First Community Bankshares, Inc. Announces Third Quarter Results

Company Release - 10/27/2020 4:30 PM ET

BLUEFIELD, Va., Oct. 27, 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 September 30, 2020. The Company reported net income of $8.27 million, or $0.47 per diluted common share, for the quarter ended September 30, 2020, which was a decrease of $0.11, or 18.97%, over the same quarter of 2019.   Net income was $24.38 million, or $1.37 per diluted common share, for the nine months ended September 30, 2020, which represents a 25.95% 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 November 6, 2020, and is expected to be paid on or about November 20, 2020. The current year is the 35th consecutive year of regular dividends to common shareholders.

ThirdQuarter 2020 and Current Highlights

  • General
  • On September 30, 2020, the Company consolidated six of its branches located mainly in eastern Tennessee. It also announced the consolidation of two locations in Abingdon, Virginia.
  • The Company booked $113.98 million of new residential mortgage loans during the third quarter and the pipeline remains strong at $61.70 million at October 19, 2020.
  • In order to aid its affected customers, the Company has modified or deferred payments on 1,314 commercial loans totaling $330.69 million in principal balances and 2,048 consumer mortgage and installment loans totaling $95.76 million in principal balances. As of September 30, 2020, current commercial and consumer loan deferrals stand at $102.54 million and $13.09 million, respectively. Included in those deferral totals are re-deferrals of commercial loans with principal balances totaling approximately $69.32 million and consumer mortgage and installment loans with principal balances totaling approximately $5.09 million.
  • Through September 30, 2020, the Company processed 803 loans with original principal balances totaling $62.74 million through the SBA’s Paycheck Protection Program.
  • Income Statement
  • Third quarter earnings reflect a loan loss provision of $4.70 million, an increase of $4.03 million over third quarter of 2019, further recognizing the economic uncertainty caused by the coronavirus pandemic. 
  • Despite the significant increase in loan loss provision, return on average assets remained strong at 1.11% for the third quarter and 1.14% for the nine-month period.  
  • Net interest margin decreased 46 basis points to 4.10% compared to the same quarter of 2019. Net interest margin decreased 30 basis points to 4.33% for the first nine months compared to the same period of 2019. Both period decreases are reflective of the current historic low interest rate environment.
  • Service charges on deposit have increased since the second quarter of 2020 as pandemic shutdowns and stay-at-home orders were relaxed during the summer. 
  • Balance Sheet
  • Interest-free deposits grew $122.41 million during 2020, and total deposits grew $162.33 million, or 6.97%, during 2020.
  • Book value per share at September 30, 2020, was $23.70, an increase of $0.37 during the year.
  • As of September 30, 2020, the Company continues to significantly exceed regulatory “well capitalized” targets, as well as all capital targets of its capital management plan.

Non-GAAP Financial Measures

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

About First Community Bankshares, Inc.

First Community Bankshares, Inc., a financial holding company headquartered in Bluefield, Virginia, provides banking products and services through its wholly owned subsidiary First Community Bank. First Community Bank operated 52 branch banking locations in Virginia, West Virginia, North Carolina, and Tennessee as of September 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 $1.13 billion in combined assets as of September 30, 2020. The Company reported consolidated assets of $2.95 billion as of September 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.

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


CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
                
   Three Months Ended Nine Months Ended
   September 30, June 30, March 31, December 31, September 30,September 30,
(Amounts in thousands, except share and per share data) 2020   2020   2020   2019   2019   2020   2019 
Interest income             
 Interest and fees on loans$27,297  $26,991  $28,058  $21,837  $22,068  $82,346  $66,968 
 Interest on securities 609   713   918   870   857   2,240   2,846 
 Interest on deposits in banks 89   82   533   663   680   704   1,784 
Total interest income 27,995   27,786   29,509   23,370   23,605   85,290   71,598 
Interest expense             
 Interest on deposits 1,161   1,445   1,825   1,312   1,383   4,431   4,080 
 Interest on borrowings -   2   2   1   1   4   122 
Total interest expense 1,161   1,447   1,827   1,313   1,384   4,435   4,202 
Net interest income 26,834   26,339   27,682   22,057   22,221   80,855   67,396 
Provision for loan losses 4,703   3,831   3,500   91   675   12,034   3,480 
Net interest income after provision 22,131   22,508   24,182   21,966   21,546   68,821   63,916 
Noninterest income 7,638   6,913   7,549   9,314   7,634   22,100   24,363 
Noninterest expense 19,171   18,913   21,664   18,883   17,444   59,748   50,880 
Income before income taxes 10,598   10,508   10,067   12,397   11,736   31,173   37,399 
Income tax expense 2,332   2,270   2,195   2,833   2,580   6,797   8,161 
Net income$8,266  $8,238  $7,872  $9,564  $9,156  $24,376  $29,238 
                
