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

Company Release - 1/23/2019 5:00 PM ET

BLUEFIELD, Va., Jan. 23, 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 and year ended December 31, 2018. The Company reported net income of $9.31 million, or $0.57 per diluted common share, for the quarter ended December 31, 2018, which was an increase of $8.09 million from the same quarter of 2017. The Company also reported $36.34 million, or $2.18 per diluted common share, for the year ended December 31, 2018, which was an increase of $14.86 million from 2017. The fourth quarter and full year both constitute net income records for the respective periods.

The Company also announced today that the Board of Directors declared a quarterly cash dividend to common shareholders of twenty-one cents ($0.21) per common share. The quarterly dividend is payable to common shareholders of record on February 1, 2019, and is expected to be paid on or about February 15, 2019. The current year marks the 34th consecutive year of regular cash dividends paid to shareholders.

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, absent other needs, the Company’s capital management plan aspires to return current earnings not needed to fund growth in core operations back to shareholders through regular cash dividends and stock repurchases. The Company earned approximately $36.34 million in 2018, from which it paid regular cash dividends of approximately $12.96 million.  The Company also repurchased 1,060,312 common shares for approximately $34.41 million.  Since regular dividends and stock repurchases returned all current earnings to shareholders, the Board of Directors determined not to declare a special dividend related to 2018 earnings. As of December 31, 2018, the Company continues to significantly exceed regulatory “well capitalized” targets, as well as all capital targets of its capital management plan.

Fourth Quarter 2018 Highlights

  • General
    • On October 1, 2018, the Company completed the sale of its remaining insurance agency assets to Bankers Insurance, LLC of Glen Allen, Virginia (“BI”) in exchange for an equity interest in BI.
    • On October 2, 2018, the Company completed its Plan of Reincorporation and Merger, the sole purpose of which was to change the Company’s state of incorporation from Nevada to Virginia.
       
  • Income Statement
    • Net income increased $8.09 million to $9.31 million compared to the same quarter of 2017. The large increase reflects the deferred tax asset revaluation charge taken in the fourth quarter of 2017. Non-GAAP adjusted earnings increased $1.82 million to $9.50 million compared to the same quarter of 2017.
    • Diluted earnings per share increased $0.50 to $0.57 compared to the same quarter of 2017. Again, the large increase reflects the deferred tax asset revaluation charge taken in the fourth quarter of 2017. Non-GAAP adjusted diluted earnings per share increased $0.13 to $0.58 compared to the same quarter of 2017.
    • Return on average assets (“ROAA”) for the quarter increased to 1.63%, the highest reported quarterly ROAA for the Company in 15 years. Return on average equity for the quarter increased to 11.01%.
    • Net interest margin increased 63 basis points to 4.80% compared to the same quarter of 2017. 

  • Balance Sheet
    • Book value per common share increased $0.16 to $20.79, and tangible book value per common share increased $0.05 to $14.69, compared to December 31, 2017.
    • The Company repurchased 390,296 common shares for $13.12 million during the quarter and 1,060,312 common shares for $34.41 million during the year ended December 31, 2018.
    • The Company and its subsidiary bank both significantly exceed regulatory “well capitalized” targets as of December 31, 2018.

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% for periods after January 1, 2018, and 35% for periods prior to January 1, 2018.  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 December 31, 2018. First Community Bank offers wealth management and investment advice through its Trust Division and First Community Wealth Management, which collectively managed and administered $975 million in combined assets as of December 31, 2018. The Company reported consolidated assets of $2.24 billion as of December 31, 2018. The Company’s common stock is listed on the NASDAQ Global Select Market under the trading symbol, “FCBC”. Additional investor information is available on the Company’s website at www.firstcommunitybank.com.

This news release may include forward-looking statements. These forward-looking statements are based on current expectations that involve risks, uncertainties, and assumptions. Should one or more of these risks or uncertainties materialize or should underlying assumptions prove incorrect, actual results may differ materially. These risks include: changes in business or other market conditions; the timely development, production and acceptance of new products and services; the challenge of managing asset/liability levels; the management of credit risk and interest rate risk; the difficulty of keeping expense growth at modest levels while increasing revenues; and other risks detailed from time to time in the Company’s Securities and Exchange Commission reports including, but not limited to, the Annual Report on Form 10-K for the most recent fiscal year end. Pursuant to the Private Securities Litigation Reform Act of 1995, the Company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made.


