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

Company Release - 7/23/2019 5:17 PM ET

BLUEFIELD, Va., July 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 ended June 30, 2019. The Company reported net income of $10.45 million, or $0.66 per diluted common share, for the quarter ended June 30, 2019, which was an increase of $1.39 million, or 15.28%, over the same quarter of 2018.

The Company also announced today that the Board of Directors declared a quarterly cash dividend to common shareholders of twenty-five cents ($0.25) per common share, an increase of four cents ($0.04), or 19.05%, over last year’s third quarter dividend. The quarterly dividend is payable to common shareholders of record on August 2, 2019, and is expected to be paid on or about August 16, 2019. The current year marks the 34th consecutive year of regular cash dividends paid to shareholders.

Second Quarter 2019 Highlights

  • General
    - The Company declared a quarterly cash dividend to common shareholders of twenty-five cents ($0.25) per common share.
    - The Company received $2.03 million from litigation settlements during the second quarter.
  • Income Statement
    - Net income increased $1.39 million, or 15.28%, to $10.45 million compared to the same quarter of 2018.
    - Diluted earnings per share increased $0.12 to $0.66 compared to the same quarter of 2018, for an increase of 22.22%.
    - Return on average assets for the quarter increased to 1.89%. Return on average equity for the quarter increased to 12.57%.
    - Net interest margin increased 47 basis points to 4.72% compared to the same quarter of 2018.
     
  • Balance Sheet
    - Book value per common share increased $0.55 to $21.34, and tangible book value per common share increased $0.43 to a record $15.12, compared to December 31, 2018.
    - The Company repurchased 194,000 common shares for $6.58 million during the quarter. Year to date, the Company has repurchased 426,900 common shares for $14.36 million compared to 474,240 shares during same period of 2018.
    - The Company and its subsidiary bank both significantly exceed regulatory “well capitalized” targets as of June 30, 2019.

Non-GAAP Financial Measures

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

About First Community Bankshares, Inc.

First Community Bankshares, Inc., a financial holding company headquartered in Bluefield, Virginia, provides banking products and services through its wholly owned subsidiary First Community Bank. First Community Bank operated 44 branch banking locations in Virginia, West Virginia, North Carolina, and Tennessee as of June 30, 2019. First Community Bank offers wealth management and investment advice through its Trust Division and First Community Wealth Management, which collectively managed and administered $1.05 billion in combined assets as of June 30, 2019. The Company reported consolidated assets of $2.21 billion as of June 30, 2019. The Company’s common stock is listed on the NASDAQ Global Select Market under the trading symbol, “FCBC”. Additional investor information is available on the Company’s website at www.firstcommunitybank.com.

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

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

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
                
   Three Months Ended Six Months Ended
(Amounts in thousands, except share and per share data)
June 30,
 2019 
 March 31,
 2019 
 December 31,
 2018
 September 30,
 2018
 June 30,
 2018
 June 30,
 2019  2018
Interest income             
Interest and fees on loans$22,721  $22,179  $23,938  $22,556  $22,422  $44,900  $45,177 
Interest on securities 895   1,094   1,249   1,372   1,361   1,989   2,465 
Interest on deposits in banks 766   338   194   358   514   1,104   985 
Total interest income 24,382   23,611   25,381   24,286   24,297   47,993   48,627 
Interest expense             
Interest on deposits 1,392   1,305   1,297   1,269   1,327   2,697   2,578 
Interest on borrowings 1   120   205   692   708   121   1,408 
Total interest expense 1,393   1,425   1,502   1,961   2,035   2,818   3,986 
Net interest income 22,989   22,186   23,879   22,325   22,262   45,175   44,641 
Provision for loan losses 1,585   1,220   908   495   495   2,805   990 
Net interest income after provision 21,404   20,966   22,971   21,830   21,767   42,370   43,651 
Noninterest income 8,649   8,080   6,297   6,519   6,959   16,729   13,627 
Noninterest expense 16,651   16,785   17,366   18,131   17,160   33,436   34,276 
Income before income taxes 13,402   12,261   11,902   10,218   11,566   25,663   23,002 
Income tax expense 2,951   2,630   2,596   1,118   2,500   5,581   5,068 
Net income$10,451  $9,631  $9,306  $9,100  $9,066  $20,082  $17,934 
                
