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

fcbc20200311_8ka.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K/A

Amendment No. 1

 

CURRENT REPORT

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

 
 

Date of Report (Date of earliest event reported): December 31, 2019

 

 

 

FIRST COMMUNITY BANKSHARES, INC.

 

(Exact name of registrant as specified in its charter)

 

 

Virginia

 

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))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock ($1.00 par value) FCBC NASDAQ Global Select

 

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. ☐

 

1

 

Explanatory Note

 

 

 

On January 2, 2020, First Community Bankshares, Inc. (the “Company” or “First Community”) filed a Current Report on Form 8-K (the “Original Report”) with the Securities and Exchange Commission (the “SEC”) to report the completion of its previously announced merger (the “Merger”) of Highlands Bankshares, Inc. (“Highlands”), a Virginia corporation headquartered in Abingdon, Virginia pursuant to the Agreement and Plan of Merger dates as of September 11, 2019 (the “Agreement”) by and between First Community and Highlands. At 5:01 p.m. on December 31, 2019 (the “Effective Time”), Highlands merged with and into First Community, with First Community as the surviving corporation in the Merger.

 

Item 9.01 Financial Statements and Exhibits

 

 

(a)

Financial statements of business acquired.

 

The audited historical consolidated financial statements of Highlands as of December 31, 2018 and 2017 are filed as Exhibit 99.1 and are incorporated herein by reference. The unaudited historical consolidated financial statements of Highlands as of and for the three and nine months ended September 30, 2019 and 2018, are filed as Exhibit 99.2 and are incorporated by reference herein.

 

 

(b)

Pro Forma Financial Information.

 

The unaudited pro forma condensed combined financial statements of First Community for the year ended December 31, 2018, for the nine months ended September 30, 2019, and as of September 30, 2019 are filed as Exhibit 99.3 hereto and incorporated herein by reference.

 

 

(d)

Exhibits.

 

Exhibit No.

 

Exhibit Description

     
     

23.1

 

Consent of Brown, Edwards and Company, L.L.P., Highlands’ independent registered public accounting firm.

99.1

 

Audited consolidated financial statements of Highlands as of December 31, 2018 and 2017, and for each of the three years ended December 31, 2018, as well as the accompanying notes thereto and the related Report of the Independent Registered Public Accounting Firm (incorporated by reference to the Annual Report on Form 10-K filed by Highlands on March 28, 2019 (File No. 000-27622)).

99.2

 

Unaudited consolidated financial statements of Highlands as of September 30, 2019 and for the three and nine month periods ended September 30, 2019 and 2018, as well as the accompanying notes thereto (incorporated by reference to the Quarterly Report on Form 10-Q filed by Highlands on November 14, 2019 (File No. 000-27622)).

99.3

 

Unaudited pro forma condensed combined financial statements of First Community for the nine months ended September 30, 2019 and as of September 30, 2019 and for the year ended December 31, 2018.

 

 

Forward-Looking Statements 

 

This Current Report on Form 8-K/A 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.

 

2

 

SIGNATURE

 

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 thereunto duly authorized.

 

 

 

FIRST COMMUNITY BANKSHARES, INC.

     

Date:

March 13, 2020

 

By:

/s/ David D. Brown

     
   

David D. Brown

   

Chief Financial Officer

 

3

 

 

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Section 2: EX-23.1 (EXHIBIT 23.1)

ex_176833.htm

Exhibit 23.1

 

 

 

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

We consent to the use in this Form 8-K/A of First Community Bankshares, Inc. of our report dated March 28, 2019, with respect to our audit of the consolidated financial statements of Highlands Bankshares, Inc. and subsidiary as of December 31, 2018 and 2017 and the related consolidated statements of income, comprehensive income, changes in stockholders’ equity and cash flows for each of the years in the three-year period ended December 31, 2018.

 

/s/ Brown, Edwards & Company, L.L.P.

 

Blacksburg, Virginia

March 13, 2020

 

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Section 3: EX-99.3 (EXHIBIT 99.3)

ex_176835.htm

Exhibit 99.3

 

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

 

The following unaudited pro forma condensed combined financial statements are based on the separate historical financial statements of First Community Bankshares, Inc. (the “Company”) and Highlands Bankshares, Inc. (“Highlands”) after giving effect to the merger and the issuance of the Company’s common stock in connection therewith, and the assumptions and adjustments described in the accompanying notes to the unaudited pro forma condensed combined financial statements. The unaudited pro forma condensed combined balance sheet as of September 30, 2019, is presented as if the merger with Highlands had occurred on September 30, 2019. The unaudited pro forma condensed combined income statement for the year ended December 31, 2018 and the nine months ended September 30, 2019, is presented as if the merger had occurred on January 1, 2018. The historical consolidated financial information has been adjusted to reflect factually supportable items that are directly attributable to the merger and, with respect to the income statements only, expected to have a continuing impact on consolidated results of operations.

