U.S. Markets close in 5 hrs 20 mins

Edited Transcript of ESXB.OQ earnings conference call or presentation 25-Oct-19 2:00pm GMT

Q3 2019 Community Bankers Trust Corp Earnings Call

RICHMOND Oct 30, 2019 (Thomson StreetEvents) -- Edited Transcript of Community Bankers Trust Corp earnings conference call or presentation Friday, October 25, 2019 at 2:00:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Bruce E. Thomas

Community Bankers Trust Corporation - Executive VP & CFO

* Rex L. Smith

Community Bankers Trust Corporation - President, CEO & Director

================================================================================

Conference Call Participants

================================================================================

* Casey Cassiday Whitman

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

* John Lawrence Rodis

Janney Montgomery Scott LLC, Research Division - Director of Banks and Thrifts

* Stuart Lotz

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

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Good day, and welcome to the Community Bankers Trust Corporation Third 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.

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Good morning, and thank you for joining us today as we review the results of the third quarter and year-to-date for 2019 for Community Bankers Trust Corporation, which is the holding company for Essex Bank.

First, a brief 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 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 risks and uncertainties are included in our earnings release and most recent Form 10-K and other reports that Community Bankers Trust Corporation files with or furnishes to the Securities and Exchange Commission. You can access all of these documents through our website at www.cbtrustcorp.com.

Last year at this time, I reported that net income year-to-date was higher than it has been since the formation of the company in 2008, and that was $10.3 million. I am excited to report that we have beaten that number for 2019 by over $1.3 million. Net income for the first 9 months of 2019 is $11.66 million. This equates to an annualized ROA of 1.10%. Annualized return on equity is 10.71%.

There were numerous positive factors that contributed to the success of the quarter, and most of these trends are sustainable for the future. Loan growth, excluding PCI loans, increased $72 million or 7.5% year-over-year. This is the first time in 2 years that we have seen this much growth at this point in the year. And the growth was not from being aggressive on either rate or credit quality. The yield on loans increased to 5.03%, despite both the competitive nature of our markets and the change in loan mix to more adjustable rate loans.

Credit quality continues to be a strong focus for both new loans and the existing portfolio. Total nonperforming loans are just over half of what they were at the beginning of the year. This includes moving our largest and oldest nonperforming loan into OREO to push for final resolution. Our current credit quality metrics are among the top of our peer banks.

The bank also continued to increase its growth in demand deposits. Noninterest-bearing deposits grew $24.1 million or 15.2% year-over-year, representing 15.5% of total deposits compared to 14% this time last year. I believe this shows that we can continue at double-digit growth in these accounts, which will continually decrease our cost of funds moving forward. We also continually focus on our efficiency and controlling cost. As part of that, we continually analyze our branch system and alternative channels. All of our branches, particularly our new offices, continue to grow, and that has helped strengthen our deposit mix. We are also realizing rapid expansion in the use of our digital platforms and the customer service center. All of these factors combined help us control overhead, while expanding our market share. While much progress has been made, we are pushing a sense of urgency with a disciplined approach to cost controls to make further improvements.

I will now turn the call over to Bruce to cover more financial highlights.

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Good morning, and we are very excited to present positive results for the third quarter and first 9 months of 2019. I am going to open my comments this morning by looking at returns. First, book value of our common stock on September 30, 2019, was $6.83 per share. This compares with $5.96 on September 30, 2018. This is an increase of $0.87 per share or 14.6% year-over-year.

No matter where bank stocks trade in relation to book value and earnings, annual growth of this nature over the long term will prove beneficial and should be an acceptable return to shareholders. Additionally, in 2019, we resumed paying our shareholders a dividend. Dividends paid year-to-date totaled $0.09 per share. The combination of book value growth and cash dividends to shareholders compares favorably with our peers.