Earnings per common share             
Basic$0.67  $0.61  $0.57  $0.55  $0.54  $1.27  $1.06 
Diluted 0.66   0.60   0.57   0.55   0.54   1.27   1.06 
Cash dividends per common share             
Regular 0.25   0.21   0.21   0.21   0.18   0.46   0.36 
Special -   -   -   -   -   -   0.48 
Weighted average shares outstanding             
Basic 15,712,204   15,839,424   16,201,148   16,512,823   16,689,398   15,775,462   16,821,842 
Diluted 15,775,320   15,920,950   16,280,404   16,612,416   16,788,615   15,847,498   16,912,872 
Performance ratios             
Return on average assets 1.89%  1.75%  1.63%  1.55%  1.53%  1.82%  1.53%
Return on average common equity 12.57%  11.77%  11.01%  10.59%  10.68%  12.17%  10.49%
Return on average tangible common equity(1) 17.57%  16.66%  15.58%  15.06%  15.21%  17.04%  14.87%
                
                
(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 Six Months Ended
 June 30, March 31, December 31, September 30, June 30, June 30,
  2019   2019   2018   2018   2018   2019   2018 
(Amounts in thousands, except per share data)             
Net income$10,451  $9,631  $9,306  $9,100  $9,066  $20,082  $17,934 
Non-GAAP adjustments:             
Net loss on sale of securities 43   -   -   618   -   43   - 
Loss on extinguishment of debt -   -   -   1,096   -   -   - 
Goodwill impairment -   -   -   1,492   -   -   - 
Deferred tax asset revaluation -   -   -   (1,669)  -   -   - 
Other items(1) (2,025)  (1,675)  254   -   297   (3,700)  167 
Total adjustments (1,982)  (1,675)  254   1,537   297   (3,657)  167 
Tax effect (550)  (328)- 61   411   96   (878)- 72 
Adjusted earnings, non-GAAP$9,019  $8,284  $9,499  $10,226  $9,267  $17,303  $18,029 
              
Adjusted diluted earnings per common share,             
non-GAAP$0.57  $0.52  $0.58  $0.62  $0.55  $1.09  $1.07 
Performance ratios, non-GAAP             
Adjusted return on average assets 1.63%  1.51%  1.67%  1.74%  1.57%  1.57%  1.53%
Adjusted return on average common equity 10.84%  10.12%  11.23%  11.90%  10.91%  10.48%  10.54%
Adjusted return on average tangible             
common equity(2) 15.16%  14.33%  15.90%  16.93%  15.55%  14.68%  15.21%
              
              
(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 June 30,
  2019 2018
  Average    Average Yield/ Average    Average Yield/
(Amounts in thousands)Balance Interest(1) Rate(1) Balance Interest(1) Rate(1)
Assets           
Earning assets           
Loans(2)(3)$1,721,392 $22,772 5.31% $1,795,094 $22,458 5.02%
Securities available for sale 126,153  1,068 3.41%  190,605  1,447 3.04%
Securities held to maturity -  - -   25,098  104 1.66%
Interest-bearing deposits 125,759  766 2.44%  109,349  514 1.89%
Total earning assets 1,973,304  24,606 5.00%  2,120,146  24,523 4.64%
Other assets 248,270      252,843    
Total assets$2,221,574     $2,372,989    
             
