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

Company Release - 2/4/2020 4:47 PM ET

BLUEFIELD, Va., Feb. 04, 2020 (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 December 31, 2019. The Company reported net income of $9.56 million, or $0.61 per diluted common share, for the quarter ended December 31, 2019, which was an increase of $0.04, or 7.02%, over the same quarter of 2018.  For the full year, the Company earned $38.80 million, or $2.46 per diluted share, an increase of $2.46 million over 2018.

Additionally, the Company recently 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 the same quarter last year.  2020 is the 35th consecutive year of regular dividends to common shareholders.

Fourth Quarter and Full Year 2019 Highlights

At the close of business on December 31, 2019, the Company closed the acquisition of Highlands Bankshares, Inc., headquartered in Abingdon, Virginia, with total assets of $563 million.  The completion of the transaction increased total consolidated assets to $2.80 billion.

  • Income Statement
    • Diluted earnings per share increased $0.04 to $0.61 compared to the same quarter of 2018, an increase of 7.02%.
    • Compared to the same quarter last year, return on average assets for the quarter increased 0.08% to 1.71% and return on average equity for the quarter increased 0.07% to 11.08%.
    • Net interest margin decreased 29 basis points to 4.47% compared to the same quarter of 2018.
    • Diluted earnings per share for the full year of $2.46 was an increase of $0.28, or 12.84%, over 2018.
    • Return on average assets for 2019 increased 0.19% to 1.75% and return on average equity for the year increased 0.90% to 11.54%.
    • The Company received $2.40 million from litigation settlements during the fourth quarter.  Year to date, the Company has received $7.00 million.
    • The Company incurred $940 thousand in merger expenses related to the Highlands Bankshares, Inc. acquisition in the fourth quarter.
       
  • Balance Sheet
    • Book value per common share increased $2.54 to $23.33, and tangible book value per common share increased $1.13 to a record $15.82, compared to December 31, 2018.
    • The Company’s capital management plan and philosophy require maintenance of a strong capital base from which to grow and serve customers. As reported in early 2018, due to a strong capital position, the Company’s current capital management plan aspires to return current earnings not needed to fund growth in core operations or other capital needs back to shareholders through regular cash dividends, stock repurchases, and special cash dividends when warranted. The Company earned approximately $38.80 million in 2019, from which it paid regular cash dividends of approximately $15.06 million. The Company also repurchased 487,400 common shares for approximately $16.36 million. Because the Company successfully leveraged capital with the Highlands acquisition, in addition to regular dividends and stock repurchases returning most current earnings to shareholders, the Board of Directors determined not to declare a special dividend related to 2019 earnings. As of December 31, 2019, the Company continues to significantly exceed regulatory “well capitalized” targets, as well as all capital targets of its capital management plan.

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 58 branch banking locations in Virginia, West Virginia, North Carolina, and Tennessee as of December 31, 2019. First Community Bank offers wealth management and investment advice through its Trust Division and First Community Wealth Management, which collectively managed and administered $1.12 billion in combined assets as of December 31, 2019. The Company reported consolidated assets of $2.80 billion as of December 31, 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 Twelve Months Ended
   December 31,   September 30,   June 30,  March 31,  December 31,   December 31,
 
