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

Company Release - 7/28/2020 4:30 PM ET

BLUEFIELD, Va., July 28, 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 June 30, 2020. The Company reported net income of $8.24 million, or $0.46 per diluted common share, for the quarter ended June 30, 2020, which was a decrease of $0.20, or 30.30%, over the same quarter of 2019.  Net income was $16.11 million, or $0.90 per diluted common share, for the six months ended June 30, 2020, which represents a 29.13% decrease in per share diluted earnings compared to the same period of 2019.

Additionally, today the Company declared a quarterly cash dividend to common shareholders of twenty-five cents ($0.25) per common share. The quarterly dividend is payable to common shareholders of record on August 7, 2020, and is expected to be paid on or about August 21, 2020. The current year is the 35th consecutive year of regular dividends to common shareholders.

Second Quarter 2020 and Current Highlights

  • Pandemic and General
    • The Company’s social distancing practices at its branches and corporate offices continue today.  Remote working environments remain in place for approximately 60% of the Company’s back office workforce.
    • The Company implemented a pay differential for employees working at branch and back-office locations which ended May 31, 2020.  As a result of the pay differential and other COVID-19 related expenses, the Company incurred approximately $612 thousand in additional expenses for the quarter.
    • In order to aid its affected customers, the Company modified or deferred payments on 1,277 commercial loans totaling $340.00 million in principal balances and 1,820 retail loans totaling $96.11 million in principal balances.
    • Through June 30, 2020, the Company processed 758 loans with original principal balances totaling $60.23 million through the SBA’s Paycheck Protection Program.
    • As a result of the low interest rate environment, the Company’s pipeline for mortgage loans grew to approximately $99.75 million at June 30, 2020, and stood at $101.39 million at July 24, 2020.
       
  • Income Statement
    • Second quarter earnings reflect a loan loss provision of $3.83 million, an increase of $2.25 million over second quarter of 2019, to recognize the impact of the coronavirus slowdown.  Coupled with the provision in the first quarter of 2020, the second quarter provision had the cumulative effect of increasing loan loss reserve $5.33 million.
    • Despite the significant increase in loan loss provision, return on average assets remained strong at 1.15% for both the second quarter and the six month period. The significant increase in loan loss provision over previous quarterly provisions reduced return on average assets for the quarter by 0.24%.
    • Net interest margin decreased 50 basis points to 4.22% compared to the same quarter of 2019.  Net interest margin decreased 20 basis points to 4.46% for the six months compared to the same period of 2019.  Both period decreases are reflective of the current historic low interest rate environment.
    • Pandemic shutdowns and stay-at-home orders had a significant negative impact on deposit service charges.
       
  • Balance Sheet
    • As of June 30, 2020, the Company continues to significantly exceed regulatory “well capitalized” targets, as well as all capital targets of its capital management plan. The Company completed its previous share repurchase authorization in the first quarter of 2020, prior to the onset of the current coronavirus pandemic, which completed a strategic objective of acquiring 6.6 million shares, returning over $149 million in surplus capital to shareholders. In light of the uncertain economic forecast, the Company has temporarily delayed consideration of a new share repurchase authorization to preserve and further accumulate surplus capital.
    • Total deposits have grown $167.93 million, or 7.21%, during 2020 with $125.03 million of the increase coming in interest free categories.

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 June 30, 2020. First Community Bank offers wealth management and investment advice through its Trust Division and First Community Wealth Management, which collectively managed and administered $1.10 billion in combined assets as of June 30, 2020. The Company reported consolidated assets of $2.95 billion as of June 30, 2020. 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 Six Months Ended
  June 30, March 31, December 31, September 30, June 30, June 30,
(Amounts in thousands, except share and per share data)2020 2020 2019 2019 2019 2020 2019
Interest income                    
Interest and fees on loans$  26,991  $  28,058  $  21,837  $  22,068  $  22,721  $  55,049  $  44,900 
Interest on securities713  918  870  857  895  1,631  1,989 
Interest on deposits in banks82  533  663  680  766  615  1,104 
Total interest income27,786  29,509  23,370  23,605  24,382  57,295  47,993 
Interest expense                    
Interest on deposits1,445  1,825  1,312  1,383  1,392  3,270  2,697 
Interest on borrowings2  2  1  1  1  4  121 
Total interest expense1,447  1,827  1,313  1,384  1,393  3,274  2,818 
Net interest income26,339  27,682  22,057  22,221  22,989  54,021  45,175 
Provision for loan losses3,831  3,500  91  675  1,585  7,331  2,805 
Net interest income after provision22,508  24,182  21,966  21,546  21,404  46,690  42,370 
Noninterest income6,913  7,549  9,314  7,634  8,649  14,462  16,729 
Noninterest expense18,913  21,664  18,883  17,444  16,651  40,577  33,436 
Income before income taxes10,508  10,067  12,397  11,736  13,402  20,575  25,663 
Income tax expense2,270  2,195  2,833  2,580  2,951  4,465  5,581 
Net income$  8,238  $  7,872  $  9,564  $  9,156  $  10,451  $  16,110  $  20,082 
                     
