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Section 1: 8-K (FORM 8-K)

fcbc20180123_8k.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

 
 

Date of Report (Date of earliest event reported): January 23, 2018

 
 
 

FIRST COMMUNITY BANCSHARES, INC.

 

(Exact name of registrant as specified in its charter)

 
 

Nevada

 

000-19297

 

55-0694814

(State or other jurisdiction

 

(Commission

 

(IRS Employer

of incorporation)

 

File Number)

 

Identification No.)

 
 

P.O. Box 989

Bluefield, Virginia

 

24605-0989

(Address of principal executive offices)

 

(Zip Code)

 
 

Registrant’s telephone number, including area code: (276) 326-9000

___________________________________________________________________________________________________

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

 

 

 

Item 2.02     Results of Operations and Financial Condition.

 

On January 23, 2018, First Community Bancshares, Inc. (the “Company”) announced by press release its earnings for the fourth quarter and full year of 2017. A copy of the press release is attached hereto as Exhibit 99.1.

 

Item 8.01     Other Events.     

 

On January 23, 2018, the Company announced by press release its quarterly cash dividend to common stockholders of eighteen cents ($0.18) per common share, payable on February 16, 2018, to shareholders of record on February 2, 2018. A copy of the press release is attached hereto as Exhibit 99.1.

 

Item 9.01     Financial Statements and Exhibits.

 

(d)

 

The following exhibit is included with this report:

 

 

 

Exhibit No.

 

Exhibit Description

 

 

 

99.1

 

Earnings and dividend press release dated January 23, 2018

 

Forward-Looking Statements 

 

This Current Report on Form 8-K contains forward-looking statements. These forward-looking statements are based on current expectations that involve risks, uncertainties, and assumptions. Should one or more of these risks or uncertainties materialize or should underlying assumptions prove incorrect, actual results may differ materially. These risks include:  changes in business or other market conditions; the timely development, production and acceptance of new products and services; the challenge of managing asset/liability levels; the management of credit risk and interest rate risk; the difficulty of keeping expense growth at modest levels while increasing revenues; and other risks detailed from time to time in the Company’s Securities and Exchange Commission reports, including but not limited to the Annual Report on Form 10-K for the most recent year ended. Pursuant to the Private Securities Litigation Reform Act of 1995, the Company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made.

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

FIRST COMMUNITY BANCSHARES, INC.

     

Date:

January 23, 2018

 

By:

/s/ David D. Brown

     
   

David D. Brown

   

Chief Financial Officer

 

(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

ex_103402.htm

Exhibit 99.1

 

NEWS RELEASE

FOR IMMEDIATE RELEASE:

 

FOR MORE INFORMATION, CONTACT:

January 23, 2018

 

David D. Brown

   

(276) 326-9000

 

First Community Bancshares, Inc. Announces Fourth Quarter and Full Year 2017 Results

and Quarterly Dividend

 

Bluefield, Virginia – First Community Bancshares, Inc. (NASDAQ: FCBC) (www.firstcommunitybank.com) (the “Company”) today reported its unaudited results of operations and other financial information for the quarter and year ended December 31, 2017. The Company reported net income of $1.21 million, or $0.07 per diluted common share for the quarter ended December 31, 2017, and $21.49 million, or $1.26 per diluted common share for the year ended December 31, 2017.

 

On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Reform Act”), was enacted into law. The Tax Reform Act reduces the federal tax rate for corporations from 35% to 21%, effective January 1, 2018, and changes, or limits, certain tax deductions. As a result of the new law, generally accepted accounting principles in the United States (“GAAP”) require the immediate revaluation of deferred tax assets to a value reflective of the lower corporate tax rate. During the fourth quarter of 2017, the Company recorded a one-time estimated revaluation adjustment of approximately $6.55 million to reduce its net deferred tax asset, which increased the provision for income taxes.

 

Excluding the impact of the non-cash revaluation, fourth quarter earnings were $7.77 million, or $0.45 per diluted share, an increase of $1.36 million, or 21.25%, over fourth quarter 2016. Full year earnings exclusive of the revaluation were $28.04 million, an increase of $2.91 million, or 11.59%, over 2016 earnings. Adjusted return on assets and equity were 1.18% and 8.02%, respectively, both significant increases over the prior year.