(Amounts in thousands, except share and per share data) 2019   2019   2019  2019  2018   2019   2018 
Interest income           
 Interest and fees on loans$21,837  $22,068  $22,721 $22,179 $23,938  $88,805  $91,671 
 Interest on securities 870   857   895  1,094  1,249   3,716   5,086 
 Interest on deposits in banks 663   680   766  338  194   2,447   1,537 
Total interest income 23,370   23,605   24,382  23,611  25,381   94,968   98,294 
Interest expense           
 Interest on deposits 1,312   1,383   1,392  1,305  1,297   5,392   5,144 
 Interest on borrowings 1   1   1  120  205   123   2,305 
Total interest expense 1,313   1,384   1,393  1,425  1,502   5,515   7,449 
Net interest income 22,057   22,221   22,989  22,186  23,879   89,453   90,845 
Provision for loan losses 91   675   1,585  1,220  908   3,571   2,393 
Net interest income after provision 21,966   21,546   21,404  20,966  22,971   85,882   88,452 
Noninterest income 9,314   7,634   8,649  8,080  6,297   33,677   26,443 
Noninterest expense 18,883   17,444   16,651  16,785  17,366   69,763   69,773 
Income before income taxes 12,397   11,736   13,402  12,261  11,902   49,796   45,122 
Income tax expense 2,833   2,580   2,951  2,630  2,596   10,994   8,782 
Net income$9,564  $9,156  $10,451 $9,631 $9,306  $38,802  $36,340 
             
Earnings per common share           
 Basic$0.61  $0.59  $0.67 $0.61 $0.57  $2.47  $2.19 
 Diluted 0.61   0.58   0.66  0.60  0.57   2.46   2.18 
Cash dividends per common share           
 Regular 0.25   0.25   0.25  0.21  0.21   0.96   1.26 
Weighted average shares outstanding           
 Basic 15,611,093   15,603,992   15,712,204  15,839,424  16,201,148   15,690,812   16,587,504 
 Diluted 15,670,047   15,664,587   15,775,320  15,920,950  16,280,404   15,756,093   16,666,385 
Performance ratios           
 Return on average assets 1.71%  1.65%  1.89% 1.75% 1.63%  1.75%  1.56%
 Return on average common equity 11.08%  10.80%  12.57% 11.77% 11.01%  11.54%  10.64%
 Return on average tangible common equity(1) 15.33%  15.19%  17.57% 16.66% 15.58%  16.09%  15.09%
                           
  
(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 EndedTwelve Months Ended
    December 31,   September 30,   June 30,   March 31,   December 31,  December 31,
    2019   2019   2019   2019   2018   2019   2018 
(Amounts in thousands, except per share data)             
Net income$9,564  $9,156  $10,451  $9,631  $9,306  $38,802  $36,340 
Non-GAAP adjustments:             
 Net loss on sale of securities -   -   43   -   -   43   618 
 Loss on extinguishment of debt -   -   -   -   -   -   1,096 
 Goodwill impairment -   -   -   -   -   -   1,492 
 Deferred tax asset revaluation -   -   -   -   -   -   (1,669)
 Merger, acquisition, and divestiture expense 940   592   -   -   -   1,532   - 
 Other items(1) (2,395)  (900)  (2,025)  (1,675)  254   (6,995)  421 
Total adjustments (1,455)  (308)  (1,982)  (1,675)  254   (5,420)  1,958 
 Tax effect (331)  (134)  (550)  (328)  61   (1,343)  544 
Adjusted earnings, non-GAAP$8,440  $8,982  $9,019  $8,284  $9,499  $34,725  $37,754 
                
Adjusted diluted earnings per common share,             
 non-GAAP$0.54  $0.57  $0.57  $0.52  $0.58  $2.20  $2.27 
Performance ratios, non-GAAP             
 Adjusted return on average assets 1.51%  1.62%  1.63%  1.51%  1.67%  1.57%  1.62%
 Adjusted return on average common equity 9.78%  10.59%  10.84%  10.12%  11.23%  10.33%  11.05%
 Adjusted return on average tangible             
  common equity(2) 13.53%  14.90%  15.16%  14.33%  15.90%  14.40%  15.68%
                
   
(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 December 31,
   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)$1,697,133 $21,876 5.11% $1,788,570 $23,976 5.32%
 Securities available for sale116,950 1,020 3.46% 162,330 1,329 3.26%
 Securities held to maturity- - - 25,030 104 1.65%
 Interest-bearing deposits159,904 663 1.64% 33,736 194 2.28%
Total earning assets1,973,987 23,559 4.73% 2,009,666 25,603 5.05%
Other assets249,300     249,056    
Total assets$2,223,287     $2,258,722    
              
