FIRST COMMUNITY BANKSHARES INC /VA/ - FORM 8-K - EX-99.1 - EXHIBIT 99.1

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8-K - FORM 8-K - FIRST COMMUNITY BANKSHARES INC /VA/	fcbc20180424_8k.htm

Exhibit 99.1


NEWS RELEASE
FOR IMMEDIATE RELEASE:		FOR MORE INFORMATION, CONTACT:
April 24, 2018		David D. Brown
		(276) 326-9000

First Community Bancshares, Inc. Announces Record First Quarter 2018 Results

and Quarterly Dividend

Bluefield, Virginia – First Community Bancshares, 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, 2018. The Company reported net income of $8.87 million, or $0.52 per diluted common share for the quarter ended March 31, 2018, which represents a 44.44% increase in per share diluted earnings compared to the same quarter of 2017.

The Company also announced today that the Board of Directors declared a quarterly cash dividend to common shareholders of eighteen cents ($0.18) per common share. The quarterly dividend is payable to common shareholders of record on May 4, 2018, and is expected to be paid on or about May 18, 2018. The current year marks the 33^rd consecutive year of regular cash dividends paid to shareholders.

First Quarter 2018 Highlights

●	Income Statement

Pre-tax income increased $2.18 million, or 23.54%, to $11.44 million compared to the same quarter of 2017.

Net income increased $2.67 million, or 42.99%, to $8.87 million compared to the same quarter of 2017.

Diluted earnings per share increased $0.16, or 44.44%, to $0.52 compared to the same quarter of 2017.

The non-GAAP efficiency ratio improved to 58.29% compared to 61.35% in the same quarter of 2017.

Net interest margin increased 21 basis points to 4.38%, and normalized net interest margin increased 8 basis points to 4.03% compared to the same quarter of 2017.

●	Balance Sheet

The Company repurchased 187,300 common shares during the quarter for $5.41 million compared to 6,800 shares during the same quarter of 2017.

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

●

Other

The Company paid a one-time special cash dividend to common shareholders of $0.48 per common share on March 23, 2018. The special dividend was in addition to the regular cash dividend of $0.18 per common share paid on February 16, 2018.

Non-GAAP Financial Measures

The Company prepares its financial statements in accordance with GAAP. This press release also refers to certain non-GAAP financial measures that the Company believes provide investors with important information, when used in conjunction with results presented in accordance with GAAP, regarding its operational performance. The Company’s non-GAAP financial measures presented in this release include core earnings, the efficiency ratio, tangible book value per common share, average tangible common equity, and normalized net interest margin. Management believes that core earnings provide the Company and investors a valuable tool to evaluate the Company’s financial results. Management believes that the efficiency ratio provides important information about the Company’s operating expense control and efficiency of operations. Management also believes this ratio focuses attention on the core operating performance of the Company over time and is highly useful in comparing period-to-period operating performance of core business operations. The efficiency ratio used by the Company may not be comparable to efficiency ratios reported by other financial institutions. The reconciliations of these measures to GAAP measures are provided within this news release.

About First Community Bancshares, Inc.

First Community Bancshares, 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 March 31, 2018. First Community Bank provides insurance services through First Community Insurance Services, which operates in-branch locations in Virginia and West Virginia and offers wealth management and investment advice through its Trust Division and First Community Wealth Management, which collectively managed $945 million in combined assets as of March 31, 2018. The Company reported consolidated assets of $2.43 billion as of March 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.