 

The Company also announced today that the Board of Directors declared a quarterly cash dividend to common shareholders of eighteen cents ($0.18) per common share. The quarterly dividend is payable to common shareholders of record on February 2, 2018, and is expected to be paid on or about February 16, 2018. The current year marks the 33rd consecutive year of regular cash dividends paid to stockholders.

 

Fourth Quarter 2017 Highlights

 

Income Statement

 

o

Net income totaled $1.21 million, or $0.07 per diluted common share for the fourth quarter of 2017.

 

o

Excluding the impact of the one-time deferred tax asset revaluation, earnings increased $1.36 million, or 21.25% to $7.77 million and diluted earnings per share increased $0.07 to $0.45 compared to the same quarter of 2016.

 

o

The non-GAAP efficiency ratio improved to 57.04% compared to 61.58% in the same quarter of 2016.

 

o

Net interest margin increased 18 basis points to 4.17%, and normalized net interest margin increased 12 basis points to 3.95% compared to the same quarter of 2016.

 

Balance Sheet

 

o

Net charge-offs decreased $2.10 million, or 59.23%, to $1.44 million for the year ended December 31, 2017, compared to the same period of 2016.

 

o

Book value per common share increased $0.68 to $20.63 compared to December 31, 2016.

 

o

Tangible book value per common share increased $0.75 to $14.64 compared to December 31, 2016.

 

o

The Company and its subsidiary bank both significantly exceed regulatory “well capitalized” targets as of December 31, 2017.

 

Non-GAAP Financial Measures

 

The Company prepares its financial statements in accordance with GAAP. This press release also refers to certain non-GAAP financial measures that the Company believes provide investors with important information, when used in conjunction with results presented in accordance with GAAP, regarding its operational performance. The Company’s non-GAAP financial measures presented in this release include core earnings, the efficiency ratio, tangible book value per common share, average tangible common equity, and normalized net interest margin. Management believes that core earnings provide the Company and investors a valuable tool to evaluate the Company’s financial results. Management believes that the efficiency ratio provides important information about the Company’s operating expense control and efficiency of operations. Management also believes this ratio focuses attention on the core operating performance of the Company over time and is highly useful in comparing period-to-period operating performance of core business operations. The efficiency ratio used by the Company may not be comparable to efficiency ratios reported by other financial institutions. The reconciliations of these measures to GAAP measures are provided within this news release.

 

1

 

 

About First Community Bancshares, Inc.

 

First Community Bancshares, Inc., a financial holding company headquartered in Bluefield, Virginia, provides banking products and services through its wholly owned subsidiary First Community Bank. First Community Bank operated 44 branch banking locations in Virginia, West Virginia, North Carolina, and Tennessee as of December 31, 2017. First Community Bank provides insurance services through First Community Insurance Services, which operates 8 in-branch locations in Virginia and West Virginia and offers wealth management and investment advice through its Trust Division and First Community Wealth Management, which collectively managed $957 million in combined assets as of December 31, 2017. The Company reported consolidated assets of $2.39 billion as of December 31, 2017. The Company’s common stock is listed on the NASDAQ Global Select Market under the trading symbol, “FCBC”. Additional investor information is available on the Company’s website at www.firstcommunitybank.com.

 

This news release may include forward-looking statements. These forward-looking statements are based on current expectations that involve risks, uncertainties, and assumptions. Should one or more of these risks or uncertainties materialize or should underlying assumptions prove incorrect, actual results may differ materially. These risks include: changes in business or other market conditions; the timely development, production and acceptance of new products and services; the challenge of managing asset/liability levels; the management of credit risk and interest rate risk; the difficulty of keeping expense growth at modest levels while increasing revenues; and other risks detailed from time to time in the Company’s Securities and Exchange Commission reports including, but not limited to, the Annual Report on Form 10-K for the most recent fiscal year end. Pursuant to the Private Securities Litigation Reform Act of 1995, the Company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made.

