First Community Bankshares, Inc. Announces Third Quarter Results and Quarterly Dividend

Company Release - 10/22/2019 4:05 PM ET

BLUEFIELD, Va., Oct. 22, 2019 (GLOBE NEWSWIRE) -- First Community Bankshares, Inc. (NASDAQ: FCBC) (www.firstcommunitybank.com) (the “Company”) today reported its unaudited results of operations and other financial information for the quarter ended September 30, 2019. The Company reported net income of $9.16 million, or $0.58 per diluted common share, for the quarter ended September 30, 2019, which was an increase of $0.03, or 5.45%, over the same quarter of 2018.

The Company also announced today that the Board of Directors declared a quarterly cash dividend to common shareholders of twenty-five cents ($0.25) per common share, an increase of four cents ($0.04), or 19.05%, over last year’s fourth quarter dividend. The quarterly dividend is payable to common shareholders of record on November 1, 2019, and is expected to be paid on or about November 15, 2019. The current year marks the 34th consecutive year of regular cash dividends paid to shareholders.

Third Quarter 2019 Highlights

  • General
    • On September 11, 2019, the Company announced the pending acquisition of Highlands Bankshares, Inc., headquartered in Abingdon, Virginia, with total assets of approximately $612 million.  Upon completion of the transaction, the Company is expected to have total consolidated assets in excess of $2.8 billion.
    • The Company declared a quarterly cash dividend to common shareholders of twenty-five cents ($0.25) per common share, an increase of four cents ($0.04) over last year.
    • The Company incurred $592 thousand in merger expenses related to the Highlands Bankshares, Inc. acquisition for the third quarter.
    • The Company received $900 thousand from litigation settlements during the third quarter.  Year to date, the Company has received $4.60 million.
       
  • Income Statement
    • Diluted earnings per share increased $0.03 to $0.58 compared to the same quarter of 2018, an increase of 5.45%.
    • Compared to the same quarter last year, return on average assets for the quarter increased 0.10% to 1.65% and return on average equity for the quarter increased 0.21% to 10.80%.
    • Net interest margin increased 24 basis points to 4.56% compared to the same quarter of 2018.
       
  • Balance Sheet
    • Book value per common share increased $0.86 to $21.65, and tangible book value per common share increased $0.74 to a record $15.43, compared to December 31, 2018.
    • The Company repurchased 60,500 common shares for $2.00 million during the quarter.  Year to date, the Company has repurchased 487,400 common shares for $16.36 million.
    • The Company and its subsidiary bank both significantly exceed regulatory “well capitalized” targets as of September 30, 2019.

Non-GAAP Financial Measures

In addition to financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), the Company uses certain non-GAAP financial measures that provide useful information for financial and operational decision making, evaluating trends, and comparing financial results to other financial institutions. The non-GAAP financial measures presented in this news release include “tangible book value per common share,” “return on average tangible common equity,” “adjusted earnings,” “adjusted diluted earnings per share,” “adjusted return on average assets,” “adjusted return on average common equity,” “adjusted return on average tangible common equity,” and certain financial measures presented on a fully taxable equivalent (“FTE”) basis. FTE basis is calculated using the federal statutory income tax rate of 21%. While the Company believes certain non-GAAP financial measures enhance the understanding of its business and performance, they are supplemental and not a substitute for, or more important than, financial measures prepared in accordance with GAAP and may not be comparable to those reported by other financial institutions.

About First Community Bankshares, Inc.

First Community Bankshares, 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 September 30, 2019. First Community Bank offers wealth management and investment advice through its Trust Division and First Community Wealth Management, which collectively managed and administered $1.08 billion in combined assets as of September 30, 2019. The Company reported consolidated assets of $2.21 billion as of September 30, 2019. 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.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
                