 
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
               
  Three Months Ended Year Ended
(Amounts in thousands, except share and per share data)
December 31, September 30, June 30, March 31, December 31, December 31,
 2018   2018   2018   2018   2017   2018   2017 
Interest income             
 Interest and fees on loans$  23,938  $  22,556  $  22,422  $  22,755  $  22,314  $  91,671  $  89,749 
 Interest on securities   1,249     1,372     1,361     1,104     1,095     5,086     4,551 
 Interest on deposits in banks   194     358     514     471     353     1,537     1,008 
Total interest income   25,381     24,286     24,297     24,330     23,762     98,294     95,308 
Interest expense             
 Interest on deposits   1,297     1,269     1,327     1,251     1,313     5,144     4,987 
 Interest on borrowings   205     692     708     700     716     2,305     3,103 
Total interest expense   1,502     1,961     2,035     1,951     2,029     7,449     8,090 
Net interest income   23,879     22,325     22,262     22,379     21,733     90,845     87,218 
Provision for loan losses   908     495     495     495     615     2,393     2,771 
Net interest income after provision   22,971     21,830     21,767     21,884     21,118     88,452     84,447 
Noninterest income    6,297     6,519     6,959     6,668     7,498     26,443     24,568 
Noninterest expense   17,366     18,131     17,160     17,116     16,683     69,773     66,902 
Income before income taxes   11,902     10,218     11,566     11,436     11,933     45,122     42,113 
Income tax expense   2,596     1,118     2,500     2,568     10,720     8,782     20,628 
Net income$  9,306  $  9,100  $  9,066  $  8,868  $  1,213  $  36,340  $  21,485 
               
Earnings per common share             
 Basic$  0.57  $  0.55  $  0.54  $  0.52  $  0.07  $  2.19  $  1.26 
 Diluted   0.57     0.55     0.54     0.52     0.07     2.18     1.26 
Cash dividends per common share             
 Regular   0.21     0.21     0.18     0.18     0.18     0.78     0.68 
 Special   -      -      -      0.48     -      0.48     -  
Weighted average shares outstanding             
 Basic   16,201,148     16,512,823     16,689,398     16,955,758     16,992,519     16,587,504     17,002,116 
 Diluted   16,280,404     16,612,416     16,788,615     17,047,638     17,083,949     16,666,385     17,077,842 
Performance ratios             
 Return on average assets 1.63%  1.55%  1.53%  1.52%  0.20%  1.56%  0.91%
 Return on average common equity 11.01%  10.59%  10.68%  10.30%  1.35%  10.64%  6.14%
 Return on average tangible common equity(1) 15.58%  15.06%  15.21%  14.53%  1.89%  15.09%  8.69%
               
  
(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 Year Ended
  December 31, September 30, June 30, March 31, December 31, December 31,
   2018   2018   2018   2018   2017   2018   2017 
(Amounts in thousands, except per share data)             
Net income$  9,306  $  9,100  $  9,066  $  8,868  $  1,213  $  36,340  $  21,485 
Non-GAAP adjustments:             
 Net loss on sale of securities   -     618     -     -     4     618     661 
 Loss on extinguishment of debt   -     1,096     -     -     -     1,096     - 
 Goodwill impairment   -     1,492     -     -     -     1,492     - 
 Deferred tax asset revaluation   -     (1,669)    -     -     6,552     (1,669)    6,552 
 Other items(1)   254     -     297     (130)    (140)    421     (298)
Total adjustments   254     1,537     297     (130)    6,416     1,958     6,915 
Tax effect    61     411     96     (24)    (50)    544     301 
Adjusted earnings, non-GAAP$  9,499  $  10,226  $  9,267  $  8,762  $  7,679  $  37,754  $  28,099 
               
Adjusted diluted earnings per common share, non-GAAP$  0.58  $  0.62  $  0.55  $  0.51  $  0.45  $  2.27  $  1.65 
Performance ratios, non-GAAP             
 Adjusted return on average assets 1.67%  1.74%  1.57%  1.50%  1.28%  1.62%  1.19%
 Adjusted return on average common equity 11.23%  11.90%  10.91%  10.17%  8.56%  11.05%  8.04%
 Adjusted return on average tangible common equity(2) 15.90%  16.93%  15.55%  14.36%  11.99%  15.68%  11.36%
               