Earnings per common share             
 Basic$0.47  $0.47  $0.44  $0.61  $0.59  $1.37  $1.86 
 Diluted 0.47   0.46   0.44   0.61   0.58   1.37   1.85 
Cash dividends per common share 0.25   0.25   0.25   0.25   0.25   0.75   0.71 
Weighted average shares outstanding             
 Basic 17,710,283   17,701,853   17,998,994   15,611,093   15,603,992   17,803,369   15,717,678 
 Diluted 17,732,428   17,728,300   18,050,071   15,670,047   15,664,587   17,836,963   15,785,484 
Performance ratios             
 Return on average assets 1.11%  1.15%  1.16%  1.71%  1.65%  1.14%  1.76%
 Return on average common equity 7.83%  7.97%  7.49%  11.08%  10.80%  7.76%  11.70%
 Return on average tangible common equity(1) 11.62%  11.91%  11.12%  15.33%  15.19%  11.55%  16.52%
                
(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 EndedNine Months Ended
   September 30, June 30, March 31, December 31, September 30, September 30,
    2020   2020   2020   2019   2019   2020   2019 
(Amounts in thousands, except per share data)             
Net income$8,266  $8,238  $7,872  $9,564  $9,156  $24,376  $29,238 
Adjustments:             
 Net (gain) loss on sale of securities -   -   (385)  -   -   (385)  43 
 Merger, acquisition, and divestiture expense -   -   1,893   1,532   592   1,893   592 
 Other items(1) -   -   -   (2,395)  (900)  -   (4,600)
Total adjustments -   -   1,508   (863)  (308)  1,508   (3,965)
 Tax effect -   -   354   (331)  (134)  354   (1,012)
Adjusted earnings, non-GAAP$8,266  $8,238  $9,026  $9,032  $8,982  $25,530  $26,285 
                
Adjusted diluted earnings per common share,             
 non-GAAP$0.47  $0.46  $0.50  $0.58  $0.57  $1.43  $1.67 
Performance ratios, non-GAAP             
 Adjusted return on average assets 1.11%  1.15%  1.33%  1.61%  1.62%  1.19%  1.59%
 Adjusted return on average common equity 7.83%  7.97%  8.59%  10.46%  10.59%  8.13%  10.52%
 Adjusted return on average tangible             
  common equity(2) 11.62%  11.91%  12.75%  14.48%  14.90%  12.09%  14.85%
                
(1) Includes other non-recurring income and expense items primarily related to income from litigation settlements.
(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 September 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)$2,171,023 $27,331 5.01% $1,706,936$22,106 5.14%
Securities available for sale 93,263  720 3.07%  118,450  1,015 3.40%
Interest-bearing deposits 352,144  90 0.10%  122,891  680 2.20%
Total earning assets 2,616,430  28,141 4.28%  1,948,277  23,801 4.85%
Other assets 344,285      250,142    
Total assets$2,960,715     $2,198,419    
             
Liabilities and stockholders' equity           
Interest-bearing deposits           
Demand deposits$580,165 $73 0.05% $450,650 $78 0.07%
Savings deposits 720,657  136 0.08%  500,600  222 0.18%
Time deposits 448,275  951 0.84%  413,012  1,083 1.04%
Total interest-bearing deposits 1,749,097  1,160 0.26%  1,364,262  1,383 0.40%
Borrowings           
Retail repurchase agreements 969  1 0.14%  2,107  1 0.17%
FHLB advances and other borrowings  -  - -   -  - - 
Total borrowings 969  1 0.14%  2,107  1 0.17%
Total interest-bearing liabilities 1,750,066  1,161 0.26%  1,366,369  1,384 0.40%
Noninterest-bearing demand deposits 754,147      466,253    
Other liabilities 36,379      29,449    
Total liabilities 2,540,592      1,862,071    
Stockholders' equity 420,123      336,348    
Total liabilities and stockholders' equity$2,960,715     $2,198,419    
Net interest income, FTE(1)  $26,980     $22,417  
Net interest rate spread    4.02%     4.44%
Net interest margin, FTE(1)    4.10%     4.56%
             
(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 $1.77 million and $566 thousand for the three months ended September 30, 2020 and 2019, respectively.


AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited)
              
   Nine Months Ended September 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)$2,127,383 $82,476 5.18% $1,730,940$67,114 5.18%
 Securities available for sale 110,852  2,619 3.16%  130,029  3,314 3.41%
 Securities held to maturity -  - -   4,071  45 1.48%
 Interest-bearing deposits 270,106  706 0.34%  101,364  1,784 2.34%
Total earning assets 2,508,341  85,801 4.57%  1,966,404  72,257 4.91%
Other assets 351,589      248,801    
Total assets$2,859,930     $2,215,205    
              
Liabilities and stockholders' equity           
Interest-bearing deposits           
 Demand deposits$543,539 $261 0.06% $450,653 $192 0.06%
 Savings deposits 702,604  790 0.15%  502,241  589 0.16%
 Time deposits 466,126  3,380 0.97%  426,885  3,299 1.03%
Total interest-bearing deposits 1,712,269  4,431 0.35%  1,379,779  4,080 0.40%
Borrowings           
 Retail repurchase agreements 1,218  3 0.32%  2,792  3 0.13%
 Wholesale repurchase agreements -  - -   5,037  119 3.17%
 FHLB advances and other borrowings  48  1 2.23%  -  - - 
Total borrowings 1,266  4 0.42%  7,829  122 2.08%
Total interest-bearing liabilities 1,713,535  4,435 0.35%  1,387,608  4,202 0.40%
Noninterest-bearing demand deposits 688,891      464,958    
Other liabilities 38,001      28,651    
Total liabilities 2,440,427      1,881,217    
Stockholders' equity 419,503      333,988    
Total liabilities and stockholders' equity$2,859,930     $2,215,205    
Net interest income, FTE(1)  $81,366     $68,055  
Net interest rate spread    4.22%     4.51%
Net interest margin, FTE(1)    4.33%     4.63%
              
(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 $5.22 million and $2.72 million for the nine months ended September 30, 2020 and 2019, respectively.


CONDENSED CONSOLIDATED QUARTERLY NONINTEREST INCOME AND EXPENSE (Unaudited)
               
  Three Months Ended Nine Months Ended
  September 30,June 30, March 31, December 31,September 30,September 30,
(Amounts in thousands) 2020   2020   2020   2019   2019   2020   2019 
Noninterest income             
 Wealth management$909  $854  $844  $842  $952  $2,607  $2,581 
 Service charges on deposits 3,250   2,560   3,731   3,702   3,785   9,541   10,892 
 Other service charges and fees 2,748   2,617   2,231   2,096   2,007   7,596   6,185 
 Net gain (loss) on sale of securities -   -   385   -   -   385   (43)
 Net FDIC indemnification asset amortization (383)  (483)  (486)  (590)  (719)  (1,352)  (1,787)
 Other income -   -   -   2,395   900   -   4,600 
 Other operating income 1,114   1,365   844   869   709   3,323   1,935 
Total noninterest income$7,638  $6,913  $7,549  $9,314  $7,634  $22,100  $24,363 
Noninterest expense             
 Salaries and employee benefits$10,485  $11,015  $11,386  $9,495  $9,334  $32,886  $27,653 
 Occupancy expense 1,228   1,275   1,315   1,057   1,042   3,818   3,277 
 Furniture and equipment expense 1,412   1,316   1,384   1,179   1,183   4,112   3,278 
 Service fees 1,581   1,329   1,523   721   1,053   4,433   3,727 
 Advertising and public relations 430   475   512   478   795   1,417   1,832 
 Professional fees 408   307   233   408   375   948   1,290 
 Amortization of intangibles 365   360   361   251   251   1,086   746 
 FDIC premiums and assessments 191   33   -   -   -   224   318 
 Merger, acquisition, and divestiture expense -   -   1,893   1,532   592   1,893   592 
 Other operating expense 3,071   2,803   3,057   3,762   2,819   8,931   8,167 
Total noninterest expense$19,171  $18,913  $21,664  $18,883  $17,444  $59,748  $50,880 
               


CONDENSED CONSOLIDATED QUARTERLY BALANCE SHEETS (Unaudited)
            
   September 30,June 30, March 31, December 31,September 30,
(Amounts in thousands, except per share data) 2020   2020   2020   2019   2019 
Assets         
Cash and cash equivalents$375,664  $421,492  $241,613  $217,009  $182,458 
Debt securities available for sale 90,972   98,367   107,753   169,574   115,537 
Loans held for sale -   -   -   263   - 
Loans held for investment, net of unearned income        
 Noncovered 2,184,251   2,125,560   2,084,610   2,101,599   1,679,958 
 Covered 10,744   11,257   12,115   12,861   14,158 
 Allowance for loan losses (27,277)  (23,758)  (21,137)  (18,425)  (18,493)
Loans held for investment, net 2,167,718   2,113,059   2,075,588   2,096,035   1,675,623 
FDIC indemnification asset 1,598   1,943   2,433   2,883   3,458 
Premises and equipment, net 60,488   62,658   63,319   62,824   48,521 
Other real estate owned, noncovered 2,103   2,181   2,502   3,969   2,528 
Interest receivable 9,151   8,380   6,117   6,677   4,842 
Goodwill 129,565   129,565   129,565   129,565   92,744 
Other intangible assets 7,433   7,798   8,159   8,519   4,280 
Other assets 103,236   103,623   101,912   101,529   75,056 
Total assets$2,947,928  $2,949,066  $2,738,961  $2,798,847  $2,205,047 
            