   Three Months Ended Nine Months Ended
   September 30, June 30, March 31, December 31, September 30, September 30,
(Amounts in thousands, except share and per share data) 2019   2019   2019   2018   2018   2019   2018 
Interest income             
 Interest and fees on loans$22,068  $22,721  $22,179  $23,938  $22,556  $66,968  $67,733 
 Interest on securities 857   895   1,094   1,249   1,372   2,846   3,837 
 Interest on deposits in banks 680   766   338   194   358   1,784   1,343 
Total interest income 23,605   24,382   23,611   25,381   24,286   71,598   72,913 
Interest expense             
 Interest on deposits 1,383   1,392   1,305   1,297   1,269   4,080   3,847 
 Interest on borrowings 1   1   120   205   692   122   2,100 
Total interest expense 1,384   1,393   1,425   1,502   1,961   4,202   5,947 
Net interest income 22,221   22,989   22,186   23,879   22,325   67,396   66,966 
Provision for loan losses 675   1,585   1,220   908   495   3,480   1,485 
Net interest income after provision 21,546   21,404   20,966   22,971   21,830   63,916   65,481 
Noninterest income 7,634   8,649   8,080   6,297   6,519   24,363   20,146 
Noninterest expense 17,444   16,651   16,785   17,366   18,131   50,880   52,407 
Income before income taxes 11,736   13,402   12,261   11,902   10,218   37,399   33,220 
Income tax expense 2,580   2,951   2,630   2,596   1,118   8,161   6,186 
Net income$9,156  $10,451  $9,631  $9,306  $9,100  $29,238  $27,034 
                
Earnings per common share             
 Basic$0.59  $0.67  $0.61  $0.57  $0.55  $1.86  $1.62 
 Diluted 0.58   0.66   0.60   0.57   0.55   1.85   1.61 
Cash dividends per common share             
 Regular 0.25   0.25   0.21   0.21   0.21   0.71   1.05 
Weighted average shares outstanding             
 Basic 15,603,992   15,712,204   15,839,424   16,201,148   16,512,823   15,717,678   16,717,704 
 Diluted 15,664,587   15,775,320   15,920,950   16,280,404   16,612,416   15,785,484   16,810,425 
Performance ratios             
 Return on average assets 1.65%   1.89%   1.75%   1.63%   1.55%   1.76%   1.53% 
 Return on average common equity 10.80%   12.57%   11.77%   11.01%   10.59%   11.70%   10.52% 
 Return on average tangible common equity(1) 15.19%   17.57%   16.66%   15.58%   15.06%   16.52%   14.93% 
                
  
(1) A non-GAAP financial measure defined as net income divided by average stockholders' equity less average goodwill and other intangible assets


RECONCILIATION OF GAAP NET INCOME TO NON-GAAP ADJUSTED EARNINGS (Unaudited)
                
   Three Months Ended Nine Months Ended
   September 30, June 30, March 31, December 31, September 30, September 30,
    2019   2019   2019   2018   2018   2019   2018 
(Amounts in thousands, except per share data)             
Net income$9,156  $10,451  $9,631  $9,306  $9,100  $29,238  $27,034 
Non-GAAP adjustments:             
 Net loss on sale of securities -   43   -   -   618   43   618 
 Loss on extinguishment of debt -   -   -   -   1,096   -   1,096 
 Goodwill impairment -   -   -   -   1,492   -   1,492 
 Deferred tax asset revaluation -   -   -   -   (1,669)  -   (1,669)
 Merger, acquisition, and divestiture expense 592   -   -   -   -   592   - 
 Other items(1) (900)  (2,025)  (1,675)  254   -   (4,600)  167 
Total adjustments (308)  (1,982)  (1,675)  254   1,537   (3,965)  1,704 
Tax effect (134)  (550)  (328)  61   411   (1,012)  483 
Adjusted earnings, non-GAAP$8,982  $9,019  $8,284  $9,499  $10,226  $26,285  $28,255 
                
Adjusted diluted earnings per common share,             
 non-GAAP$0.57  $0.57  $0.52  $0.58  $0.62  $1.67  $1.68 
Performance ratios, non-GAAP             
 Adjusted return on average assets 1.62%   1.63%   1.51%   1.67%   1.74%   1.59%   1.60% 
 Adjusted return on average common equity 10.59%   10.84%   10.12%   11.23%   11.90%   10.52%   11.00% 
 Adjusted return on average tangible             
  common equity(2) 14.90%   15.16%   14.33%   15.90%   16.93%   14.85%   15.61% 
                
  
(1) Includes other non-recurring income and expense items
(2) A non-GAAP financial measure defined as adjusted earnings divided by average stockholders' equity less average goodwill and other intangible assets


AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited)
              
