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First Community Bankshares, Inc. Announces First Quarter Results

BLUEFIELD, Va., May 11, 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 March 31, 2020. The Company reported net income of $7.87 million, or $0.44 per diluted common share, for the quarter ended March 31, 2020, which was a decrease of $0.16, or 26.67%, over the same quarter of 2019. 

Additionally, the Company recently declared a quarterly cash dividend to common shareholders of twenty-five cents ($0.25) per common share.  2020 is the 35th consecutive year of regular dividends to common shareholders.

First Quarter 2020 and Current Highlights

  • Pandemic and General
    • The Company initiated social distancing practices at its branches and corporate offices on March 20, 2020, and those continue today.  Remote working environments were successfully initiated for approximately 80% of the Company’s back office workforce.
    • Implemented a pay differential for employees continuing to work at branch and back-office locations.
    • In order to aid its affected customers, the Company modified or deferred payments on 887 commercial loans totaling $254.72 million in principal balances and 1,535 retail loans totaling $72.80 million in principal balances.
    • Through May 1, 2020, the Company processed 641 loans for proceeds of $58.26 million through the SBA’s Paycheck Protection Program. 
    • The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, signed into law on March 27, 2020 to address economic disruption caused by the COVID-19 pandemic, provides financial institutions with the option to not comply with the Financial Accounting Standards Board’s Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments – Credit Losses (Topic 326) until the earlier of the end of the national emergency or the end of 2020.  The Company has chosen to not comply with ASU No. 2016-13 and its Current Expected Credit Loss methodology (“CECL”), as permitted by the CARES Act, during the national emergency.  Complying during the national emergency would impose significant and ongoing expenses on the Company and consume a significant amount of staff time when the need to process customer loan modifications and deferrals and PPP loan applications remains very high.  Management believes the incurred loss impairment methodology provides a more practical measurement of credit losses in the current economic environment.
       
  • Income Statement
    • Current year quarter earnings include a loan loss provision of $3.50 million, an increase of $2.28 million over first quarter of 2019.  The provision had the effect of increasing loan loss reserves $2.71 million during the first quarter to recognize the impact of the coronavirus slowdown.
    • Despite the significant increase in loan loss provision, return on average assets was 1.16% for the quarter.
    • Net interest margin increased 11 basis points to 4.71% compared to the same quarter of 2019, reflective of the addition of Highlands Bankshares, Inc.
    • The Company incurred $1.89 million in residual merger expenses during the quarter related to the Highlands acquisition that closed on December 31, 2019.
       
  • Balance Sheet
    • Prior to the pandemic responses, the Company completed its stock repurchase authorization with the repurchase of 734,653 shares for approximately $21.87 million.  Based on the current outlook for economic conditions, the Company has temporarily suspended further share repurchases.  As of March 31, 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 58 branch banking locations in Virginia, West Virginia, North Carolina, and Tennessee as of March 31, 2020. First Community Bank offers wealth management and investment advice through its Trust Division and First Community Wealth Management, which collectively managed and administered $1.02 billion in combined assets as of March 31, 2020. The Company reported consolidated assets of $2.74 billion as of March 31, 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  
      March 31,   December 31,
  September 30,
  June 30,   March 31,  
(Amounts in thousands, except share and per share data)   2020       2019       2019       2019       2019    
Interest income                    
  Interest and fees on loans $ 28,058     $ 21,837     $ 22,068     $ 22,721     $ 22,179    
  Interest on securities   918       870       857       895       1,094    
  Interest on deposits in banks   533       663       680       766       338    
Total interest income   29,509       23,370       23,605       24,382       23,611    
Interest expense                    
  Interest on deposits   1,825       1,312       1,383       1,392       1,305    
  Interest on borrowings   2       1       1       1       120    
Total interest expense   1,827       1,313       1,384       1,393       1,425    
Net interest income   27,682       22,057       22,221       22,989       22,186    
Provision for loan losses   3,500       91       675       1,585       1,220    
Net interest income after provision   24,182       21,966       21,546       21,404       20,966    
Noninterest income   7,549       9,314       7,634       8,649       8,080    
Noninterest expense   21,664       18,883       17,444       16,651       16,785    
Income before income taxes   10,067       12,397       11,736       13,402       12,261    
Income tax expense   2,195       2,833       2,580       2,951       2,630    
Net income $ 7,872     $ 9,564     $ 9,156     $ 10,451     $ 9,631    
                         