Financial Performance

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)	2018			2017			2017			2017			2017
Interest income
Interest and fees on loans	$	22,755		$	22,314		$	22,694		$	22,914		$	21,827
Interest on securities		1,104			1,095			1,080			1,170			1,206
Interest on deposits in banks		471			353			275			221			159
Total interest income		24,330			23,762			24,049			24,305			23,192
Interest expense
Interest on deposits		1,251			1,313			1,275			1,233			1,166
Interest on borrowings		700			716			724			778			885
Total interest expense		1,951			2,029			1,999			2,011			2,051
Net interest income		22,379			21,733			22,050			22,294			21,141
Provision for loan losses		495			615			730			934			492
Net interest income after provision		21,884			21,118			21,320			21,360			20,649
Total noninterest income		7,096			7,947			7,135			5,475			5,691
Total noninterest expense		17,544			17,132			16,909			17,458			17,083
Income before income taxes		11,436			11,933			11,546			9,377			9,257
Income tax expense		2,568			10,720			3,894			2,959			3,055
Net income	$	8,868		$	1,213		$	7,652		$	6,418		$	6,202

Earnings per common share
Basic	$	0.52		$	0.07		$	0.45		$	0.38		$	0.36
Diluted		0.52			0.07			0.45			0.38			0.36
Cash dividends per common share		0.66			0.18			0.16			0.16			0.16
Weighted average shares outstanding
Basic		16,955,758			16,992,519			17,005,654			17,012,189			16,998,125
Diluted		17,047,638			17,083,949			17,082,729			17,082,832			17,072,174
Performance ratios
Return on average assets		1.52	%		0.20	%		1.29	%		1.08	%		1.06	%
Return on average common equity		10.30	%		1.35	%		8.61	%		7.41	%		7.35	%
Return on average tangible common equity⁽¹⁾		14.53	%		1.89	%		12.13	%		10.51	%		10.50	%

(1)

A non-GAAP financial measure defined as average stockholders’ equity less average goodwill and other intangibles

RECONCILIATION OF GAAP NET INCOME TO CORE EARNINGS (Unaudited)

	Three Months Ended
	March 31,			December 31,			September 30,			June 30,			March 31,
	2018			2017			2017			2017			2017
(Amounts in thousands, except per share data)
Net income, GAAP	$	8,868		$	1,213		$	7,652		$	6,418		$	6,202
Non-GAAP adjustments:
Net loss on sale of securities		-			4			-			657			-
Deferred tax asset revaluation		-			6,552			-			-			-
Other non-core items		(130	)		(140	)		34			(174	)		(18	)
Total adjustments to core earnings		(130	)		6,416			34			483			(18	)
Tax effect		(24	)		(50	)		12			345			(7	)
Core earnings, non-GAAP⁽¹⁾	$	8,762		$	7,679		$	7,674		$	6,556		$	6,191

Core diluted earnings per common share	$	0.51		$	0.45		$	0.45		$	0.38		$	0.36
Performance ratios
Core return on average assets		1.50	%		1.28	%		1.29	%		1.11	%		1.06	%
Core return on average common equity		10.17	%		8.56	%		8.63	%		7.57	%		7.33	%
Core return on average tangible common equity⁽²⁾		14.36	%		11.99	%		12.16	%		10.74	%		10.48	%


(1)		Excludes gains, losses, and impairment losses on securities; goodwill and intangible impairment; taxes; and other non-recurring income and expense items from net income
(2)		A non-GAAP financial measure defined as average stockholders’ equity less average goodwill and other intangibles

Net Interest Income and Margin

AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited)

	Three Months Ended March 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⁾	$	1,805,839	$	22,827		5.13	%	$	1,838,837	$	21,895		4.83	%
Securities available for sale		165,103		1,384		3.40	%		161,738		1,483		3.72	%
Securities held to maturity		25,132		105		1.69	%		47,112		152		1.31	%
Interest-bearing deposits		117,953		471		1.62	%		55,754		159		1.16	%
Total earning assets		2,114,027		24,787		4.76	%		2,103,441		23,689		4.57	%
Other assets		252,284							270,597
Total assets	$	2,366,311						$	2,374,038