   Three Months Ended September 30,
    2019   2018 
   Average    Average Yield/ Average    Average Yield/
(Amounts in thousands)Balance Interest(1) Rate(1) Balance Interest(1) Rate(1)
Assets           
Earning assets           
 Loans(2)(3)$1,706,936 $22,106 5.14% $1,792,284 $22,594 5.00%
 Securities available for sale 118,450  1,015 3.40%  188,975  1,455 3.06%
 Securities held to maturity -  - -   25,064  104 1.65%
 Interest-bearing deposits 122,891  680 2.20%  66,137  358 2.15%
Total earning assets 1,948,277  23,801 4.85%  2,072,460  24,511 4.69%
Other assets 250,142      253,199    
Total assets$2,198,419     $2,325,659    
              
Liabilities and stockholders' equity           
Interest-bearing deposits           
 Demand deposits$450,650 $78 0.07% $459,759 $39 0.03%
 Savings deposits 500,600  222 0.18%  502,255  85 0.06%
 Time deposits 413,012  1,083 1.04%  463,885  1,145 0.98%
Total interest-bearing deposits 1,364,262  1,383 0.40%  1,425,899  1,269 0.35%
Borrowings           
 Retail repurchase agreements 2,107  1 0.17%  3,455  1 0.12%
 Wholesale repurchase agreements -  - -   25,000  203 3.22%
 FHLB advances and other borrowings -  - -   47,826  488 4.06%
Total borrowings 2,107  1 0.17%  76,281  692 3.60%
Total interest-bearing liabilities 1,366,369  1,384 0.40%  1,502,180  1,961 0.52%
Noninterest-bearing demand deposits 466,253      454,126    
Other liabilities 29,449      28,430    
Total liabilities 1,862,071      1,984,736    
Stockholders' equity 336,348      340,923    
Total liabilities and stockholders' equity$2,198,419     $2,325,659    
Net interest income, FTE(1)  $22,417     $22,550  
Net interest rate spread    4.44%     4.17%
Net interest margin, FTE(1)    4.56%     4.32%
              
  
(1)Interest income and average yield/rate are presented on a FTE, non-GAAP, basis using the federal statutory income tax rate of 21%.
(2)Nonaccrual loans are included in the average balance; however, no related interest income is recorded during the period of nonaccrual.
(3)Interest on loans includes non-cash and accelerated purchase accounting accretion of $566 thousand and $1.05 million for the three months ended September 30, 2019 and 2018, respectively.


AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited)
              
   Nine Months Ended September 30,
    2019   2018 
   Average    Average Yield/ Average    Average Yield/
(Amounts in thousands)Balance Interest(1) Rate(1) Balance Interest(1) Rate(1)
Assets           
Earning assets           
 Loans(2)(3)$  1,730,940 $  67,114 5.18% $  1,797,689 $  67,842 5.05%
 Securities available for sale   130,029    3,314 3.41%    181,630    4,091 3.01%
 Securities held to maturity   4,071    45 1.48%    25,098    314 1.67%
 Interest-bearing deposits   101,364    1,784 2.34%    97,623    1,343 1.84%
Total earning assets   1,966,404    72,257 4.91%    2,102,040    73,590 4.68%
Other assets   248,801        252,797    
Total assets$  2,215,205     $  2,354,837    
              
Liabilities and stockholders' equity           
Interest-bearing deposits           
 Demand deposits$  450,653 $  192 0.06% $  469,081 $  206 0.06%
 Savings deposits   502,241    589 0.16%    512,897    250 0.07%
 Time deposits   426,885    3,299 1.03%    478,265    3,391 0.95%
Total interest-bearing deposits   1,379,779    4,080 0.40%    1,460,243    3,847 0.35%
Borrowings           
 Retail repurchase agreements   2,792    3 0.13%    3,836    3 0.10%
 Wholesale repurchase agreements   5,037    119 3.17%    25,000    603 3.22%
 FHLB advances and other borrowings   -    - -     49,267    1,494 4.05%
Total borrowings   7,829    122 2.08%    78,103    2,100 3.59%
Total interest-bearing liabilities   1,387,608    4,202 0.40%    1,538,346    5,947 0.52%
Noninterest-bearing demand deposits   464,958        444,672    
Other liabilities   28,651        28,257    
Total liabilities   1,881,217        2,011,275    
Stockholders' equity   333,988        343,562    
Total liabilities and stockholders' equity$  2,215,205     $  2,354,837    
Net interest income, FTE(1)  $  68,055     $  67,643  
Net interest rate spread    4.51%     4.16%
Net interest margin, FTE(1)    4.63%     4.30%
              
  
(1)Interest income and average yield/rate are presented on a FTE, non-GAAP, basis using the federal statutory income tax rate of 21%.
(2)Nonaccrual loans are included in the average balance; however, no related interest income is recorded during the period of nonaccrual.
(3)Interest on loans includes non-cash and accelerated purchase accounting accretion of $2.72 million and $4.26 million for the nine months ended September 30, 2019 and 2018, respectively.