 

2

 

Financial Performance

 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

 
                                                           
     

Three Months Ended

   

Year Ended

 
(Amounts in thousands, except share  

December 31,

   

September 30,

   

June 30,

   

March 31,

   

December 31,

   

December 31,

 

and per share data)

 

2017

   

2017

   

2017

   

2017

   

2016

   

2017

   

2016

 

Interest income

                                                       

Interest and fees on loans

  $ 22,314     $ 22,694     $ 22,914     $ 21,827     $ 21,956     $ 89,749     $ 87,718  

Interest on securities

    1,095       1,080       1,170       1,206       1,362       4,551       6,853  

Interest on deposits in banks

    353       275       221       159       98       1,008       153  

Total interest income

    23,762       24,049       24,305       23,192       23,416       95,308       94,724  

Interest expense

                                                       

Interest on deposits

    1,313       1,275       1,233       1,166       1,145       4,987       4,479  

Interest on borrowings

    716       724       778       885       1,314       3,103       5,365  

Total interest expense

    2,029       1,999       2,011       2,051       2,459       8,090       9,844  

Net interest income

    21,733       22,050       22,294       21,141       20,957       87,218       84,880  

Provision for loan losses

    615       730       934       492       500       2,771       1,255  

Net interest income after provision

    21,118       21,320       21,360       20,649       20,457       84,447       83,625  

Total noninterest income

    7,947       7,135       5,475       5,691       6,238       26,248       27,066  

Total noninterest expense

    17,132       16,909       17,458       17,083       16,653       68,582       72,746  

Income before income taxes

    11,933       11,546       9,377       9,257       10,042       42,113       37,945  

Income tax expense

    10,720       3,894       2,959       3,055       3,638       20,628       12,819  

Net income

  $ 1,213     $ 7,652     $ 6,418     $ 6,202     $ 6,404     $ 21,485     $ 25,126  
                                                           

Earnings per common share

                                                       

Basic

  $ 0.07     $ 0.45     $ 0.38     $ 0.36     $ 0.38     $ 1.26     $ 1.45  

Diluted

    0.07       0.45       0.38       0.36       0.38       1.26       1.45  

Cash dividends per common share

    0.18       0.18       0.16       0.16       0.16       0.68       0.60  

Weighted average shares outstanding

                                                       

Basic

    16,992,519       17,005,654       17,012,189       16,998,125       16,891,010       17,002,116       17,319,689  

Diluted

    17,083,949       17,082,729       17,082,832       17,072,174       17,043,869       17,077,842       17,365,524  

Performance ratios

                                                       

Return on average assets

    0.20 %     1.29 %     1.08 %     1.06 %     1.05 %     0.91 %     1.02 %

Return on average common equity

    1.35 %     8.61 %     7.41 %     7.35 %     7.49 %     6.14 %     7.42 %

Return on average tangible common equity(1)

    1.89 %     12.13 %     10.51 %     10.50 %     10.75 %     8.69 %     10.76 %

 

 

 

             

(1)

A non-GAAP financial measure defined as average stockholders’ equity less average goodwill and other intangibles

 

RECONCILIATION OF GAAP NET INCOME TO CORE EARNINGS (Unaudited)

 
                                                           
     

Three Months Ended

   

Year Ended

 
     

December 31,

   

September 30,

   

June 30,

   

March 31,

   

December 31,

   

December 31,

 
(Amounts in thousands, except  

2017

   

2017

   

2017

   

2017

   

2016

   

2017

   

2016

 

per share data)

                                                       

Net income, GAAP

  $ 1,213     $ 7,652     $ 6,418     $ 6,202     $ 6,404     $ 21,485     $ 25,126  

Non-GAAP adjustments:

                                                       

Net gain on divestitures

    -       -       -       -       (619 )     -       (3,684 )

Allowance reversal for sold loans

    -       -       -       -       -       -       (1,354 )

Merger, acquisition, and divestiture expense

    -       -       -       -       55       -       730  

Net loss (gain) on sale of securities

    4       -       657       -       (388 )     661       (335 )

Net impairment losses

    -       -       -       -       -       -       4,646  

Deferred tax asset revaluation (estimated)

    6,552       -       -       -       -       6,552       -  

Other non-core items

    (140 )     34       (174 )     (18 )     (48 )     (298 )     (552 )

