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

fcbc20180724_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): July 24, 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 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

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 July 24, 2018, First Community Bancshares, Inc. (the “Company”) announced by press release its earnings for the second quarter of 2018. A copy of the press release is attached hereto as Exhibit 99.1.

 

Item 8.01 Other Events. 

 

On July 24, 2018, the Company announced by press release its quarterly cash dividend to common shareholders of twenty-one cents ($0.21) per common share, payable on August 17, 2018, to shareholders of record on August 3, 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 July 24, 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:

July 24, 2018

 

By:

/s/ David D. Brown

     
   

David D. Brown

   

Chief Financial Officer

 

(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

ex_118402.htm

Exhibit 99.1

 

NEWS RELEASE

FOR IMMEDIATE RELEASE:

FOR MORE INFORMATION, CONTACT:

July 24, 2018

David D. Brown

 

(276) 326-9000

 

First Community Bancshares, Inc. Announces Record Second Quarter 2018 Results

and Increased 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 six months ended June 30, 2018. The Company reported net income of $9.07 million, or $0.54 per diluted common share for the quarter ended June 30, 2018, which represents a 42.11% increase in per share diluted earnings compared to the same quarter of 2017. Net income was $17.93 million, or $1.06 per diluted common share, for the six months ended June 30, 2018, which represents a 43.24% increase in per share diluted earnings compared to the same period of 2017.

 

The Company also announced today that the Board of Directors declared a quarterly cash dividend to common shareholders of twenty-one cents ($0.21) per common share, an increase of 16.67% over the $0.18 dividend paid last quarter. The quarterly dividend is payable to common shareholders of record on August 3, 2018, and is expected to be paid on or about August 17, 2018. The current year marks the 33rd consecutive year of regular cash dividends paid to shareholders.

 

Second Quarter 2018 Highlights

 

Income Statement

 

Pre-tax income increased $2.19 million, or 23.34%, to $11.57 million and net income increased $2.65 million, or 41.26%, to $9.07 million compared to the same quarter of 2017.

 

Diluted earnings per share increased $0.16, or 42.11%, to $0.54 and core diluted earnings per share increased $0.17, or 44.74%, to $0.55 compared to the same quarter of 2017.

 

Return on average assets improved 45 basis points to 1.53% and return on average equity improved 327 basis points to 10.68% compared to the same quarter of 2017.

 

The GAAP efficiency ratio improved 349 basis points to 58.81% and the non-GAAP efficiency ratio improved 470 basis points to 54.25% compared to the same quarter of 2017.

 

Net interest margin decreased 3 basis points to 4.16%, while the normalized net interest margin increased 5 basis points to 4.04% compared to the same quarter of 2017.

 

Balance Sheet

 

The Company repurchased 286,940 common shares during the quarter. Year to date, the Company has repurchased 474,240 common shares for $14.72 million compared to 10,602 shares during the same period of 2017.

 

The Company and its subsidiary bank both significantly exceed regulatory “well capitalized” targets as of June 30, 2018.

 

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 June 30, 2018. First Community Bank provides insurance services through First Community Insurance Services, which operates 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 $969 million in combined assets as of June 30, 2018. The Company reported consolidated assets of $2.35 billion as of June 30, 2018. 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

   

Six Months Ended

 
   

June 30,

   

March 31,

   

December 31,

   

September 30,

   

June 30,

   

June 30,

 

(Amounts in thousands, except share and per share data)

 

2018

   

2018

   

2017

   

2017

   

2017

   

2018

   

2017

 

Interest income

                                                       

Interest and fees on loans

  $ 22,422     $ 22,755     $ 22,314     $ 22,694     $ 22,914     $ 45,177     $ 44,741  

Interest on securities

    1,361       1,104       1,095       1,080       1,170       2,465       2,376  

Interest on deposits in banks

    514       471       353       275       221       985       380  

Total interest income

    24,297       24,330       23,762       24,049       24,305       48,627       47,497  

Interest expense

                                                       

Interest on deposits

    1,327       1,251       1,313       1,275       1,233       2,578       2,399  

Interest on borrowings

    708       700       716       724       778       1,408       1,663  

Total interest expense

    2,035       1,951       2,029       1,999       2,011       3,986       4,062  

Net interest income

    22,262       22,379       21,733       22,050       22,294       44,641       43,435  