  
(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,
   2018  2017
  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)$  1,788,570 $  24,017 5.33% $  1,822,583 $  22,387 4.87%
 Securities available for sale   162,330    1,518 3.71%    171,288    1,383 3.20%
 Securities held to maturity   25,030    104 1.65%    25,165    105 1.66%
 Interest-bearing deposits   33,736    194 2.28%    95,174    353 1.47%
Total earning assets   2,009,666    25,833 5.10%    2,114,210    24,228 4.55%
Other assets    249,056        256,591    
Total assets$  2,258,722     $  2,370,801    
             
Liabilities and stockholders' equity           
Interest-bearing deposits           
 Demand deposits $  458,458 $  40 0.03% $  451,024 $  62 0.05%
 Savings deposits    494,868    132 0.11%    512,156    83 0.06%
 Time deposits   450,770    1,125 0.99%    502,515    1,168 0.92%
Total interest-bearing deposits   1,404,096    1,297 0.37%    1,465,695    1,313 0.36%
Borrowings           
 Retail repurchase agreements   4,526    2 0.18%    5,470    1 0.07%
 Wholesale repurchase agreements   25,000    203 3.22%    25,000    204 3.24%
 FHLB advances and other borrowings   -    - -    50,000    511 4.05%
Total borrowings   29,526    205 2.75%    80,470    716 3.53%
Total interest-bearing liabilities   1,433,622    1,502 0.42%    1,546,165    2,029 0.52%
Noninterest-bearing demand deposits   461,457        446,487    
Other liabilities   28,188        22,103    
Total liabilities   1,923,267        2,014,755    
Stockholders' equity   335,455        356,046    
Total liabilities and stockholders' equity$  2,258,722     $  2,370,801    
Net interest income, FTE(1)  $  24,331     $  22,199  
Net interest rate spread    4.68%     4.03%
Net interest margin, FTE(1)    4.80%     4.17%
             
  
(1) Interest income and average yield/rate are presented on a FTE, non-GAAP, basis using the federal statutory income tax rate of 21% for periods after January 1, 2018, and 35% for periods prior to January 1, 2018.
(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 include non-cash purchase accounting accretion of $2.13 million and $1.16 million for the three months ended December 31, 2018 and 2017, respectively.
             


AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited)
             
  Year Ended December 31,
   2018  2017
  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)$  1,795,391 $  91,971 5.12% $  1,837,092 $  90,032 4.90%
 Securities available for sale   176,766    6,190 3.50%    164,489    5,695 3.46%
 Securities held to maturity   25,081    418 1.67%    32,954    487 1.48%
 Interest-bearing deposits   81,520    1,537 1.89%    73,405    1,008 1.37%
Total earning assets   2,078,758    100,116 4.82%    2,107,940    97,222 4.61%
Other assets    251,853        262,381    
Total assets$  2,330,611     $  2,370,321    
             
Liabilities and stockholders' equity           
Interest-bearing deposits           
 Demand deposits $  466,403 $  246 0.05% $  401,092 $  224 0.06%
 Savings deposits    508,353    382 0.08%    520,430    336 0.06%
 Time deposits   471,335    4,516 0.96%    510,411    4,427 0.87%
Total interest-bearing deposits   1,446,091    5,144 0.36%    1,431,933    4,987 0.35%
Borrowings           
 Federal funds purchased   -    - -    1    - -
 Retail repurchase agreements   4,010    5 0.12%    47,716    32 0.07%
 Wholesale repurchase agreements   25,000    806 3.22%    25,000    806 3.22%
 FHLB advances and other borrowings   36,849    1,494 4.05%    55,502    2,265 4.08%
Total borrowings   65,859    2,305 3.50%    128,219    3,103 2.42%
Total interest-bearing liabilities   1,511,950    7,449 0.49%    1,560,152    8,090 0.52%
Noninterest-bearing demand deposits   448,903        438,513    
Other liabilities   28,239        21,955    
Total liabilities   1,989,092        2,020,620    
Stockholders' equity   341,519        349,701    
Total liabilities and stockholders' equity$  2,330,611     $  2,370,321    
Net interest income, FTE(1)  $  92,667     $  89,132  
Net interest rate spread    4.33%     4.09%
Net interest margin, FTE(1)    4.46%     4.23%
             
  
(1) Interest income and average yield/rate are presented on a FTE, non-GAAP, basis using the federal statutory income tax rate of 21% for periods after January 1, 2018, and 35% for periods prior to January 1, 2018.
(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 include non-cash purchase accounting accretion of $6.39 million and $5.42 million for the year ended December 31, 2018 and 2017, respectively.
             