Liabilities and stockholders' equity
Interest-bearing deposits
Demand deposits	$	462,741	$	63		0.06	%	$	381,050	$	54		0.06	%
Savings deposits		518,560		82		0.06	%		525,573		84		0.06	%
Time deposits		493,545		1,106		0.91	%		515,506		1,028		0.81	%
Total interest-bearing deposits		1,474,846		1,251		0.34	%		1,422,129		1,166		0.33	%
Borrowings
Retail repurchase agreements		4,444		1		0.09	%		66,947		11		0.07	%
Wholesale repurchase agreements		25,000		199		3.23	%		25,000		199		3.23	%
FHLB advances and other borrowings		50,000		500		4.06	%		66,618		675		4.11	%
Total borrowings		79,444		700		3.57	%		158,565		885		2.26	%
Total interest-bearing liabilities		1,554,290		1,951		0.51	%		1,580,694		2,051		0.53	%
Noninterest-bearing demand deposits		432,606							425,540
Other liabilities		30,142							25,477
Total liabilities		2,017,038							2,031,711
Stockholders' equity		349,273							342,327
Total liabilities and stockholders' equity	$	2,366,311						$	2,374,038
Net interest income, FTE			$	22,836						$	21,638
Net interest rate spread						4.25	%						4.04	%
Net interest margin						4.38	%						4.17	%


(1)		Fully taxable equivalent ("FTE") basis based on the federal statutory rate of 21% for periods after January 1, 2018, and 35% for periods prior to January 1, 2018
(2)		Nonaccrual loans are included in average balances; however, no related interest income is recorded during the period of nonaccrual.

RECONCILIATION OF GAAP NET INTEREST MARGIN TO NON-GAAP NORMALIZED NET INTEREST MARGIN (Unaudited)

	Three Months Ended March 31,
	2018					2017
(Amounts in thousands)	Interest⁽¹⁾		Average Yield/ Rate⁽¹⁾			Interest⁽¹⁾		Average Yield/ Rate⁽¹⁾
Earning assets
Loans⁽²⁾	$	22,827		5.13	%	$	21,895		4.83	%
Accretion income		2,324					1,784
Less: cash accretion income		479					650
Non-cash accretion income		1,845					1,134
Loans, normalized⁽³⁾		20,982		4.71	%		20,761		4.58	%
Other earning assets		1,960		2.58	%		1,794		2.75	%
Total earning assets		22,942		4.40	%		22,555		4.35	%
Total interest-bearing liabilities		1,951		0.51	%		2,051		0.53	%
Net interest income, FTE⁽³⁾	$	20,991				$	20,504
Net interest rate spread, normalized⁽³⁾				3.89	%				3.82	%
Net interest margin, normalized⁽³⁾				4.03	%				3.95	%


(1)		FTE basis based on the federal statutory rate of 21% for periods after January 1, 2018, and 35% for periods prior to January 1, 2018
(2)		Nonaccrual loans are included in average balances; however, no related interest income is recorded during the period of nonaccrual.
(3)		Normalized totals are non-GAAP financial measures that exclude non-cash loan interest accretion related to PCI loans.

Noninterest Income and Expense

CONDENSED QUARTERLY STATEMENTS OF INCOME (Unaudited)

	Three Months Ended
	March 31,			December 31,			September 30,			June 30,			March 31,
(Amounts in thousands)	2018			2017			2017			2017			2017
Noninterest income
Wealth management	$	794		$	811		$	758		$	791		$	790
Service charges on deposits		3,468			3,725			3,605			3,360			3,113
Other service charges and fees		2,285			2,237			2,141			2,168			2,078
Insurance commissions		329			343			306			325			373
Net loss on sale of securities		-			(4	)		-			(657	)		-
Net FDIC indemnification asset amortization		(382	)		(331	)		(268	)		(1,586	)		(1,332	)
Other operating income		602			1,166			593			1,074			669
Total noninterest income		7,096			7,947			7,135			5,475			5,691
Noninterest expense
Salaries and employee benefits		9,441			9,003			9,001			9,022			9,020
Occupancy expense		1,250			1,104			1,082			1,341			1,248
Furniture and equipment expense		1,046			1,114			1,133			1,087			1,091
Service fees		828			703			705			1,095			845
Interchange expense		593			577			555			561			517
Advertising and public relations		522			506			551			544			605
Professional fees		307			589			339			817			822
Amortization of intangibles		261			266			266			263			261
FDIC premiums and assessments		211			212			227			227			244
Other operating expense		3,085			3,058			3,050			2,501			2,430
Total noninterest expense		17,544			17,132			16,909			17,458			17,083

