ex_133285.htm

EX-99.1 2 ex_133285.htm EXHIBIT 99.1 ex_133285.htm

Exhibit 99.1



NEWS RELEASE
FOR IMMEDIATE RELEASE:		FOR MORE INFORMATION, CONTACT:
January 23, 2019		David D. Brown
		(276) 326-9000

First Community Bankshares, Inc. Announces Record Fourth Quarter and Record Full Year Results

and Quarterly Dividend

Bluefield, Virginia – 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 and year ended December 31, 2018. The Company reported net income of $9.31 million, or $0.57 per diluted common share, for the quarter ended December 31, 2018, which was an increase of $8.09 million from the same period of 2017. The Company also reported $36.34 million, or $2.18 per diluted common share, for the year ended December 31, 2018, which was an increase of $14.86 million from 2017. The fourth quarter and full year both constitute net income records for the respective periods.

The Company also announced today that the Board of Directors declared a quarterly cash dividend to common shareholders of twenty-one cents ($0.21) per common share. The quarterly dividend is payable to common shareholders of record on February 1, 2019, and is expected to be paid on or about February 15, 2019. The current year marks the 34^th consecutive year of regular cash dividends paid to shareholders.

The Company’s capital management plan and philosophy require maintenance of a strong capital base from which to grow and serve customers. As reported in early 2018, absent other needs, the Company’s capital management plan aspires to return current earnings not needed to fund growth in core operations back to shareholders through regular cash dividends and stock repurchases. The Company earned approximately $36.34 million in 2018, from which it paid regular cash dividends of approximately $12.96 million. The Company also repurchased 1,060,312 common shares for approximately $34.41 million. Since regular dividends and stock repurchases returned all current earnings to shareholders, the Board of Directors determined not to declare a special dividend related to 2018 earnings. As of December 31, 2018, the Company continues to significantly exceed regulatory “well capitalized” targets, as well as all capital targets of its capital management plan.

Fourth Quarter 2018 Highlights

●	General

On October 1, 2018, the Company completed the sale of its remaining insurance agency assets to Bankers Insurance, LLC of Glen Allen, Virginia (“BI”) in exchange for an equity interest in BI.

On October 2, 2018, the Company completed its Plan of Reincorporation and Merger, the sole purpose of which was to change the Company’s state of incorporation from Nevada to Virginia.

●	Income Statement

Net income increased $8.09 million to $9.31 million compared to the same quarter of 2017. The large increase reflects the deferred tax asset revaluation charge taken in the fourth quarter of 2017. Non-GAAP adjusted earnings increased $1.82 million to $9.50 million compared to the same quarter of 2017.

Diluted earnings per share increased $0.50 to $0.57 compared to the same quarter of 2017. Again, the large increase reflects the deferred tax asset revaluation charge taken in the fourth quarter of 2017. Non-GAAP adjusted diluted earnings per share increased $0.13 to $0.58 compared to the same quarter of 2017.

Return on average assets (“ROAA”) for the quarter increased to 1.63%, the highest reported quarterly ROAA for the Company in 15 years. Return on average equity for the quarter increased to 11.01%.

Net interest margin increased 63 basis points to 4.80% compared to the same quarter of 2017.

●	Balance Sheet

Book value per common share increased $0.16 to $20.79, and tangible book value per common share increased $0.05 to $14.69, compared to December 31, 2017.

The Company repurchased 390,296 common shares for $13.12 million during the quarter and 1,060,312 common shares for $34.41 million during the year ended December 31, 2018.

The Company and its subsidiary bank both significantly exceed regulatory “well capitalized” targets as of December 31, 2018.