Liabilities and stockholders' equity           
Interest-bearing deposits           
Demand deposits$454,246 $77 0.07% $484,776 $104 0.09%
Savings deposits 504,854  192 0.15%  518,055  83 0.06%
Time deposits 429,469  1,123 1.05%  477,691  1,140 0.96%
Total interest-bearing deposits 1,388,569  1,392 0.40%  1,480,522  1,327 0.36%
Borrowings           
Retail repurchase agreements 3,024  1 0.13%  3,615  1 0.11%
Wholesale repurchase agreements -  - -   25,000  201 3.22%
FHLB advances and other borrowings -  - -   50,000  506 4.06%
Total borrowings 3,024  1 0.13%  78,615  708 3.61%
Total interest-bearing liabilities 1,391,593  1,393 0.40%  1,559,137  2,035 0.52%
Noninterest-bearing demand deposits 468,782      447,048    
Other liabilities 27,904      26,222    
Total liabilities 1,888,279      2,032,407    
Stockholders' equity 333,595      340,582    
Total liabilities and stockholders' equity$2,221,874     $2,372,989    
Net interest income, FTE(1)  $23,213     $22,488  
Net interest rate spread    4.60%     4.12%
Net interest margin, FTE(1)    4.72%     4.25%
             
             
(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 $1.39 million and $1.36 million for the three months ended June 30, 2019 and 2018, respectively.


AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited)
             
  Six Months Ended June 30,
  2019 2018
  Average    Average Yield/ Average    Average Yield/
(Amounts in thousands)Balance Interest(1) Rate(1) Balance Interest(1) Rate(1)
Assets           
Earning assets           
Loans(2)(3)$1,743,141 $45,008 5.21% $1,800,438 $45,249 5.07%
Securities available for sale 135,914  2,299 3.41%  177,897  2,636 2.99%
Securities held to maturity 6,140  45 1.48%  25,115  209 1.68%
Interest-bearing deposits 90,423  1,104 2.46%  113,627  985 1.75%
Total earning assets 1,975,618  48,456 4.95%  2,117,077  49,079 4.67%
Other assets 248,118      252,592    
Total assets$2,223,736     $2,369,669    
             
Liabilities and stockholders' equity           
Interest-bearing deposits           
Demand deposits$450,655 $114 0.05% $473,819 $167 0.07%
Savings deposits 503,075  367 0.15%  518,306  165 0.06%
Time deposits 433,936  2,216 1.03%  485,574  2,246 0.93%
Total interest-bearing deposits 1,387,666  2,697 0.39%  1,477,699  2,578 0.35%
Borrowings           
Retail repurchase agreements 3,141  2 0.13%  4,031  2 0.10%
Wholesale repurchase agreements 7,597  119 3.16%  25,000  400 3.23%
FHLB advances and other borrowings -  - -   50,000  1,006 4.06%
Total borrowings 10,738  121 2.27%  79,031  1,408 3.59%
Total interest-bearing liabilities 1,398,404  2,818 0.41%  1,556,730  3,986 0.52%
Noninterest-bearing demand deposits 464,299      439,867    
Other liabilities 28,245      28,168    
Total liabilities 1,890,948      2,024,765    
Stockholders' equity 332,788      344,904    
Total liabilities and stockholders' equity$2,223,736     $2,369,669    
Net interest income, FTE(1)  $45,638     $45,093  
Net interest rate spread    4.54%     4.16%
Net interest margin, FTE(1)    4.66%     4.30%
             
             
(1) Interest income and average yield/rate are presented on a FTE, non-GAAP, basis using the federal statutory income tax rate of 21%.
(2) Nonaccrual loans are included in the average balance; however, no related interest income is recorded during the period of nonaccrual.
(3) Interest on loans includes non-cash and accelerated purchase accounting accretion of $2.15 million and $3.20 million for the six months ended June 30, 2019 and 2018, respectively.