Efficiency Ratio

EFFICIENCY RATIO CALCULATION (Unaudited)

	Three Months Ended
	March 31,			December 31,			September 30,			June 30,			March 31,
	2018			2017			2017			2017			2017
(Amounts in thousands)
Noninterest expense, GAAP	$	17,544		$	17,132		$	16,909		$	17,458		$	17,083
Non-GAAP adjustments
OREO expense and net loss		(171	)		(14	)		(647	)		(213	)		(328	)
Other non-core items		-			-			(64	)		(327	)		-
Adjusted noninterest expense		17,373			17,118			16,198			16,918			16,755

Net interest income, GAAP		22,379			21,733			22,050			22,294			21,141
Noninterest income, GAAP		7,096			7,947			7,135			5,475			5,691
Non-GAAP adjustments
Tax equivalency adjustment		457			466			470			481			497
Net loss on sale of securities		-			4			-			657			-
Other non-core items		(130	)		(140	)		(30	)		(501	)		(18	)
Adjusted net interest and noninterest income		29,802			30,010			29,625			28,406			27,311

Non-GAAP efficiency ratio⁽¹⁾		58.29	%		57.04	%		54.68	%		59.56	%		61.35	%
GAAP efficiency ratio		59.52	%		57.72	%		57.94	%		62.87	%		63.67	%


(1)		A non-GAAP financial measure computed by dividing adjusted noninterest expense by the sum of tax equivalent net interest income and adjusted noninterest income

Balance Sheet and Capital

CONDENSED CONSOLIDATED QUARTERLY BALANCE SHEETS (Unaudited)

	March 31,			December 31,			September 30,			June 30,			March 31,
(Amounts in thousands, except per share data)	2018			2017			2017			2017			2017
Assets
Total cash and cash equivalents	$	205,140		$	157,951		$	105,119		$	106,799		$	152,851
Securities available for sale		164,192			165,580			174,424			157,854			158,685
Securities held to maturity		25,115			25,149			25,182			25,216			47,092
Loans held for investment, net of unearned income
Non-covered		1,767,703			1,789,236			1,806,434			1,796,263			1,784,371
Covered		25,406			27,948			31,287			45,845			51,412
Less allowance for loan losses		(19,500	)		(19,276	)		(19,206	)		(18,886	)		(18,458	)
Loans held for investment, net		1,773,609			1,797,908			1,818,515			1,823,222			1,817,325
FDIC indemnification asset		6,884			7,161			7,465			8,159			9,931
Premises and equipment, net		46,415			48,126			48,949			49,598			50,057
Other real estate owned, non-covered		4,620			2,409			3,543			3,914			4,477
Other real estate owned, covered		70			105			54			124			241
Interest receivable		5,155			5,778			5,156			5,072			5,059
Goodwill		95,779			95,779			95,779			95,779			95,779
Other intangible assets		5,891			6,151			6,417			6,683			6,947
Other assets		95,437			76,363			84,177			84,183			82,069
Total assets	$	2,428,307		$	2,388,460		$	2,374,780		$	2,366,603		$	2,430,513

Liabilities
Deposits
Noninterest-bearing	$	460,478		$	454,143		$	452,940		$	443,800		$	467,677
Interest-bearing		1,520,141			1,475,748			1,410,880			1,413,574			1,438,917
Total deposits		1,980,619			1,929,891			1,863,820			1,857,374			1,906,594
Securities sold under agreements to repurchase		29,115			30,086			83,783			86,011			90,653
FHLB borrowings		50,000			50,000			50,000			50,000			65,000
Other borrowings		-			-			-			-			244
Interest, taxes, and other liabilities		26,536			27,769			24,540			24,443			24,618
Total liabilities		2,086,270			2,037,746			2,022,143			2,017,828			2,087,109