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% for periods after January 1, 2018, and 35% for periods prior to January 1, 2018. 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 44 branch banking locations in Virginia, West Virginia, North Carolina, and Tennessee as of December 31, 2018. First Community Bank offers wealth management and investment advice through its Trust Division and First Community Wealth Management, which collectively managed and administered $975 million in combined assets as of December 31, 2018. The Company reported consolidated assets of $2.24 billion as of December 31, 2018. 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															Year Ended
	December 31,			September 30,			June 30,			March 31,			December 31,			December 31,
(Amounts in thousands, except share and per share data)	2018			2018			2018			2018			2017			2018			2017
Interest income
Interest and fees on loans	$	23,938		$	22,556		$	22,422		$	22,755		$	22,314		$	91,671		$	89,749
Interest on securities		1,249			1,372			1,361			1,104			1,095			5,086			4,551
Interest on deposits in banks		194			358			514			471			353			1,537			1,008
Total interest income		25,381			24,286			24,297			24,330			23,762			98,294			95,308
Interest expense
Interest on deposits		1,297			1,269			1,327			1,251			1,313			5,144			4,987
Interest on borrowings		205			692			708			700			716			2,305			3,103
Total interest expense		1,502			1,961			2,035			1,951			2,029			7,449			8,090
Net interest income		23,879			22,325			22,262			22,379			21,733			90,845			87,218
Provision for loan losses		908			495			495			495			615			2,393			2,771
Net interest income after provision		22,971			21,830			21,767			21,884			21,118			88,452			84,447
Noninterest income		6,297			6,519			6,959			6,668			7,498			26,443			24,568
Noninterest expense		17,366			18,131			17,160			17,116			16,683			69,773			66,902
Income before income taxes		11,902			10,218			11,566			11,436			11,933			45,122			42,113
Income tax expense		2,596			1,118			2,500			2,568			10,720			8,782			20,628
Net income	$	9,306		$	9,100		$	9,066		$	8,868		$	1,213		$	36,340		$	21,485

Earnings per common share
Basic	$	0.57		$	0.55		$	0.54		$	0.52		$	0.07		$	2.19		$	1.26
Diluted		0.57			0.55			0.54			0.52			0.07			2.18			1.26
Cash dividends per common share
Regular		0.21			0.21			0.18			0.18			0.18			0.78			0.68
Special		-			-			-			0.48			-			0.48			-
Weighted average shares outstanding
Basic		16,201,148			16,512,823			16,689,398			16,955,758			16,992,519			16,587,504			17,002,116
Diluted		16,280,404			16,612,416			16,788,615			17,047,638			17,083,949			16,666,385			17,077,842
Performance ratios
Return on average assets		1.63	%		1.55	%		1.53	%		1.52	%		0.20	%		1.56	%		0.91	%
Return on average common equity		11.01	%		10.59	%		10.68	%		10.30	%		1.35	%		10.64	%		6.14	%
Return on average tangible common equity⁽¹⁾		15.58	%		15.06	%		15.21	%		14.53	%		1.89	%		15.09	%		8.69	%

(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															Year Ended
	December 31,			September 30,			June 30,			March 31,			December 31,			December 31,
	2018			2018			2018			2018			2017			2018			2017
(Amounts in thousands, except per share data)
Net income	$	9,306		$	9,100		$	9,066		$	8,868		$	1,213		$	36,340		$	21,485
Non-GAAP adjustments:
Net loss on sale of securities		-			618			-			-			4			618			661
Loss on extinguishment of debt		-			1,096			-			-			-			1,096			-
Goodwill impairment		-			1,492			-			-			-			1,492			-
Deferred tax asset revaluation		-			(1,669	)		-			-			6,552			(1,669	)		6,552
Other items⁽¹⁾		254			-			297			(130	)		(140	)		421			(298	)
Total adjustments		254			1,537			297			(130	)		6,416			1,958			6,915
Tax effect		61			411			96			(24	)		(50	)		544			301
Adjusted earnings, non-GAAP	$	9,499		$	10,226		$	9,267		$	8,762		$	7,679		$	37,754		$	28,099

Adjusted diluted earnings per common share, non-GAAP	$	0.58		$	0.62		$	0.55		$	0.51		$	0.45		$	2.27		$	1.65
Performance ratios, non-GAAP
Adjusted return on average assets		1.67	%		1.74	%		1.57	%		1.50	%		1.28	%		1.62	%		1.19	%
Adjusted return on average common equity		11.23	%		11.90	%		10.91	%		10.17	%		8.56	%		11.05	%		8.04	%
Adjusted return on average tangible common equity⁽²⁾		15.90	%		16.93	%		15.55	%		14.36	%		11.99	%		15.68	%		11.36	%

(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 December 31,
	2018							2017
	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⁾	$	1,788,570	$	24,017		5.33	%	$	1,822,583	$	22,387		4.87	%
Securities available for sale		162,330		1,518		3.71	%		171,288		1,383		3.20	%
Securities held to maturity		25,030		104		1.65	%		25,165		105		1.66	%
Interest-bearing deposits		33,736		194		2.28	%		95,174		353		1.47	%
Total earning assets		2,009,666		25,833		5.10	%		2,114,210		24,228		4.55	%
Other assets		249,056							256,591
Total assets	$	2,258,722						$	2,370,801