 
CONDENSED CONSOLIDATED QUARTERLY NONINTEREST INCOME AND EXPENSE  (Unaudited)
               
  Three Months Ended Year Ended
  December 31, September 30, June 30, March 31, December 31, December 31,
(Amounts in thousands) 2018   2018   2018   2018   2017   2018   2017 
Noninterest income             
 Wealth management$  854  $  791  $  823  $  794  $  811  $  3,262  $  3,150 
 Service charges on deposits   3,850     3,803     3,612     3,468     3,725     14,733     13,803 
 Other service charges and fees   2,017     1,925     1,934     1,857     1,788     7,733     6,944 
 Insurance commissions   -     299     338     329     343     966     1,347 
 Net loss on sale of securities   -     (618)    -     -     (4)    (618)    (661)
 Net FDIC indemnification asset amortization   (579)    (645)    (575)    (382)    (331)    (2,181)    (3,517)
 Other operating income   155     964     827     602     1,166     2,548     3,502 
Total noninterest income $  6,297  $  6,519  $  6,959  $  6,668  $  7,498  $  26,443  $  24,568 
Noninterest expense             
 Salaries and employee benefits$  9,273  $  8,983  $  8,993  $  9,441  $  9,003  $  36,690  $  35,774 
 Occupancy expense   1,134     1,075     1,083     1,250     1,104     4,542     4,775 
 Furniture and equipment expense   1,004     985     945     1,046     1,114     3,980     4,425 
 Service fees   1,047     1,134     851     828     703     3,860     3,348 
 Advertising and public relations   550     478     461     522     506     2,011     2,206 
 Professional fees   356     337     430     307     589     1,430     2,567 
 Amortization of intangibles   254     261     263     261     266     1,039     1,056 
 FDIC premiums and assessments   209     234     252     211     212     906     910 
 Loss on extinguishment of debt   -     1,096     -     -     -     1,096     - 
 Goodwill impairment   -     1,492     -     -     -     1,492     - 
 Other operating expense   3,539     2,056     3,882     3,250     3,186     12,727     11,841 
Total noninterest expense$  17,366  $  18,131  $  17,160  $  17,116  $  16,683  $  69,773  $  66,902 
               

 

 
CONDENSED CONSOLIDATED QUARTERLY BALANCE SHEETS (Unaudited)
           
  December 31, September 30, June 30, March 31, December 31,
(Amounts in thousands, except per share data) 2018   2018   2018   2018   2017 
Assets         
Cash and cash equivalents$  76,873  $  73,679  $  107,957  $  205,140  $  157,951 
Debt securities available for sale    153,116     163,593     196,425     164,192     165,580 
Debt securities held to maturity    25,013     25,047     25,082     25,115     25,149 
Loans held for investment, net of unearned income         
 Noncovered   1,756,269     1,770,426     1,776,112     1,767,703     1,789,236 
 Covered   18,815     20,483     22,919     25,406     27,948 
 Allowance for loan losses   (18,267)    (18,256)    (19,583)    (19,500)    (19,276)
Loans held for investment, net   1,756,817     1,772,653     1,779,448     1,773,609     1,797,908 
FDIC indemnification asset   5,108     5,653     6,390     6,884     7,161 
Premises and equipment, net   45,785     45,537     45,547     46,415     48,126 
Other real estate owned, noncovered   3,806     4,754     4,805     4,620     2,409 
Other real estate owned, covered   32     44     44     70     105 
Interest receivable   5,481     5,374     5,580     5,155     5,778 
Goodwill   92,744     94,287     95,779     95,779     95,779 
Other intangible assets   5,026     5,366     5,628     5,891     6,151 
Other assets   74,573     73,701     75,435     95,437     76,363 
Total assets$  2,244,374  $  2,269,688  $  2,348,120  $  2,428,307  $  2,388,460 
           