Liabilities and stockholders' equity           
Interest-bearing deposits           
 Demand deposits$462,834 $88 0.08% $458,458 $40 0.03%
 Savings deposits507,645 234 0.18% 494,868 132 0.10%
 Time deposits393,424 989 1.00% 450,770 1,125 0.99%
Total interest-bearing deposits1,363,903 1,311 0.38% 1,404,096 1,297 0.37%
Borrowings           
 Retail repurchase agreements1,515-- - 4,526 2 0.19%
 Wholesale repurchase agreements- - - 25,000 203 3.22%
Total borrowings1,515 - - 29,526 205 2.75%
Total interest-bearing liabilities1,365,418 1,311 0.38% 1,433,622 1,502 0.42%
Noninterest-bearing demand deposits482,391     461,457    
Other liabilities32,958     28,188    
Total liabilities1,880,767     1,923,267    
Stockholders' equity342,520     335,455    
Total liabilities and stockholders' equity$2,223,287     $2,258,722    
Net interest income, FTE(1)  $22,248     $24,101  
Net interest rate spread    4.36%     4.63%
Net interest margin, FTE(1)    4.47%     4.76%
              
  
(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 $511 thousand and $2.13 million for the three months ended December 31, 2019 and 2018, respectively.
              

 




AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited)
              
   Twelve Months Ended December 31,
   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)$1,722,419 $88,990 5.17% $1,795,391 $91,819 5.11%
 Securities available for sale126,732 4,334 3.42% 176,766 5,419 3.07%
 Securities held to maturity3,045 45 1.48% 25,081 418 1.67%
 Interest-bearing deposits116,119 2,447 2.10% 81,520 1,537 1.89%
Total earning assets1,968,315 95,816 4.87% 2,078,758 99,193 4.77%
Other assets248,926     251,853    
Total assets$2,217,241     $2,330,611    
              
Liabilities and stockholders' equity           
Interest-bearing deposits           
 Demand deposits$453,724 $281 0.06% $466,403 $246 0.05%
 Savings deposits503,603 823 0.16% 508,353 382 0.08%
 Time deposits418,450 4,288 1.02% 471,335 4,516 0.96%
Total interest-bearing deposits1,375,777 5,392 0.39% 1,446,091 5,144 0.36%
Borrowings           
 Retail repurchase agreements2,471 3 0.14% 4,010 5 0.12%
 Wholesale repurchase agreements3,767 119 3.17% 25,000 806 3.22%
 FHLB advances and other borrowings - - - 36,849 1,494 4.05%
Total borrowings6,238 122 1.96% 65,859 2,305 3.50%
Total interest-bearing liabilities1,382,015 5,514 0.40% 1,511,950 7,449 0.49%
Noninterest-bearing demand deposits469,352     448,903    
Other liabilities29,736     28,239    
Total liabilities1,881,103     1,989,092    
Stockholders' equity336,138     341,519    
Total liabilities and stockholders' equity$2,217,241     $2,330,611    
Net interest income, FTE(1)  $90,302     $91,744  
Net interest rate spread    4.47%     4.28%
Net interest margin, FTE(1)    4.59%     4.41%
              
  
(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 $3.23 million and $6.39 million for the years ended December 31, 2019 and 2018, respectively.
              

 




CONDENSED CONSOLIDATED QUARTERLY NONINTEREST INCOME AND EXPENSE (Unaudited)
               
