Community Bankers Bank // Annual Report 2012

growth& strength F O R

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Y E A R S

2012 ANNUAL REPORT AND UNAUDITED FINANCIAL HIGHLIGHTS

2012 board of directors

of CBB Financial Corp.

Monte L. Layman G. Lyn Hayth, III

President & CEO, Blue Ridge Bank, Luray, VA Chairman of the Board

Ellis L. Gutshall

President & CEO, Valley Bank Roanoke, VA Vice Chairman of the Board

Robert R. Chapman III

President & CEO, Bank of The James Lynchburg, VA

Charles K. Collum, Jr.

Executive Officer, John Marshall Bank Alexandria, VA

Jerri D. Cowan

Owner, Human Resources Consultants Richmond, VA

President & CEO, Bank of Botetourt Troutville, VA

Christopher J. Honenberger President & CEO, Clearpoint Financial Services, Inc. Richmond, VA

Robert W. Jonte , Jr.

President & CEO, Bank of Greeleyville Greeleyville, SC

William H. McFaddin

President & CEO, Community Bankers’ Bank Midlothian, VA

John E. Stringer

President & CEO, The Bank of Marion Marion, VA

senior officers William H. McFaddin Stephen R. Kinnier President & CEO

Senior Vice President & CFO

Howard F. Pisons Wendy C. Wright Executive Vice President

Senior Vice President, Operations & IT

silver spotlight

T W E N T Y- F I V E Y E A R S

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dear shareholders COMMUNITY BANKERS’ BANK celebrated its Silver Anniversary in 2012, and we proudly commemorated our steadfast and committed work on behalf of community financial institutions. When chartered twenty-five years ago, the intent was to operate a financial institution for banks and bankers that would function as a partner institution for its shareholders and clients. We would never compete against each other. In 2013, we mark the beginning of the next twenty-five years of offering our unique service to community banks. Despite the passage of time, and especially the turmoil of the past four years, we remain true to the mission of the bankers’ bank model, which was our guide post when we first opened for business. Changing times and events have caused us to be more creative and flexible in order to remain relevant, and I am proud to report to you that our business model remains both useful and valuable for our base of independent community institutions.

We remain “well capitalized” and have gained 25 new shareholders over the last three years, which is a strong indication that a loyal, client owned, and non-competing correspondent is highly regarded in this market environment.

Asset quality improvement has been an important goal for us over the last few years, and I believe we took a major step in that direction in 2012. We resolved the majority of our problem loans during the year, and believe we have responsibly maintained a strong loss reserve against troubled assets that should absorb any exposure. The amount of time for a workout to conclude is frustrating, but our credit department staff continues to work hard seeking acceptable resolutions. Other real estate owned has been reduced by 50% over the last year, and the number of problem credits has declined as well.

We continue to move forward with our credit service offerings, which will help grow our portfolio as well as the loan portfolios of our shareholders. Our municipal financing program is just one example of the opportunities and capabilities that our experienced and talented associates present to our shareholders and client banks.

National economic conditions remain weak. Poor labor markets, huge public debt concerns, and tepid new business activity in the private sector force us to be realistic in our expectations for the near term. The dynamic and cumbersome regulatory environment gives us pause when considering future ramifications for our industry. Nevertheless, CBB will be successful as long as community banks are successful, and we are committed to help you make that happen.

On behalf of the officers and associates of CBB, I thank you for your business and commitment to us. To the 52 bankers that have served as directors of CBB over the last 25 years, a special thanks for your service and support of this endeavor.

William H. McFaddin

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we continue to expand our RANGE OF SERVICES

In order for our independent community bank customers to remain competitive in the marketplace, Community Bankers’ Bank is continually expanding and improving the services we offer. On these pages are just six examples of that ongoing work.

MUNICIPAL FINANCING OPTIONS

Municipal Financing Options help our customers capture opportunities in municipal financing. In the current economy, many municipalities have returned to seeking bank financing, rather than using bond issues to fund needs such as essential equipment for public services. Tax-exempt leasing is one of the simplest and most successful ways to purchase essential equipment and facilities.

Some advantages of leasing are: • Conserves municipalities’ cash, and allows acquisitions at today’s prices • Saves time, expense, and restrictions of issuing bond debt • Considered short term debt, fitting nicely with annual budgeting allocations for public service in municipalities CBB has created a strategic alliance for referrals, documentation, and servicing of municipal lease transactions with one of the largest nationwide leasing institutions, Community Leasing Partners, which is a subsidiary of Community First National Bank, based in Kansas. With over twenty years of experience in municipal leasing and financing, CLP is a strong partner of CBB, ensuring your customer is handled quickly, accurately and professionally.

COMMUNITY BANKERS’ CLEARING NETWORK

Community Bankers’ Clearing Network (CBCN) provides an affordable, faster, and more efficient solution for our customers to clear their cash letter. It will lower the cost of the entire image exchange environment, including outgoing and incoming image cash letters, outgoing and incoming returns, and adjustments. The CBCN solution has minimal impact on item processing operations, as it processes the same co-mingled image X9 file that customers currently send to FED today.

