ex_160644.htm

EX-99.1 2 ex_160644.htm EXHIBIT 99.1 ex_160644.htm

Exhibit 99.1



NEWS RELEASE
FOR IMMEDIATE RELEASE:		FOR MORE INFORMATION, CONTACT:
October 22, 2019		David D. Brown
		(276) 326-9000

First Community Bankshares, Inc. Announces Third Quarter 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 ended September 30, 2019. The Company reported net income of $9.16 million, or $0.58 per diluted common share, for the quarter ended September 30, 2019, which was an increase of $0.03, or 5.45%, over the same quarter of 2018.

The Company also announced today that the Board of Directors declared a quarterly cash dividend to common shareholders of twenty-five cents ($0.25) per common share, an increase of four cents ($0.04), or 19.05%, over last year’s fourth quarter dividend. The quarterly dividend is payable to common shareholders of record on November 1, 2019, and is expected to be paid on or about November 15, 2019. The current year marks the 34^th consecutive year of regular cash dividends paid to shareholders.

Third Quarter 2019 Highlights

●	General

	o	On September 11, 2019, the Company announced the pending acquisition of Highlands Bankshares, Inc., headquartered in Abingdon, Virginia, with total assets of approximately $612 million. Upon completion of the transaction, the Company is expected to have total consolidated assets in excess of $2.8 billion.
	o	The Company declared a quarterly cash dividend to common shareholders of twenty-five cents ($0.25) per common share, an increase of four cents ($0.04) over last year.

The Company incurred $592 thousand in merger expenses related to the Highlands Bankshares, Inc. acquisition for the third quarter.

The Company received $900 thousand from litigation settlements during the third quarter. Year to date, the Company has received $4.60 million.

●	Income Statement

Diluted earnings per share increased $0.03 to $0.58 compared to the same quarter of 2018, an increase of 5.45%.

Compared to the same quarter last year, return on average assets for the quarter increased 0.10% to 1.65% and return on average equity for the quarter increased 0.21% to 10.80%.

Net interest margin increased 24 basis points to 4.56% compared to the same quarter of 2018.

●	Balance Sheet

Book value per common share increased $0.86 to $21.65, and tangible book value per common share increased $0.74 to a record $15.43, compared to December 31, 2018.

The Company repurchased 60,500 common shares for $2.00 million during the quarter. Year to date, the Company has repurchased 487,400 common shares for $16.36 million.

The Company and its subsidiary bank both significantly exceed regulatory “well capitalized” targets as of September 30, 2019.

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 44 branch banking locations in Virginia, West Virginia, North Carolina, and Tennessee as of September 30, 2019. First Community Bank offers wealth management and investment advice through its Trust Division and First Community Wealth Management, which collectively managed and administered $1.08 billion in combined assets as of September 30, 2019. The Company reported consolidated assets of $2.21 billion as of September 30, 2019. 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															Nine Months Ended
(Amounts in thousands, except share	September 30,			June 30,			March 31,			December 31,			September 30,			September 30,
and per share data)	2019			2019			2019			2018			2018			2019			2018
Interest income
Interest and fees on loans	$	22,068		$	22,721		$	22,179		$	23,938		$	22,556		$	66,968		$	67,733
Interest on securities		857			895			1,094			1,249			1,372			2,846			3,837
Interest on deposits in banks		680			766			338			194			358			1,784			1,343
Total interest income		23,605			24,382			23,611			25,381			24,286			71,598			72,913
Interest expense
Interest on deposits		1,383			1,392			1,305			1,297			1,269			4,080			3,847
Interest on borrowings		1			1			120			205			692			122			2,100
Total interest expense		1,384			1,393			1,425			1,502			1,961			4,202			5,947
Net interest income		22,221			22,989			22,186			23,879			22,325			67,396			66,966
Provision for loan losses		675			1,585			1,220			908			495			3,480			1,485
Net interest income after provision		21,546			21,404			20,966			22,971			21,830			63,916			65,481
Noninterest income		7,634			8,649			8,080			6,297			6,519			24,363			20,146
Noninterest expense		17,444			16,651			16,785			17,366			18,131			50,880			52,407
Income before income taxes		11,736			13,402			12,261			11,902			10,218			37,399			33,220
Income tax expense		2,580			2,951			2,630			2,596			1,118			8,161			6,186
Net income	$	9,156		$	10,451		$	9,631		$	9,306		$	9,100		$	29,238		$	27,034