Net income was given a boost in the third quarter of 2019 by a $1.1 million payoff of a purchased credit impaired loan, with a carrying value of 0. This means that the entire payoff was booked to interest income as there was no principal balance remaining on this loan. Payments of this type in future periods will be periodic, but unpredictable, but will nonetheless be a recurring income item. The receipt of cash basis income on the PCI portfolio, due to improved economic conditions, subsequent to the acquisition date in 2009, has resulted in better-than-forecasted performance and may produce recurring but unpredictable income over the remaining life of these loans.

The 2 pools within the purchased credit impaired loan portfolio that had 0 carrying values have over $5.8 million in potential revenue in future periods. Future payments to these 2 loan pools will increase the projected yield of 13.1% on the PCI portfolio. Likewise, the other 4 pools within PCI, which have carrying values totaling $34 million at September 30, also have potential income of $5.1 million, above the current forecast that would, if realized, have a positive impact on the projected yield. When and if these payments are realized is unpredictable but certainly beneficial and meaningful, as pointed out in this morning's press release.

One other item of note that occurred during the third quarter of 2019 was the migration of a longstanding, nonperforming loans into other real estate owned. As a part of this transaction, the bank paid delinquent real estate taxes in the amount of $624,000, thus having a negative impact on net income returns and earnings per share as the entire amount was expensed in the current quarter. However, we look forward to final resolution on this matter.

Basic earnings per share were $0.21 for the third quarter of 2019 compared with $0.16 in the second quarter of 2019. 9 months EPS was $0.52 for 2019 and $0.47 for 2018. The year-to-date increase is 10.6%. Annualized return on equity was 12.24% for the third quarter of 2019 versus 9.79% for the second quarter of 2019. Annualized year-to-date ROE was 10.71% for 2019 and 10.79% for 2018. Annualized return on assets was 1.29% for the third quarter of 2019. That is the highest ROA yet to be recorded by the company since the inception of its current structure in 2008. This compares with ROA of 1.01% in the second quarter of 2019, annualized 9-month ROA of 1.10% for the first 9 months of 2019 compared with 1.02% for the same period in the prior year.

The net interest margin clearly got a boost from the cash payment in the PCI portfolio. I will compare both with and without this payment to prior periods. This is not to infer that the payment was a one-off transaction, but that it had a meaningful impact on the net interest margin and has been and should be a recurring contributor to ongoing earnings. I will separate the 2 to show the interest piece of the margin for the comparison periods.

The third quarter of 2019 net interest margin of 4.02% compared with a linked quarter net interest margin of 3.69%. This is an increase of 33 basis points or 8.9%. Excluding the cash payment to the PCI portfolio, the margin would have been 3.70% in the third quarter of 2019 and an increase of 1 basis points compared with the second quarter of 2019.

For the 9 months ended September 30, 2019, compared with same period in 2018, the net interest margin was 3.84% compared with 3.76%, an increase of 8 basis points or 2.1%. Excluding the cash payment to the PCI portfolio, the margin would have been 3.73%, a decrease of 3 basis points or 0.008%.

For the year-over-year quarterly comparison, the net interest margin of 4.02% in the third quarter of 2019 is a 25 basis point or 6.6% increase over the third quarter of 2018. Excluding the cash payment to the PCI portfolio, the margin would have been 3.70% in the third quarter of 2019, a decrease of 7 basis points or 1.9% compared with the third quarter of 2018.

The net interest margin, excluding the cash PCI payment, shows a slight increase on a linked quarter basis and only a minimal decline on a year-to-date and year-over-year comparison with 2018. This has been possible due to growth of our noninterest-bearing deposits and shareholders' equity as well as loan rate floors in place, the higher than carrying yield on the securities portfolio and actions we have taken on the funding side to lock in the best funding available and our ability in future periods to reprice those quickly in a lower-rate environment.

Noninterest income was $1.5 million in the third quarter of 2019, an increase of $60,000 on a linked quarter basis. While securities gains declined by $188,000 in the third quarter, mortgage loan income increased by $76,000 and was $176,000 for the third quarter of 2019.