Total adjustments to core earnings

    6,416       34       483       (18 )     (1,000 )     6,915       (549 )

Tax effect

    (50 )     12       345       (7 )     (708 )     301       (542 )

Core earnings, non-GAAP(1)

  $ 7,679     $ 7,674     $ 6,556     $ 6,191     $ 6,112     $ 28,099     $ 25,119  
                                                           

Core diluted earnings per common share

  $ 0.45     $ 0.45     $ 0.38     $ 0.36     $ 0.36     $ 1.64     $ 1.45  

Performance ratios

                                                       

Core return on average assets

    1.28 %     1.29 %     1.11 %     1.06 %     1.01 %     1.19 %     1.02 %

Core return on average common equity

    8.56 %     8.63 %     7.57 %     7.33 %     7.15 %     8.04 %     7.42 %

Core return on average tangible common equity(2)

    11.99 %     12.16 %     10.74 %     10.48 %     10.26 %     11.36 %     10.75 %

 

 

 

                         

(1)

Excludes gains, losses, and impairment losses on securities; goodwill and intangible impairment; taxes; and other non-recurring income and expense items from net income

(2)

A non-GAAP financial measure defined as average stockholders’ equity less average goodwill and other intangibles

3

 

 

Net Interest Income and Margin

 

AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited)

 
                                                 
   

Three Months Ended December 31,

 
   

2017

   

2016

 
   

Average

           

Average Yield/

   

Average

           

Average Yield/

 

(Amounts in thousands)

 

Balance

   

Interest(1)

   

Rate(1)

   

Balance

   

Interest(1)

   

Rate(1)

 

Assets

                                               

Earning assets

                                               

Loans(2)

  $ 1,822,583     $ 22,387       4.87%     $ 1,846,848     $ 22,012       4.74%  

Securities available for sale

    171,288       1,383       3.20%       193,342       1,644       3.38%  

Securities held to maturity

    25,165       105       1.66%       67,254       182       1.08%  

Interest-bearing deposits

    95,174       353       1.47%       35,470       98       1.10%  

Total earning assets

    2,114,210       24,228       4.55%       2,142,914       23,936       4.44%  

Other assets

    256,591                       275,022                  

Total assets

  $ 2,370,801                     $ 2,417,936                  
                                                 

Liabilities and stockholders' equity

                                               

Interest-bearing deposits

                                               

Demand deposits

  $ 451,024     $ 111       0.10%     $ 348,869     $ 73       0.08%  

Savings deposits

    512,156       34       0.03%       522,864       57       0.04%  

Time deposits

    502,515       1,168       0.92%       519,521       1,015       0.78%  

Total interest-bearing deposits

    1,465,695       1,313       0.36%       1,391,254       1,145       0.33%  

Borrowings

                                               

Federal funds purchased

    -       -       -       82       -       0.00%  

Retail repurchase agreements

    5,470       1       0.07%       66,776       12       0.07%  

Wholesale repurchase agreements

    25,000       204       3.24%       48,913       464       3.77%  

FHLB advances and other borrowings

    50,000       511       4.05%       92,175       838       3.62%  

Total borrowings

    80,470       716       3.53%       207,946       1,314       2.51%  

Total interest-bearing liabilities

    1,546,165       2,029       0.52%       1,599,200       2,459       0.61%  

Noninterest-bearing demand deposits

    446,487                       454,161                  

Other liabilities

    22,103                       24,410                  

Total liabilities

    2,014,755                       2,077,771                  

Stockholders' equity

    356,046                       340,165                  

Total liabilities and stockholders' equity

  $ 2,370,801                     $ 2,417,936                  

Net interest income, FTE

          $ 22,199                     $ 21,477          

Net interest rate spread

                    4.03%                       3.83%  

Net interest margin

                    4.17%                       3.99%  

 

 

 

           

(1)

Fully taxable equivalent ("FTE") basis based on the federal statutory rate of 35%

(2)

Nonaccrual loans are included in average balances; however, no related interest income is recorded during the period of nonaccrual.