Provision for loan losses

    495       495       615       730       934       990       1,426  

Net interest income after provision

    21,767       21,884       21,118       21,320       21,360       43,651       42,009  

Noninterest income

    7,016       6,611       7,498       6,703       5,055       13,627       10,367  

Noninterest expense

    17,217       17,059       16,683       16,477       17,038       34,276       33,742  

Income before income taxes

    11,566       11,436       11,933       11,546       9,377       23,002       18,634  

Income tax expense

    2,500       2,568       10,720       3,894       2,959       5,068       6,014  

Net income

  $ 9,066     $ 8,868     $ 1,213     $ 7,652     $ 6,418     $ 17,934     $ 12,620  
                                                         

Earnings per common share

                                                       

Basic

  $ 0.54     $ 0.52     $ 0.07     $ 0.45     $ 0.38     $ 1.06     $ 0.74  

Diluted

    0.54       0.52       0.07       0.45       0.38       1.06       0.74  

Cash dividends per common share

    0.18       0.66       0.18       0.16       0.16       0.84       0.32  

Weighted average shares outstanding

                                                       

Basic

    16,689,398       16,955,758       16,992,519       17,005,654       17,012,189       16,821,842       17,005,196  

Diluted

    16,788,615       17,047,638       17,083,949       17,082,729       17,082,832       16,912,872       17,075,961  

Performance ratios

                                                       

Return on average assets

    1.53 %     1.52 %     0.20 %     1.29 %     1.08 %     1.53 %     1.07 %

Return on average common equity

    10.68 %     10.30 %     1.35 %     8.61 %     7.41 %     10.49 %     7.38 %

Return on average tangible common equity(1)

    15.21 %     14.53 %     1.89 %     12.13 %     10.51 %     14.87 %     10.51 %

 


(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

   

Six Months Ended

 
   

June 30,

   

March 31,

   

December 31,

   

September 30,

   

June 30,

   

June 30,

 
   

2018

   

2018

   

2017

   

2017

   

2017

   

2018

   

2017

 

(Amounts in thousands, except per share data)

                                                       

Net income, GAAP

  $ 9,066     $ 8,868     $ 1,213     $ 7,652     $ 6,418     $ 17,934     $ 12,620  

Non-GAAP adjustments:

                                                       

Net loss on sale of securities

    -       -       4       -       657       -       657  

Deferred tax asset revaluation

    -       -       6,552       -       -       -       -  

Other non-core items

    297       (130 )     (140 )     34       (174 )     167       (192 )

Total adjustments to core earnings

    297       (130 )     6,416       34       483       167       465  

Tax effect

    71       (24 )     (50 )     12       345       72       338  

Core earnings, non-GAAP(1)

  $ 9,292     $ 8,762     $ 7,679     $ 7,674     $ 6,556     $ 18,029     $ 12,747  
                                                         

Core diluted earnings per common share

  $ 0.55     $ 0.51     $ 0.45     $ 0.45     $ 0.38     $ 1.07     $ 0.74  

Performance ratios

                                                       

Core return on average assets

    1.57 %     1.50 %     1.28 %     1.29 %     1.11 %     1.53 %     1.08 %

Core return on average common equity

    10.94 %     10.17 %     8.56 %     8.63 %     7.57 %     10.54 %     7.45 %

Core return on average tangible common equity(2)

    15.59 %     14.36 %     11.99 %     12.16 %     10.74 %     14.95 %     10.61 %

 


(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 June 30,

 
   

2018

   

2017

 
   

Average

           

Average Yield/

   

Average

           

Average Yield/

 

(Amounts in thousands)

 

Balance

   

Interest(1)

   

Rate(1)

   

Balance

   

Interest(2)

   

Rate(2)

 

Assets

                                               

Earning assets

                                               

Loans(3)

  $ 1,795,094     $ 22,495       5.03 %   $ 1,843,441     $ 22,986       5.00 %

Securities available for sale

    190,605       1,641       3.45 %     167,869       1,455       3.48 %

Securities held to maturity

    25,098       104       1.66 %     34,664       125       1.45 %

Interest-bearing deposits

    109,349       514       1.89 %     68,455       221       1.29 %

Total earning assets

    2,120,146       24,754       4.68 %     2,114,429       24,787       4.70 %

Other assets

    252,843                       263,767                  

Total assets

  $ 2,372,989                     $ 2,378,196                  
                                                 

Liabilities and stockholders' equity

                                               

