First Community Bankshares, Inc. Announces Third Quarter Results

First Community Bankshares, Inc.
·19-min read

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.

Third Quarter 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 Ended

Nine 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