 

4

 

 

AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited)

 
                                                 
   

Year Ended December 31,

 
   

2017

   

2016

 
   

Average

           

Average Yield/

   

Average

           

Average Yield/

 

(Amounts in thousands)

 

Balance

   

Interest(1)

   

Rate(1)

   

Balance

   

Interest(1)

   

Rate(1)

 

Assets

                                               

Earning assets

                                               

Loans(2)

  $ 1,837,092     $ 90,032       4.90%     $ 1,793,618     $ 87,848       4.90%  

Securities available for sale

    164,489       5,695       3.46%       287,332       8,047       2.80%  

Securities held to maturity

    32,954       487       1.48%       71,069       757       1.07%  

Interest-bearing deposits

    73,405       1,008       1.37%       18,864       153       0.81%  

Total earning assets

    2,107,940       97,222       4.61%       2,170,883       96,805       4.46%  

Other assets

    262,381                       284,575                  

Total assets

  $ 2,370,321                     $ 2,455,458                  
                                                 

Liabilities and stockholders' equity

                                               

Interest-bearing deposits

                                               

Demand deposits

  $ 401,092     $ 412       0.10%     $ 342,169     $ 250       0.07%  

Savings deposits

    520,430       148       0.03%       531,050       248       0.05%  

Time deposits

    510,411       4,427       0.87%       525,162       3,981       0.76%  

Total interest-bearing deposits

    1,431,933       4,987       0.35%       1,398,381       4,479       0.32%  

Borrowings

                                               

Federal funds purchased

    1       -       0.00%       4,058       26       0.64%  

Retail repurchase agreements

    47,716       32       0.07%       68,701       49       0.07%  

Wholesale repurchase agreements

    25,000       806       3.22%       49,727       1,874       3.77%  

FHLB advances and other borrowings

    55,502       2,265       4.08%       116,602       3,416       2.93%  

Total borrowings

    128,219       3,103       2.42%       239,088       5,365       2.24%  

Total interest-bearing liabilities

    1,560,152       8,090       0.52%       1,637,469       9,844       0.60%  

Noninterest-bearing demand deposits

    438,513                       456,474                  

Other liabilities

    21,955                       23,040                  

Total liabilities

    2,020,620                       2,116,983                  

Stockholders' equity

    349,701                       338,475                  

Total liabilities and stockholders' equity

  $ 2,370,321                     $ 2,455,458                  

Net interest income, FTE

          $ 89,132                     $ 86,961          

Net interest rate spread

                    4.09%                       3.86%  

Net interest margin

                    4.23%                       4.01%  

 

 

 

                     

(1)

Fully taxable equivalent ("FTE") basis based on the federal statutory rate of 35%

(2)

Nonaccrual loans are included in average balances; however, no related interest income is recorded during the period of nonaccrual.

 

5

 

 

RECONCILIATION OF GAAP NET INTEREST MARGIN TO NON-GAAP NORMALIZED NET INTEREST MARGIN (Unaudited)

 
                                 
   

Three Months Ended December 31,

 
   

2017

   

2016

 

(Amounts in thousands)

 

Interest(1)

   

Average Yield/

Rate(1)

   

Interest(1)

   

Average Yield/

Rate(1)

 

Earning assets

                               

Loans(2)

  $ 22,387       4.87 %   $ 22,012       4.74 %

Accretion income

    1,620               1,506          

Less: cash accretion income

    460               633          

Non-cash accretion income

    1,160               873          

Loans, normalized(3)

    21,227       4.62 %     21,139       4.55 %

Other earning assets

    1,841       2.50 %     1,924       2.59 %

Total earning assets

    23,068       4.33 %     23,063       4.28 %

Total interest-bearing liabilities

    2,029       0.52 %     2,459       0.61 %

Net interest income, FTE(3)

  $ 21,039             $ 20,604          

Net interest rate spread, normalized(3)

            3.81 %             3.67 %

Net interest margin, normalized(3)

            3.95 %             3.83 %

 

 

 

                     

(1)

FTE basis based on the federal statutory rate of 35%

(2)

Nonaccrual loans are included in average balances; however, no related interest income is recorded during the period of nonaccrual.

(3)

Normalized totals are non-GAAP financial measures that exclude non-cash loan interest accretion related to PCI loans.