Interest-bearing deposits

                                               

Demand deposits

  $ 484,776     $ 104       0.09 %   $ 387,113     $ 60       0.06 %

Savings deposits

    518,055       83       0.06 %     525,808       85       0.06 %

Time deposits

    477,691       1,140       0.96 %     514,527       1,088       0.85 %

Total interest-bearing deposits

    1,480,522       1,327       0.36 %     1,427,448       1,233       0.35 %

Borrowings

                                               

Federal funds purchased

    -       -       -       5       -       0.00 %

Retail repurchase agreements

    3,615       1       0.11 %     60,809       10       0.07 %

Wholesale repurchase agreements

    25,000       201       3.22 %     25,000       201       3.22 %

FHLB advances and other borrowings

    50,000       506       4.06 %     55,635       567       4.09 %

Total borrowings

    78,615       708       3.61 %     141,449       778       2.21 %

Total interest-bearing liabilities

    1,559,137       2,035       0.52 %     1,568,897       2,011       0.51 %

Noninterest-bearing demand deposits

    447,048                       441,547                  

Other liabilities

    26,222                       20,197                  

Total liabilities

    2,032,407                       2,030,641                  

Stockholders' equity

    340,582                       347,555                  

Total liabilities and stockholders' equity

  $ 2,372,989                     $ 2,378,196                  

Net interest income, FTE

          $ 22,719                     $ 22,776          

Net interest rate spread

                    4.16 %                     4.19 %

Net interest margin

                    4.30 %                     4.32 %

 


(1)

Fully taxable equivalent ("FTE") basis based on the federal statutory rate of 21%

(2)

FTE basis based on the federal statutory rate of 35%

(3)

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)

 

   

Six Months Ended June 30,

 
   

2018

   

2017

 
   

Average

           

Average Yield/

   

Average

           

Average Yield/

 

(Amounts in thousands)

 

Balance

   

Interest(1)

   

Rate(1)

   

Balance

   

Interest(2)

   

Rate(2)

 

Assets

                                               

Earning assets

                                               

Loans(3)

  $ 1,800,438     $ 45,322       5.08 %   $ 1,841,152     $ 44,880       4.92 %

Securities available for sale

    177,897       3,025       3.43 %     164,820       2,939       3.60 %

Securities held to maturity

    25,115       209       1.68 %     40,854       276       1.36 %

Interest-bearing deposits

    113,627       985       1.75 %     62,140       380       1.23 %

Total earning assets

    2,117,077       49,541       4.72 %     2,108,966       48,475       4.64 %

Other assets

    252,592                       267,163                  

Total assets

  $ 2,369,669                     $ 2,376,129                  
                                                 

Liabilities and stockholders' equity

                                               

Interest-bearing deposits

                                               

Demand deposits

  $ 473,819     $ 167       0.07 %   $ 384,098     $ 114       0.06 %

Savings deposits

    518,306       165       0.06 %     525,691       169       0.06 %

Time deposits

    485,574       2,246       0.93 %     515,014       2,116       0.83 %

Total interest-bearing deposits

    1,477,699       2,578       0.35 %     1,424,803       2,399       0.34 %

Borrowings

                                               

Federal funds purchased

    -       -       -       3       -       0.00 %

Retail repurchase agreements

    4,031       2       0.10 %     63,861       21       0.07 %

Wholesale repurchase agreements

    25,000       400       3.23 %     25,000       399       3.22 %

FHLB advances and other borrowings

    50,000       1,006       4.06 %     61,096       1,243       4.10 %

Total borrowings

    79,031       1,408       3.59 %     149,960       1,663       2.24 %

Total interest-bearing liabilities

    1,556,730       3,986       0.52 %     1,574,763       4,062       0.52 %

Noninterest-bearing demand deposits

    439,867                       433,588                  

Other liabilities

    28,168                       22,822                  

Total liabilities

    2,024,765                       2,031,173                  

Stockholders' equity

    344,904                       344,956                  

Total liabilities and stockholders' equity

  $ 2,369,669                     $ 2,376,129                  

Net interest income, FTE

          $ 45,555                     $ 44,413          

Net interest rate spread

                    4.20 %                     4.12 %

Net interest margin

                    4.34 %                     4.25 %

 