Some benefits of CBCN are: • 100% availability • Flat pricing 24/7—no network deposit deadline • Free inclearings from other CBCN and Endpoint Exchange banks, typically well over 50% of total inclearing volume • All settlement is done directly to the customer’s CBB DDA

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we continue to expand our RANGE OF SERVICES

CBLINK AND VIRTUAL REAL TIME

CBLink provides our customers secure, highly-automated, online technology that allows 24/7 access to detailed information regarding their CBB accounts and balances, as well as access to Federal Reserve Services.

To maintain a high level of service, CBLink provides transactional and wire data to customers in virtual real time.

Several features of CBLink are: • DDA Statements continuously updated and delivered to CBLink between 8:00 a.m. and 5:30 p.m.

• Domestic Incoming and Outgoing wire transfer Advices and Fed Acknowledgements processed every several minutes between 8:30 a.m. and 5:00 p.m.

FOREIGN SERVICES

CBB offers full Foreign Services capabilities that are customer oriented and community bank friendly. Using CBLink, client banks are able to initiate international wires, order international bank drafts, and buy or sell foreign currency. As your partner, CBB enables your bank to maintain and expand customer relationships instead of directing customers to larger institutions for foreign services.

Since we became aware of the new “Remittance Rules” resulting from The Dodd-Frank Act, CBB has been working with our foreign service partner, Western Union Business Solutions (“WUBS”), to create a solution that offers full compliance and the least interruption to your processing routine. CBB has transitioned our clients to the fully compliant GlobalPay Alliance (“GPA”) payment platform in anticipation of the final ruling from the Consumer Financial Protection Bureau.

CONSULTING

CB Consulting Services, Inc., a subsidiary of Community Bankers’ Bank, has highly qualified professionals with the experience and expertise necessary to address a wide array of regulatory issues. Our professionals average over 23 years in banking and audit experience which includes prior work with the Federal Reserve Bank, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation. This combined experience enables us to be a valuable partner for financial institutions throughout the 5th Federal Reserve District.

We have specialists in the fields of Information Technology, Loan Review, Finance Accounting, Operations, Administration, and Compliance. To provide the best service possible, we constantly monitor regulations, legislation, and trends that impact the industry and constantly strive to increase our knowledge and remain current in the ever changing financial world.

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2012 Financial Highlights UNAUDITED DOLLARS IN THOUSANDS

2012

2011

2010 2009

Total Assets

$156,731

$143,677

$142,549

$152,789

Participation loans sold to other banks

$47,161

$61,309

$64,538

$116,821

Fed funds agency pool balances

$23,310

$77,033

$93,499

$87,362

Excess Balance Account balances

$631,119

$577,197

$459,360

$341,381

Public Funds CDs

$50,824

$36,308

$29,921

$58,480

Total assets under management

$909,145

$895,524

$789,867

$756,833

Safekeeping assets

$994,419

$1,016,038

$895,000

$700,450

Total assets under management and safekeeping assets

$1,903,564

$1,911,562

$1,684,867

$1,457,283

Acct. Maintenance/ Access Fee Discounts

$63,850

$64,786

$53,821

$46,416

Domestic and Foreign Wire Service Fee Discounts

$38,532

$38,860

$39,661

$28,088

Public Funds CD Program Fee Discounts

$600

$600

$400

$1,000

Consulting Services Discounts

$8,955

$7,151

$9,020

$6,410

Stock Par Value Earnings Credits

$6,164

$6,426

$6,108

$5,771

FF Purchase Rate Bonuses

$3,320

$3,860

$11,820

$53,300

FF Sold Rate Discounts

$250

$570

$1,200

$2,270

Legacy Shareholder Earnings Credits

$5,706

$5,928

$5,858

$4,250

Legacy FF Bonus

$867

$1,295

$3,880

$16,038

Cash Dividends Paid

$0

$0

$0

$0

Total Dividends To Shareholders

$128,244

$129,476

$131,768

$163,543

Assets

Shareholder Dividends

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our mission

Community Bankers’ Bank will be the correspondent bank of choice for community banks in the Fifth Federal Reserve District.

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our vision

Community Bankers’ Bank is a client-owned correspondent bank focusing on community banks, and providing select, value added products and services to its clients, thereby allowing them to succeed in the market place.

CBB generates a valuable return to its shareholders through discounts, special shareholder fee schedules and credits, rate advantages, preferred access as well as cash dividends.

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the benefits

we offer our community bank customers Community Bankers’ Bank was born and has evolved to fulfill an important mission in the community banking industry. By helping independent banks to offer “big bank” services, we help improve competition at the regional and even national level. We’re able to offer community banks everything big banks do, but without competing with them. We’re able to work just as efficiently and smartly. But instead of offering proprietary technology created by the big banks’ in-house techies, we use sophisticated partners to develop what we offer. This efficient outsourcing results in less waste, but still gives our customers globally-vetted technology that has an international reputation for quality.

