ex_150622.htm

EX-99.1 2 ex_150622.htm EXHIBIT 99.1 ex_150622.htm

Exhibit 99.1

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

First Community Bankshares, Inc. Announces Second 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 June 30, 2019. The Company reported net income of $10.45 million, or $0.66 per diluted common share, for the quarter ended June 30, 2019, which was an increase of $1.39 million, or 15.28%, 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 third quarter dividend. The quarterly dividend is payable to common shareholders of record on August 2, 2019, and is expected to be paid on or about August 16, 2019. The current year marks the 34^th consecutive year of regular cash dividends paid to shareholders.

Second Quarter 2019 Highlights

●	General

The Company declared a quarterly cash dividend to common shareholders of twenty-five cents ($0.25) per common share.

The Company received $2.03 million from litigation settlements during the second quarter.

●	Income Statement

Net income increased $1.39 million, or 15.28%, to $10.45 million compared to the same quarter of 2018.

Diluted earnings per share increased $0.12 to $0.66 compared to the same quarter of 2018, for an increase of 22.22%.

Return on average assets for the quarter increased to 1.89%. Return on average equity for the quarter increased to 12.57%.

Net interest margin increased 47 basis points to 4.72% compared to the same quarter of 2018.

●	Balance Sheet

Book value per common share increased $0.55 to $21.34, and tangible book value per common share increased $0.43 to a record $15.12, compared to December 31, 2018.

The Company repurchased 194,000 common shares for $6.58 million during the quarter. Year to date, the Company has repurchased 426,900 common shares for $14.36 million compared to 474,240 shares during same period of 2018.

The Company and its subsidiary bank both significantly exceed regulatory “well capitalized” targets as of June 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 June 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 $1.05 billion in combined assets as of June 30, 2019. The Company reported consolidated assets of $2.21 billion as of June 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															Six Months Ended
(Amounts in thousands, except share	June 30,			March 31,			December 31,			September 30,			June 30,			June 30,
and per share data)	2019			2019			2018			2018			2018			2019			2018
Interest income
Interest and fees on loans	$	22,721		$	22,179		$	23,938		$	22,556		$	22,422		$	44,900		$	45,177
Interest on securities		895			1,094			1,249			1,372			1,361			1,989			2,465
Interest on deposits in banks		766			338			194			358			514			1,104			985
Total interest income		24,382			23,611			25,381			24,286			24,297			47,993			48,627
Interest expense
Interest on deposits		1,392			1,305			1,297			1,269			1,327			2,697			2,578
Interest on borrowings		1			120			205			692			708			121			1,408
Total interest expense		1,393			1,425			1,502			1,961			2,035			2,818			3,986
Net interest income		22,989			22,186			23,879			22,325			22,262			45,175			44,641
Provision for loan losses		1,585			1,220			908			495			495			2,805			990
Net interest income after provision		21,404			20,966			22,971			21,830			21,767			42,370			43,651
Noninterest income		8,649			8,080			6,297			6,519			6,959			16,729			13,627
Noninterest expense		16,651			16,785			17,366			18,131			17,160			33,436			34,276
Income before income taxes		13,402			12,261			11,902			10,218			11,566			25,663			23,002
Income tax expense		2,951			2,630			2,596			1,118			2,500			5,581			5,068
Net income	$	10,451		$	9,631		$	9,306		$	9,100		$	9,066		$	20,082		$	17,934

Earnings per common share
Basic	$	0.67		$	0.61		$	0.57		$	0.55		$	0.54		$	1.27		$	1.06
Diluted		0.66			0.60			0.57			0.55			0.54			1.27			1.06
Cash dividends per common share
Regular		0.25			0.21			0.21			0.21			0.18			0.46			0.36
Special		-			-			-			-			-			-			0.48
Weighted average shares outstanding
Basic		15,712,204			15,839,424			16,201,148			16,512,823			16,689,398			15,775,462			16,821,842
Diluted		15,775,320			15,920,950			16,280,404			16,612,416			16,788,615			15,847,498			16,912,872
Performance ratios
Return on average assets		1.89	%		1.75	%		1.63	%		1.55	%		1.53	%		1.82	%		1.53	%
Return on average common equity		12.57	%		11.77	%		11.01	%		10.59	%		10.68	%		12.17	%		10.49	%
Return on average tangible common equity⁽¹⁾		17.57	%		16.66	%		15.58	%		15.06	%		15.21	%		17.04	%		14.87	%