(1)

FTE basis based on the federal statutory rate of 21%

(2)

FTE basis based on the federal statutory rate of 35%

(3)

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 June 30,

 
   

2018

   

2017

 

(Amounts in thousands)

 

Interest(1)

   

Average Yield/ Rate(1)

   

Interest(2)

   

Average Yield/ Rate(2)

 

Earning assets

                               

Loans(3)

  $ 22,495       5.03 %   $ 22,986       5.00 %

Accretion income

    1,827               2,534          

Less: cash accretion income

    468               788          

Non-cash accretion income

    1,359               1,746          

Loans, normalized(4)

    21,136       4.72 %     21,240       4.62 %

Other earning assets

    2,259       2.79 %     1,801       2.67 %

Total earning assets

    23,395       4.43 %     23,041       4.37 %

Total interest-bearing liabilities

    2,035       0.52 %     2,011       0.51 %

Net interest income, FTE(4)

  $ 21,360             $ 21,030          

Net interest rate spread, normalized(4)

            3.90 %             3.86 %

Net interest margin, normalized(4)

            4.04 %             3.99 %

 


(1)

FTE basis based on the federal statutory rate of 21%

(2)

FTE basis based on the federal statutory rate of 35%

(3)

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

(4)

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

 

   

Six Months Ended June 30,

 
   

2018

   

2017

 

(Amounts in thousands)

 

Interest(1)

   

Average Yield/ Rate(1)

   

Interest(2)

   

Average Yield/ Rate(2)

 

Earning assets

                               

Loans(3)

  $ 45,322       5.08 %   $ 44,880       4.92 %

Accretion income

    4,151               4,318          

Less: cash accretion income

    947               1,438          

Non-cash accretion income

    3,204               2,880          

Loans, normalized(4)

    42,118       4.72 %     42,000       4.60 %

Other earning assets

    4,219       2.69 %     3,595       2.71 %

Total earning assets

    46,337       4.41 %     45,595       4.36 %

Total interest-bearing liabilities

    3,986       0.52 %     4,062       0.52 %

Net interest income, FTE(4)

  $ 42,351             $ 41,533          

Net interest rate spread, normalized(4)

            3.90 %             3.84 %

Net interest margin, normalized(4)

            4.03 %             3.97 %

 


(1)

FTE basis based on the federal statutory rate of 21%

(2)

FTE basis based on the federal statutory rate of 35%

(3)

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

(4)

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

   

Six Months Ended

 
   

June 30,

   

March 31,

   

December 31,

   

September 30,

   

June 30,

   

June 30,

 

(Amounts in thousands)

 

2018

   

2018

   

2017

   

2017

   

2017

   

2018

   

2017

 

Noninterest income

                                                       

Wealth management

  $ 823     $ 794     $ 811     $ 758     $ 791     $ 1,617     $ 1,581  

Service charges on deposits

    3,612       3,468       3,725       3,605       3,360       7,080       6,473  

Other service charges and fees

    1,991       1,800       1,788       1,709       1,748       3,791       3,447  

Insurance commissions

    338       329       343       306       325       667       698  

Net loss on sale of securities

    -       -       (4 )     -       (657 )     -       (657 )

Net FDIC indemnification asset amortization

    (575 )     (382 )     (331 )     (268 )     (1,586 )     (957 )     (2,918 )

Other operating income

    827       602       1,166       593       1,074       1,429       1,743  

Total noninterest income

    7,016       6,611       7,498       6,703       5,055       13,627       10,367  

Noninterest expense

                                                       

Salaries and employee benefits

    8,993       9,441       9,003       9,001       9,022       18,434       17,770  

Occupancy expense

    1,083       1,250       1,104       1,082       1,341       2,333       2,589  

Furniture and equipment expense

    945       1,046       1,114       1,133       1,087       1,991       2,178  

Service fees

    851       828       703       705       1,095       1,679       1,940  

Advertising and public relations

    461       522       506       551       544       983       1,149  

Professional fees

    430       307       589       339       817       737       1,639  

Amortization of intangibles

    263       261       266       266       263       524       524  

FDIC premiums and assessments

    252       211       212       227       227       463       471  

Other operating expense

    3,939       3,193       3,186       3,173       2,642       7,132       5,482  

Total noninterest expense

    17,217       17,059       16,683       16,477       17,038       34,276       33,742  