Earnings per common share                    
Basic$  0.47  $  0.44  $  0.61  $  0.59  $  0.67  $  0.90  $  1.27 
Diluted0.46  0.44  0.61  0.58  0.66  0.90  1.27 
Cash dividends per common share                    
Regular0.25  0.25  0.25  0.25  0.25  0.50  0.46 
Weighted average shares outstanding                    
Basic17,701,853  17,998,994  15,611,093  15,603,992  15,712,204  17,850,423  15,775,462 
Diluted17,728,300  18,050,071  15,670,047  15,664,587  15,775,320  17,888,325  15,847,498 
Performance ratios                    
Return on average assets1.15% 1.16% 1.71% 1.65% 1.89% 1.15% 1.82%
Return on average common equity7.97% 7.49% 11.08% 10.80% 12.57% 7.73% 12.17%
Return on average tangible common equity(1)11.91% 11.12% 15.33% 15.19% 17.57% 11.51% 17.04%
                     
                     
(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, 
   2020 2020 2019 2019 2019 2020 2019
(Amounts in thousands, except per share data)                    
Net income$  8,238  $  7,872  $  9,564  $  9,156  $  10,451  $  16,110  $  20,082 
Adjustments:                    
Net (gain) loss on sale of securities-  (385) -  -  43  (385) 43 
Merger, acquisition, and divestiture expense-  1,893  1,532  592  -  1,893  - 
Other items(1)-  -  (2,395) (900) (2,025) -  (3,700)
Total adjustments-  1,508  (863) (308) (1,982) 1,508  (3,657)
Tax effect-  354  (331) (134) (550) 354  (878)
Adjusted earnings, non-GAAP$  8,238  $  9,026  $  9,032  $  8,982  $  9,019  $  17,264  $  17,303 
                     
Adjusted diluted earnings per common share,                    
non-GAAP$  0.46  $  0.50  $  0.58  $  0.57  $  0.57  $  0.97  $  1.09 
Performance ratios, non-GAAP                    
Adjusted return on average assets1.15% 1.33% 1.61% 1.62% 1.63% 1.24% 1.57%
Adjusted return on average common equity7.97% 8.59% 10.46% 10.59% 10.84% 8.28% 10.48%
Adjusted return on average tangible                    
common equity(2)11.91% 12.75% 14.48% 14.90% 15.16% 12.33% 14.68%
                     
                     
(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 June 30,
   2020 2019
   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)$  2,129,513 $  27,040 5.11% $  1,721,392 $  22,772 5.31%
Securities available for sale103,378 839 3.26% 126,153 1,068 3.41%
Interest-bearing deposits293,791 81 0.11% 125,759 766 2.44%
Total earning assets2,526,682 27,960 4.45% 1,973,304 24,606 5.00%
Other assets356,913      248,270     
Total assets$  2,883,595      $  2,221,574     
                
Liabilities and stockholders' equity             
Interest-bearing deposits             
Demand deposits$  547,445 $  98 0.07% $  454,246 $  77 0.07%
Savings deposits707,298 240 0.14% 504,854 192 0.15%
Time deposits465,212 1,107 0.96% 429,469 1,123 1.05%
Total interest-bearing deposits1,719,955 1,445 0.34% 1,388,569 1,392 0.40%
Borrowings             
Retail repurchase agreements1,244 1 0.14% 3,024 1 0.13%
FHLB advances and other borrowings- - -  - - - 
Total borrowings1,244 1 0.32% 3,024 1 0.13%
Total interest-bearing liabilities1,721,199 1,446 0.34% 1,391,593 1,393 0.40%
Noninterest-bearing demand deposits711,174      468,782     
Other liabilities35,467      27,604     
Total liabilities2,467,840      1,887,979     
Stockholders' equity415,755      333,595     
Total liabilities and stockholders' equity$  2,883,595      $  2,221,574     
Net interest income, FTE(1)  $  26,514      $  23,213   
Net interest rate spread    4.11%     4.60%
Net interest margin, FTE(1)    4.22%     4.72%
                
                
(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 $1.50 million and $1.39 million for the three months ended June 30, 2020 and 2019, respectively.



AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited)
                
   Six Months Ended June 30,
   2020 2019
   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)$  2,105,323 $  55,145 5.27% $  1,743,141 $  45,008 5.21%
Securities available for sale119,744 1,899 3.19% 135,914 2,299 3.41%
Securities held to maturity- - -  6,140 45 1.48%
Interest-bearing deposits228,636 616 0.53% 90,423 1,104 2.46%
Total earning assets2,453,703 57,660 4.73% 1,975,618 48,456 4.95%
Other assets355,280      248,118     
Total assets$  2,808,983      $  2,223,736     
                
Liabilities and stockholders' equity             
Interest-bearing deposits             
Demand deposits$  525,024 $  188 0.07% $  450,655 $  114 0.05%
Savings deposits693,477 654 0.19% 503,075 367 0.15%
Time deposits475,149 2,429 1.03% 433,936 2,216 1.03%
Total interest-bearing deposits1,693,650 3,271 0.39% 1,387,666 2,697 0.39%
Borrowings             
Retail repurchase agreements1,346 3 0.39% 3,141 2 0.13%
Wholesale repurchase agreements- - -  7,597 119 3.16%
FHLB advances and other borrowings72 1 2.23% - - - 
Total borrowings1,418 4 0.57% 10,738 121 2.27%
Total interest-bearing liabilities1,695,068 3,275 0.39% 1,398,404 2,818 0.41%
Noninterest-bearing demand deposits655,906      464,299     
Other liabilities38,820      28,245     
Total liabilities2,389,794      1,890,948     
Stockholders' equity419,189      332,788     
Total liabilities and stockholders' equity$  2,808,983      $  2,223,736     
Net interest income, FTE(1)  $  54,385      $  45,638   
Net interest rate spread    4.34%     4.54%
Net interest margin, FTE(1)    4.46%     4.66%
                
                
(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 $3.46 million and $2.15 million for the six months ended June 30, 2020 and 2019, 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)2020 2020 2019 2019 2019 2020 2019
Noninterest income                    
Wealth management$  854  $  844  $  842  $  952  $  884  $  1,698  $  1,629 
Service charges on deposits2,560  3,731  3,702  3,785  3,699  6,291  7,107 
Other service charges and fees2,617  2,231  2,096  2,007  2,129  4,848  4,178 
Net gain (loss) on sale of securities-  385  -  -  (43) 385  (43)
Net FDIC indemnification asset amortization(483) (486) (590) (719) (516) (969) (1,068)
Other income-  -  2,395  900  2,025  -  3,700 
Other operating income1,365  844  869  709  471  2,209  1,226 
Total noninterest income$  6,913  $  7,549  $  9,314  $  7,634  $  8,649  $  14,462  $  16,729 
Noninterest expense                    
Salaries and employee benefits$  11,015  $  11,386  $  9,495  $  9,334  $  9,153  $  22,401  $  18,319 
Occupancy expense1,275  1,315  1,057  1,042  1,082  2,590  2,235 
Furniture and equipment expense1,316  1,384  1,179  1,183  1,062  2,700  2,095 
Service fees1,329  1,523  721  1,053  1,231  2,852  2,261 
Advertising and public relations475  512  478  795  513  987  1,037 
Professional fees307  233  408  375  328  540  742 
Amortization of intangibles360  361  251  251  249  721  495 
FDIC premiums and assessments33  -  -  -  150  33  318 
Merger, acquisition, and divestiture expense-  1,893  1,532  592  -  1,893  - 
Other operating expense2,803  3,057  3,762  2,819  2,883  5,860  5,934 
Total noninterest expense$  18,913  $  21,664  $  18,883  $  17,444  $  16,651  $  40,577  $  33,436 



CONDENSED CONSOLIDATED QUARTERLY BALANCE SHEETS (Unaudited)
                 
   June 30, March 31, December 31, September 30, June 30,
(Amounts in thousands, except per share data)2020 2020 2019 2019 2019
Assets              
Cash and cash equivalents$  421,492  $  241,613  $  217,009  $  182,458  $  156,478 
Debt securities available for sale98,367  107,753  169,574  115,537  119,076 
Loans held for sale-  -  263  -  - 
Loans held for investment, net of unearned income              
Noncovered2,125,560  2,084,610  2,101,599  1,679,958  1,705,408 
Covered11,257  12,115  12,861  14,158  15,520 
Allowance for loan losses(23,758) (21,137) (18,425) (18,493) (18,540)
Loans held for investment, net2,113,059  2,075,588  2,096,035  1,675,623  1,702,388 
FDIC indemnification asset1,943  2,433  2,883  3,458  4,020 
Premises and equipment, net62,658  63,319  62,824  48,521  48,262 
Other real estate owned, noncovered2,181  2,502  3,969  2,528  3,810 
Other real estate owned, covered-  -  -  -  152 
Interest receivable8,380  6,117  6,677  4,842  5,317 
Goodwill129,565  129,565  129,565  92,744  92,744 
Other intangible assets7,798  8,159  8,519  4,280  4,532 
Other assets103,623  101,912  101,529  75,056  75,248 
Total assets$  2,949,066  $  2,738,961  $  2,798,847  $  2,205,047  $  2,212,027 
                 
