First Community Bancshares, Inc. Announces First Quarter 2017 Results and Quarterly Dividend

Company Release - 4/25/2017 4:00 PM ET

BLUEFIELD, Va., April 25, 2017 (GLOBE NEWSWIRE) -- First Community Bancshares, Inc. (NASDAQ:FCBC) (www.fcbinc.com) (the “Company”) today reported its unaudited results of operations and other financial information for the quarter ended March 31, 2017. The Company reported net income available to common shareholders of $6.20 million, or $0.36 per diluted common share for the quarter ended March 31, 2017, which represents a 5.88% increase in per share diluted earnings compared to the same quarter of 2016.

The Company also announced today that the Board of Directors declared a quarterly cash dividend to common shareholders of sixteen cents ($0.16) per common share, which represents an increase of 14.29% over the first quarter of 2016. The quarterly dividend is payable to common shareholders of record on May 5, 2017, and is expected to be paid on or about May 19, 2017. The current year marks the 32nd consecutive year of cash dividends paid to stockholders.

First Quarter 2017 Highlights

  • Income Statement
    • Net income available to common shareholders increased $118 thousand, or 1.94%, to $6.20 million compared to the same quarter of 2016.
    • Diluted earnings per share increased $0.02, or 5.88%, to $0.36 compared to the same quarter of 2016.
    • Core, non-GAAP diluted earnings per common share increased $0.03, or 9.09%, to $0.36 compared to the same quarter of 2016.
    • Net interest margin increased 16 basis points to 4.17%, and normalized net interest margin increased 21 basis points to 3.95% compared to the same quarter of 2016.
       
  • Balance Sheet
    • Book value per common share increased $0.23 to $20.18 compared to December 31, 2016.
    • On January 9, 2017, the Company redeemed all of its previously issued trust preferred securities totaling $15.46 million. The callable trust preferred securities bore an interest rate of three-month LIBOR plus 2.95% with a maturity date of October 8, 2033.
    • The Company and its subsidiary bank both significantly exceed regulatory “well capitalized” targets as of March 31, 2017.

Non-GAAP Financial Measures

The Company prepares its financial statements in accordance with generally accepted accounting principles in the United States (“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.

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 45 branch banking locations in Virginia, West Virginia, North Carolina, and Tennessee as of March 31, 2017. First Community Bank provides insurance services through First Community Insurance Services, which operated 6 in-branch locations in Virginia and West Virginia as of March 31, 2017, and offers wealth management and investment advice through its Trust Division and First Community Wealth Management, which collectively managed $906 million in combined assets as of March 31, 2017. The Company reported consolidated assets of $2.43 billion as of March 31, 2017. The Company’s common stock is listed on the NASDAQ Global Select Market under the trading symbol, “FCBC”. Additional investor information is available on the Company’s website at www.fcbinc.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.

Financial Performance

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
           
   Three Months Ended
   March 31, December 31, September 30,June 30, March 31,
(Amounts in thousands, except share and per share data) 2017   2016   2016   2016   2016 
Interest income             
 Interest and fees on loans$  21,827  $  21,956  $  21,952  $  22,237  $  21,573 
 Interest on securities   1,206     1,362     1,643     1,891     1,957 
 Interest on deposits in banks   159     98     26     9     20 
Total interest income   23,192     23,416     23,621     24,137     23,550 
Interest expense        
 Interest on deposits   1,166     1,145     1,133     1,087     1,114 
 Interest on borrowings   885     1,314     1,367     1,359     1,325 
Total interest expense   2,051     2,459     2,500     2,446     2,439 
Net interest income   21,141     20,957     21,121     21,691     21,111 
Provision for (recovery of) loan losses   492     500     (1,154)    722     1,187 
Net interest income after              
 provision (recovery)   20,649     20,457     22,275     20,969     19,924 
Total noninterest income    5,691     6,238     5,895     7,030     7,903 
Total noninterest expense   17,083     16,653     18,557     18,722     18,814 
Income before income taxes   9,257     10,042     9,613     9,277     9,013 
Income tax expense   3,055     3,638     3,230     3,022     2,929 
Net income    6,202     6,404     6,383     6,255     6,084 
Dividends on preferred stock   -     -     -     -     - 
Net income available to common shareholders$  6,202  $  6,404  $  6,383  $  6,255  $  6,084 
                
