1% are repriceable between January and June of next year, bringing the total to $502.2 million or 77.7% of all CDs that will get repriced in the next year.

Additionally, we have taken further measures to stay nimble on the funding side of the ledger. During the second quarter of 2019, we placed $10 million of -- replaced $10 million of brokered funding with $15 million of funding. Half of that funding was short-term funding and will reprice and mature by year-end. The other $7.5 million we took on at longer terms, while there was still speculation of higher rates. However, we paid additional basis points that gave us a put option prior to year-end. Should rates go lower as predicted, we have the ability to return the funding back to the depositor.

The low level of federal home loan bank borrowings and broker deposits as well as our strong noninterest-bearing deposit growth will give us the flexibility to do so, if it is beneficial. Likewise, we have a $30 million notional swap that matures on November 7, 2019, at a fixed rate of 1.69%. We have taken on a blended strategy at a forward start date, the same day the swap matures and that strategy will come on our books November 7, 2019, at a blended rate of 1.22%.

This all shows that even though we're slightly asset sensitive, we work hard to protect our margins in the uncertain world of the direction of interest rates. Our interest-rate rift modeling shows a preserved margin generated by our balance sheet in a multitude of interest rate scenarios.

With that, I will turn the call back over to Rex.

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Rex L. Smith, Community Bankers Trust Corporation - President, CEO & Director [4]

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Thank you, Bruce. I am pleased with the consistent improvement in the majority of our core metrics, but I'm also focused on some trends that we need to improve. I believe that a disciplined approach to growth and pricing and a strong commitment to lowering our funding cost helps continue to grow our franchise value. We've faced an unconventional interest rate environment, but we've managed to keep the growth rates we desire, while keeping the balance sheet flexible for whatever may come ahead. We have focused on maintaining rate floors in our adjustable-rate loans and therefore, protection for the predicted rate environment. Still, we need to significantly change our funding mix and therefore, our cost of funds, especially in a lower interest rate environment.

We continue to emphasize the importance of demand deposit growth, and I believe, the current growth rate shows that we have the ability to continue to attract those long-term low-cost relationships. We also continue to focus on the most efficient and effective ways to gain profitable market share, which includes our customer service call center and our digital banking platform. We continue to gain momentum in our newer branch offices, and as we have shown, we will not hesitate to close those that cannot meet a desired rate of returns.

I believe this quarter's earnings show that our future is very strong. We continue to gain positive market share in 3 of the best growth markets in the Mid-Atlantic, and we were able to post consistent earnings, while including a provision and some other onetime noninterest expenses.

I hope that you, our investors, are also pleased with our results, and we're looking forward to the rest of 2019. I thank all of you who participated in the call today and for your ongoing support of the company.

With that, we'd like to open the call for any questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question today will come from Casey Whitman of Sandler O’Neill.

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Charlie Hough, Sandler O'Neill + Partners, L.P., Research Division - Equity Research Associate [2]

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This is Charlie Hough. I'm on for Casey Whitman today. So as you think about your loan growth this quarter, just curious timing-wise if most of the growth occurred towards the end of the quarter, so we have yet to see the full benefit to interest income. Would you say that is a fair assessment?

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Rex L. Smith, Community Bankers Trust Corporation - President, CEO & Director [3]

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I think as I went back and looked at it, for a call we're going to do all our associates next week, it was a -- we had a good January and then things got slow from February till, like, April. But towards the middle of May and through June, there was significant growth, and I think that will -- you'll see that start to come forward in this coming quarter.

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Charlie Hough, Sandler O'Neill + Partners, L.P., Research Division - Equity Research Associate [4]

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Okay. Great. And then obviously, at a faster pace of loan growth on an end-to-period basis this quarter. Did the level of paydowns in the CRE book come down? And then secondly, are you still thinking growth will come in around the 6%-ish range for the year?

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Rex L. Smith, Community Bankers Trust Corporation - President, CEO & Director [5]

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Yes. I think we’re going to be at 6%. And I was very encouraged because it's been for the last 2 years that first quarter of the year for us has been either no growth or negative growth. And so we have gone to the first quarter with a decent amount of growth and then the second quarter last year was probably running about 3% annualized. And so it's double, and the pipeline looks really good and we've got a lot of good projects out there. So I think, I'm very encouraged by that, and I think it is going to come and probably we're going to hit that 6% mark.

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Charlie Hough, Sandler O'Neill + Partners, L.P., Research Division - Equity Research Associate [6]

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Okay. Great. And then just lastly. I was wondering if you could provide an update on the M&A and capital strategy, maybe for the back half of the year.