 

The unaudited pro forma condensed combined financial information has been prepared using the acquisition method of accounting for business combinations under accounting principles generally accepted in the United States. The Company is the acquirer for accounting purposes. The Company has completed an initial evaluation of significant identifiable long-lived tangible assets associated with Highlands’ balance sheet. A determination of the acquisition consideration and fair values of Highlands’ assets and liabilities has been made as of the acquisition date of December 31, 2019, and included in these pro forma financial statements.

 

In connection with the plan to integrate the operations of the Company and Highlands following the completion of the merger, the Company anticipates that nonrecurring charges, such as costs associated with systems implementation, severance, and other costs related to exit or disposal activities, will be incurred.

 

The unaudited pro forma condensed combined financial statements are provided for informational purposes only. The unaudited pro forma condensed combined financial statements are not necessarily, and should not be assumed to be, an indication of the results that would have been achieved had the transaction been completed as of the dates indicated or that may be achieved in the future. The preparation of the unaudited pro forma condensed combined financial statements and related adjustments required management to make certain assumptions and estimates. The unaudited pro forma condensed combined financial statements should be read together with:

 

 

The accompanying notes to the unaudited pro forma condensed combined financial statements:

 

The Company’s separate audited historical consolidated financial statements and accompanying notes as of and for the year ended December 31, 2018, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018;

 

The Company’s separate unaudited historical condensed consolidated financial statement and accompanying notes as of and for the nine months ended September 30, 2019, included in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019;

 

Highlands’ separate audited historical consolidated financial statements and accompanying notes as of and for the year ended December 31, 2018, included in Highlands’ Annual Report on Form 10-K for the year ended December 31, 2018; and

 

Highlands’ separate unaudited historical condensed consolidated financial statement and accompanying notes as of and for the nine months ended September 30, 2019, included in Highlands’ Quarterly Report on Form 10-Q for the quarter ended September 30, 2019

 

The unaudited pro forma condensed combined balance sheet as of September 30, 2019 presents the consolidated financial position giving pro forma effect to the following transactions as if they had occurred as of September 30, 2019:

 

 

The completion of the Company’s acquisition of Highlands, including the issuance of 2,795,712 shares (based upon the number of shares outstanding of Highlands’ common and preferred stock as of September 30, 2019 and an exchange ratio of 0.2703 shares of the Company stock for one Highlands’ share) of the Company’s common stock; and

 

The unaudited pro forma condensed combined income statement for the year ended December 31, 2018 and for the nine months ended September 30, 2019 presents the consolidated results of operations giving pro forma effect to the following transactions as if they had occurred as of January 1, 2018:

 

 

The full-year impact of Highlands’ income statement, including pro forma amortization and accretion of purchase accounting adjustment on loans, deposits, other borrowings and intangible assets; and

 

The issuance of additional Company common stock applying the 0.2703 exchange ratio to the weighted-average shares outstanding of Highlands’ shares in determining EPS.

 

1

 

First Community Bankshares, Inc.

Condensed Consolidated Balance Sheets

 

   

September 30, 2019

 
   

First

           

Purchase

           
   

Community

   

Highlands

   

Accounting

           
   

Bankshares, Inc.

   

Bankshares, Inc.

   

& Pro Forma

     

Pro Forma

 

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

 

(as reported)

   

(as reported)

   

Adjustments

     

Combined

 

Assets

                                 

Cash and due from banks

  $ 48,209     $ 20,248     $ -       $ 68,457  

Federal funds sold

    133,253       2,627       -         135,880  

Interest-bearing deposits in banks

    996       -       -         996  

Total cash and cash equivalents

    182,458       22,875       -         205,333  

Debt securities available for sale

    115,537       56,472       -         172,009  

Debt securities held to maturity

    -       1,493       -         1,493  

Loans held for sale

    -       233       -         233  

Loans held for investment, net of unearned income (includes covered loans of $14,158)

    1,694,116       453,239       (15,664 )

(a)

    2,131,691  

Allowance for loan losses

    (18,493 )     (4,168 )     4,168  

(a)

    (18,493 )

Loans held for investment, net

    1,675,623       449,071       (11,496 )       2,113,198  

FDIC indemnification asset

    3,458       -       -         3,458  

Premises and equipment, net

    48,521       17,559       (2,317 )

(b)

    63,763  

Other real estate owned

    2,528       2,484       -         5,012  

Interest receivable

    4,842       1,962       -         6,804  

Goodwill

    92,744       -       37,647  

(g)

    130,391  

Other intangible assets

    4,280       -       4,490  

(d)