Earnings per common share
Basic	$	0.59		$	0.67		$	0.61		$	0.57		$	0.55		$	1.86		$	1.62
Diluted		0.58			0.66			0.60			0.57			0.55			1.85			1.61
Cash dividends per common share
Regular		0.25			0.25			0.21			0.21			0.21			0.71			1.05
Weighted average shares outstanding
Basic		15,603,992			15,712,204			15,839,424			16,201,148			16,512,823			15,717,678			16,717,704
Diluted		15,664,587			15,775,320			15,920,950			16,280,404			16,612,416			15,785,484			16,810,425
Performance ratios
Return on average assets		1.65	%		1.89	%		1.75	%		1.63	%		1.55	%		1.76	%		1.53	%
Return on average common equity		10.80	%		12.57	%		11.77	%		11.01	%		10.59	%		11.70	%		10.52	%
Return on average tangible common equity⁽¹⁾		15.19	%		17.57	%		16.66	%		15.58	%		15.06	%		16.52	%		14.93	%

(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,
(Amounts in thousands, except per	2019			2019			2019			2018			2018			2019			2018
share data)
Net income	$	9,156		$	10,451		$	9,631		$	9,306		$	9,100		$	29,238		$	27,034
Non-GAAP adjustments:
Net loss on sale of securities		-			43			-			-			618			43			618
Loss on extinguishment of debt		-			-			-			-			1,096			-			1,096
Goodwill impairment		-			-			-			-			1,492			-			1,492
Deferred tax asset revaluation		-			-			-			-			(1,669	)		-			(1,669	)
Merger, acquisition, and divestiture expense		592			-			-			-			-			592			-
Other items⁽¹⁾		(900	)		(2,025	)		(1,675	)		254			-			(4,600	)		167
Total adjustments		(308	)		(1,982	)		(1,675	)		254			1,537			(3,965	)		1,704
Tax effect		(134	)		(550	)		(328	)		61			411			(1,012	)		483
Adjusted earnings, non-GAAP	$	8,982		$	9,019		$	8,284		$	9,499		$	10,226		$	26,285		$	28,255

Adjusted diluted earnings per common share, non-GAAP	$	0.57		$	0.57		$	0.52		$	0.58		$	0.62		$	1.67		$	1.68
Performance ratios, non-GAAP
Adjusted return on average assets		1.62	%		1.63	%		1.51	%		1.67	%		1.74	%		1.59	%		1.60	%
Adjusted return on average common equity		10.59	%		10.84	%		10.12	%		11.23	%		11.90	%		10.52	%		11.00	%
Adjusted return on average tangible common equity⁽²⁾		14.90	%		15.16	%		14.33	%		15.90	%		16.93	%		14.85	%		15.61	%

(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 September 30,
	2019							2018
	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⁾	$	1,706,936	$	22,106		5.14	%	$	1,792,284	$	22,594		5.00	%
Securities available for sale		118,450		1,015		3.40	%		188,975		1,455		3.06	%
Securities held to maturity		-		-		-			25,064		104		1.65	%
Interest-bearing deposits		122,891		680		2.20	%		66,137		358		2.15	%
Total earning assets		1,948,277		23,801		4.85	%		2,072,460		24,511		4.69	%
Other assets		250,142							253,199
Total assets	$	2,198,419						$	2,325,659

Liabilities and stockholders' equity
Interest-bearing deposits
Demand deposits	$	450,650	$	78		0.07	%	$	459,759	$	39		0.03	%
Savings deposits		500,600		222		0.18	%		502,255		85		0.06	%
Time deposits		413,012		1,083		1.04	%		463,885		1,145		0.98	%
Total interest-bearing deposits		1,364,262		1,383		0.40	%		1,425,899		1,269		0.35	%
Borrowings
Retail repurchase agreements		2,107		1		0.17	%		3,455		1		0.12	%
Wholesale repurchase agreements		-		-		-			25,000		203		3.22	%
FHLB advances and other borrowings		-		-		-			47,826		488		4.06	%
Total borrowings		2,107		1		0.17	%		76,281		692		3.60	%
Total interest-bearing liabilities		1,366,369		1,384		0.40	%		1,502,180		1,961		0.52	%
Noninterest-bearing demand deposits		466,253							454,126
Other liabilities		29,449							28,430
Total liabilities		1,862,071							1,984,736
Stockholders' equity		336,348							340,923
Total liabilities and stockholders' equity	$	2,198,419						$	2,325,659
Net interest income, FTE⁽¹⁾			$	22,417						$	22,550
Net interest rate spread						4.44	%						4.17	%
Net interest margin, FTE⁽¹⁾						4.56	%						4.32	%

(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 $566 thousand and $1.05 million for the three months ended September 30, 2019 and 2018, respectively.

AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited)

	Nine Months Ended September 30,
	2019							2018
	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⁾	$	1,730,940	$	67,114		5.18	%	$	1,797,689	$	67,842		5.05	%
Securities available for sale		130,029		3,314		3.41	%		181,630		4,091		3.01	%
Securities held to maturity		4,071		45		1.48	%		25,098		314		1.67	%
Interest-bearing deposits		101,364		1,784		2.34	%		97,623		1,343		1.84	%
Total earning assets		1,966,404		72,257		4.91	%		2,102,040		73,590		4.68	%
Other assets		248,801							252,797
Total assets	$	2,215,205						$	2,354,837

Liabilities and stockholders' equity
Interest-bearing deposits
Demand deposits	$	450,653	$	192		0.06	%	$	469,081	$	206		0.06	%
Savings deposits		502,241		589		0.16	%		512,897		250		0.07	%
Time deposits		426,885		3,299		1.03	%		478,265		3,391		0.95	%
Total interest-bearing deposits		1,379,779		4,080		0.40	%		1,460,243		3,847		0.35	%
Borrowings
Retail repurchase agreements		2,792		3		0.13	%		3,836		3		0.10	%
Wholesale repurchase agreements		5,037		119		3.17	%		25,000		603		3.22	%
FHLB advances and other borrowings		-		-		-			49,267		1,494		4.05	%
Total borrowings		7,829		122		2.08	%		78,103		2,100		3.59	%
Total interest-bearing liabilities		1,387,608		4,202		0.40	%		1,538,346		5,947		0.52	%
Noninterest-bearing demand deposits		464,958							444,672
Other liabilities		28,651							28,257
Total liabilities		1,881,217							2,011,275
Stockholders' equity		333,988							343,562
Total liabilities and stockholders' equity	$	2,215,205						$	2,354,837
Net interest income, FTE⁽¹⁾			$	68,055						$	67,643
Net interest rate spread						4.51	%						4.16	%
Net interest margin, FTE⁽¹⁾						4.63	%						4.30	%

(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 $2.72 million and $4.26 million for the nine months ended September 30, 2019 and 2018, 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)	2019			2019			2019			2018			2018			2019			2018
Noninterest income
Wealth management	$	952		$	884		$	745		$	854		$	791		$	2,581		$	2,408
Service charges on deposits		3,785			3,699			3,408			3,850			3,803			10,892			10,883
Other service charges and fees		2,007			2,129			2,049			2,017			1,925			6,185			5,716
Insurance commissions		-			-			-			-			299			-			966
Net loss on sale of securities		-			(43	)		-			-			(618	)		(43	)		(618	)
Net FDIC indemnification asset amortization		(719	)		(516	)		(552	)		(579	)		(645	)		(1,787	)		(1,602	)
Other income		900			2,025			1,675			-			-			4,600			-
Other operating income		709			471			755			155			964			1,935			2,393
Total noninterest income	$	7,634		$	8,649		$	8,080		$	6,297		$	6,519		$	24,363		$	20,146
Noninterest expense
Salaries and employee benefits	$	9,334		$	9,153		$	9,166		$	9,273		$	8,983		$	27,653		$	27,417
Occupancy expense		1,042			1,082			1,153			1,134			1,075			3,277			3,408
Furniture and equipment expense		1,183			1,062			1,033			1,004			985			3,278			2,976
Service fees		1,466			1,231			1,030			1,047			1,134			3,727			2,813
Advertising and public relations		795			513			524			550			478			1,832			1,461
Professional fees		548			328			414			356			337			1,290			1,074
Amortization of intangibles		251			249			246			254			261			746			785
FDIC premiums and assessments		-			150			168			209			234			318			697
Loss on extinguishment of debt		-			-			-			-			1,096			-			1,096
Merger, acquisition, and divestiture expense		592			-			-			-			-			592			-
Goodwill impairment		-			-			-			-			1,492			-			1,492
Other operating expense		2,233			2,883			3,051			3,539			2,056			8,167			9,188
Total noninterest expense	$	17,444		$	16,651		$	16,785		$	17,366		$	18,131		$	50,880		$	52,407

CONDENSED CONSOLIDATED QUARTERLY BALANCE SHEETS (Unaudited)

	September 30,			June 30,			March 31,			December 31,			September 30,
(Amounts in thousands, except per share data)	2019			2019			2019			2018			2018
Assets
Cash and cash equivalents	$	182,458		$	156,478		$	148,546		$	76,873		$	73,679
Debt securities available for sale		115,537			119,076			132,597			153,116			163,593
Debt securities held to maturity		-			-			-			25,013			25,047
Loans held for investment, net of unearned income
Noncovered		1,679,958			1,705,408			1,719,905			1,756,269			1,770,426
Covered		14,158			15,520			17,475			18,815			20,483
Allowance for loan losses		(18,493	)		(18,540	)		(18,243	)		(18,267	)		(18,256	)
Loans held for investment, net		1,675,623			1,702,388			1,719,137			1,756,817			1,772,653
FDIC indemnification asset		3,458			4,020			4,578			5,108			5,653
Premises and equipment, net		48,521			48,262			46,636			45,785			45,537
Other real estate owned, noncovered		2,528			3,810			3,903			3,806			4,754
Other real estate owned, covered		-			152			152			32			44
Interest receivable		4,842			5,317			5,227			5,481			5,374
Goodwill		92,744			92,744			92,744			92,744			94,287
Other intangible assets		4,280			4,532			4,780			5,026			5,366
Other assets		75,056			75,248			84,035			74,573			73,701
Total assets	$	2,205,047		$	2,212,027		$	2,242,335		$	2,244,374		$	2,269,688