(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															Six Months Ended
	June 30,			March 31,			December 31,			September 30,			June 30,			June 30,
(Amounts in thousands, except per	2019			2019			2018			2018			2018			2019			2018
share data)
Net income	$	10,451		$	9,631		$	9,306		$	9,100		$	9,066		$	20,082		$	17,934
Non-GAAP adjustments
Net loss on sale of securities		43			-			-			618			-			43			-
Loss on extinguishment of debt		-			-			-			1,096			-			-			-
Goodwill impairment		-			-			-			1,492			-			-			-
Deferred tax asset revaluation		-			-			-			(1,669	)		-			-			-
Other items⁽¹⁾		(2,025	)		(1,675	)		254			-			297			(3,700	)		167
Total adjustments		(1,982	)		(1,675	)		254			1,537			297			(3,657	)		167
Tax effect		(550	)		(328	)		61			411			96			(878	)		72
Adjusted earnings, non-GAAP	$	9,019		$	8,284		$	9,499		$	10,226		$	9,267		$	17,303		$	18,029

Adjusted diluted earnings per common share, non-GAAP	$	0.57		$	0.52		$	0.58		$	0.62		$	0.55		$	1.09		$	1.07
Performance ratios, non-GAAP
Adjusted return on average assets		1.63	%		1.51	%		1.67	%		1.74	%		1.57	%		1.57	%		1.53	%
Adjusted return on average common equity		10.84	%		10.12	%		11.23	%		11.90	%		10.91	%		10.48	%		10.54	%
Adjusted return on average tangible common equity⁽²⁾		15.16	%		14.33	%		15.90	%		16.93	%		15.55	%		14.68	%		15.21	%

(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 June 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⁾	$	1,721,392	$	22,772		5.31	%	$	1,795,094	$	22,458		5.02	%
Securities available for sale		126,153		1,068		3.41	%		190,605		1,447		3.04	%
Securities held to maturity		-		-		-			25,098		104		1.66	%
Interest-bearing deposits		125,759		766		2.44	%		109,349		514		1.89	%
Total earning assets		1,973,304		24,606		5.00	%		2,120,146		24,523		4.64	%
Other assets		248,270							252,843
Total assets	$	2,221,574						$	2,372,989

Liabilities and stockholders' equity
Interest-bearing deposits
Demand deposits	$	454,246	$	77		0.07	%	$	484,776	$	104		0.09	%
Savings deposits		504,854		192		0.15	%		518,055		83		0.06	%
Time deposits		429,469		1,123		1.05	%		477,691		1,140		0.96	%
Total interest-bearing deposits		1,388,569		1,392		0.40	%		1,480,522		1,327		0.36	%
Borrowings
Retail repurchase agreements		3,024		1		0.13	%		3,615		1		0.11	%
Wholesale repurchase agreements		-		-		-			25,000		201		3.22	%
FHLB advances and other borrowings		-		-		-			50,000		506		4.06	%
Total borrowings		3,024		1		0.13	%		78,615		708		3.61	%
Total interest-bearing liabilities		1,391,593		1,393		0.40	%		1,559,137		2,035		0.52	%
Noninterest-bearing demand deposits		468,782							447,048
Other liabilities		27,904							26,222
Total liabilities		1,888,279							2,032,407
Stockholders' equity		333,595							340,582
Total liabilities and stockholders' equity	$	2,221,874						$	2,372,989
Net interest income, FTE⁽¹⁾			$	23,213						$	22,488
Net interest rate spread						4.60	%						4.12	%
Net interest margin, FTE⁽¹⁾						4.72	%						4.25	%

(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 $1.39 million and $1.36 million for the three months ended June 30, 2019 and 2018, respectively.

AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited)
	Six Months Ended June 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⁾	$	1,743,141	$	45,008		5.21	%	$	1,800,438	$	45,249		5.07	%
Securities available for sale		135,914		2,299		3.41	%		177,897		2.636		2.99	%
Securities held to maturity		6,140		45		1.48	%		25,115		209		1.68	%
Interest-bearing deposits		90,423		1,104		2.46	%		113,627		985		1.75	%
Total earning assets		1,975,618		48,456		4.95	%		2,117,077		49,079		4.67	%
Other assets		248,118							252,592
Total assets	$	2,223,736						$	2,369,669