 

   

Year Ended December 31,

 
   

2017

   

2016

 

(Amounts in thousands)

 

Interest(1)

   

Average Yield/ Rate(1)

   

Interest(1)

   

Average Yield/ Rate(1)

 

Earning assets

                               

Loans(2)

  $ 90,032       4.90 %   $ 87,848       4.90 %

Accretion income

    7,863               7,690          

Less: cash accretion income

    2,446               2,924          

Non-cash accretion income

    5,417               4,766          

Loans, normalized(3)

    84,615       4.61 %     83,082       4.63 %

Other earning assets

    7,190       2.65 %     8,957       2.37 %

Total earning assets

    91,805       4.36 %     92,039       4.24 %

Total interest-bearing liabilities

    8,090       0.52 %     9,844       0.60 %

Net interest income, FTE(3)

  $ 83,715             $ 82,195          

Net interest rate spread, normalized(3)

            3.84 %             3.64 %

Net interest margin, normalized(3)

            3.97 %             3.79 %

 

 

 

                     

(1)

FTE basis based on the federal statutory rate of 35%

(2)

Nonaccrual loans are included in average balances; however, no related interest income is recorded during the period of nonaccrual.

(3)

Normalized totals are non-GAAP financial measures that exclude non-cash loan interest accretion related to PCI loans.

 

6

 

 

Noninterest Income and Expense

 

CONDENSED QUARTERLY STATEMENTS OF INCOME (Unaudited)

 
                                                         
   

Three Months Ended

   

Year Ended

 
   

December 31,

   

September 30,

   

June 30,

   

March 31,

   

December 31,

   

December 31,

 

(Amounts in thousands)

 

2017

   

2017

   

2017

   

2017

   

2016

   

2017

   

2016

 

Noninterest income

                                                       

Wealth management

  $ 811     $ 758     $ 791     $ 790     $ 681     $ 3,150     $ 2,828  

Service charges on deposits

    3,725       3,605       3,360       3,113       3,442       13,803       13,588  

Other service charges and fees

    2,237       2,141       2,168       2,078       2,014       8,624       8,102  

Insurance commissions

    343       306       325       373       59       1,347       5,442  

Net impairment losses recognized in earnings

    -       -       -       -       -       -       (4,646 )

Net gain (loss) on sale of securities

    (4 )     -       (657 )     -       388       (661 )     335  

Net FDIC indemnification asset amortization

    (331 )     (268 )     (1,586 )     (1,332 )     (1,618 )     (3,517 )     (5,474 )

Net gain on divestitures

    -       -       -       -       619       -       3,684  

Other operating income

    1,166       593       1,074       669       653       3,502       3,207  

Total noninterest income

    7,947       7,135       5,475       5,691       6,238       26,248       27,066  

Noninterest expense

                                                       

Salaries and employee benefits

    9,139       9,137       9,157       8,884       9,411       36,317       39,912  

Occupancy expense

    1,104       1,082       1,341       1,248       1,158       4,775       5,297  

Furniture and equipment expense

    1,114       1,133       1,087       1,091       1,070       4,425       4,341  

Amortization of intangibles

    266       266       263       261       265       1,056       1,136  

FDIC premiums and assessments

    212       227       227       244       274       910       1,383  

Merger, acquisition, and divestiture expense

    -       -       -       -       55       -       730  

Other operating expense

    5,297       5,064       5,383       5,355       4,420       21,099       19,947  

Total noninterest expense

    17,132       16,909       17,458       17,083       16,653       68,582       72,746  

 

Efficiency Ratio

 

EFFICIENCY RATIO CALCULATION (Unaudited)

 
                                                         
   

Three Months Ended

   

Year Ended

 
   

December 31,

   

September 30,

   

June 30,

   

March 31,

   

December 31,

   

December 31,

 
   

2017

   

2017

   

2017

   

2017

   

2016

   

2017

   

2016

 

(Amounts in thousands)

                                                       

Noninterest expense, GAAP

  $ 17,132     $ 16,909     $ 17,458     $ 17,083     $ 16,653     $ 68,582     $ 72,746  

Non-GAAP adjustments

                                                       