Earnings per common share             
 Basic$  0.36  $  0.38  $  0.37  $  0.36  $  0.34 
 Diluted   0.36     0.38     0.37     0.36     0.34 
Cash dividends per common share   0.16     0.16     0.16     0.14     0.14 
Weighted average shares outstanding        
 Basic   16,998,125     16,891,010     17,031,074     17,414,320     17,859,197 
 Diluted   17,072,174     17,043,869     17,083,526     17,462,845     17,892,531 
Performance ratios        
 Return on average assets 1.06%  1.05%  1.03%  1.02%  0.99%
 Return on average common equity 7.35%  7.49%  7.58%  7.47%  7.15%
 Return on average tangible common equity(1) 10.50%  10.75%  11.07%  10.88%  10.34%
                       
                       
(1) A non-GAAP financial measure defined as average stockholders’ equity less average goodwill, other intangibles, and preferred stock liquidation preference
           

 

RECONCILIATION OF GAAP NET INCOME TO CORE EARNINGS (Unaudited) 
             
   Three Months Ended 
   March 31, December 31, September 30, June 30, March 31, 
    2017   2016   2016   2016   2016  
(Amounts in thousands, except per share data)          
Net income, GAAP$  6,202  $  6,404  $  6,383  $  6,255  $  6,084  
Non-GAAP adjustments:          
 Net gain on divestitures   -     (619)    (3,065)    -     -  
 Allowance reversal for sold loans   -     -     (1,354)    -     -  
 Merger, acquisition, and divestiture expense   -     55     226     410     39  
 Net (gain) loss on sale of securities   -     (388)    (25)    79     (1) 
 Net impairment losses   -     -     4,635     11     -  
 Other non-core items   (18)    (48)    (264)    -     (240) 
Total adjustments to core earnings   (18)    (1,000)    153     500     (202) 
Tax effect    (7)    (708)    56     184     (74) 
Core earnings, non-GAAP(1)$  6,191  $  6,112  $  6,480  $  6,571  $  5,956  
             
Core diluted earnings per common share$  0.36  $  0.36  $  0.38  $  0.38  $  0.33  
Performance ratios          
 Core return on average assets 1.06%  1.01%  1.05%  1.07%  0.97% 
 Core return on average common equity 7.33%  7.15%  7.70%  7.85%  7.00% 
 Core return on average tangible common equity(2) 10.48%  10.26%  11.24%  11.43%  10.12% 
                        
                        
(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, other intangibles, and preferred stock liquidation preference 
             


Net Interest Income and Margin

AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited) 
               
   Three Months Ended March 31, 
    2017   2016  
   Average    Average Yield/ Average    Average Yield/ 
(Amounts in thousands)Balance Interest(1) Rate(1) Balance Interest(1) Rate(1) 
Assets            
Earning assets            
 Loans(2)$  1,838,837 $  21,895 4.83% $  1,730,401 $  21,599 5.02% 
 Securities available for sale   161,738    1,483 3.72%    354,582    2,268 2.57% 
 Securities held to maturity   47,112    152 1.31%    72,512    194 1.08% 
 Interest-bearing deposits   55,754    159 1.16%    15,591    20 0.52% 
Total earning assets   2,103,441    23,689 4.57%    2,173,086    24,081 4.45% 
Other assets    270,597        297,156     
Total assets$  2,374,038     $  2,470,242     
               