Service charges on deposit accounts also reflected a linked quarter increase of $51,000 and were $758,000 in the third quarter. Also, noninterest income benefited in the current reporting period from $120,000 in life insurance proceeds.

Noninterest expenses totaled $9.2 million for the third quarter of 2019, which was a linked quarter increase of $239,000. This increase was precipitated by a net increase of $460,000 in other real estate expenses, which included the payment of delinquent real estate taxes on a nonperforming loan that was moved to OREO in the third quarter of 2019.

In summary, we look to remain nimble on the liability side and take advantage of shifts in the yield curve. We are also looking to build momentum in loan balances to get 2020 off to a start where we are slightly more leveraged than we are at the present time. This will help our net interest margin as well continued emphasis on building noninterest-bearing deposit (inaudible). Lastly, we are emphasizing mortgage generation, which is reflected in our noninterest income and also continuing to lower our efficiency ratio.

With that, I turn the call back to Rex Smith.

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Thank you, Bruce. As a management team, we are pleased that our hard work, focus and attention to detail resulted in record earnings year-to-date.

Over the past several years, our improvement has been substantial in all key areas, and I see no reason why it cannot continue. The balance sheet is flexible and slightly liability-sensitive going into a predicted consistently lower-rate environment. Additionally, we continue to see strong cash flow from the PCI portfolio, and that model shows that it will continue for a number of years.

Credit quality is better than it has been in quite some time. That, coupled with the delayed implementation of CECL until 2023, will mean our provision expense should remain relatively low. Our newer branch offices, digital banking services and customer service center continue to gain market share and are contributing positively to our deposit mix, cost structure and overall bottom line. This is important as we continue to strengthen our efficiency while expanding the balance sheet.

The community bank model is working quite effectively, and we are grateful for the support and enthusiasm from our diverse markets and the shareholders that live in them. That support is evident in our ability to grow loans and deposits in our markets while holding our net interest margin steady. The households and small businesses we have the pleasure of working with every day, make up a large part of our shareholder base. And we appreciate all the support they give us and our communities. Our goal has always been to consistently enhance the franchise and, therefore, shareholder value. And I believe that we are accomplishing that goal. Certainly, the overall metrics and trends would point to success, and I hope that you, our investors, feel the same way.

I look forward to the rest of 2019 and more progress in 2020. I thank all of you who participated in the call today and for your ongoing support of the company.

We will now open the call for any questions.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) The first question today comes from Casey Whitman of Sandler O'Neill.

--------------------------------------------------------------------------------

Casey Cassiday Whitman, Sandler O'Neill + Partners, L.P., Research Division - MD of Equity Research [2]

--------------------------------------------------------------------------------

So we saw non-PCI loan yields actually come up this quarter and -- around 5%, can you give us an indication of where is new loans are coming on? And do you see any pressure on loan yields with another cut, potentially this month? Or do you think you can keep holding loan yields at around 5%? .

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

I think we're going to see some pressure downward on that, Casey. It's -- we've -- we already felt some pressure early in September. We managed to close out where we were in the pipeline. But what's in the pipeline right now, is a little bit south of that, which is okay because we're looking at some repricing on the liability side that will catch it up. So overall, I think the margin is going to remain relatively stable. But we are going to see some downward pressure on that loan yield.

--------------------------------------------------------------------------------

Casey Cassiday Whitman, Sandler O'Neill + Partners, L.P., Research Division - MD of Equity Research [4]

--------------------------------------------------------------------------------

Okay. Okay. And then you talked about the change in loan mix to more adjustable rate loans. I guess can you remind us just how much of the loan book is adjustable versus fix right now?

--------------------------------------------------------------------------------

Bruce E. Thomas, Community Bankers Trust Corporation - Executive VP & CFO [5]

--------------------------------------------------------------------------------

I have that, it's almost the 50-50 split. I'm going to give you the exact numbers here in just a minute. But it's fairly representative. Here we go, 200 and -- well, let's see, yes, hold on, I'll get back to you on that, Casey. I have that here. Yes, here we go. It's close to...

