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

/EIN News/ -- 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 securities 713     918     870     857     895     1,631     1,989  
Interest on deposits in banks 82     533     663     680     766     615     1,104  
Total interest income 27,786     29,509     23,370     23,605     24,382     57,295     47,993  
Interest expense                                        
Interest on deposits 1,445     1,825     1,312     1,383     1,392     3,270     2,697  
Interest on borrowings 2     2     1     1     1     4     121  
Total interest expense 1,447     1,827     1,313     1,384     1,393     3,274     2,818  
Net interest income 26,339     27,682     22,057     22,221     22,989     54,021     45,175  
Provision for loan losses 3,831     3,500     91     675     1,585     7,331     2,805  
Net interest income after provision 22,508     24,182     21,966     21,546     21,404     46,690     42,370  
Noninterest income 6,913     7,549     9,314     7,634     8,649     14,462     16,729  
Noninterest expense 18,913     21,664     18,883     17,444     16,651     40,577     33,436  
Income before income taxes 10,508     10,067     12,397     11,736     13,402     20,575     25,663  
Income tax expense 2,270     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  
Diluted 0.46     0.44     0.61     0.58     0.66     0.90     1.27  
Cash dividends per common share                                        
Regular 0.25     0.25     0.25     0.25     0.25     0.50     0.46  
Weighted average shares outstanding                                        
Basic 17,701,853     17,998,994     15,611,093     15,603,992     15,712,204     17,850,423     15,775,462  
Diluted 17,728,300     18,050,071     15,670,047     15,664,587     15,775,320     17,888,325     15,847,498  
Performance ratios                                        
Return on average assets 1.15 %   1.16 %   1.71 %   1.65 %   1.89 %   1.15 %   1.82 %
Return on average common equity 7.97 %   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 assets 1.15 %   1.33 %   1.61 %   1.62 %   1.63 %   1.24 %   1.57 %
Adjusted return on average common equity 7.97 %   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 sale 103,378   839   3.26 %   126,153   1,068   3.41 %
Interest-bearing deposits 293,791   81   0.11 %   125,759   766   2.44 %
Total earning assets 2,526,682   27,960   4.45 %   1,973,304   24,606   5.00 %
Other assets 356,913             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 deposits 707,298   240   0.14 %   504,854   192   0.15 %
Time deposits 465,212   1,107   0.96 %   429,469   1,123   1.05 %
Total interest-bearing deposits 1,719,955   1,445   0.34 %   1,388,569   1,392   0.40 %
Borrowings                          
Retail repurchase agreements 1,244   1   0.14 %   3,024   1   0.13 %
FHLB advances and other borrowings -   -   -     -   -   -  
Total borrowings 1,244   1   0.32 %   3,024   1   0.13 %
Total interest-bearing liabilities 1,721,199   1,446   0.34 %   1,391,593   1,393   0.40 %
Noninterest-bearing demand deposits 711,174             468,782          
Other liabilities 35,467             27,604          
Total liabilities 2,467,840             1,887,979          
Stockholders' equity 415,755             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 sale 119,744   1,899   3.19 %   135,914   2,299   3.41 %
Securities held to maturity -   -   -     6,140   45   1.48 %
Interest-bearing deposits 228,636   616   0.53 %   90,423   1,104   2.46 %
Total earning assets 2,453,703   57,660   4.73 %   1,975,618   48,456   4.95 %
Other assets 355,280             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 deposits 693,477   654   0.19 %   503,075   367   0.15 %
Time deposits 475,149   2,429   1.03 %   433,936   2,216   1.03 %
Total interest-bearing deposits 1,693,650   3,271   0.39 %   1,387,666   2,697   0.39 %
Borrowings                          
Retail repurchase agreements 1,346   3   0.39 %   3,141   2   0.13 %
Wholesale repurchase agreements -   -   -     7,597   119   3.16 %
FHLB advances and other borrowings 72   1   2.23 %   -   -   -  
Total borrowings 1,418   4   0.57 %   10,738   121   2.27 %
Total interest-bearing liabilities 1,695,068   3,275   0.39 %   1,398,404   2,818   0.41 %
Noninterest-bearing demand deposits 655,906             464,299          
Other liabilities 38,820             28,245          
Total liabilities 2,389,794             1,890,948          
Stockholders' equity 419,189             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 deposits 2,560     3,731     3,702     3,785     3,699     6,291     7,107  
Other service charges and fees 2,617     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 income 1,365     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 expense 1,275     1,315     1,057     1,042     1,082     2,590     2,235  
Furniture and equipment expense 1,316     1,384     1,179     1,183     1,062     2,700     2,095  
Service fees 1,329     1,523     721     1,053     1,231     2,852     2,261  
Advertising and public relations 475     512     478     795     513     987     1,037  
Professional fees 307     233     408     375     328     540     742  
Amortization of intangibles 360     361     251     251     249     721     495  
FDIC premiums and assessments 33     -     -     -     150     33     318  
Merger, acquisition, and divestiture expense -     1,893     1,532     592     -     1,893     -  
Other operating expense 2,803     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 sale 98,367     107,753     169,574     115,537     119,076  
Loans held for sale -     -     263     -     -  
Loans held for investment, net of unearned income                            
Noncovered 2,125,560     2,084,610     2,101,599     1,679,958     1,705,408  
Covered 11,257     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, net 2,113,059     2,075,588     2,096,035     1,675,623     1,702,388  
FDIC indemnification asset 1,943     2,433     2,883     3,458     4,020  
Premises and equipment, net 62,658     63,319     62,824     48,521     48,262  
Other real estate owned, noncovered 2,181     2,502     3,969     2,528     3,810  
Other real estate owned, covered -     -     -     -     152  
Interest receivable 8,380     6,117     6,677     4,842     5,317  
Goodwill 129,565     129,565     129,565     92,744     92,744  
Other intangible assets 7,798     8,159     8,519     4,280     4,532  
Other assets 103,623     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-bearing 1,744,947     1,668,122     1,702,044     1,364,374     1,367,465  
Total deposits 2,497,846     2,288,414     2,329,912     1,836,852     1,848,038  
Securities sold under agreements to repurchase 1,100     1,348     1,601     1,863     3,083  
FHLB and other borrowings -     1,000     -     -     -  
Interest, taxes, and other liabilities 34,290     36,593     38,515     28,969     27,220  
Total liabilities 2,533,236     2,327,355     2,370,028     1,867,684     1,878,341  
                                 