 

Efficiency Ratio

 

EFFICIENCY RATIO CALCULATION (Unaudited)

 

   

Three Months Ended

   

Six Months Ended

 
   

June 30,

   

March 31,

   

December 31,

   

September 30,

   

June 30,

   

June 30,

 
   

2018

   

2018

   

2017

   

2017

   

2017

   

2018

   

2017

 

(Amounts in thousands)

                                                       

Noninterest expense, GAAP

  $ 17,217     $ 17,059     $ 16,683     $ 16,477     $ 17,038     $ 34,276     $ 33,742  

Non-GAAP adjustments

                                                       

OREO expense and net loss

    (742 )     (171 )     (14 )     (647 )     (213 )     (913 )     (541 )

Other non-core items

    (400 )     -       -       (64 )     (327 )     (400 )     (327 )

Adjusted noninterest expense

    16,075       16,888       16,669       15,766       16,498       32,963       32,874  
                                                         

Net interest income, GAAP

    22,262       22,379       21,733       22,050       22,294       44,641       43,435  

Noninterest income, GAAP

    7,016       6,611       7,498       6,703       5,055       13,627       10,367  

Non-GAAP adjustments

                                                       

Tax equivalency adjustment

    457       457       466       470       481       914       978  

Net loss on sale of securities

    -       -       4       -       657       -       657  

Other non-core items

    (103 )     (130 )     (140 )     (30 )     (501 )     (233 )     (519 )

Adjusted net interest and noninterest income

    29,632       29,317       29,561       29,193       27,986       58,949       54,918  
                                                         

Non-GAAP efficiency ratio(1)

    54.25 %     57.60 %     56.39 %     54.01 %     58.95 %     55.92 %     59.86 %

GAAP efficiency ratio

    58.81 %     58.84 %     57.07 %     57.31 %     62.30 %     58.82 %     62.72 %

 


(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)

 

   

June 30,

   

March 31,

   

December 31,

   

September 30,

   

June 30,

 

(Amounts in thousands, except per share data)

 

2018

   

2018

   

2017

   

2017

   

2017

 

Assets

                                       

Cash and cash equivalents

  $ 107,957     $ 205,140     $ 157,951     $ 105,119     $ 106,799  

Debt securities available for sale

    196,425       164,192       165,580       174,424       157,854  

Debt securities held to maturity

    25,082       25,115       25,149       25,182       25,216  

Loans held for investment, net of unearned income

                                       

Non-covered

    1,776,112       1,767,703       1,789,236       1,806,434       1,796,263  

Covered

    22,919       25,406       27,948       31,287       45,845  

Allowance for loan losses

    (19,583 )     (19,500 )     (19,276 )     (19,206 )     (18,886 )

Loans held for investment, net

    1,779,448       1,773,609       1,797,908       1,818,515       1,823,222  

FDIC indemnification asset

    6,390       6,884       7,161       7,465       8,159  

Premises and equipment, net

    45,547       46,415       48,126       48,949       49,598  

Other real estate owned, non-covered

    4,805       4,620       2,409       3,543       3,914  

Other real estate owned, covered

    44       70       105       54       124  

Interest receivable

    5,580       5,155       5,778       5,156       5,072  

Goodwill

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

Other intangible assets

    5,628       5,891       6,151       6,417       6,683  

Other assets

    75,435       95,437       76,363       84,177       84,183  

Total assets

  $ 2,348,120     $ 2,428,307     $ 2,388,460     $ 2,374,780     $ 2,366,603  
                                         

Liabilities

                                       

Deposits

                                       

Noninterest-bearing

  $ 462,851     $ 460,478     $ 454,143     $ 452,940     $ 443,800  

Interest-bearing

    1,441,887       1,520,141       1,475,748       1,410,880       1,413,574  

Total deposits

    1,904,738       1,980,619       1,929,891       1,863,820       1,857,374  

Securities sold under agreements to repurchase

    27,869       29,115       30,086       83,783       86,011  

FHLB borrowings

    50,000       50,000       50,000       50,000       50,000  

Interest, taxes, and other liabilities

    26,392       26,536       27,769       24,540       24,443  

Total liabilities

    2,008,999       2,086,270       2,037,746       2,022,143       2,017,828  
                                         

Stockholders' equity

                                       