Liabilities and stockholders' equity            
Interest-bearing deposits            
 Demand deposits $  381,050 $  102 0.11% $  342,524 $  57 0.07% 
 Savings deposits    525,573    36 0.03%    535,769    66 0.05% 
 Time deposits   515,506    1,028 0.81%    533,635    991 0.75% 
Total interest-bearing deposits   1,422,129    1,166 0.33%    1,411,928    1,114 0.32% 
Borrowings            
 Federal funds purchased   -    - -     3,424    5 0.59% 
 Retail repurchase agreements   66,947    11 0.07%    77,993    13 0.07% 
 Wholesale repurchase agreements   25,000    199 3.23%    50,000    468 3.76% 
 FHLB advances and other borrowings   66,618    675 4.11%    108,013    839 3.12% 
Total borrowings   158,565    885 2.26%    239,430    1,325 2.23% 
Total interest-bearing liabilities   1,580,694    2,051 0.53%    1,651,358    2,439 0.59% 
Noninterest-bearing demand deposits   425,540        448,849     
Other liabilities   25,477        27,784     
Total liabilities   2,031,711        2,127,991     
Stockholders' equity   342,327        342,251     
Total liabilities and stockholders' equity$  2,374,038     $  2,470,242     
Net interest income, FTE  $  21,638     $  21,642   
Net interest rate spread    4.04%     3.86% 
Net interest margin    4.17%     4.01% 
               
                      
(1) Fully taxable equivalent ("FTE") basis based on the federal statutory rate of 35% 
(2) Nonaccrual loans are included in average balances; however, no related interest income is recorded during the period of nonaccrual. 
  


RECONCILIATION OF GAAP NET INTEREST MARGIN TO NON-GAAP NORMALIZED NET INTEREST MARGIN (Unaudited)    
              
   Three Months Ended March 31,    
    2017   2016     
(Amounts in thousands)Interest(1) Average Yield/
Rate
(1) 
 Interest(1) Average Yield/
Rate
(1) 
    
Earning assets           
Loans(2)$  21,895 4.83% $  21,599 5.02%    
 Accretion income   1,784      2,252      
 Less: cash accretion income   650      805      
 Non-cash accretion income   1,134      1,447      
Loans, normalized(3)   20,761 4.58%    20,152 4.68%    
Other earning assets   1,794 2.75%    2,482 2.26%    
Total earning assets   22,555 4.35%    22,634 4.18%    
Total interest-bearing liabilities   2,051 0.53%    2,439 0.59%    
Net interest income, FTE(3)$  20,504   $  20,195      
Net interest rate spread, normalized(3)  3.82%   3.60%    
Net interest margin, normalized(3)  3.95%   3.74%    
              
              
(1) FTE basis based on the federal statutory rate of 35%           
(2) Nonaccrual loans are included in average balances; however, no related interest income is recorded during the period of nonaccrual.
(3) Normalized totals are non-GAAP financial measures that exclude non-cash loan interest accretion related to PCI loans.    
       


Noninterest Income and Expense

CONDENSED QUARTERLY STATEMENTS OF INCOME (Unaudited) 
            
  Three Months Ended 
  March 31, December 31, September 30, June 30, March 31, 
(Amounts in thousands) 2017   2016   2016   2016   2016  
Noninterest income          
 Wealth management$  790  $  681  $  653  $  810  $  684  
 Service charges on deposits   3,113     3,442     3,494     3,361     3,291  
 Other service charges and fees   2,078     2,014     2,024     2,054     2,010  
 Insurance commissions   373     59     1,592     1,600     2,191  
 Net impairment losses recognized in earnings     -     -     (4,635)    (11)    -  
 Net gain (loss) on sale of securities   -     388     25     (79)    1  
 Net FDIC indemnification asset amortization   (1,332)    (1,618)    (1,369)    (1,328)    (1,159) 
 Net gain on divestitures   -     619     3,065     -     -  
 Other operating income   669     653     1,046     623     885  
Total noninterest income    5,691     6,238     5,895     7,030     7,903  
Noninterest expense          
 Salaries and employee benefits   8,884     9,411     9,828     10,198     10,475  
 Occupancy expense   1,248     1,158     1,249     1,359     1,531  
 Furniture and equipment expense   1,091     1,070     1,066     1,109     1,096  
 Amortization of intangibles   261     265     316     277     278  
 FDIC premiums and assessments   244     274     363     372     374  
 Merger, acquisition, and divestiture expense   -     55     226     410     39  
 Other operating expense   5,355     4,420     5,509     4,997     5,021  
Total noninterest expense   17,083     16,653     18,557     18,722     18,814  
            