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Rex L. Smith, Community Bankers Trust Corporation - President, CEO & Director [7]

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Yes. So I mean, we started the dividends, and we continually look at that. Stock buyback is always something that's out there that's being considered. It's -- that one's a little -- it's one thing that we still carry that retained deficit. So that makes the stock buyback timing-wise a little more difficult to try to achieve it in a way we'd like to achieve it until we get rid of that. But that comes off fourth quarter of this year, so we continue to look at that.

And the M&A, as I tell people, the phone lines are wide open. We've had some discussions with some folks that we like talking with at the VBA from aside of -- are looking at an acquisition. But things are quiet right now. We spent a lot of time -- we talk with all of our investment banking partners. And we've got some good relationships with a lot of the folks out there. And they are saying it's -- I don't know if it's summer or where the markets have been, the rates, but it's a little quiet right now, but we always keep the lines open.

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Operator [8]

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(Operator Instructions) Our next question will come from Austin Nicholas with Stephens.

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Austin Lincoln Nicholas, Stephens Inc., Research Division - VP and Research Analyst [9]

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I appreciate your comments, and I apologize I jumped on a little bit late, but just on the margin. Maybe just any commentary on your outlook for the back half of the year? And then maybe a little bit more specifically, how we should be thinking about the impact just from a 25 basis points move in the earlier quarters and then how that maybe impacts the margin as you look out more towards 1Q of next year?

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Rex L. Smith, Community Bankers Trust Corporation - President, CEO & Director [10]

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First of all, obviously, the margin is presented on an annualized basis. So small things have a magnified impact that -- on just looking at one quarter and just a little commentary on our second quarter net interest margin. And I was scratching this out this morning, anticipating questions. We had -- and we have very few of these. We do have a fairly sizable -- about $18 million USDA and SBA loan portfolio. Not mean -- not huge, but it's been helpful. We pretty much amortized the premium off that entire portfolio, and it has a really great yield and it's 100% government guaranteed. Almost all of those are USDA loans.

We had an SBA loan that paid off and the -- and was a fairly new loan paid off in the second quarter, and that had an unamortized premium of $77,000 on it. And I backed that out and then -- or added it back and recalculated our yield, and the yield on the loan portfolio would've been 5.04%, which was exactly what it was in the first quarter. So we would have seen no deterioration in the yield on loans in the second quarter had that loan not paid off. So just a little sidebar there.

And likewise, on the security side, there was some amortized premiums SBA loan pools that paid down a little quicker than normal, higher CPR. And as a result, just on that 1 month of June, we had -- I estimated $45,000 over the normal run rate for amortization. Put that back and recalculate the securities yield and it would've been 3.31% versus 3.35% to prior quarter.

I go through that exercise to state that, I think, even if rates get cut by 25 basis points on July 31, we still may see a couple of basis points increase in the cost of funds in the third quarter, but I fully anticipate that we're going to see a rebound in the yield on earning assets more resembling what we had in the first quarter as opposed to this quarter. We just got kind of a double whammy on the asset side. And so I anticipate that we may see a tick up of a couple of basis points on both top and the bottom of the house. Therefore, I really don't look at much in the way of change in regard to our net interest margin for the third quarter.

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Austin Lincoln Nicholas, Stephens Inc., Research Division - VP and Research Analyst [11]

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Understood. So kind of expecting it to be in that 3.69%, 3.70%range in the third quarter, if you'd exclude that kind of -- the asset and any loan that...

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Rex L. Smith, Community Bankers Trust Corporation - President, CEO & Director [12]

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And if the -- and we've already begun with the rate cut process. On the liability side, you know the answer is it always depends. If others follow us, we're going to be able to get those liability prices down pretty quickly, those costs down. I would -- I don't know that we'll get back to the first quarter range of 3.81%, but I would say in the 3.73% to 3.77% range would be a reasonable estimate for us next quarter.

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Bruce E. Thomas, Community Bankers Trust Corporation - Executive VP & CFO [13]

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And I think too, we -- couple of things we look at, one is, we're going to start a campaign for the next half of the year that's going to be really pushing for those demand deposit growth. And as part of that, we've talked about, we're going to let some of these CDs run down a little bit and leverage the balance sheet a little more than we've done in the past. And I think, between the additional leverage and its focus on, it's okay to let some of these rate-sensitive one-horse folks that are just doing CDs, go out and focus on the deposit side or the long-term, low-cost relationships. We've shown we can do a pretty good job with that growth. So I think that's going to help us too.

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Austin Lincoln Nicholas, Stephens Inc., Research Division - VP and Research Analyst [14]

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Makes sense. Appreciate all the details on the margin there and the deposit strategy. And maybe just on provisioning and asset quality, any thoughts around any areas that you're seeing any kind of incremental build in kind of risk weightings? And then any thoughts on CECL? I know most people -- most aren't -- don't have their -- don't have a disclosed kind of estimate, but any thoughts on CECL and kind of the day 1 reserve build?