Liabilities
Deposits
Noninterest-bearing	$	472,478		$	480,573		$	479,299		$	459,550		$	463,945
Interest-bearing		1,364,374			1,367,465			1,399,138			1,396,200			1,411,906
Total deposits		1,836,852			1,848,038			1,878,437			1,855,750			1,875,851
Securities sold under agreements to repurchase		1,863			3,083			3,700			29,370			30,151
Interest, taxes, and other liabilities		28,969			27,220			27,096			26,397			25,284
Total liabilities		1,867,684			1,878,341			1,909,233			1,911,517			1,931,286

Stockholders' equity
Common stock⁽²⁾		15,580			15,633			15,818			16,007			21,382
Additional paid-in capital⁽²⁾		108,222			109,816			115,914			122,486			229,182
Retained earnings		213,866			208,618			202,103			195,793			189,902
Treasury stock, at cost⁽²⁾		-			-			-			-			(99,247	)
Accumulated other comprehensive loss		(305	)		(381	)		(733	)		(1,429	)		(2,817	)
Total stockholders' equity		337,363			333,686			333,102			332,857			338,402
Total liabilities and stockholders' equity	$	2,205,047		$	2,212,027		$	2,242,335		$	2,244,374		$	2,269,688

Shares outstanding at period-end		15,579,740			15,633,388			15,818,368			16,007,263			16,390,502
Book value per common share	$	21.65		$	21.34		$	21.06		$	20.79		$	20.65
Tangible book value per common share⁽¹⁾		15.43			15.12			14.89			14.69			14.57

(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)

	September 30,			June 30,			March 31,			December 31,			September 30,
(Amounts in thousands)	2019			2019			2019			2018			2018
Allowance for Loan Losses
Beginning balance	$	18,540		$	18,243		$	18,267		$	18,256		$	19,583
Provision for loan losses charged to operations		675			1,585			1,220			908			495
Charge-offs		(964	)		(2,114	)		(1,622	)		(1,282	)		(2,177	)
Recoveries		242			826			378			385			355
Net charge-offs		(722	)		(1,288	)		(1,244	)		(897	)		(1,822	)
Ending balance	$	18,493		$	18,540		$	18,243		$	18,267		$	18,256

Nonperforming Assets
Non-covered nonperforming assets
Nonaccrual loans	$	16,701		$	16,368		$	18,544		$	19,583		$	20,542
Accruing loans past due 90 days or more		107			37			156			58			46
Troubled debt restructurings ("TDRs")⁽¹⁾		668			821			835			161			189
Total non-covered nonperforming loans		17,476			17,226			19,535			19,802			20,777
OREO		2,528			3,810			3,903			3,806			4,754
Total non-covered nonperforming assets	$	20,004		$	21,036		$	23,438		$	23,608		$	25,531

Covered nonperforming assets
Nonaccrual loans	$	243		$	203		$	237		$	322		$	330
Total covered nonperforming loans		243			203			237			322			330
OREO		-			152			152			32			44
Total covered nonperforming assets	$	243		$	355		$	389		$	354		$	374

Additional Information
Performing TDRs⁽²⁾	$	5,635		$	5,676		$	5,654		$	6,266		$	6,953
Total Accruing TDRs⁽³⁾		6,303			6,497			6,489			6,427			7,142

Non-covered ratios
Nonperforming loans to total loans		1.04	%		1.01	%		1.14	%		1.13	%		1.17	%
Nonperforming assets to total assets		0.91	%		0.96	%		1.05	%		1.06	%		1.14	%
Non-PCI allowance to nonperforming loans		105.82	%		107.63	%		93.39	%		92.25	%		87.87	%
Non-PCI allowance to total loans		1.10	%		1.09	%		1.06	%		1.04	%		1.03	%
Annualized net charge-offs to average loans		0.17	%		0.30	%		0.29	%		0.20	%		0.41	%

Total ratios
Nonperforming loans to total loans		1.05	%		1.01	%		1.14	%		1.13	%		1.18	%
Nonperforming assets to total assets		0.92	%		0.97	%		1.06	%		1.07	%		1.14	%
Allowance for loan losses to nonperforming loans		104.37	%		106.37	%		92.27	%		90.77	%		86.49	%
Allowance for loan losses to total loans		1.09	%		1.08	%		1.05	%		1.03	%		1.02	%
Annualized net charge-offs to average loans		0.17	%		0.30	%		0.29	%		0.20	%		0.40	%

(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