    8,770  

Other assets

    75,056       23,125       2,264  

(c)

    100,445  

Total assets

  $ 2,205,047     $ 575,274     $ 30,588       $ 2,810,909  
                                   

Liabilities

                                 

Noninterest-bearing deposits

  $ 472,478     $ 154,279     $ -       $ 626,757  

Interest-bearing deposits

    1,364,374       355,826       1,261  

(e)

    1,721,461  

Total deposits

    1,836,852       510,105       1,261         2,348,218  

Federal funds purchased

    -       -       -         -  

Securities sold under agreements to repurchase

    1,863       -       -         1,863  

FHLB borrowings

    -       54       -         54  

Other borrowings

    -       -       -         -  

Interest, taxes, and other liabilities

    28,969       3,747       1,730  

(f) (j)

    34,446  

Total liabilities

    1,867,684       513,906       2,991         2,384,581  
                                   

Stockholders' equity

                                 

Preferred stock

    -       5,156       (5,156 )

(h)

    -  

Common stock

    15,580       4,184       (1,388 )

(h) (i)

    18,376  

Additional paid-in capital

    108,222       19,312       68,389  

(h) (i)

    195,923  

Retained earnings

    213,866       32,608       (34,140 )

(h) (i) (j)

    212,334  

Treasury stock

    -       -       -  

(h) (i)

    -  

Accumulated other comprehensive loss

    (305 )     108       (108 )

(h)

    (305 )

Total stockholders' equity

    337,363       61,368       27,597         426,328  

Total liabilities and stockholders' equity

  $ 2,205,047     $ 575,274     $ 30,588       $ 2,810,909  
                                   

Outstanding shares

    15,579,740       10,343,000                 18,375,452  

Book value per common share

  $ 21.65     $ 5.93               $ 23.20  

 

2

 

Purchase Accounting Adjustments:

 

(a) 

Adjustment reflects the fair value adjustments of $(14.694) million based on the Company's evaluation of the acquired loan portfolio and net deferred loan fees of $(970) thousand and Highlands' ALLR of $4.168 million.

(b)

Adjustment reflects the fair value adjustments based on the Company's evaluation of the acquired premises and equipment.

(c) 

Adjustment to record the deferred tax asset $2.264 million related to the fair value adjustments at a rate of 21%.

(d)

Adjustment reflects the recording of the core deposit intangible on the acquired deposit accounts.

(e)

Adjustment reflects the fair value adjustment based on the Company's evaluation of the time deposit portfolio.

(f) 

Adjustment reflects the fair value adjustment for death benefits payable of $320 thousand, the fair value adjustment for lease liability of $(37) thousand and the fair value adjustment to the reserve for unfunded commitments of $(85) thousand.

(g)

Adjustment reflects the goodwill generated as a result of the consideration paid being greater than the net assets acquired.

(h) 

Adjustment reflects the reversal of Highlands September 30, 2019 retained earnings, common stock, surplus, and accumulated other comprehensive income.

(i) 

Adjustment to record the issuance of 2,795,712 of Company common stock in exchange for 10,343,000 shares of Highlands common and preferred stock at an exchange ratio of 0.2703 shares at the market price of $32.37.

 

Proforma Adjustments:

 

( j)

Additional merger expenses of $1.53 million.

 

3

 

First Community Bankshares, Inc.

Condensed Statement of Income

 

   

For the nine months ended September 30, 2019

 
   

First

           

Purchase

           
   

Community

   

Highlands

   

Accounting

           
   

Bankshares, Inc.

   

Bankshares, Inc.

   

& Pro Forma

     

Pro Forma

 

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

 

(as reported)

   

(as reported)

   

Adjustments

     

Combined

 

Interest income

                                 

Interest and fees on loans

  $ 66,968     $ 17,217     $ 2,871  

(a)

  $ 87,056  

Interest on securities

    2,846       1,233       -         4,079  

Interest on deposits in banks

    1,784       453       -         2,237  

Total interest income

    71,598       18,903       2,871         93,372  

Interest expense

                                 

Interest on deposits

    4,080       2,746       235  

(c)

    7,061  

Interest on short-term borrowings

    122       -       -         122  

Interest on long-term debt

    -       664       -         664  

Total interest expense

    4,202       3,410       235         7,847  

Net interest income

    67,396       15,493       2,636         85,525  

Provision for loan losses

    3,480       1,487       -         4,967  

Net interest income after provision for loan losses

    63,916       14,006       2,636         80,558  

Noninterest income

                                 

Wealth management

    2,581       -       -         2,581  

Service charges on deposits

    10,892       1,028       -         11,920  

Other service charges and fees

    6,185       1,110       -         7,295  

Insurance commissions

    -       -       -         -  

Net (loss) gain on sale of securities

    (43 )     21       -         (22 )