Common stock

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

Additional paid-in capital

    228,949       228,774       228,750       228,510       228,326  

Retained earnings

    184,279       178,227       180,543       182,145       177,556  

Treasury stock, at cost

    (92,904 )     (83,865 )     (79,121 )     (79,333 )     (78,488 )

Accumulated other comprehensive loss

    (2,585 )     (2,481 )     (840 )     (67 )     (1 )

Total stockholders' equity

    339,121       342,037       350,714       352,637       348,775  

Total liabilities and stockholders' equity

  $ 2,348,120     $ 2,428,307     $ 2,388,460     $ 2,374,780     $ 2,366,603  
                                         

Shares outstanding at period-end

    16,574,347       16,847,452       16,998,226       16,986,502       17,017,071  

Book value per common share

  $ 20.46     $ 20.30     $ 20.63     $ 20.76     $ 20.50  

Tangible book value per common share(1)

    14.34       14.27       14.64       14.74       14.47  

 


(1)

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)

 

   

June 30,

   

March 31,

   

December 31,

   

September 30,

   

June 30,

 

(Amounts in thousands)

 

2018

   

2018

   

2017

   

2017

   

2017

 

Allowance for Loan Losses

                                       

Beginning balance

  $ 19,500     $ 19,276     $ 19,206     $ 18,886     $ 18,458  

Provision for loan losses charged to operations

    495       495       615       730       934  

Charge-offs

    (750 )     (698 )     (967 )     (717 )     (902 )

Recoveries

    338       427       422       307       396  

Net charge-offs

    (412 )     (271 )     (545 )     (410 )     (506 )

Ending balance

  $ 19,583     $ 19,500     $ 19,276     $ 19,206     $ 18,886  
                                         

Nonperforming Assets

                                       

Non-covered nonperforming assets

                                       

Nonaccrual loans

  $ 21,467     $ 21,650     $ 18,997     $ 18,942     $ 20,146  

Accruing loans past due 90 days or more

    -       27       1       -       -  

Troubled debt restructurings ("TDRs")(1)

    133       77       120       141       100  

Total non-covered nonperforming loans

    21,600       21,754       19,118       19,083       20,246  

OREO

    4,805       4,620       2,409       3,543       3,914  

Total non-covered nonperforming assets

  $ 26,405     $ 26,374     $ 21,527     $ 22,626     $ 24,160  
                                         

Covered nonperforming assets

                                       

Nonaccrual loans

  $ 509     $ 596     $ 342     $ 420     $ 446  

Total covered nonperforming loans

    509       596       342       420       446  

OREO

    44       70       105       54       124  

Total covered nonperforming assets

  $ 553     $ 666     $ 447     $ 474     $ 570  
                                         

 

Additional Information

                                       

Performing TDRs(2)

  $ 6,847     $ 7,220     $ 7,614     $ 8,101     $ 8,485  

Total TDRs(3)

    6,980       7,297       7,734       8,242       8,585  
                                         

Non-covered ratios

                                       

Nonperforming loans to total loans

    1.22 %     1.23 %     1.07 %     1.06 %     1.13 %

Nonperforming assets to total assets

    1.14 %     1.10 %     0.91 %     0.97 %     1.04 %

Non-PCI allowance to nonperforming loans

    90.66 %     89.64 %     100.83 %     100.64 %     93.24 %

Non-PCI allowance to total loans

    1.10 %     1.10 %     1.08 %     1.06 %     1.05 %

Annualized net charge-offs to average loans

    0.09 %     0.06 %     0.12 %     0.09 %     0.11 %
                                         

Total ratios

                                       

Nonperforming loans to total loans

    1.23 %     1.25 %     1.07 %     1.06 %     1.12 %

Nonperforming assets to total assets

    1.15 %     1.11 %     0.92 %     0.97 %     1.04 %

Allowance for loan losses to nonperforming loans

    88.57 %     87.25 %     99.05 %     98.48 %     91.27 %

Allowance for loan losses to total loans

    1.09 %     1.09 %     1.06 %     1.05 %     1.03 %

Annualized net charge-offs to average loans

    0.09 %     0.06 %     0.12 %     0.09 %     0.11 %

 


(1)

Accruing TDRs restructured within the past six months or nonperforming

(2)

Accruing TDRs with six months or more of satisfactory payment performance

(3)

Accruing total TDRs

 

9

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