--------------------------------------------------------------------------------

Rex L. Smith, Community Bankers Trust Corporation - President, CEO & Director [6]

--------------------------------------------------------------------------------

It's fairly close to 50-50.

--------------------------------------------------------------------------------

Bruce E. Thomas, Community Bankers Trust Corporation - Executive VP & CFO [7]

--------------------------------------------------------------------------------

Yes.

--------------------------------------------------------------------------------

Casey Cassiday Whitman, Sandler O'Neill + Partners, L.P., Research Division - MD of Equity Research [8]

--------------------------------------------------------------------------------

Okay. Okay. Great. And then it sounds like just with deposit cost coming up just pretty modestly this quarter, but it sounds like we probably reached the peak. Is it deposit cost, assuming rates keep going down. Is that accurate?

--------------------------------------------------------------------------------

Rex L. Smith, Community Bankers Trust Corporation - President, CEO & Director [9]

--------------------------------------------------------------------------------

Yes. That is accurate, Casey.

--------------------------------------------------------------------------------

Bruce E. Thomas, Community Bankers Trust Corporation - Executive VP & CFO [10]

--------------------------------------------------------------------------------

Here we go, Casey. Total loan portfolio, which includes the PCI portfolio, and let's go with balances because that's really more meaningful than the count. But count-wise, 50.7% of variable, 49.3% fixed. But where the rubber hits the road is in balances, I would assume. So variable rate is 60.2% and fixed rate is 39.8%. If you exclude the PCI portfolio, it's a little higher variable, it's 62.6% variable and 37.4% fixed. So it took me a minute to get to that. I've I got so much paper in here because I want to be able to answer every question, and I can't get my hands on quickly.

--------------------------------------------------------------------------------

Casey Cassiday Whitman, Sandler O'Neill + Partners, L.P., Research Division - MD of Equity Research [11]

--------------------------------------------------------------------------------

No worries. I'll just ask one more and let somebody else jump on. But maybe can you just remind us of the strategy for branch closures or openings next year?

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Yes. We're -- we look at it constantly. We've got a couple of potentials, and I think, anything we're looking at right now are in existing markets where we just feel like there's some fill-in need. But it's not -- I think we're probably looking at net-net a gain of one new branch at best but probably it's going to be about the same number. And we've been pretty aggressive on closing the ones that have been around little longer that just haven't made the grade. But ones we've got right now all show good progress or all showing good gains in deposits and some consumer loan mix. So right now, it looks like the core base is doing very well.

--------------------------------------------------------------------------------

Operator [13]

--------------------------------------------------------------------------------

(Operator Instructions) The next question today comes from John Rodis with Janney Montgomery Scott.

--------------------------------------------------------------------------------

John Lawrence Rodis, Janney Montgomery Scott LLC, Research Division - Director of Banks and Thrifts [14]

--------------------------------------------------------------------------------

Bruce, maybe just back to your comment during your prepared remarks about entering 2020 with more leverage. Could you maybe just give a little bit more detail on those thoughts?

--------------------------------------------------------------------------------

Bruce E. Thomas, Community Bankers Trust Corporation - Executive VP & CFO [15]

--------------------------------------------------------------------------------

Yes. We have -- the conservative thing to do in banking is you go, anticipate and grab your funding, and then you send the loan guys out and tell them to make some loans. Well, to some degree, we have a reverse process going on. And we have gotten conservative on our certificate pricing. We're okay if some of the certificates that we have exit, if they're not customers with a total relationship with us, i.e., if they're rate chasers, that's okay. And we want to inch up because we have a huge, in relation to the total balance sheet, a very ample liquid securities portfolio. We're okay with inching the loan deposit ratio up higher than it currently is.