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2012

SHAREHOLDER BANKS OF C B B F I N A N C I A L C O R P. Alliance Bank & Trust American Bank American National Bank & Trust Co. Bank @LANTEC Bank of Botetourt Bank of Clarke County* Bank of Greeleyville* Bank of Hampton Roads Bank of Lancaster* Bank of McKenney Bank of North Carolina Bank of The James* Benchmark Community Bank* Blue Ridge Bank (SC) Blue Ridge Bank (VA)* Burke & Herbert Bank & Trust Co. Capital Bank NA Cardinal Bank Carroll Community Bank Cecil Bank Central Virginia Bank* Chain Bridge Bank, NA Chesapeake Bank Citizens Bank and Trust Company* Citizens Community Bank* Citizens National Bank Community Capital Bank of Virginia EagleBank Essex Bank EVB Farmers & Merchants Bank Farmers & Merchants Bank of Craig County Farmers Bank First and Citizens Bank First Bank First Capital Bank First Citizens Bank & Trust First Community Bank First National Bank* First Reliance Bank First State Bank First United Bank & Trust First Virginia Community Bank FNB Bank Four Oaks Bank & Trust* Fraternity Federal Savings and Loan Assoc.

Fulton Bank Grayson National Bank Greer State Bank Highlands Community Bank* Highlands Union Bank*

Jefferson Security Bank John Marshall Bank KS Bank, Inc. Lee Bank and Trust MainStreet Bank* Millennium Bank, N.A. Miners Exchange Bank Monarch Bank* Monument Bank New Horizon Bank, NA New Republic Savings Bank Oak View National Bank Old Dominion National Bank Park Sterling Bank* Peoples Community Bank Premier Bank River Community Bank, NA Roanoke Rapids Savings Bank Sandhills Bank Select Bank Shore Bank SonaBank, NA* StellarOne Bank Surrey Bank & Trust Taylorsville Savings Bank, SSB The Bank of Charlotte County* The Bank of Fincastle The Bank of Marion* The Bank of Romney The Bank of Southside Virginia The Business Bank* The Commercial Bank The Farmers Bank of Appomattox* The Fauquier Bank The National Bank of Blacksburg The Peoples Bank Union First Market Bankshares, Corp.

United Bank Valley Bank* VantageSouth Bank Village Bank* Virginia Bank & Trust Company Virginia Commerce Bank* Virginia Commonwealth Bank Virginia Community Bank* WashingtonFirst Bank* West Union Bank Worthington Federal Bank

* denotes LEGACY SHAREHOLDER

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on the value of a bankers’ bank “We are fully supportive of the bankers’ bank model. The bankers’ banks have provided critical services in support of community banking. As the banking industry re-shapes itself in response to the financial crisis, the subsequent recession, and regulatory reform, we believe there will be a critical role for bankers’ banks. They have an opportunity to contribute to the viability of community banking, promote economic growth and contribute to financial stability.”

John W. Ryan, President and CEO, Conference of State Bank Supervisors “Having been a bankers’ bank president myself for nearly 20 years, I know the vital role bankers’ banks play not online in the community banking industry but within the overall financial services sector. Bankers’ banks help provide the muscle that allows community banks to compete and prosper wherever they may be located, thus ensuring that our nation’s citizens always have financial choices.”

Camden Fine, President and CEO, ICBA “The nation’s bankers’ banks help community banks do what they do best – grow their local economies – by leveraging and providing resources that are beyond small banks’ scope or scale.”

Frank Keating, President and CEO American Bankers Association

leadership, now and in the future When the first bankers’ bank was founded in Minnesota in 1975, it set the way for others with vision, spirit and persistence to follow… and provide a whole new way to approach correspondent bank services. Today, there are 15 bankers’ banks across the U.S. We’re proud to be among them, offering a comprehensive mix of wholesale correspondent services, and keeping community banking a strong force in the U.S. economy.

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looking to the future Who would have thought 25 years ago that we would be doing much of our daily banking on computers… much less on our telephones? But as technology continues to expand rapidly, Community Bankers’ Bank will grow and expand to meet our customers’ needs. By being resourceful, responsive and reliable, we’ll give your community bank all of the technological advances you need to compete with bigger banks.

1987

Virginia Bankers’ Bank founded

1993

Added our 50th Shareholder

1996

Changed name to Community Bankers’ Bank

2000

William H. McFaddin named President and CEO

2008

Legacy Stock offered

2010

Added our 100th shareholder

2012

Celebrated 25 years

P O B O X 2 6 8 • M I D L O T H I A N , VA 2 3 1 1 3 • ( 8 0 4 ) 7 9 4 - 5 8 8 5 W W W. C B B O N L I N E . C O M