Earnings per common share                    
  Basic $ 0.44     $ 0.61     $ 0.59     $ 0.67     $ 0.61    
  Diluted   0.44       0.61       0.58       0.66       0.60    
Cash dividends per common share                    
  Regular   0.25       0.25       0.25       0.25       0.21    
Weighted average shares outstanding                    
  Basic   17,998,994       15,611,093       15,603,992       15,712,204       15,839,424    
  Diluted   18,050,071       15,670,047       15,664,587       15,775,320       15,920,950    
Performance ratios                    
  Return on average assets   1.16 %     1.71 %     1.65 %     1.89 %     1.75 %  
  Return on average common equity   7.49 %     11.08 %     10.80 %     12.57 %     11.77 %  
  Return on average tangible common equity(1)   11.12 %     15.33 %     15.19 %     17.57 %     16.66 %  
                         
                         
(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
      March 31,   December 31,
  September 30,
  June 30,   March 31,  
        2020       2019       2019       2019       2019    
(Amounts in thousands, except per share data)                    
Net income $ 7,872     $ 9,564     $ 9,156     $ 10,451     $ 9,631    
Non-GAAP adjustments:                    
  Net (gain) loss on sale of securities   (385 )     -       -       43       -    
  Merger, acquisition, and divestiture expense   1,893       1,532       592       -       -    
  Other items(1)   -       (2,395 )     (900 )     (2,025 )     (1,675 )  
Total adjustments   1,508       (863 )     (308 )     (1,982 )     (1,675 )  
Tax effect   354       (331 )     (134 )     (550 )     (328 )  
Adjusted earnings, non-GAAP $ 9,026     $ 9,032     $ 8,982     $ 9,019     $ 8,284    
                         
Adjusted diluted earnings per common share,                    
  non-GAAP $ 0.50     $ 0.58     $ 0.57     $ 0.57     $ 0.52    
Performance ratios, non-GAAP                    
  Adjusted return on average assets   1.33 %     1.61 %     1.62 %     1.63 %     1.51 %  
  Adjusted return on average common equity   8.59 %     10.46 %     10.59 %     10.84 %     10.12 %  
  Adjusted return on average tangible                    
    common equity(2)   12.75 %     14.48 %     14.90 %     15.16 %     14.33 %  
                         
                         
(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 March 31,  
        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) $ 2,081,132   $ 28,105   5.43 %   $ 1,765,132   $ 22,236   5.11 %  
  Securities available for sale   136,109     1,060   3.13 %     145,783     1,231   3.43 %  
  Securities held to maturity   -     -   -       12,348     45   1.48 %  
  Interest-bearing deposits   163,483     535   1.31 %     54,694     338   2.50 %  
Total earning assets   2,380,724     29,700   5.02 %     1,977,957     23,850   4.89 %  
Other assets   353,647             247,965          
Total assets $ 2,734,371           $ 2,225,922          
                             
Liabilities and stockholders' equity                        
Interest-bearing deposits                        
  Demand deposits $ 502,603   $ 90   0.07 %   $ 447,023   $ 37   0.03 %  
  Savings deposits   679,656     414   0.24 %     501,276     175   0.14 %  
  Time deposits   485,085     1,322   1.10 %     438,454     1,093   1.01 %  
Total interest-bearing deposits   1,667,344     1,826   0.44 %     1,386,753     1,305   0.38 %  
Borrowings                        
  Retail repurchase agreements   1,459     2   0.59 %     3,259     1   0.13 %  
  Wholesale repurchase agreements   -     -   -       15,278     119   3.17 %  
  FHLB advances and other borrowings     134     1   1.70 %     -     -   -    
Total borrowings   1,593     3   -       18,537     120   2.63 %  
Total interest-bearing liabilities   1,668,937     1,829   0.44 %     1,405,290     1,425   0.41 %  
Noninterest-bearing demand deposits   600,636             459,766          
Other liabilities   42,174             28,894          
Total liabilities   2,311,747             1,893,950          
Stockholders' equity   422,624             331,972          
Total liabilities and stockholders' equity $ 2,734,371           $ 2,225,922          
Net interest income, FTE(1)     $ 27,871           $ 22,425      
Net interest rate spread         4.58 %           4.48 %  
Net interest margin, FTE(1)         4.71 %           4.60 %  
                             
                             
(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 $1.95 million and $764 thousand for the three months ended March 31, 2020 and 2019, respectively.  