Merger, acquisition, and divestiture expense

    -       -       -       -       (55 )     -       (730 )

OREO expense and net loss

    (14 )     (647 )     (213 )     (328 )     (184 )     (1,202 )     (1,420 )

Other non-core items

    -       (64 )     (327 )     -       8       (391 )     (364 )

Adjusted noninterest expense

    17,118       16,198       16,918       16,755       16,422       66,989       70,232  
                                                         

Net interest income, GAAP

    21,733       22,050       22,294       21,141       20,957       87,218       84,880  

Noninterest income, GAAP

    7,947       7,135       5,475       5,691       6,238       26,248       27,066  

Non-GAAP adjustments

                                                       

Tax equivalency adjustment

    466       470       481       497       520       1,914       2,081  

Net impairment losses

    -       -       -       -       -       -       4,646  

Net loss (gain) on sale of securities

    4       -       657       -       (388 )     661       (335 )

Net gain on divestitures

    -       -       -       -       (619 )     -       (3,684 )

Other non-core items

    (140 )     (30 )     (501 )     (18 )     (40 )     (689 )     (916 )

Adjusted net interest and noninterest income

    30,010       29,625       28,406       27,311       26,668       115,352       113,738  
                                                         

Non-GAAP efficiency ratio(1)

    57.04 %     54.68 %     59.56 %     61.35 %     61.58 %     58.07 %     61.75 %

GAAP efficiency ratio

    57.72 %     57.94 %     62.87 %     63.67 %     61.24 %     60.44 %     64.98 %

 

 

 

                         

(1)

A non-GAAP financial measure computed by dividing adjusted noninterest expense by the sum of tax equivalent net interest income and adjusted noninterest income

 

7

 

 

Balance Sheet and Capital

 

CONDENSED CONSOLIDATED QUARTERLY BALANCE SHEETS (Unaudited)

 
                                           
     

December 31,

   

September 30,

   

June 30,

   

March 31,

   

December 31,

 

(Amounts in thousands, except per share data)

 

2017

   

2017

   

2017

   

2017

   

2016

 

Assets

                                       

Total cash and cash equivalents

  $ 157,951     $ 105,119     $ 106,799     $ 152,851     $ 76,307  

Securities available for sale

    165,580       174,424       157,854       158,685       165,579  

Securities held to maturity

    25,149       25,182       25,216       47,092       47,133  

Loans held for investment, net of unearned income

                                       

Non-covered

    1,789,236       1,806,434       1,796,263       1,784,371       1,795,954  

Covered

    27,948       31,287       45,845       51,412       56,994  

Less allowance for loan losses

    (19,276 )     (19,206 )     (18,886 )     (18,458 )     (17,948 )

Loans held for investment, net

    1,797,908       1,818,515       1,823,222       1,817,325       1,835,000  

FDIC indemnification asset

    7,161       7,465       8,159       9,931       12,173  

Premises and equipment, net

    48,126       48,949       49,598       50,057       50,085  

Other real estate owned, non-covered

    2,409       3,543       3,914       4,477       5,109  

Other real estate owned, covered

    105       54       124       241       276  

Interest receivable

    5,778       5,156       5,072       5,059       5,553  

Goodwill

    95,779       95,779       95,779       95,779       95,779  

Other intangible assets

    6,151       6,417       6,683       6,947       7,207  

Other assets

    76,363       84,177       84,183       82,069       86,197  

Total assets

  $ 2,388,460     $ 2,374,780     $ 2,366,603     $ 2,430,513     $ 2,386,398  
                                           

Liabilities

                                       

Deposits

                                       

Noninterest-bearing

  $ 454,143     $ 452,940     $ 443,800     $ 467,677     $ 427,705  

Interest-bearing

    1,475,748       1,410,880       1,413,574       1,438,917       1,413,633  

Total deposits

    1,929,891       1,863,820       1,857,374       1,906,594       1,841,338  

Securities sold under agreements to repurchase

    30,086       83,783       86,011       90,653       98,005  

FHLB borrowings

    50,000       50,000       50,000       65,000       65,000  

Other borrowings

    -       -       -       244       15,708  

Interest, taxes, and other liabilities

    27,769       24,540       24,443       24,618       27,290  

Total liabilities

    2,037,746       2,022,143       2,017,828       2,087,109       2,047,341  
                                           

Stockholders' equity

                                       