CONDENSED CONSOLIDATED QUARTERLY NONINTEREST INCOME AND EXPENSE (Unaudited)
              
 Three Months Ended Six Months Ended
 June 30, March 31, December 31, September 30, June 30, June 30,
(Amounts in thousands) 2019   2019   2018   2018   2018   2019   2018 
Noninterest income             
Wealth management$884  $745  $854  $791  $823  $1,629  $1,617 
Service charges on deposits 3,699   3,408   3,850   3,803   3,612   7,107   7,080 
Other service charges and fees 2,129   2,049   2,017   1,925   1,934   4,178   3,791 
Insurance commissions -   -   -   299   338   -   667 
Net loss on sale of securities (43)  -   -   (618)  -   (43)  - 
Net FDIC indemnification asset amortization (516)  (552)  (579)  (645)  (575)  (1,068)  (957)
Other income 2,025   1,675   -   -   -   3,700   - 
Other operating income 471   755   155   964   827   1,226   1,429 
Total noninterest income$8,649  $8,080  $6,297  $6,519  $6,959  $16,729  $13,627 
Noninterest expense             
Salaries and employee benefits$9,153  $9,166  $9,273  $8,983  $8,993  $18,319  $18,434 
Occupancy expense 1,082   1,153   1,134   1,075   1,083   2,235   2,333 
Furniture and equipment expense 1,062   1,033   1,004   985   945   2,095   1,991 
Service fees 1,231   1,030   1,047   1,134   851   2,261   1,679 
Advertising and public relations 513   524   550   478   461   1,037   983 
Professional fees 328   414   356   337   430   742   737 
Amortization of intangibles 249   246   254   261   263   495   524 
FDIC premiums and assessments 150   168   209   234   252   318   463 
Loss on extinguishment of debt -   -   -   1,096   -   -   - 
Goodwill impairment -   -   -   1,492   -   -   - 
Other operating expense 2,883   3,051   3,539   2,056   3,882   5,934   7,132 
Total noninterest expense$16,651  $16,785  $17,366  $18,131  $17,160  $33,436  $34,276 


CONDENSED CONSOLIDATED QUARTERLY BALANCE SHEETS (Unaudited)
           
  June 30, March 31, December 31, September 30, June 30,
(Amounts in thousands, except per share data) 2019   2019   2018   2018   2018 
Assets         
Cash and cash equivalents$156,478  $148,546  $76,873  $73,679  $107,957 
Debt securities available for sale 119,076   132,597   153,116   163,593   196,425 
Debt securities held to maturity -   -   25,013   25,047   25,082 
Loans held for investment, net of unearned income         
Noncovered 1,705,408   1,719,905   1,756,269   1,770,426   1,776,112 
Covered 15,520   17,475   18,815   20,483   22,919 
Allowance for loan losses (18,540)  (18,243)  (18,267)  (18,256)  (19,583)
Loans held for investment, net 1,702,388   1,719,137   1,756,817   1,772,653   1,779,448 
FDIC indemnification asset 4,020   4,578   5,108   5,653   6,390 
Premises and equipment, net 48,262   46,636   45,785   45,537   45,547 
Other real estate owned, noncovered 3,810   3,903   3,806   4,754   4,805 
Other real estate owned, covered 152   152   32   44   44 
Interest receivable 5,317   5,227   5,481   5,374   5,580 
Goodwill 92,744   92,744   92,744   94,287   95,779 
Other intangible assets 4,532   4,780   5,026   5,366   5,628 
Other assets 75,248   84,035   74,573   73,701   75,435 
Total assets$2,212,027  $2,242,335  $2,244,374  $2,269,688  $2,348,120 
           
Liabilities         
Deposits         
Noninterest-bearing$480,573  $479,299  $459,550  $463,945  $462,851 
Interest-bearing 1,367,465   1,399,138   1,396,200   1,411,906   1,441,887 
Total deposits 1,848,038   1,878,437   1,855,750   1,875,851   1,904,738 
Securities sold under agreements to repurchase 3,083   3,700   29,370   30,151   27,869 
FHLB borrowings -   -   -   -   50,000 
Interest, taxes, and other liabilities 27,220   27,096   26,397   25,284   26,392 
Total liabilities 1,878,341   1,909,233   1,911,517   1,931,286   2,008,999 
           