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Rex L. Smith, Community Bankers Trust Corporation - President, CEO & Director [15]

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Well, CECL for us is a 2023 event more than likely. We have -- we are continuing though to move forward on it.

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Bruce E. Thomas, Community Bankers Trust Corporation - Executive VP & CFO [16]

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As if 1/1/20 was the implementation day.

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Rex L. Smith, Community Bankers Trust Corporation - President, CEO & Director [17]

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So as soon as we get something that becomes disclosable, we'll -- it will show up, and we're going to -- we're still working to try to get that there.

And as far as credit quality goes, it's a -- we've -- I haven't seen any real deterioration in anything. As Bruce mentioned, sometimes one loan -- if we have a $3 million loan that misses a payment and gets in the delinquency for the end of the quarter on a timing issue, it moves the needle a little bit. But there's nothing that we've seen in any particular loan class or NAICS code category that gives us any real concern. It's been -- its credit quality remains good.

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Bruce E. Thomas, Community Bankers Trust Corporation - Executive VP & CFO [18]

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And that's as a -- this will be in the 10-Q, and I have mentioned it in my comments. So I feel like I can expand on this. And this has been true in the last several quarters. The unallocated portion of our allowance is pretty well gone. I mean we calculate a number and that's pretty close to what our allowance is. So to the degree that we have loan growth or a negative migration in credit quality, even the slightest it will precipitate a provision.

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Austin Lincoln Nicholas, Stephens Inc., Research Division - VP and Research Analyst [19]

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Okay. Makes sense. That's helpful. And then maybe just bigger picture on capital and your thoughts around M&A. Obviously, you've continued to build capital and have a nice cushion there, but any thoughts on, kind of, changing the strategy in terms of the excess capital position?

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Rex L. Smith, Community Bankers Trust Corporation - President, CEO & Director [20]

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Well, as I said, I think once we get beyond -- get through the accumulated deficit that's out there, the retained deficit, that opens the door for potentially looking at a stock buyback. The Board of Directors has discussed it a lot. There's some mixed opinions about that sitting on the Board, but obviously, we want to make sure that we are utilizing capital the right way. And as I said on M&A, we continually -- this is -- it's a small community in the Mid-Atlantic of bankers and we have good relationships and we talk. And so phone lines are always open and conversations are always taking place. But as I said, it's a little bit -- it's kind of slow right now.

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Operator [21]

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Our next question comes from Stuart Lotz with KBW.

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Stuart Lotz, Keefe, Bruyette, & Woods, Inc., Research Division - Research Analyst [22]

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I appreciate the color on, obviously, a lot of the margin stuff as well as deposit pricing strategy, but I guess, just a bigger question -- a bigger-picture question for me. You're now at a 1% ROA, that's -- and many would argue that we've kind of reached a peak profitability point for banks. What is your outlook for that and for your, I guess, your other profitability ratios as we go into the back half of this year? Is 1.10% your next target or you are just hoping to kind of stay around 1%?

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Rex L. Smith, Community Bankers Trust Corporation - President, CEO & Director [23]

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No. We are not hoping to stay around 1%. And the campaign that I'm talking about on the deposit side, if we do what we want to try to do and work on the expenses the way we're working on them, we have -- obviously, we closed one branch in this quarter. We have a second branch slated to close a week from today. That's about -- but the combination of the 2 of them between branch expenses, operating expenses and salaries and benefits is a little over a $0.5 million annualized that's going to help on that side.

And then, for us, I would not put us in a category. We talked about that today. When you go to you UBPR, and you put us in a bunch of national banks. The Mid-Atlantic area is a little bit different, it's a little bit more vibrant. And for us, when you're sitting at 15% DDA, there is another 10% to 15% of growth in that. And that growth alone moves the needle significantly on the ROA front.

So one thing that I can assure you, I'm sure some of my associates are listening now, listening to the broadcast. They are going hear 4 words from me over and over and over, which are urgency, process, discipline and accountability. And that is what we are working towards with this campaign, on how we -- the urgency of getting the types of deposits, the relationships we need, the urgency of getting the right pricing on the loan side and the types of loans, that we stick to our process. We have the discipline to understand the process, stay with the process, work it through, and there's accountability. If you're not doing what we need you to do, you will be held accountable for it. And those who do it right, will be held in esteem. And that is what we are -- and that urgency is the key to all that. I think we've got a new sense of urgency. And we've got the ability. It is not unreasonable for us to think that we can continue a pretty strong growth rate in that low cost deposit side and that -- what is fueling the machine is going to be what drives it for the next 18 months.

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Stuart Lotz, Keefe, Bruyette, & Woods, Inc., Research Division - Research Analyst [24]

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Got that. So it sounds like next quarter -- I guess, this quarter's $8.7 million expense run rate, you have some coming out next quarter, call it, $150,000, $200,000? Is that -- that gets you to about an $8.5 million run rate? Plus, the onetime expenses, is that a good number to extrapolate from here?