Efficiency Ratio

EFFICIENCY RATIO CALCULATION (Unaudited)
            
   Three Months Ended
   March 31, December 31, September 30, June 30, March 31,
    2017   2016   2016   2016   2016 
(Amounts in thousands)         
Noninterest expense, GAAP$  17,083  $  16,653  $  18,557  $  18,722  $  18,814 
Non-GAAP adjustments         
 Merger, acquisition, and divestiture expense   -     (55)    (226)    (410)    (39)
 OREO expense and net loss   (328)    (184)    (278)    (247)    (711)
 Other non-core items   -     8     (168)    (30)    (174)
Adjusted noninterest expense   16,755     16,422     17,885     18,035     17,890 
            
Net interest income, GAAP   21,141     20,957     21,121     21,691     21,111 
Noninterest income, GAAP   5,691     6,238     5,895     7,030     7,903 
Non-GAAP adjustments         
 Tax equivalency adjustment   497     520     509     521     531 
 Net impairment losses   -     -     4,635     11     - 
 Net (gain) loss on sale of securities   -     (388)    (25)    79     (1)
 Net gain on divestitures   -     (619)    (3,065)    -     - 
 Other non-core items   (18)    (40)    (432)    (30)    (414)
Adjusted net interest and noninterest income   27,311     26,668     28,638     29,302     29,130 
            
Non-GAAP efficiency ratio(1) 61.35%  61.58%  62.45%  61.55%  61.41%
GAAP efficiency ratio 63.67%  61.24%  68.69%  65.19%  64.84%
            
                       
(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
            


Balance Sheet and Capital

CONDENSED CONSOLIDATED QUARTERLY BALANCE SHEETS (Unaudited)
            
   March 31, December 31, September 30, June 30, March 31,
(Amounts in thousands, except per share data) 2017   2016   2016   2016   2016 
Assets         
Total cash and cash equivalents$  152,851  $  76,307  $  65,929  $  44,301  $  39,587 
Securities available for sale    158,685     165,579     220,856     322,699     338,469 
Securities held to maturity    47,092     47,133     72,182     72,239     72,485 
Loans held for investment, net of unearned income         
 Non-covered   1,784,371     1,795,954     1,774,547     1,733,398     1,685,891 
 Covered   51,412     56,994     61,837     68,585     76,538 
 Less allowance for loan losses   (18,458)    (17,948)    (19,633)    (21,099)    (20,467)
Loans held for investment, net   1,817,325     1,835,000     1,816,751     1,780,884     1,741,962 
FDIC indemnification asset   9,931     12,173     14,332     16,431     18,787 
Premises and equipment, net   50,057     50,085     50,564     50,199     50,799 
Other real estate owned, non-covered   4,477     5,109     4,052     4,187     5,313 
Other real estate owned, covered   241     276     2,437     2,017     2,279 
Interest receivable   5,059     5,553     5,498     6,115     5,968 
Goodwill   95,779     95,779     101,776     100,486     100,486 
Other intangible assets   6,947     7,207     7,964     4,688     4,965 
Other assets   82,069     86,197     87,932     91,082     89,187 
Total assets$  2,430,513  $  2,386,398  $  2,450,273  $  2,495,328  $  2,470,287 
            
Liabilities         
Deposits         
 Noninterest-bearing$  467,677  $  427,705  $  473,509  $  451,003  $  453,336 
 Interest-bearing   1,438,917     1,413,633     1,388,390     1,373,412     1,421,329 
Total deposits   1,906,594     1,841,338     1,861,899     1,824,415     1,874,665 
Federal funds purchased   -     -     -     42,000     18,000 
Securities sold under agreements to repurchase   90,653     98,005     118,532     113,392     134,661 
FHLB borrowings   65,000     65,000     90,000     140,000     65,000 
Other borrowings   244     15,708     15,707     15,756     15,756 
Interest, taxes, and other liabilities   24,618     27,290     26,599     25,553     24,576 
Total liabilities   2,087,109     2,047,341     2,112,737     2,161,116     2,132,658 
            