Stockholders' equity
Common stock		21,382			21,382			21,382			21,382			21,382
Additional paid-in capital		228,774			228,750			228,510			228,326			228,176
Retained earnings		178,227			180,543			182,145			177,556			173,860
Treasury stock, at cost		(83,865	)		(79,121	)		(79,333	)		(78,488	)		(78,533	)
Accumulated other comprehensive loss		(2,481	)		(840	)		(67	)		(1	)		(1,481	)
Total stockholders' equity		342,037			350,714			352,637			348,775			343,404
Total liabilities and stockholders' equity	$	2,428,307		$	2,388,460		$	2,374,780		$	2,366,603		$	2,430,513

Shares outstanding at period-end		16,847,452			16,998,226			16,986,502			17,017,071			17,013,185
Book value per common share	$	20.30		$	20.63		$	20.76		$	20.50		$	20.18
Tangible book value per common share⁽¹⁾		14.27			14.64			14.74			14.47			14.15


(1)		A non-GAAP financial measure defined as stockholders’ equity less goodwill and other intangibles, divided by common shares outstanding

Asset Quality

SELECTED CREDIT QUALITY INFORMATION (Unaudited)

	March 31,			December 31,			September 30,			June 30,			March 31,
(Amounts in thousands)	2018			2017			2017			2017			2017
Allowance for Loan Losses
Beginning balance	$	19,276		$	19,206		$	18,886		$	18,458		$	17,948
Provision for loan losses charged to operations		495			615			730			934			492
Charge-offs		(698	)		(967	)		(717	)		(902	)		(357	)
Recoveries		427			422			307			396			375
Net (charge-offs) recoveries		(271	)		(545	)		(410	)		(506	)		18
Ending balance	$	19,500		$	19,276		$	19,206		$	18,886		$	18,458

Nonperforming Assets
Non-covered nonperforming assets
Nonaccrual loans	$	21,650		$	18,997		$	18,942		$	20,146		$	18,537
Accruing loans past due 90 days or more		27			1			-			-			20
Troubled debt restructurings ("TDRs")⁽¹⁾		77			120			141			100			-
Total non-covered nonperforming loans		21,754			19,118			19,083			20,246			18,557
OREO		4,620			2,409			3,543			3,914			4,477
Total non-covered nonperforming assets	$	26,374		$	21,527		$	22,626		$	24,160		$	23,034

Covered nonperforming assets
Nonaccrual loans	$	596		$	342		$	420		$	446		$	918
Total covered nonperforming loans		596			342			420			446			918
OREO		70			105			54			124			241
Total covered nonperforming assets	$	666		$	447		$	474		$	570		$	1,159

Additional Information
Performing TDRs⁽²⁾	$	7,220		$	7,614		$	8,101		$	8,485		$	8,593
Total TDRs⁽³⁾		7,297			7,734			8,242			8,585			8,593

Non-covered ratios
Nonperforming loans to total loans		1.23	%		1.07	%		1.06	%		1.13	%		1.04	%
Nonperforming assets to total assets		1.10	%		0.91	%		0.97	%		1.04	%		0.97	%
Non-PCI allowance to nonperforming loans		89.64	%		100.83	%		100.64	%		93.24	%		99.40	%
Non-PCI allowance to total loans		1.10	%		1.08	%		1.06	%		1.05	%		1.03	%
Annualized net charge-offs to average loans		0.06	%		0.12	%		0.09	%		0.11	%		0.00	%

Total ratios
Nonperforming loans to total loans		1.25	%		1.07	%		1.06	%		1.12	%		1.06	%
Nonperforming assets to total assets		1.11	%		0.92	%		0.97	%		1.04	%		1.00	%
Allowance for loan losses to nonperforming loans		87.25	%		99.05	%		98.48	%		91.27	%		94.78	%
Allowance for loan losses to total loans		1.09	%		1.06	%		1.05	%		1.03	%		1.01	%
Annualized net charge-offs to average loans		0.06	%		0.12	%		0.09	%		0.11	%		0.00	%


(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

FIRST COMMUNITY BANKSHARES INC /VA/ - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - April 25, 2018

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FIRST COMMUNITY BANKSHARES INC /VA/ Reports