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Rex L. Smith, Community Bankers Trust Corporation - President, CEO & Director [25]

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I think so. My goal is to push it down a little bit more, but I think for your purposes of modeling, that's a good number to go with.

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Stuart Lotz, Keefe, Bruyette, & Woods, Inc., Research Division - Research Analyst [26]

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Got it.

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Rex L. Smith, Community Bankers Trust Corporation - President, CEO & Director [27]

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I mean part of this, we talked about what we have got internally for goals of return on assets, return on equity is also part of that is that efficiency ratio, which is -- we are determined to get that down into the low 60s.

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Stuart Lotz, Keefe, Bruyette, & Woods, Inc., Research Division - Research Analyst [28]

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Awesome. And I guess back to Austin's question on provisioning. So I guess this quarter was your first time since 2017 where you actually looked to provision and with the unallocated balance -- or the unallocated reserve kind of running out. And if growth picks up in the back half of this year like we saw this quarter, what is a good provision rate that we could expect to see in the back half of this year? Or is it purely...

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Rex L. Smith, Community Bankers Trust Corporation - President, CEO & Director [29]

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Yes. Yes, Bruce and I just -- now -- I think what we budgeted this from here forward is probably another 400.

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Operator [30]

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(Operator Instructions) Our next question comes from John Rodis with FIG Partners.

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John Lawrence Rodis, FIG Partners, LLC, Research Division - Former Senior VP & Research Analyst [31]

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Rex, I just wanted to make sure I heard the last question. So you said operating expenses in second half of the year around $8.5 million per quarter, is that right?

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Rex L. Smith, Community Bankers Trust Corporation - President, CEO & Director [32]

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Yes. I think that's a good number to look at. And as I said, there are certain things I'm working on. I hope it might -- maybe here or there, there's a little bit of reduction, but that's -- I think that's the right number.

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John Lawrence Rodis, FIG Partners, LLC, Research Division - Former Senior VP & Research Analyst [33]

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Okay. During the quarter, you guys saw a decent jump in service charges. Was there anything unusual in there? Or sort of what's going on there?

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Rex L. Smith, Community Bankers Trust Corporation - President, CEO & Director [34]

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No, just DDA growth. That's the good news. We're getting that DDA growth.

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John Lawrence Rodis, FIG Partners, LLC, Research Division - Former Senior VP & Research Analyst [35]

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Okay. And then either Bruce or Rex. I guess, this was the -- if you look at -- you talked about the margin, Bruce, but on an absolute basis, this is the first linked quarter where you actually saw a decline in net interest income dollars in quite a while, and I know you talked about the higher premium amortization. But as you look to the third and fourth quarter, if the premium amortization slows some, do you think you can grow net interest income dollars again?

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Bruce E. Thomas, Community Bankers Trust Corporation - Executive VP & CFO [36]

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Yes. Because of the loan growth, and we -- the 2 items that I mentioned there, ironically, were $125,000. Pretty close to it, $123,000. And that gets you right back to the decline in the margin on a linked-quarter basis, net interest income. So yes. I think that loan growth will help us increase the net interest income.

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John Lawrence Rodis, FIG Partners, LLC, Research Division - Former Senior VP & Research Analyst [37]

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Okay. Makes sense. And then Bruce, maybe just the tax rates sort of stayed around 18%, 18.5%. Is this still a good level?

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Bruce E. Thomas, Community Bankers Trust Corporation - Executive VP & CFO [38]

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Yes. We did have a lower level of investable securities. Part of those securities gains were -- there's such demand in the marketplace for tax-exempt municipal bonds in particular because of lower level of issuance and in particular, the states that are impacted by the limit on the deductibility on their income tax returns. So there's a high demand for that tax-exempt income, and that's just made what I have in my portfolio, very attractive to people.

And to the extent that you can -- you can't always do it, but I watch this daily with the Bloomberg and the commentary coming across. If you can sell bond at a gain, not decrease credit quality, not extend your duration and keep the same or get a higher yield, I mean, that's a no-brainer, you'd do it all day long. So to the degree that those opportunities present themselves and I would be a seller of municipals, and of course, that would make that effective tax rate go up. But right now, I don't see a big need for us to do a lot of revamping in the Union portfolio. So I would say that, that run rate is pretty good.

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Operator [39]

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This concludes our question-and-answer session. I would like to turn the conference back over to Rex Smith for any closing remarks.

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Rex L. Smith, Community Bankers Trust Corporation - President, CEO & Director [40]

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I would just like to thank everybody for participating today, and hope that we gave you good insights into where the company is headed.

I will remind you, Bruce and I are available today and next week to answer any calls if there any follow-up questions. Please feel free to give us a call, and thank you again.

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Operator [41]

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Thank you. The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.