Stockholders' equity         
Common stock   21,382     21,382     21,382     21,382     21,382 
Additional paid-in capital   228,176     228,142     227,884     227,791     227,725 
Retained earnings   173,860     170,377     166,689     163,030     159,223 
Treasury stock, at cost   (78,533)    (78,833)    (78,789)    (74,974)    (64,968)
Accumulated other comprehensive (loss) income   (1,481)    (2,011)    370     (3,017)    (5,733)
Total stockholders' equity   343,404     339,057     337,536     334,212     337,629 
Total liabilities and stockholders' equity$  2,430,513  $  2,386,398  $  2,450,273  $  2,495,328  $  2,470,287 
            
Shares outstanding at period-end   17,013,185     16,994,208     16,988,972     17,155,322     17,631,011 
Book value per common share(1)$  20.18  $  19.95  $  19.87  $  19.48  $  19.15 
Tangible book value per common share(2)   14.15     13.89     13.41     13.35     13.17 
            
                       
(1) Stockholders' equity divided by as-converted common shares outstanding
(2) A non-GAAP financial measure defined as stockholders’ equity less goodwill and other intangibles, divided by as-converted common shares outstanding
 


Asset Quality

SELECTED CREDIT QUALITY INFORMATION (Unaudited)
            
   March 31, December 31, September 30, June 30, March 31,
(Amounts in thousands) 2017   2016   2016   2016   2016 
Allowance for Loan Losses          
Beginning balance$  17,948  $  19,633  $  21,099  $  20,467  $  20,233 
Provision for (recovery of) loan losses charged         
 to operations   492     500     (1,154)    722     1,187 
(Recovery of) provision for loan losses recorded         
 through the FDIC indemnification asset   -     -     -     (10)    9 
Charge-offs   (357)    (2,485)    (772)    (691)    (1,228)
Recoveries   375     300     460     611     266 
Net recoveries (charge-offs)   18     (2,185)    (312)    (80)    (962)
Ending balance$  18,458  $  17,948  $  19,633  $  21,099  $  20,467 
            
Nonperforming Assets         
Non-covered nonperforming assets         
Nonaccrual loans $  18,537  $  15,854  $  17,487  $  16,626  $  16,196 
Accruing loans past due 90 days or more   20     -     62     64     243 
Troubled debt restructurings ("TDRs")(1)   -     114     115     115     158 
Total non-covered nonperforming loans   18,557     15,968     17,664     16,805     16,597 
OREO   4,477     5,109     4,052     4,187     5,313 
Total non-covered nonperforming assets$  23,034  $  21,077  $  21,716  $  20,992  $  21,910 
            
Covered nonperforming assets         
Nonaccrual loans $  918  $  608  $  688  $  680  $  1,955 
Total covered nonperforming loans   918     608     688     680     1,955 
OREO   241     276     2,437     2,017     2,279 
Total covered nonperforming assets$  1,159  $  884  $  3,125  $  2,697  $  4,234 
            
Additional Information         
Performing TDRs(2)$  8,593  $  12,838  $  13,336  $  13,562  $  13,474 
Total TDRs(3)   8,593     12,952     13,451     13,677     13,632 
            
Non-covered ratios         
Nonperforming loans to total loans 1.04%  0.89%  1.00%  0.97%  0.98%
Nonperforming assets to total assets 0.97%  0.90%  0.91%  0.87%  0.92%
Non-PCI allowance to nonperforming loans 99.40%  112.32%  111.08%  125.48%  123.17%
Non-PCI allowance to total loans 1.03%  1.00%  1.11%  1.22%  1.21%
Annualized net charge-offs to average loans 0.00%  0.49%  0.07%  0.02%  0.23%
            
Total ratios         
Nonperforming loans to total loans 1.06%  0.89%  1.00%  0.97%  1.05%
Nonperforming assets to total assets 1.00%  0.92%  1.01%  0.95%  1.06%
Allowance for loan losses to nonperforming loans   94.78%  108.28%  106.98%  120.67%  110.32%
Allowance for loan losses to total loans 1.01%  0.97%  1.07%  1.17%  1.16%
Annualized net charge-offs to average loans 0.00%  0.47%  0.07%  0.02%  0.22%
            
                       
(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 Bancshares, Inc.