In that regard, in the next 12 months, we're going to have $448 million from October 1 of this year to September 30 of next year. $448 million of CDs, that will have opportunity to reprice. And that blended cost on those is probably somewhere very close to $210 million. We look to drive that cost down, as Rex talked about the pressure on the loan pricing. I think in recent quarters, the beta has been higher on the liability side. I think in a good way, if rates go down, the beta is still going to be higher on the liability side, i.e. we're going to be able to reprice. We'll see more of a drop on the liability side in terms of cost than we will see a drop in yield on the asset side.

--------------------------------------------------------------------------------

John Lawrence Rodis, Janney Montgomery Scott LLC, Research Division - Director of Banks and Thrifts [16]

--------------------------------------------------------------------------------

Okay. As far as the loan-to-deposit ratio, so you ended the quarter at about 91%. How high would you be comfortable taking that?

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Well, Bruce and I have a debate about that. He gets a little apoplectic when I say numbers, but we're probably going to be sitting around like 92% to 93%. And we start to get a little more conservative I think. But that's probably where we would be.

--------------------------------------------------------------------------------

John Lawrence Rodis, Janney Montgomery Scott LLC, Research Division - Director of Banks and Thrifts [18]

--------------------------------------------------------------------------------

So you're not going above 100% or anything like that?

--------------------------------------------------------------------------------

Rex L. Smith, Community Bankers Trust Corporation - President, CEO & Director [19]

--------------------------------------------------------------------------------

No. I mean, no. We will not do that. We're going to be in the mid-90s at worst case scenario.

--------------------------------------------------------------------------------

John Lawrence Rodis, Janney Montgomery Scott LLC, Research Division - Director of Banks and Thrifts [20]

--------------------------------------------------------------------------------

Okay. And then on expenses, obviously, a little bit of noise with the real estate taxes and then I guess the FDIC credit. But if you back those 2 sort of methods to line items and back them out, you are around, by my calculation, expenses of around $8.7 million for the quarter, and that was sort of in line with what you said last quarter. Is sort of $8.7 million still a good number going forward on expenses?

--------------------------------------------------------------------------------

Rex L. Smith, Community Bankers Trust Corporation - President, CEO & Director [21]

--------------------------------------------------------------------------------

Yes. I think that's the right number, John.

--------------------------------------------------------------------------------

John Lawrence Rodis, Janney Montgomery Scott LLC, Research Division - Director of Banks and Thrifts [22]

--------------------------------------------------------------------------------

Okay. And then, Bruce, one final one for you, just the tax rate. It inched up a little bit, I think you said it could do that if you sold some of your muni securities. So is 19% a better rate going forward?

--------------------------------------------------------------------------------

Bruce E. Thomas, Community Bankers Trust Corporation - Executive VP & CFO [23]

--------------------------------------------------------------------------------

I think so. I anticipated that question. Not only did I sell some, and there are embedded gains, unrealized gains in virtually every municipal bond on hold because of the supply-and-demand metrics on those are favorable for people that own season paper. But I have, in my 30-plus year career, I have never seen the municipal market as efficient with regard to calls as it is now. If you have a municipal bond and it's callable, you're going to get your cash back. So that being said, it is not in my opinion, not the most fortuitous time to purchase BQ paper. And because it's getting cold just by nature, the percentage to the total portfolio is going to go down in the total revenue. So yes, the tax rate will inch up.

--------------------------------------------------------------------------------

Operator [24]

--------------------------------------------------------------------------------

(Operator Instructions) The next question today comes from Stuart Lotz of KBW.

--------------------------------------------------------------------------------

Stuart Lotz, Keefe, Bruyette, & Woods, Inc., Research Division - Research Analyst [25]

--------------------------------------------------------------------------------

Appreciate the color on the margin so far. And I know Bruce talked about last quarter CD replacing, and that you had about -- I think it was half of the current CD book that's going to be replaceable by year-end. Just curious where the CDs were shaking out as (inaudible).