Common stock

    21,382       21,382       21,382       21,382       21,382  

Additional paid-in capital

    228,750       228,510       228,326       228,176       228,142  

Retained earnings

    180,299       182,145       177,556       173,860       170,377  

Treasury stock, at cost

    (79,121 )     (79,333 )     (78,488 )     (78,533 )     (78,833 )

Accumulated other comprehensive (loss) income

    (596 )     (67 )     (1 )     (1,481 )     (2,011 )

Total stockholders' equity

    350,714       352,637       348,775       343,404       339,057  

Total liabilities and stockholders' equity

  $ 2,388,460     $ 2,374,780     $ 2,366,603     $ 2,430,513     $ 2,386,398  
                                           

Shares outstanding at period-end

    16,998,226       16,986,502       17,017,071       17,013,185       16,994,208  

Book value per common share(1)

  $ 20.63     $ 20.76     $ 20.50     $ 20.18     $ 19.95  

Tangible book value per common share(2)

    14.64       14.74       14.47       14.15       13.89  

 

 

 

         

(1)

Stockholders' equity divided by common shares outstanding

(2)

A non-GAAP financial measure defined as stockholders’ equity less goodwill and other intangibles, divided by common shares outstanding

 

8

 

 

Asset Quality

 

SELECTED CREDIT QUALITY INFORMATION (Unaudited)

 
                                           
     

December 31,

   

September 30,

   

June 30,

   

March 31,

   

December 31,

 

(Amounts in thousands)

 

2017

   

2017

   

2017

   

2017

   

2016

 

Allowance for Loan Losses

                                       

Beginning balance

  $ 19,206     $ 18,886     $ 18,458     $ 17,948     $ 19,633  

Provision for (recovery of) loan losses charged to operations

    615       730       934       492       500  

Charge-offs

    (967 )     (717 )     (902 )     (357 )     (2,485 )

Recoveries

    422       307       396       375       300  

Net (charge-offs) recoveries

    (545 )     (410 )     (506 )     18       (2,185 )

Ending balance

  $ 19,276     $ 19,206     $ 18,886     $ 18,458     $ 17,948  
                                           

Nonperforming Assets

                                       

Non-covered nonperforming assets

                                       

Nonaccrual loans

  $ 18,997     $ 18,942     $ 20,146     $ 18,537     $ 15,854  

Accruing loans past due 90 days or more

    1       -       -       20       -  

Troubled debt restructurings ("TDRs")(1)

    120       141       100       -       114  

Total non-covered nonperforming loans

    19,118       19,083       20,246       18,557       15,968  

OREO

    2,409       3,543       3,914       4,477       5,109  

Total non-covered nonperforming assets

  $ 21,527     $ 22,626     $ 24,160     $ 23,034     $ 21,077  
                                           

Covered nonperforming assets

                                       

Nonaccrual loans

  $ 342     $ 420     $ 446     $ 918     $ 608  

Total covered nonperforming loans

    342       420       446       918       608  

OREO

    105       54       124       241       276  

Total covered nonperforming assets

  $ 447     $ 474     $ 570     $ 1,159     $ 884  
                                           

Additional Information

                                       

Performing TDRs(2)

  $ 7,614     $ 8,101     $ 8,485     $ 8,593     $ 12,838  

Total TDRs(3)

    7,734       8,242       8,585       8,593       12,952  
                                           

Non-covered ratios

                                       

Nonperforming loans to total loans

    1.07 %     1.06 %     1.13 %     1.04 %     0.89 %

Nonperforming assets to total assets

    0.91 %     0.97 %     1.04 %     0.97 %     0.90 %

Non-PCI allowance to nonperforming loans

    100.83 %     100.64 %     93.24 %     99.40 %     112.32 %

Non-PCI allowance to total loans

    1.08 %     1.06 %     1.05 %     1.03 %     1.00 %

Annualized net charge-offs to average loans

    0.12 %     0.09 %     0.11 %     0.00 %</