CONDENSED CONSOLIDATED QUARTERLY NONINTEREST INCOME AND EXPENSE  (Unaudited)
               
  Three Months Ended Nine Months Ended
  September 30, June 30, March  31, December 31, September 30, September 30,
(Amounts in thousands) 2019   2019   2019   2018   2018   2019   2018 
Noninterest income             
 Wealth management$952  $884  $745  $854  $791  $2,581  $2,408 
 Service charges on deposits 3,785   3,699   3,408   3,850   3,803   10,892   10,883 
 Other service charges and fees 2,007   2,129   2,049   2,017   1,925   6,185   5,716 
 Insurance commissions -   -   -   -   299   -   966 
 Net loss on sale of securities -   (43)  -   -   (618)  (43)  (618)
 Net FDIC indemnification asset amortization (719)  (516)  (552)  (579)  (645)  (1,787)  (1,602)
 Other income 900   2,025   1,675   -   -   4,600   - 
 Other operating income 709   471   755   155   964   1,935   2,393 
Total noninterest income$7,634  $8,649  $8,080  $6,297  $6,519  $24,363  $20,146 
Noninterest expense             
 Salaries and employee benefits$9,334  $9,153  $9,166  $9,273  $8,983  $27,653  $27,417 
 Occupancy expense 1,042   1,082   1,153   1,134   1,075   3,277   3,408 
 Furniture and equipment expense 1,183   1,062   1,033   1,004   985   3,278   2,976 
 Service fees 1,466   1,231   1,030   1,047   1,134   3,727   2,813 
 Advertising and public relations 795   513   524   550   478   1,832   1,461 
 Professional fees 548   328   414   356   337   1,290   1,074 
 Amortization of intangibles 251   249   246   254   261   746   785 
 FDIC premiums and assessments -   150   168   209   234   318   697 
 Loss on extinguishment of debt -   -   -   -   1,096   -   1,096 
 Merger, acquisition, and divestiture expense 592   -   -   -   -   592   - 
 Goodwill impairment -   -   -   -   1,492   -   1,492 
 Other operating expense 2,233   2,883   3,051   3,539   2,056   8,167   9,188 
Total noninterest expense$17,444  $16,651  $16,785  $17,366  $18,131  $50,880  $52,407 
               


CONDENSED CONSOLIDATED QUARTERLY BALANCE SHEETS (Unaudited)
            
   September 30, June 30, March 31, December 31, September 30,
(Amounts in thousands, except per share data) 2019   2019   2019   2018   2018 
Assets         
Cash and cash equivalents$182,458  $156,478  $148,546  $76,873  $73,679 
Debt securities available for sale 115,537   119,076   132,597   153,116   163,593 
Debt securities held to maturity -   -   -   25,013   25,047 
Loans held for investment, net of unearned income         
 Noncovered 1,679,958   1,705,408   1,719,905   1,756,269   1,770,426 
 Covered 14,158   15,520   17,475   18,815   20,483 
 Allowance for loan losses (18,493)  (18,540)  (18,243)  (18,267)  (18,256)
Loans held for investment, net 1,675,623   1,702,388   1,719,137   1,756,817   1,772,653 
FDIC indemnification asset 3,458   4,020   4,578   5,108   5,653 
Premises and equipment, net 48,521   48,262   46,636   45,785   45,537 
Other real estate owned, noncovered 2,528   3,810   3,903   3,806   4,754 
Other real estate owned, covered -   152   152   32   44 
Interest receivable 4,842   5,317   5,227   5,481   5,374 
Goodwill 92,744   92,744   92,744   92,744   94,287 
Other intangible assets 4,280   4,532   4,780   5,026   5,366 
Other assets 75,056   75,248   84,035   74,573   73,701 
Total assets$2,205,047  $2,212,027  $2,242,335  $2,244,374  $2,269,688 
            