--------------------------------------------------------------------------------

Bruce E. Thomas, Community Bankers Trust Corporation - Executive VP & CFO [26]

--------------------------------------------------------------------------------

We're experiencing about a 90% retention rate in maturing and repricing CDs. And they're coming on the books currently about the same rate that they are maturing for. But over the next -- as we get into, especially next year, current rates hold, they're going to be maturing and repricing as much as 25 to 30 basis points lower than they are now.

--------------------------------------------------------------------------------

Stuart Lotz, Keefe, Bruyette, & Woods, Inc., Research Division - Research Analyst [27]

--------------------------------------------------------------------------------

Okay. And that's with assuming the October cut, you think you can get it down to probably 180, 190 range?

--------------------------------------------------------------------------------

Bruce E. Thomas, Community Bankers Trust Corporation - Executive VP & CFO [28]

--------------------------------------------------------------------------------

Yes, I think so.

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

We're -- and I think where they're coming in November, December, we're going to get 15 basis points just up where we are right now before the October cut. So as Bruce said, where we were at the beginning of October and September, it was pretty much almost equal for the -- what was coming off and then going back on. But as we get into November and December, it's 10 or 15 basis points difference on the good side.

--------------------------------------------------------------------------------

Stuart Lotz, Keefe, Bruyette, & Woods, Inc., Research Division - Research Analyst [30]

--------------------------------------------------------------------------------

Got it. And then on money markets. I think so far from other peers we've seen this quarter money market has been kind of one of the highest betas on the way down. Are you guys making any exception-based pricing right now and how in terms of growing that part of the deposit base, what's the outlook there?

--------------------------------------------------------------------------------

Rex L. Smith, Community Bankers Trust Corporation - President, CEO & Director [31]

--------------------------------------------------------------------------------

Well, we never raise the money markets up very much. So we don't have a whole lot of downward run in those money markets. They're relatively stable. And we don't have a whole lot of outlook as far as that being a big push on deposit side. It's -- we've kept those relatively stable. And I think that's where they're going to be.

--------------------------------------------------------------------------------

Stuart Lotz, Keefe, Bruyette, & Woods, Inc., Research Division - Research Analyst [32]

--------------------------------------------------------------------------------

Okay. Awesome. And then I guess one more on the asset side. Appreciate the color on the loan yields and where new price mix coming in. So if you back up the PCI income from this quarter, it kind of -- I think your core NIM was still up 1 or 2 basis points. And Bruce, you talked about some of these dynamics of that PCI portfolio. And how the revenue we could see similar quarters for we got this quarter coming up? Is that -- what leads you to believe that -- is that another $1 million in the fourth quarter for PCIs that we expect that?

--------------------------------------------------------------------------------

Bruce E. Thomas, Community Bankers Trust Corporation - Executive VP & CFO [33]

--------------------------------------------------------------------------------

No, no. That was one of the larger loans, maybe the largest loan in either of the 2 pools that had a 0 carrying value. The other loans within those 2 pools are more granular. In fact, most -- all of the loans would be smaller than that particular loan. It just so happened that the largest loan and -- I think the largest loan and a 0 carrying value portfolio paid off. So the dollars are out there. If it performs, it's just more granular in nature.

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

As we said, Stuart, it's sort of -- it's unpredictable, it can be lumpy. But it is there, and that's -- we've seen -- in the past, we've seen some of the analysts saw a discount to the PCI and kind of get -- but that portfolio at $30-some million, it's going to have a minimum yield of 13-something. And then every little extra payment that comes in, pushes that yield way up. It's a very positive piece of the balance sheet.

--------------------------------------------------------------------------------

Bruce E. Thomas, Community Bankers Trust Corporation - Executive VP & CFO [35]

--------------------------------------------------------------------------------

$34 million of carrying value and $10.9 million of nonaccretable yield, which is potential income above the projected yield of 13.1%. And now that's over a long life.