Liabilities         
Deposits         
 Noninterest-bearing$  459,550  $  463,945  $  462,851  $  460,478  $  454,143 
 Interest-bearing   1,396,200     1,411,906     1,441,887     1,520,141     1,475,748 
Total deposits   1,855,750     1,875,851     1,904,738     1,980,619     1,929,891 
Securities sold under agreements to repurchase   29,370     30,151     27,869     29,115     30,086 
FHLB borrowings   -     -     50,000     50,000     50,000 
Interest, taxes, and other liabilities   26,397     25,284     26,392     26,536     27,769 
Total liabilities   1,911,517     1,931,286     2,008,999     2,086,270     2,037,746 
           
Stockholders' equity         
Common stock(2)   16,007     21,382     21,382     21,382     21,382 
Additional paid-in capital(2)   122,486     229,182     228,949     228,774     228,750 
Retained earnings   195,793     189,902     184,279     178,227     180,543 
Treasury stock, at cost(2)   -     (99,247)    (92,904)    (83,865)    (79,121)
Accumulated other comprehensive loss   (1,429)    (2,817)    (2,585)    (2,481)    (840)
Total stockholders' equity   332,857     338,402     339,121     342,037     350,714 
Total liabilities and stockholders' equity$  2,244,374  $  2,269,688  $  2,348,120  $  2,428,307  $  2,388,460 
           
Shares outstanding at period-end   16,007,263     16,390,502     16,574,347     16,847,452     16,998,226 
Book value per common share$  20.79  $  20.65  $  20.46  $  20.30  $  20.63 
Tangible book value per common share(1)   14.69     14.57     14.34     14.27     14.64 
           
  
(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)
          
 December 31, September 30, June 30, March 31, December 31,
(Amounts in thousands) 2018   2018   2018   2018   2017 
Allowance for Loan Losses          
Beginning balance$  18,256  $  19,583  $  19,500  $  19,276  $  19,206 
Provision for loan losses charged to operations   908     495     495     495     615 
Charge-offs   (1,282)    (2,177)    (750)    (698)    (967)
Recoveries   385     355     338     427     422 
Net charge-offs   (897)    (1,822)    (412)    (271)    (545)
Ending balance$  18,267  $  18,256  $  19,583  $  19,500  $  19,276 
          
Nonperforming Assets         
Non-covered nonperforming assets         
Nonaccrual loans $  19,583  $  20,542  $  21,467  $  21,650  $  18,997 
Accruing loans past due 90 days or more   58     46     -     27     1 
Troubled debt restructurings ("TDRs")(1)   161     189     133     77     120 
Total non-covered nonperforming loans   19,802     20,777     21,600     21,754     19,118 
OREO   3,806     4,754     4,805     4,620     2,409 
Total non-covered nonperforming assets$  23,608  $  25,531  $  26,405  $  26,374  $  21,527 
          
Covered nonperforming assets         
Nonaccrual loans $  322  $  330  $  509  $  596  $  342 
Total covered nonperforming loans   322     330     509     596     342 
OREO   32     44     44     70     105 
Total covered nonperforming assets$  354  $  374  $  553  $  666  $  447 
          
Additional Information         
Performing TDRs(2)$  6,266  $  6,953  $  6,847  $  7,220  $  7,614 
Total TDRs(3)   6,427     7,142     6,980     7,297     7,734 
          
Non-covered ratios         
Nonperforming loans to total loans 1.13%  1.17%  1.22%  1.23%  1.07%
Nonperforming assets to total assets 1.06%  1.14%  1.14%  1.10%  0.91%
Non-PCI allowance to nonperforming loans 92.25%  87.87%  90.66%  89.64%  100.83%
Non-PCI allowance to total loans 1.04%  1.03%  1.10%  1.10%  1.08%
Annualized net charge-offs to average loans 0.20%  0.41%  0.09%  0.06%  0.12%
          
Total ratios         
Nonperforming loans to total loans 1.13%  1.18%  1.23%  1.25%  1.07%
Nonperforming assets to total assets 1.07%  1.14%  1.15%  1.11%  0.92%
Allowance for loan losses to nonperforming loans 90.77%  86.49%  88.57%  87.25%  99.05%
Allowance for loan losses to total loans 1.03%  1.02%  1.09%  1.09%  1.06%
Annualized net charge-offs to average loans 0.20%  0.40%  0.09%  0.06%  0.12%
          
 
(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.