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

Attached files

file	filename
8-K - FORM 8-K - FIRST COMMUNITY BANKSHARES INC /VA/	fcbc20201026_8k.htm

Exhibit 99.1



	NEWS RELEASE
FOR IMMEDIATE RELEASE:		FOR MORE INFORMATION, CONTACT:
October 27, 2020		David D. Brown
		(276) 326-9000

First Community Bankshares, Inc. Announces Third Quarter Results

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, 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.

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,			March 31,			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

FIRST COMMUNITY BANKSHARES INC /VA/ - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - October 27, 2020

Attached files

FIRST COMMUNITY BANKSHARES INC /VA/ Reports