--------------------------------------------------------------------------------

Stuart Lotz, Keefe, Bruyette, & Woods, Inc., Research Division - Research Analyst [36]

--------------------------------------------------------------------------------

Okay. So putting that altogether...

--------------------------------------------------------------------------------

Bruce E. Thomas, Community Bankers Trust Corporation - Executive VP & CFO [37]

--------------------------------------------------------------------------------

Well, sorry, sorry, at -- above that I'll give you a mix bag. It's actually $6.7 million above the projection of 13.1%. But in any event...

--------------------------------------------------------------------------------

Stuart Lotz, Keefe, Bruyette, & Woods, Inc., Research Division - Research Analyst [38]

--------------------------------------------------------------------------------

So we can expect that run rate to get -- I think it's been averaging about 1 -- $1.2 million to $1.4 million for the last 10 quarters. Is that kind of what we can expect in the fourth quarter and into 2020?

--------------------------------------------------------------------------------

Rex L. Smith, Community Bankers Trust Corporation - President, CEO & Director [39]

--------------------------------------------------------------------------------

Yes. If you put the 13% yield against that portfolio balance and probably $6 million, $7 million running off per year, that's the math, Stuart.

--------------------------------------------------------------------------------

Bruce E. Thomas, Community Bankers Trust Corporation - Executive VP & CFO [40]

--------------------------------------------------------------------------------

And just -- the first number I gave you was correct, above the projections as I stated in my comments. The total is $10.9 million. So that is potential revenue over a long life still remaining on those loans, but it's good news, yes, right? And it's a little hard to predict because these loans have been around for a while. If rates continue to drop down and values hold, whether or not these folks come in to refi or do certain things, will move that yield certainly upwards. So we know it's a 13-plus and whether or not it goes up from there, just depends on how it reacts in this rate environment and if value still holds.

--------------------------------------------------------------------------------

Stuart Lotz, Keefe, Bruyette, & Woods, Inc., Research Division - Research Analyst [41]

--------------------------------------------------------------------------------

Last one from me. Turning to growth. I mean you guys are up well on your way to hitting the 6% loan growth target for this year. Just curious what your outlook is for next year -- going into an election year, are you seeing anything in the market that gives you a positive return or you're still feeling very comfortable with 6% growth rate in 2020 and beyond?

--------------------------------------------------------------------------------

Rex L. Smith, Community Bankers Trust Corporation - President, CEO & Director [42]

--------------------------------------------------------------------------------

Yes. I'm comfortable with that growth rate. And I think we can do a little bit better actually because right now, we're sitting at 7.5%. And I said, last 2 years, I think 2 years ago, we had negative growth rate through the third quarter and the other year's like 2%. So to be at 7.5% and going into the fourth quarter where we always do relatively well as people try to get tax exchange, deals close and other stuff close by year-end, we'll see good growth. And I think going into even with an election year, we've got very strong markets that we play in and they always tend to do fairly well. So I'm pretty excited about it. And we've also got -- there's going to be a big merger closed here sometime by the fourth quarter, is what we are hearing, with the BB&T-SunTrust deal. And that's going to put a little turmoil in the marketplace. And we're seeing a little bit of that right now, and I think that's going to help us too.

--------------------------------------------------------------------------------

Operator [43]

--------------------------------------------------------------------------------

As there are no further questions, this concludes our question-and-answer session. I would like to turn the conference back over to Rex Smith for any closing remarks.

--------------------------------------------------------------------------------

Rex L. Smith, Community Bankers Trust Corporation - President, CEO & Director [44]

--------------------------------------------------------------------------------

Well, I would like to thank everybody who participated today. And just remind you that we are available. I know there were a lot of questions today, they're good questions. If anybody has any follow-ups, please feel free to give Bruce and I a call, and we thank you for your time this morning.

--------------------------------------------------------------------------------

Operator [45]

--------------------------------------------------------------------------------

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