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