Stockholders' equity                            
Common stock 17,710     17,700     18,377     15,580     15,633  
Additional paid-in capital 172,601     172,231     192,413     108,222     109,816  
Retained earnings 226,627     222,814     219,535     213,866     208,618  
Accumulated other comprehensive loss (1,108 )   (1,139 )   (1,506 )   (305 )   (381 )
Total stockholders' equity 415,830     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-end 17,709,569     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 operations 3,831     3,500     91     675     1,585  
Charge-offs (1,672 )   (1,194 )   (1,353 )   (964 )   (2,114 )
Recoveries 462     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 more 284     329     144     107     37  
Troubled debt restructurings ("TDRs")(1) 598     623     720     668     821  
Total non-covered nonperforming loans 23,353     21,215     16,977     17,476     17,226  
OREO 2,181     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 loans 299     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 loans 1.19 %   1.02 %   0.81 %   1.04 %   1.01 %
Nonperforming assets to total assets 0.94 %   0.87 %   0.75 %   0.91 %   0.96 %
Non-PCI allowance to nonperforming loans 93.71 %   99.63 %   108.53 %   105.82 %   107.63 %
Non-PCI allowance to total loans 1.12 %   1.01 %   0.88 %   1.10 %   1.09 %
Annualized net charge-offs to average loans 0.23 %   0.15 %   0.04 %   0.17 %   0.30 %
                                 
Total ratios                            
Nonperforming loans to total loans 1.20 %   1.02 %   0.81 %   1.05 %   1.01 %
Nonperforming assets to total assets 0.94 %   0.87 %   0.76 %   0.92 %   0.97 %
Allowance for loan losses to nonperforming loans 92.62 %   98.96 %   106.99 %   104.37 %   106.37 %
Allowance for loan losses to total loans 1.11 %   1.01 %   0.87 %   1.09 %   1.08 %
Annualized net charge-offs to average loans 0.23 %   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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