Liabilities         
Deposits         
 Noninterest-bearing$472,478  $480,573  $479,299  $459,550  $463,945 
 Interest-bearing 1,364,374   1,367,465   1,399,138   1,396,200   1,411,906 
Total deposits 1,836,852   1,848,038   1,878,437   1,855,750   1,875,851 
Securities sold under agreements to repurchase 1,863   3,083   3,700   29,370   30,151 
Interest, taxes, and other liabilities 28,969   27,220   27,096   26,397   25,284 
Total liabilities 1,867,684   1,878,341   1,909,233   1,911,517   1,931,286 
            
Stockholders' equity         
Common stock(2) 15,580   15,633   15,818   16,007   21,382 
Additional paid-in capital(2) 108,222   109,816   115,914   122,486   229,182 
Retained earnings 213,866   208,618   202,103   195,793   189,902 
Treasury stock, at cost(2) -   -   -   -   (99,247)
Accumulated other comprehensive loss (305)  (381)  (733)  (1,429)  (2,817)
Total stockholders' equity 337,363   333,686   333,102   332,857   338,402 
Total liabilities and stockholders' equity$2,205,047  $2,212,027  $2,242,335  $2,244,374  $2,269,688 
            
Shares outstanding at period-end 15,579,740   15,633,388   15,818,368   16,007,263   16,390,502 
Book value per common share$21.65  $21.34  $21.06  $20.79  $20.65 
Tangible book value per common share(1) 15.43   15.12   14.89   14.69   14.57 
            
  
(1)A non-GAAP financial measure defined as stockholders' equity less goodwill and other intangible assets, divided by shares outstanding 
(2)In accordance with the Company's reincorporation from Nevada to Virginia on October 2, 2018, treasury stock is not recognized.


SELECTED CREDIT QUALITY INFORMATION (Unaudited)
            
   September 30, June 30, March 31, December 31, September 30,
(Amounts in thousands) 2019   2019   2019   2018   2018 
Allowance for Loan Losses          
Beginning balance$18,540  $18,243  $18,267  $18,256  $19,583 
Provision for loan losses charged to operations 675   1,585   1,220   908   495 
Charge-offs (964)  (2,114)  (1,622)  (1,282)  (2,177)
Recoveries 242   826   378   385   355 
Net charge-offs (722)  (1,288)  (1,244)  (897)  (1,822)
Ending balance$18,493  $18,540  $18,243  $18,267  $18,256 
            
Nonperforming Assets         
Non-covered nonperforming assets         
Nonaccrual loans$16,701  $16,368  $18,544  $19,583  $20,542 
Accruing loans past due 90 days or more 107   37   156   58   46 
Troubled debt restructurings ("TDRs")(1) 668   821   835   161   189 
Total non-covered nonperforming loans 17,476   17,226   19,535   19,802   20,777 
OREO 2,528   3,810   3,903   3,806   4,754 
Total non-covered nonperforming assets$20,004  $21,036  $23,438  $23,608  $25,531 
            
Covered nonperforming assets         
Nonaccrual loans$243  $203  $237  $322  $330 
Total covered nonperforming loans 243   203   237   322   330 
OREO -   152   152   32   44 
Total covered nonperforming assets$243  $355  $389  $354  $374 
            
Additional Information         
Performing TDRs(2)$5,635  $5,676  $5,654  $6,266  $6,953 
Total Accruing TDRs(3) 6,303   6,497   6,489   6,427   7,142 
            
Non-covered ratios         
Nonperforming loans to total loans 1.04%  1.01%  1.14%  1.13%  1.17%
Nonperforming assets to total assets 0.91%  0.96%  1.05%  1.06%  1.14%
Non-PCI allowance to nonperforming loans 105.82%  107.63%  93.39%  92.25%  87.87%
Non-PCI allowance to total loans 1.10%  1.09%  1.06%  1.04%  1.03%
Annualized net charge-offs to average loans 0.17%  0.30%  0.29%  0.20%  0.41%
            
Total ratios         
Nonperforming loans to total loans 1.05%  1.01%  1.14%  1.13%  1.18%
Nonperforming assets to total assets 0.92%  0.97%  1.06%  1.07%  1.14%
Allowance for loan losses to nonperforming loans 104.37%  106.37%  92.27%  90.77%  86.49%
Allowance for loan losses to total loans 1.09%  1.08%  1.05%  1.03%  1.02%
Annualized net charge-offs to average loans 0.17%  0.30%  0.29%  0.20%  0.40%
            
 
(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


FOR MORE INFORMATION, CONTACT:
David D. Brown
(276) 326-9000

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Source: First Community Bankshares, Inc.