Liabilities              
Deposits              
Noninterest-bearing$  752,899  $  620,292  $  627,868  $  472,478  $  480,573 
Interest-bearing1,744,947  1,668,122  1,702,044  1,364,374  1,367,465 
Total deposits2,497,846  2,288,414  2,329,912  1,836,852  1,848,038 
Securities sold under agreements to repurchase1,100  1,348  1,601  1,863  3,083 
FHLB and other borrowings-  1,000  -  -  - 
Interest, taxes, and other liabilities34,290  36,593  38,515  28,969  27,220 
Total liabilities2,533,236  2,327,355  2,370,028  1,867,684  1,878,341 
                 
Stockholders' equity              
Common stock17,710  17,700  18,377  15,580  15,633 
Additional paid-in capital172,601  172,231  192,413  108,222  109,816 
Retained earnings226,627  222,814  219,535  213,866  208,618 
Accumulated other comprehensive loss(1,108) (1,139) (1,506) (305) (381)
Total stockholders' equity415,830  411,606  428,819  337,363  333,686 
Total liabilities and stockholders' equity$  2,949,066  $  2,738,961  $  2,798,847  $  2,205,047  $  2,212,027 
                 
Shares outstanding at period-end17,709,569  17,700,140  18,376,991  15,579,740  15,633,388 
Book value per common share$  23.48  $  23.25  $  23.33  $  21.65  $  21.34 
Tangible book value per common share(1)15.72  15.47  15.82  15.43  15.12 
                 
                 
(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)
                 
   June 30, March 31, December 31, September 30, June 30,
(Amounts in thousands)2020 2020 2019 2019 2019
Allowance for Loan Losses               
Beginning balance$  21,137  $  18,425  $  18,493  $  18,540  $  18,243 
Provision for loan losses charged to operations3,831  3,500  91  675  1,585 
Charge-offs(1,672) (1,194) (1,353) (964) (2,114)
Recoveries462  406  1,194  242  826 
Net charge-offs(1,210) (788) (159) (722) (1,288)
Ending balance$  23,758  $  21,137  $  18,425  $  18,493  $  18,540 
                 
Nonperforming Assets              
Non-covered nonperforming assets              
Nonaccrual loans$  24,471  $  20,263  $  16,113  $  16,701  $  16,368 
Accruing loans past due 90 days or more284  329  144  107  37 
Troubled debt restructurings ("TDRs")(1)598  623  720  668  821 
Total non-covered nonperforming loans23,353  21,215  16,977  17,476  17,226 
OREO2,181  2,502  3,969  2,528  3,810 
Total non-covered nonperforming assets$  27,534  $  23,717  $  20,946  $  20,004  $  21,036 
                 
Covered nonperforming assets              
Nonaccrual loans$  299  $  145  $  244  $  243  $  203 
Total covered nonperforming loans299  145  244  243  203 
OREO-  -  -  -  152 
Total covered nonperforming assets$  299  $  145  $  244  $  243  $  355 
                 
Additional Information              
Performing TDRs(2)$  10,822  $  8,429  $  5,855  $  5,635  $  5,676 
Total Accruing TDRs(3)11,420  9,052  6,575  6,303  6,497 
                 
Non-covered ratios              
Nonperforming loans to total loans1.19% 1.02% 0.81% 1.04% 1.01%
Nonperforming assets to total assets0.94% 0.87% 0.75% 0.91% 0.96%
Non-PCI allowance to nonperforming loans93.71% 99.63% 108.53% 105.82% 107.63%
Non-PCI allowance to total loans1.12% 1.01% 0.88% 1.10% 1.09%
Annualized net charge-offs to average loans0.23% 0.15% 0.04% 0.17% 0.30%
                 
Total ratios              
Nonperforming loans to total loans1.20% 1.02% 0.81% 1.05% 1.01%
Nonperforming assets to total assets0.94% 0.87% 0.76% 0.92% 0.97%
Allowance for loan losses to nonperforming loans92.62% 98.96% 106.99% 104.37% 106.37%
Allowance for loan losses to total loans1.11% 1.01% 0.87% 1.09% 1.08%
Annualized net charge-offs to average loans0.23% 0.15% 0.04% 0.17% 0.30%
               
               
(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.