First Community Bankshares, Inc. Announces Third Quarter Results

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 35^th 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

[phone]

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