Stockholders' equity         
Common stock(2) 15,633   15,818   16,007   21,382   21,382 
Additional paid-in capital(2) 109,816   115,914   122,486   229,182   228,949 
Retained earnings 208,618   202,103   195,793   189,902   184,279 
Treasury stock, at cost(2) -   -   -   (99,247)  (92,904)
Accumulated other comprehensive loss (381)  (733)  (1,429)  (2,817)  (2,585)
Total stockholders' equity 333,686   333,102   332,857   338,402   339,121 
Total liabilities and stockholders' equity$2,212,027  $2,242,335  $2,244,374  $2,269,688  $2,348,120 
           
Shares outstanding at period-end 15,633,388   15,818,368   16,007,263   16,390,502   16,574,347 
Book value per common share$21.34  $21.06  $20.79  $20.65  $20.46 
Tangible book value per common share(1) 15.12   14.89   14.69   14.57   14.34 
           
           
(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)
            
   June 30, March 31, December 31, September 30, June 30,
(Amounts in thousands) 2019   2019   2018   2018   2018 
Allowance for Loan Losses          
Beginning balance$18,243  $18,267  $18,256  $19,583  $19,500 
Provision for loan losses charged to operations 1,585   1,220   908   495   495 
Charge-offs (2,114)  (1,622)  (1,282)  (2,177)  (750)
Recoveries 826   378   385   355   338 
Net charge-offs (1,288)  (1,244)  (897)  (1,822)  (412)
Ending balance$18,540  $18,243  $18,267  $18,256  $19,583 
            
Nonperforming Assets         
Non-covered nonperforming assets         
Nonaccrual loans$16,368  $18,544  $19,583  $20,542  $21,467 
Accruing loans past due 90 days or more 37   156   58   46   - 
Troubled debt restructurings ("TDRs")(1) 821   835   161   189   133 
Total non-covered nonperforming loans 17,226   19,535   19,802   20,777   21,600 
OREO 3,810   3,903   3,806   4,754   4,805 
Total non-covered nonperforming assets$21,036  $23,438  $23,608  $25,531  $26,405 
            
Covered nonperforming assets         
Nonaccrual loans$203  $237  $322  $330  $509 
Total covered nonperforming loans 203   237   322   330   509 
OREO 152   152   32   44   44 
Total covered nonperforming assets$355  $389  $354  $374  $553 
            
Additional Information         
Performing TDRs(2)$5,676  $5,654  $6,266  $6,953  $6,847 
Total TDRs(3) 6,497   6,489   6,427   7,142   6,980 
            
Non-covered ratios         
Nonperforming loans to total loans 1.01%  1.14%  1.13%  1.17%  1.22%
Nonperforming assets to total assets 0.96%  1.05%  1.06%  1.14%  1.14%
Non-PCI allowance to nonperforming loans 107.63%  93.39%  92.25%  87.87%  90.66%
Non-PCI allowance to total loans 1.09%  1.06%  1.04%  1.03%  1.10%
Annualized net charge-offs to average loans 0.30%  0.29%  0.20%  0.41%  0.09%
            
Total ratios         
Nonperforming loans to total loans 1.01%  1.14%  1.13%  1.18%  1.23%
Nonperforming assets to total assets 0.97%  1.06%  1.07%  1.14%  1.15%
Allowance for loan losses to nonperforming loans 106.37%  92.27%  90.77%  86.49%  88.57%
Allowance for loan losses to total loans 1.08%  1.05%  1.03%  1.02%  1.09%
Annualized net charge-offs to average loans 0.30%  0.29%  0.20%  0.40%  0.09%
            
            
(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
            

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Source: First Community Bankshares, Inc.