Liabilities and stockholders' equity
Interest-bearing deposits
Demand deposits	$	458,458	$	40		0.03	%	$	451,024	$	62		0.05	%
Savings deposits		494,868		132		0.11	%		512,156		83		0.06	%
Time deposits		450,770		1,125		0.99	%		502,515		1,168		0.92	%
Total interest-bearing deposits		1,404,096		1,297		0.37	%		1,465,695		1,313		0.36	%
Borrowings
Retail repurchase agreements		4,526		2		0.18	%		5,470		1		0.07	%
Wholesale repurchase agreements		25,000		203		3.22	%		25,000		204		3.24	%
FHLB advances and other borrowings		-		-		-			50,000		511		4.05	%
Total borrowings		29,526		205		2.75	%		80,470		716		3.53	%
Total interest-bearing liabilities		1,433,622		1,502		0.42	%		1,546,165		2,029		0.52	%
Noninterest-bearing demand deposits		461,457							446,487
Other liabilities		28,188							22,103
Total liabilities		1,923,267							2,014,755
Stockholders' equity		335,455							356,046
Total liabilities and stockholders' equity	$	2,258,722						$	2,370,801
Net interest income, FTE⁽¹⁾			$	24,331						$	22,199
Net interest rate spread						4.68	%						4.03	%
Net interest margin, FTE⁽¹⁾						4.80	%						4.17	%

(1)	Interest income and average yield/rate are presented on a FTE, non-GAAP, basis using the federal statutory income tax rate of 21% for periods after January 1, 2018, and 35% for periods prior to January 1, 2018.
(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 include non-cash purchase accounting accretion of $2.13 million and $1.16 million for the three months ended December 31, 2018 and 2017, respectively.

AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited)

	Year Ended December 31,
	2018							2017
	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⁾	$	1,795,391	$	91,971		5.12	%	$	1,837,092	$	90,032		4.90	%
Securities available for sale		176,766		6,190		3.50	%		164,489		5,695		3.46	%
Securities held to maturity		25,081		418		1.67	%		32,954		487		1.48	%
Interest-bearing deposits		81,520		1,537		1.89	%		73,405		1,008		1.37	%
Total earning assets		2,078,758		100,116		4.82	%		2,107,940		97,222		4.61	%
Other assets		251,853							262,381
Total assets	$	2,330,611						$	2,370,321

Liabilities and stockholders' equity
Interest-bearing deposits
Demand deposits	$	466,403	$	246		0.05	%	$	401,092	$	224		0.06	%
Savings deposits		508,353		382		0.08	%		520,430		336		0.06	%
Time deposits		471,335		4,516		0.96	%		510,411		4,427		0.87	%
Total interest-bearing deposits		1,446,091		5,144		0.36	%		1,431,933		4,987		0.35	%
Borrowings
Federal funds purchased		-		-		-			1		-		-
Retail repurchase agreements		4,010		5		0.12	%		47,716		32		0.07	%
Wholesale repurchase agreements		25,000		806		3.22	%		25,000		806		3.22	%
FHLB advances and other borrowings		36,849		1,494		4.05	%		55,502		2,265		4.08	%
Total borrowings		65,859		2,305		3.50	%		128,219		3,103		2.42	%
Total interest-bearing liabilities		1,511,950		7,449		0.49	%		1,560,152		8,090		0.52	%
Noninterest-bearing demand deposits		448,903							438,513
Other liabilities		28,239							21,955
Total liabilities		1,989,092							2,020,620
Stockholders' equity		341,519							349,701
Total liabilities and stockholders' equity	$	2,330,611						$	2,370,321
Net interest income, FTE⁽¹⁾			$	92,667						$	89,132
Net interest rate spread						4.33	%						4.09	%
Net interest margin, FTE⁽¹⁾						4.46	%						4.23	%

(1)	Interest income and average yield/rate are presented on a FTE, non-GAAP, basis using the federal statutory income tax rate of 21% for periods after January 1, 2018, and 35% for periods prior to January 1, 2018.
(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 include non-cash purchase accounting accretion of $6.39 million and $5.42 million for the year ended December 31, 2018 and 2017, respectively.