CONDENSED CONSOLIDATED QUARTERLY NONINTEREST INCOME AND EXPENSE (Unaudited)
                       
    Three Months Ended  
    March 31,   December 31,
  September 30,
  June 30,   March 31,  
(Amounts in thousands)   2020       2019       2019       2019       2019    
Noninterest income                    
  Wealth management $ 844     $ 842     $ 952     $ 884     $ 745    
  Service charges on deposits   3,731       3,702       3,785       3,699       3,408    
  Other service charges and fees   2,231       2,096       2,007       2,129       2,049    
  Net gain (loss) on sale of securities   385       -       -       (43 )     -    
  Net FDIC indemnification asset amortization   (486 )     (590 )     (719 )     (516 )     (552 )  
  Other income   -       2,395       900       2,025       1,675    
  Other operating income   844       869       709       471       755    
Total noninterest income $ 7,549     $ 9,314     $ 7,634     $ 8,649     $ 8,080    
Noninterest expense                    
  Salaries and employee benefits $ 11,386     $ 9,495     $ 9,334     $ 9,153     $ 9,166    
  Occupancy expense   1,315       1,057       1,042       1,082       1,153    
  Furniture and equipment expense   1,384       1,179       1,183       1,062       1,033    
  Service fees   1,523       721       1,053       1,231       1,030    
  Advertising and public relations   512       478       795       513       524    
  Professional fees   233       408       375       328       414    
  Amortization of intangibles   361       251       251       249       246    
  FDIC premiums and assessments   -       -       -       150       168    
  Merger, acquisition, and divestiture expense   1,893       1,532       592       -       -    
  Other operating expense   3,057       3,762       2,819       2,883       3,051    
Total noninterest expense $ 21,664     $ 18,883     $ 17,444     $ 16,651     $ 16,785    

 

CONDENSED CONSOLIDATED QUARTERLY BALANCE SHEETS (Unaudited)  
                         
      March 31,   December 31,
  September 30,
  June 30,   March 31,  
(Amounts in thousands, except per share data)   2020       2019       2019       2019       2019    
Assets                    
Cash and cash equivalents $ 241,613     $ 217,009     $ 182,458     $ 156,478     $ 148,546    
Debt securities available for sale   107,753       169,574       115,537       119,076       132,597    
Loans held for sale   -       263       -       -       -    
Loans held for investment, net of unearned income                  
  Noncovered   2,084,610       2,101,599       1,679,958       1,705,408       1,719,905    
  Covered   12,115       12,861       14,158       15,520       17,475    
  Allowance for loan losses   (21,137 )     (18,425 )     (18,493 )     (18,540 )     (18,243 )  
Loans held for investment, net   2,075,588       2,096,035       1,675,623       1,702,388       1,719,137    
FDIC indemnification asset   2,433       2,883       3,458       4,020       4,578    
Premises and equipment, net   63,319       62,824       48,521       48,262       46,636    
Other real estate owned, noncovered   2,502       3,969       2,528       3,810       3,903    
Other real estate owned, covered   -       -       -       152       152    
Interest receivable   6,117       6,677       4,842       5,317       5,227    
Goodwill   129,565       129,565       92,744       92,744       92,744    
Other intangible assets   8,159       8,519       4,280       4,532       4,780    
Other assets   101,912       101,529       75,056       75,248       84,035    
Total assets $ 2,738,961     $ 2,798,847     $ 2,205,047     $ 2,212,027     $ 2,242,335    
                         
Liabilities                    
Deposits                    
  Noninterest-bearing $ 620,292     $ 627,868     $ 472,478     $ 480,573     $ 479,299    
  Interest-bearing   1,668,122       1,702,044       1,364,374       1,367,465       1,399,138    
Total deposits   2,288,414       2,329,912       1,836,852       1,848,038       1,878,437    
Securities sold under agreements to repurchase   1,348       1,601       1,863       3,083       3,700    
FHLB and other borrowings   1,000       -       -       -       -    
Interest, taxes, and other liabilities   36,593       38,515       28,969       27,220       27,096    
Total liabilities   2,327,355       2,370,028       1,867,684       1,878,341       1,909,233    
                         