  Three Months Ended Twelve Months Ended
   December 31,   September 30,   June 30,   March 31,   December 31,  December 31,
(Amounts in thousands) 2019   2019   2019   2019   2018   2019   2018 
Noninterest income             
 Wealth management$842  $952  $884  $745  $854  $3,423  $3,262 
 Service charges on deposits 3,702   3,785   3,699   3,408   3,850   14,594   14,733 
 Other service charges and fees 2,096   2,007   2,129   2,049   2,017   8,281   7,733 
 Insurance commissions -   -   -   -   -   -   966 
 Net loss on sale of securities -   -   (43)  -   -   (43)  (618)
 Net FDIC indemnification asset amortization (590)  (719)  (516)  (552)  (579)  (2,377)  (2,181)
 Other income 2,395   900   2,025   1,675   -   6,995   - 
 Other operating income 869   709   471   755   155   2,804   2,548 
Total noninterest income$9,314  $7,634  $8,649  $8,080  $6,297  $33,677  $26,443 
Noninterest expense             
 Salaries and employee benefits$9,495  $9,334  $9,153  $9,166  $9,273  $37,148  $36,690 
 Occupancy expense 1,057   1,042   1,082   1,153   1,134   4,334   4,542 
 Furniture and equipment expense 1,179   1,183   1,062   1,033   1,004   4,457   3,980 
 Service fees 721   1,053   1,231   1,030   1,047   4,448   3,860 
 Advertising and public relations 478   795   513   524   550   2,310   2,011 
 Professional fees 408   375   328   414   356   1,698   1,430 
 Amortization of intangibles 251   251   249   246   254   997   1,039 
 FDIC premiums and assessments -   -   150   168   209   318   906 
 Loss on extinguishment of debt -   -   -   -   -   -   1,096 
 Merger, acquisition, and divestiture expense 1,532   592   -   -   -   2,124   - 
 Goodwill impairment -   -   -   -   -   -   1,492 
 Other operating expense 3,762   2,819   2,883   3,051   3,539   11,929   12,727 
Total noninterest expense$18,883  $17,444  $16,651  $16,785  $17,366  $69,763  $69,773 
               

 



CONDENSED CONSOLIDATED QUARTERLY BALANCE SHEETS (Unaudited)
 
    December 31,   September 30,   June 30,   March 31,   December 31, 
(Amounts in thousands, except per share data) 2019   2019   2019   2019   2018 
Assets         
Cash and cash equivalents$217,009  $182,458  $156,478  $148,546  $76,873 
Debt securities available for sale 169,574   115,537   119,076   132,597   153,116 
Debt securities held to maturity -   -   -   -   25,013 
Loans held for sale 263   -   -   -   - 
Loans held for investment, net of unearned income        
 Noncovered 2,101,599   1,679,958   1,705,408   1,719,905   1,756,269 
 Covered 12,861   14,158   15,520   17,475   18,815 
 Allowance for loan losses (18,425)  (18,493)  (18,540)  (18,243)  (18,267)
Loans held for investment, net 2,096,035   1,675,623   1,702,388   1,719,137   1,756,817 
FDIC indemnification asset 2,883   3,458   4,020   4,578   5,108 
Premises and equipment, net 62,824   48,521   48,262   46,636   45,785 
Other real estate owned, noncovered 3,969   2,528   3,810   3,903   3,806 
Other real estate owned, covered -   -   152   152   32 
Interest receivable 5,094   4,842   5,317   5,227   5,481 
Goodwill 129,565   92,744   92,744   92,744   92,744 
Other intangible assets 8,519   4,280   4,532   4,780   5,026 
Other assets 103,112   75,056   75,248   84,035   74,573 
Total assets$2,798,847  $2,205,047  $2,212,027  $2,242,335  $2,244,374 
            
Liabilities         
Deposits         
 Noninterest-bearing$838,974  $472,478  $480,573  $479,299  $459,550 
 Interest-bearing 1,490,938   1,364,374   1,367,465   1,399,138   1,396,200 
Total deposits 2,329,912   1,836,852   1,848,038   1,878,437   1,855,750 
Securities sold under agreements to repurchase 1,601   1,863   3,083   3,700   29,370 
FHLB borrowings 40   -   -   -   - 
Interest, taxes, and other liabilities 38,475   28,969   27,220   27,096   26,397 
Total liabilities 2,370,028   1,867,684   1,878,341   1,909,233   1,911,517 
            