CONDENSED CONSOLIDATED QUARTERLY NONINTEREST INCOME AND EXPENSE (Unaudited)

	Three Months Ended															Year Ended
	December 31,			September 30,			June 30,			March 31,			December 31,			December 31,
(Amounts in thousands)	2018			2018			2018			2018			2017			2018			2017
Noninterest income
Wealth management	$	854		$	791		$	823		$	794		$	811		$	3,262		$	3,150
Service charges on deposits		3,850			3,803			3,612			3,468			3,725			14,733			13,803
Other service charges and fees		2,017			1,925			1,934			1,857			1,788			7,733			6,944
Insurance commissions		-			299			338			329			343			966			1,347
Net loss on sale of securities		-			(618	)		-			-			(4	)		(618	)		(661	)
Net FDIC indemnification asset amortization		(579	)		(645	)		(575	)		(382	)		(331	)		(2,181	)		(3,517	)
Other operating income		155			964			827			602			1,166			2,548			3,502
Total noninterest income	$	6,297		$	6,519		$	6,959		$	6,668		$	7,498		$	26,443		$	24,568
Noninterest expense
Salaries and employee benefits	$	9,273		$	8,983		$	8,993		$	9,441		$	9,003		$	36,690		$	35,774
Occupancy expense		1,134			1,075			1,083			1,250			1,104			4,542			4,775
Furniture and equipment expense		1,004			985			945			1,046			1,114			3,980			4,425
Service fees		1,047			1,134			851			828			703			3,860			3,348
Advertising and public relations		550			478			461			522			506			2,011			2,206
Professional fees		356			337			430			307			589			1,430			2,567
Amortization of intangibles		254			261			263			261			266			1,039			1,056
FDIC premiums and assessments		209			234			252			211			212			906			910
Loss on extinguishment of debt		-			1,096			-			-			-			1,096			-
Goodwill impairment		-			1,492			-			-			-			1,492			-
Other operating expense		3,539			2,056			3,882			3,250			3,186			12,727			11,841
Total noninterest expense	$	17,366		$	18,131		$	17,160		$	17,116		$	16,683		$	69,773		$	66,902

CONDENSED CONSOLIDATED QUARTERLY BALANCE SHEETS (Unaudited)

	December 31,			September 30,			June 30,			March 31,			December 31,
(Amounts in thousands, except per share data)	2018			2018			2018			2018			2017
Assets
Cash and cash equivalents	$	76,873		$	73,679		$	107,957		$	205,140		$	157,951
Debt securities available for sale		153,116			163,593			196,425			164,192			165,580
Debt securities held to maturity		25,013			25,047			25,082			25,115			25,149
Loans held for investment, net of unearned income
Noncovered		1,756,269			1,770,426			1,776,112			1,767,703			1,789,236
Covered		18,815			20,483			22,919			25,406			27,948
Allowance for loan losses		(18,267	)		(18,256	)		(19,583	)		(19,500	)		(19,276	)
Loans held for investment, net		1,756,817			1,772,653			1,779,448			1,773,609			1,797,908
FDIC indemnification asset		5,108			5,653			6,390			6,884			7,161
Premises and equipment, net		45,785			45,537			45,547			46,415			48,126
Other real estate owned, noncovered		3,806			4,754			4,805			4,620			2,409
Other real estate owned, covered		32			44			44			70			105
Interest receivable		5,481			5,374			5,580			5,155			5,778
Goodwill		92,744			94,287			95,779			95,779			95,779
Other intangible assets		5,026			5,366			5,628			5,891			6,151
Other assets		74,573			73,701			75,435			95,437			76,363
Total assets	$	2,244,374		$	2,269,688		$	2,348,120		$	2,428,307		$	2,388,460

Liabilities
Deposits
Noninterest-bearing	$	459,550		$	463,945		$	462,851		$	460,478		$	454,143
Interest-bearing		1,396,200			1,411,906			1,441,887			1,520,141			1,475,748
Total deposits		1,855,750			1,875,851			1,904,738			1,980,619			1,929,891
Securities sold under agreements to repurchase		29,370			30,151			27,869			29,115			30,086
FHLB borrowings		-			-			50,000			50,000			50,000
Interest, taxes, and other liabilities		26,397			25,284			26,392			26,536			27,769
Total liabilities		1,911,517			1,931,286			2,008,999			2,086,270			2,037,746