Stockholders' equity                    
Common stock   17,700       18,377       15,580       15,633       15,818    
Additional paid-in capital   172,231       192,413       108,222       109,816       115,914    
Retained earnings   222,814       219,535       213,866       208,618       202,103    
Accumulated other comprehensive loss   (1,139 )     (1,506 )     (305 )     (381 )     (733 )  
Total stockholders' equity   411,606       428,819       337,363       333,686       333,102    
Total liabilities and stockholders' equity $ 2,738,961     $ 2,798,847     $ 2,205,047     $ 2,212,027     $ 2,242,335    
                         
Shares outstanding at period-end   17,700,140       18,376,991       15,579,740       15,633,388       15,818,368    
Book value per common share $ 23.25     $ 23.33     $ 21.65     $ 21.34     $ 21.06    
Tangible book value per common share(1)   15.47       15.82       15.43       15.12       14.89    
                         
                         
(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)
                       
      March31,   December 31,
  September 30,
  June 30,   March 31,
(Amounts in thousands)   2020       2019       2019       2019       2019  
Allowance for Loan Losses                  
Beginning balance $ 18,425     $ 18,493     $ 18,540     $ 18,243     $ 18,267  
Provision for loan losses charged to operations   3,500       91       675       1,585       1,220  
Charge-offs   (1,194 )     (1,353 )     (964 )     (2,114 )     (1,622 )
Recoveries   406       1,194       242       826       378  
Net charge-offs   (788 )     (159 )     (722 )     (1,288 )     (1,244 )
Ending balance $ 21,137     $ 18,425     $ 18,493     $ 18,540     $ 18,243  
                       
Nonperforming Assets                  
Non-covered nonperforming assets                  
Nonaccrual loans $ 20,263     $ 16,113     $ 16,701     $ 16,368     $ 18,544  
Accruing loans past due 90 days or more   329       144       107       37       156  
Troubled debt restructurings ("TDRs")(1)   623       720       668       821       835  
Total non-covered nonperforming loans   21,215       16,977       17,476       17,226       19,535  
OREO   2,502       3,969       2,528       3,810       3,903  
Total non-covered nonperforming assets $ 23,717     $ 20,946     $ 20,004     $ 21,036     $ 23,438  
                       
Covered nonperforming assets                  
Nonaccrual loans $ 145     $ 244     $ 243     $ 203     $ 237  
Total covered nonperforming loans   145       244       243       203       237  
OREO   -       -       -       152       152  
Total covered nonperforming assets $ 145     $ 244     $ 243     $ 355     $ 389  
                       
Additional Information                  
Performing TDRs(2) $ 8,429     $ 5,855     $ 5,635     $ 5,676     $ 5,654  
Total Accruing TDRs(3)   9,052       6,575       6,303       6,497       6,489  
                       
Non-covered ratios                  
Nonperforming loans to total loans   1.02 %     0.81 %     1.04 %     1.01 %     1.14 %
Nonperforming assets to total assets   0.87 %     0.75 %     0.91 %     0.96 %     1.05 %
Non-PCI allowance to nonperforming loans   99.63 %     108.53 %     105.82 %     107.63 %     93.39 %
Non-PCI allowance to total loans   1.01 %     0.88 %     1.10 %     1.09 %     1.06 %
Annualized net charge-offs to average loans   0.15 %     0.04 %     0.17 %     0.30 %     0.29 %
                       
Total ratios                  
Nonperforming loans to total loans   1.02 %     0.81 %     1.05 %     1.01 %     1.14 %
Nonperforming assets to total assets   0.87 %     0.76 %     0.92 %     0.97 %     1.06 %
Allowance for loan losses to nonperforming loans   98.96 %     106.99 %     104.37 %     106.37 %     92.27 %
Allowance for loan losses to total loans   1.01 %     0.87 %     1.09 %     1.08 %     1.05 %
Annualized net charge-offs to average loans   0.15 %     0.04 %     0.17 %     0.30 %     0.29 %
                       
                       
(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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