Stockholders' equity         
Common stock 18,377   15,580   15,633   15,818   16,007 
Additional paid-in capital 192,413   108,222   109,816   115,914   122,486 
Retained earnings 219,535   213,866   208,618   202,103   195,793 
Accumulated other comprehensive loss (1,506)  (305)  (381)  (733)  (1,429)
Total stockholders' equity 428,819   337,363   333,686   333,102   332,857 
Total liabilities and stockholders' equity$2,798,847  $2,205,047  $2,212,027  $2,242,335  $2,244,374 
            
Shares outstanding at period-end 18,376,991   15,579,740   15,633,388   15,818,368   16,007,263 
Book value per common share$23.33  $21.65  $21.34  $21.06  $20.79 
Tangible book value per common share(1) 15.82   15.43   15.12   14.89   14.69 
            
   
(1)A non-GAAP financial measure defined as stockholders' equity less goodwill and other intangible assets, divided by shares outstanding
            

 




SELECTED CREDIT QUALITY INFORMATION (Unaudited)
            
    December 31,   September 30,   June 30,   March 31,   December 31, 
(Amounts in thousands) 2019   2019   2019   2019   2018 
Allowance for Loan Losses          
Beginning balance$18,493  $18,540  $18,243  $18,267  $18,256 
Provision for loan losses charged to operations 91   675   1,585   1,220   908 
Charge-offs (1,353)  (964)  (2,114)  (1,622)  (1,282)
Recoveries 1,194   242   826   378   385 
Net charge-offs (159)  (722)  (1,288)  (1,244)  (897)
Ending balance$18,425  $18,493  $18,540  $18,243  $18,267 
            
Nonperforming Assets         
Non-covered nonperforming assets         
Nonaccrual loans$16,113  $16,701  $16,368  $18,544  $19,583 
Accruing loans past due 90 days or more 144   107   37   156   58 
Troubled debt restructurings ("TDRs")(1) 720   668   821   835   161 
Total non-covered nonperforming loans 16,977   17,476   17,226   19,535   19,802 
OREO 3,969   2,528   3,810   3,903   3,806 
Total non-covered nonperforming assets$20,946  $20,004  $21,036  $23,438  $23,608 
            
Covered nonperforming assets         
Nonaccrual loans$244  $243  $203  $237  $322 
Total covered nonperforming loans 244   243   203   237   322 
OREO -   -   152   152   32 
Total covered nonperforming assets$244  $243  $355  $389  $354 
            
Additional Information         
Performing TDRs(2)$5,855  $5,635  $5,676  $5,654  $6,266 
Total Accruing TDRs(3) 6,575   6,303   6,497   6,489   6,427 
            
Non-covered ratios         
Nonperforming loans to total loans 0.81%  1.04%  1.01%  1.14%  1.13%
Nonperforming assets to total assets 0.75%  0.91%  0.96%  1.05%  1.06%
Non-PCI allowance to nonperforming loans 108.53%  105.82%  107.63%  93.39%  92.25%
Non-PCI allowance to total loans 0.88%  1.10%  1.09%  1.06%  1.04%
Annualized net charge-offs to average loans 0.04%  0.17%  0.30%  0.29%  0.20%
            
Total ratios         
Nonperforming loans to total loans 0.81%  1.05%  1.01%  1.14%  1.13%
Nonperforming assets to total assets 0.76%  0.92%  0.97%  1.06%  1.07%
Allowance for loan losses to nonperforming loans 106.99%  104.37%  106.37%  92.27%  90.77%
Allowance for loan losses to total loans 0.87%  1.09%  1.08%  1.05%  1.03%
Annualized net charge-offs to average loans 0.04%  0.17%  0.30%  0.29%  0.20%
            
   
(1) Accruing TDRs restructured within the past six months or nonperforming
(2) Accruing TDRs with six months or more of satisfactory payment performance
    

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

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Source: First Community Bankshares, Inc.