Stockholders' equity
Common stock⁽²⁾		16,007			21,382			21,382			21,382			21,382
Additional paid-in capital⁽²⁾		122,486			229,182			228,949			228,774			228,750
Retained earnings		195,793			189,902			184,279			178,227			180,543
Treasury stock, at cost⁽²⁾		-			(99,247	)		(92,904	)		(83,865	)		(79,121	)
Accumulated other comprehensive loss		(1,429	)		(2,817	)		(2,585	)		(2,481	)		(840	)
Total stockholders' equity		332,857			338,402			339,121			342,037			350,714
Total liabilities and stockholders' equity	$	2,244,374		$	2,269,688		$	2,348,120		$	2,428,307		$	2,388,460

Shares outstanding at period-end		16,007,263			16,390,502			16,574,347			16,847,452			16,998,226
Book value per common share	$	20.79		$	20.65		$	20.46		$	20.30		$	20.63
Tangible book value per common share⁽¹⁾		14.69			14.57			14.34			14.27			14.64

(1)	A non-GAAP financial measure defined as stockholders' equity less goodwill and other intangible assets, divided by shares outstanding
(2)	In accordance with the Company's reincorporation from Nevada to Virginia on October 2, 2018, treasury stock is not recognized.

SELECTED CREDIT QUALITY INFORMATION (Unaudited)

	December 31,			September 30,			June 30,			March 31,			December 31,
(Amounts in thousands)	2018			2018			2018			2018			2017
Allowance for Loan Losses
Beginning balance	$	18,256		$	19,583		$	19,500		$	19,276		$	19,206
Provision for loan losses charged to operations		908			495			495			495			615
Charge-offs		(1,282	)		(2,177	)		(750	)		(698	)		(967	)
Recoveries		385			355			338			427			422
Net charge-offs		(897	)		(1,822	)		(412	)		(271	)		(545	)
Ending balance	$	18,267		$	18,256		$	19,583		$	19,500		$	19,276

Nonperforming Assets
Non-covered nonperforming assets
Nonaccrual loans	$	19,583		$	20,542		$	21,467		$	21,650		$	18,997
Accruing loans past due 90 days or more		58			46			-			27			1
Troubled debt restructurings ("TDRs")⁽¹⁾		161			189			133			77			120
Total non-covered nonperforming loans		19,802			20,777			21,600			21,754			19,118
OREO		3,806			4,754			4,805			4,620			2,409
Total non-covered nonperforming assets	$	23,608		$	25,531		$	26,405		$	26,374		$	21,527

Covered nonperforming assets
Nonaccrual loans	$	322		$	330		$	509		$	596		$	342
Total covered nonperforming loans		322			330			509			596			342
OREO		32			44			44			70			105
Total covered nonperforming assets	$	354		$	374		$	553		$	666		$	447

Additional Information
Performing TDRs⁽²⁾	$	6,266		$	6,953		$	6,847		$	7,220		$	7,614
Total TDRs⁽³⁾		6,427			7,142			6,980			7,297			7,734

Non-covered ratios
Nonperforming loans to total loans		1.13	%		1.17	%		1.22	%		1.23	%		1.07	%
Nonperforming assets to total assets		1.06	%		1.14	%		1.14	%		1.10	%		0.91	%
Non-PCI allowance to nonperforming loans		92.25	%		87.87	%		90.66	%		89.64	%		100.83	%
Non-PCI allowance to total loans		1.04	%		1.03	%		1.10	%		1.10	%		1.08	%
Annualized net charge-offs to average loans		0.20	%		0.41	%		0.09	%		0.06	%		0.12	%

Total ratios
Nonperforming loans to total loans		1.13	%		1.18	%		1.23	%		1.25	%		1.07	%
Nonperforming assets to total assets		1.07	%		1.14	%		1.15	%		1.11	%		0.92	%
Allowance for loan losses to nonperforming loans		90.77	%		86.49	%		88.57	%		87.25	%		99.05	%
Allowance for loan losses to total loans		1.03	%		1.02	%		1.09	%		1.09	%		1.06	%
Annualized net charge-offs to average loans		0.20	%		0.40	%		0.09	%		0.06	%		0.12	%

(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