Liabilities         
Deposits         
 Noninterest-bearing$750,277  $752,899  $620,292  $627,868  $472,478 
 Interest-bearing 1,741,962   1,744,947   1,668,122   1,702,044   1,364,374 
Total deposits 2,492,239   2,497,846   2,288,414   2,329,912   1,836,852 
Securities sold under agreements to repurchase 956   1,100   1,348   1,601   1,863 
FHLB and other borrowings -   -   1,000   -   - 
Interest, taxes, and other liabilities 34,816   34,290   36,593   38,515   28,969 
Total liabilities 2,528,011   2,533,236   2,327,355   2,370,028   1,867,684 
            
Stockholders' equity         
Common stock 17,717   17,710   17,700   18,377   15,580 
Additional paid-in capital 172,980   172,601   172,231   192,413   108,222 
Retained earnings 230,464   226,627   222,814   219,535   213,866 
Accumulated other comprehensive loss (1,244)  (1,108)  (1,139)  (1,506)  (305)
Total stockholders' equity 419,917   415,830   411,606   428,819   337,363 
Total liabilities and stockholders' equity$2,947,928  $2,949,066  $2,738,961  $2,798,847  $2,205,047 
            
Shares outstanding at period-end 17,716,522   17,709,569   17,700,140   18,376,991   15,579,740 
Book value per common share$23.70  $23.48  $23.25  $23.33  $21.65 
Tangible book value per common share(1) 15.97   15.72   15.47   15.82   15.43 
            
(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)
            
   September 30,June 30, March31, December 31,September 30,
(Amounts in thousands) 2020   2020   2020   2019   2019 
Allowance for Loan Losses          
Beginning balance$23,758  $21,137  $18,425  $18,493  $18,540 
Provision for loan losses charged to operations 4,703   3,831   3,500   91   675 
Charge-offs (1,563)  (1,672)  (1,194)  (1,353)  (964)
Recoveries 379   462   406   1,194   242 
Net charge-offs (1,184)  (1,210)  (788)  (159)  (722)
Ending balance$27,277  $23,758  $21,137  $18,425  $18,493 
            
Nonperforming Assets         
Non-covered nonperforming assets         
Nonaccrual loans$24,423  $24,471  $20,263  $16,113  $16,701 
Accruing loans past due 90 days or more 43   284   329   144   107 
Troubled debt restructurings ("TDRs")(1) 456   598   623   720   668 
Total non-covered nonperforming loans 24,922   25,353   21,215   16,977   17,476 
OREO 2,103   2,181   2,502   3,969   2,528 
Total non-covered nonperforming assets$27,025  $27,534  $23,717  $20,946  $20,004 
            
Covered nonperforming assets         
Nonaccrual loans$333  $299  $145  $244  $243 
Total covered nonperforming loans 333   299   145   244   243 
OREO -   -   -   -   - 
Total covered nonperforming assets$333  $299  $145  $244  $243 
            
Additional Information         
Performing TDRs(2)$10,480  $10,822  $8,429  $5,855  $5,635 
Total Accruing TDRs(3) 10,936   11,420   9,052   6,575   6,303 
            
Non-covered ratios         
Nonperforming loans to total loans 1.14%  1.19%  1.02%  0.81%  1.04%
Nonperforming assets to total assets 0.92%  0.94%  0.87%  0.75%  0.91%
Non-PCI allowance to nonperforming loans 109.45%  93.71%  99.63%  108.53%  105.82%
Non-PCI allowance to total loans 1.25%  1.12%  1.01%  0.88%  1.10%
Annualized net charge-offs to average loans 0.22%  0.23%  0.15%  0.04%  0.17%
            
Total ratios         
Nonperforming loans to total loans 1.15%  1.20%  1.02%  0.81%  1.05%
Nonperforming assets to total assets 0.93%  0.94%  0.87%  0.76%  0.92%
Allowance for loan losses to nonperforming loans 108.01%  92.62%  98.96%  106.99%  104.37%
Allowance for loan losses to total loans 1.24%  1.11%  1.01%  0.87%  1.09%
Annualized net charge-offs to average loans 0.22%  0.23%  0.15%  0.04%  0.17%
            
(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.