Net income for the six months ended June 30, 2016 was $280,000 (unaudited). Adjusted 2015 earnings for the first six months were $99,000 as the earnings for 2015 included $462,000 of extraordinary income. The Bank’s interest income has improved, provision for loan losses has been substantially reduced, and other operating expenses are down, year-over-year. Net income per share for 2016 was $0.89, compared to $1.78 per share before adjusting for extra ordinary income, or $0.31 per share with the adjustment, during the same period one year ago. Core earnings improved when comparing 2016 to 2015. The year-over-year improvement is an attributable to lower provisions for loan losses, lower FDIC assessments due to improved performance and lower wages. The improvement in net interest income is due increased loan volume and the reduction in the provision for loan losses, resulting from improvement in loan quality. Non-interest income and non-interest expense each decreased year-over-year. Net interest margin ended the second quarter of 2016 at 3.63% compared to 3.48% for the same period in 2015. Dedicated bank employees continued to migrate balance sheet funds into higher yielding loans over lower yielding investment securities during the second quarter of 2016.
Loans have grown 20.0% or $15.0 million since June 30, 2015. The increases in loans, along with prospective loan growth, remain the key to ongoing strong earnings improvement. While the loan quality of the bank continues to improve, past due loans at June 30, 2016 were 1.36%, compared to June 30, 2015 of 1.18%. The allowance for loan losses had a net recovery of $67,376 for the first six months of 2016, compared to a net charge off $22,746 for the same time period in 2015. The bank provided $30,000 for loan loss during the first six months of 2016. The reduced provision amount, when comparing to the prior year, is directly related to overall improved credit quality in the loan portfolio. This resulted in an allowance of loan loss reserve of 1.88% at June 30, 2016 compared to 1.18% at June 30, 2015. The reserve ratio is higher due to minimum levels required by the merger agreement. The bank’s classified/problem loans have improved substantially year-over-year. At June 30, 2016 classified loans were 3.11% of total loans, compared to 7.29% at June 30, 2015. Community State Bank lenders continue developing new loan relationships
and expanding current relationships. Lenders welcome referrals for loans of any need or size.
The Bank’s Tier 1 Leverage Ratio was 9.64% at June 30, 2016, which increased from 9.61% at the same time last year. The minimum Tier 1 Leverage Ratio to be considered well capitalized by FDIC standards is 8.00% and the Bank exceeds limits set forth in 2016 for Basel III Capital Conservation Buffer thresholds. The Bank’s capital position continues to improve with stronger earnings each quarter. Book value of Community Bancorp, Inc. stock at June 30, 2016 is $70.37 compared to $66.18 last year.
We have also included a joint letter to shareholders on the status of the merger of Community Bancorp Inc. and Fentura Financial Inc. As always, “Thank You” for your continued support of the bank and please remember to refer our bank to your family, friends and associates.
John C. Wendling
President/Chief Executive Officer