Net FDIC indemnification asset amortization

    (1,787 )     -       -         (1,787 )

Other income

    4,600       -       -         4,600  

Other operating income

    1,935       639       -         2,574  

Total noninterest income

    24,363       2,798       -         27,161  

Noninterest expense

                                 

Salaries and employee benefits

    27,653       6,959       -         34,612  

Occupancy, furniture and equipment expense

    6,555       1,770       -         8,325  

Amortization of intangibles

    746       -       333  

(b)

    1,079  

Merger/acquisition/divestiture expenses

    592       -                 592  

Other operating expense

    15,334       5,010       -         20,344  

Total noninterest expense

    50,880       13,739       333         64,952  

Income before income taxes

    37,399       3,065       2,303         42,767  

Income tax expense

    8,161       588       503  

(d)

    9,252  

Net income

  $ 29,238     $ 2,477     $ 1,800       $ 33,515  
                                   

Earnings per common share

                                 

Basic

  $ 1.86     $ 0.30               $ 1.40  

Diluted

    1.85       0.24               $ 1.28  
                                   

Weighted average shares outstanding

                                 

Basic

    15,717,678       8,256,666          

 

    23,974,344  

Diluted

    15,785,484       10,320,833          

 

    26,106,317  

 

Proforma Adjustments:

 

(a)

Record loan accretion for $2.87 million.

(b)

Record core intangible amoritization $333 thousand.

(c)

Record CD amortization for $235 thousand.

(d)

Record income taxes on proforma adjustments at a rate of $21.82%.

 

4

 

First Community Bankshares, Inc.

Condensed Statement of Income

 

   

For the year ended December 31, 2018

 
   

First

           

Purchase

           
   

Community

   

Highlands

   

Accounting

           
   

Bankshares, Inc.

   

Bankshares, Inc.

   

& Pro Forma

     

Pro Forma

 

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

 

(as reported)

   

(as reported)

   

Adjustments

     

Combined

 

Interest income

                                 

Interest and fees on loans

  $ 91,671     $ 21,936     $ 3,828  

(a)

  $ 117,435  

Interest on securities

    5,086       1,807       -         6,893  

Interest on deposits in banks

    1,537       250       -         1,787  

Total interest income

    98,294       23,993       3,828         126,115  

Interest expense

                                 

Interest on deposits

    5,144       2,090       313  

(c)

    7,547  

Interest on short-term borrowings

    811       -       -         811  

Interest on long-term debt

    1,494       1,317       -         2,811  

Total interest expense

    7,449       3,407       313         11,169  

Net interest income

    90,845       20,586       3,515         114,946  

Provision for loan losses

    2,393       738       -         3,131  

Net interest income after provision for loan losses

    88,452       19,848       3,515         111,815  

Noninterest income

                                 

Wealth management

    3,262       -       -         3,262  

Service charges on deposits

    14,733       1,471       -         16,204  

Other service charges and fees

    7,733       1,627       -         9,360  

Insurance commissions

    966       -       -         966  

Net loss on sale of securities

    (618 )     -       -         (618 )

Net FDIC indemnification asset amortization

    (2,181 )     -       -         (2,181 )

Other income

    -       -       -         -  

Other operating income

    2,548       1,169       -         3,717  

Total noninterest income

    26,443       4,267       -         30,710  

Noninterest expense

                                 

Salaries and employee benefits

    36,690       9,648       -         46,338  

Occupancy, furniture and equipment expense

    8,522       2,658       444  

(b)

    11,624  

Amortization of intangibles

    1,039       -       -         1,039  

Merger/acquisition/divestiture expenses

    -       -       1,532  

(d)

    1,532  

Other operating expense

    23,522       7,268       -         30,790  

Total noninterest expense

    69,773       19,574       1,976         91,323  

Income before income taxes

    45,122       4,541       1,539         51,202  

Income tax expense

    8,782       949       336  

(e)

    10,067  

Net income

  $ 36,340     $ 3,592     $ 1,203       $ 41,135  
                                   

Earnings per common share

                                 

Basic

  $ 2.19     $ 0.44               $ 1.66  

Diluted

    2.18       0.35               $ 1.53  
                                   

Weighted average shares outstanding

                                 

Basic

    16,587,504       8,163,636          

 

    24,751,140  

Diluted

    16,666,385       10,262,857          

 

    26,929,242  

 

Proforma Adjustments:

 

(a)

Record loan accretion for $3.83 million.

(b)

Record core intangible amoritization $444 thousand.

(c)

Record CD amortization for $313 thousand.

(d)

Merger expense of $1.53 million.

(e)

Record income taxes on proforma adjustments at a rate of $21.82%.

 

5

 

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