Liabilities and stockholders' equity
Interest-bearing deposits
Demand deposits	$	450,655	$	114		0.05	%	$	473,819	$	167		0.07	%
Savings deposits		503,075		367		0.15	%		518,306		165		0.06	%
Time deposits		433,936		2,216		1.03	%		485,574		2,246		0.93	%
Total interest-bearing deposits		1,387,666		2,697		0.39	%		1,477,699		2,578		0.35	%
Borrowings
Retail repurchase agreements		3,141		2		0.13	%		4,031		2		0.10	%
Wholesale repurchase agreements		7,597		119		3.16	%		25,000		400		3.23	%
FHLB advances and other borrowings		-		-		-			50,000		1,006		4.06	%
Total borrowings		10,738		121		2.27	%		79,031		1,408		3.59	%
Total interest-bearing liabilities		1,398,404		2,818		0.41	%		1,556,730		3,986		0.52	%
Noninterest-bearing demand deposits		464,299							439,867
Other liabilities		28,245							28,168
Total liabilities		1,890,948							2,024,765
Stockholders' equity		332,788							344,904
Total liabilities and stockholders' equity	$	2,223,736						$	2,369,669
Net interest income, FTE⁽¹⁾			$	45,638						$	45,093
Net interest rate spread						4.54	%						4.16	%
Net interest margin, FTE⁽¹⁾						4.66	%						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 $2.15 million and $3.20 million for the six months ended June 30, 2019 and 2018, respectively.

CONDENSED CONSOLIDATED QUARTERLY NONINTEREST INCOME AND EXPENSE (Unaudited)

	Three Months Ended															Six Months Ended
	June 30,			March 31,			December 31,			September 30,			June 30,			June 30,
(Amounts in thousands)	2019			2019			2018			2018			2018			2019			2018
Noninterest income
Wealth management	$	884		$	745		$	854		$	791		$	823		$	1,629		$	1,617
Service charges on deposits		3,699			3,408			3,850			3,803			3,612			7,107			7,080
Other service charges and fees		2,129			2,049			2,017			1,925			1,934			4,178			3,791
Insurance commissions		-			-			-			299			338			-			667
Net loss on sale of securities		(43	)		-			-			(618	)		-			(43	)		-
Net FDIC indemnification asset amortization		(516	)		(552	)		(579	)		(645	)		(575	)		(1,068	)		(957	)
Other income		2,025			1,675			-			-			-			3,700			-
Other operating income		471			755			155			964			827			1,226			1,429
Total noninterest income	$	8,649		$	8,080		$	6,297		$	6,519		$	6,959		$	16,729		$	13,627
Noninterest expense
Salaries and employee benefits	$	9,153		$	9,166		$	9,273		$	8,983		$	8,993		$	18,319		$	18,434
Occupancy expense		1,082			1,153			1,134			1,075			1,083			2,235			2,333
Furniture and equipment expense		1,062			1,033			1,004			985			945			2,095			1,991
Service fees		1,231			1,030			1,047			1,134			851			2,261			1,679
Advertising and public relations		513			524			550			478			461			1,037			983
Professional fees		328			414			356			337			430			742			737
Amortization of intangibles		249			246			254			261			263			495			524
FDIC premiums and assessments		150			168			209			234			252			318			463
Loss on extinguishment of debt		-			-			-			1,096			-			-			-
Goodwill impairment		-			-			-			1,492			-			-			-
Other operating expense		2,883			3,051			3,539			2,056			3,882			5,934			7,132
Total noninterest expense	$	16,651		$	16,785		$	17,366		$	18,131		$	17,160		$	33,436		$	34,276

CONDENSED CONSOLIDATED QUARTERLY BALANCE SHEETS (Unaudited)

	June 30,			March 31,			December 31,			September 30,			June 30,
(Amounts in thousands, except per share data)	2019			2019			2018			2018			2018
Assets
Cash and cash equivalents	$	156,478		$	148,546		$	76,873		$	73,679		$	107,957
Debt securities available for sale		119,076			132,597			153,116			163,593			196,425
Debt securities held to maturity		-			-			25,013			25,047			25,082
Loans held for investment, net of unearned income
Noncovered		1,705,408			1,719,905			1,756,269			1,770,426			1,776,112
Covered		15,520			17,475			18,815			20,483			22,919
Allowance for loan losses		(18,540	)		(18,243	)		(18,267	)		(18,256	)		(19,583	)
Loans held for investment, net		1,702,388			1,719,137			1,756,817			1,772,653			1,779,448
FDIC indemnification asset		4,020			4,578			5,108			5,653			6,390
Premises and equipment, net		48,262			46,636			45,785			45,537			45,547
Other real estate owned, noncovered		3,810			3,903			3,806			4,754			4,805
Other real estate owned, covered		152			152			32			44			44
Interest receivable		5,317			5,227			5,481			5,374			5,580
Goodwill		92,744			92,744			92,744			94,287			95,779
Other intangible assets		4,532			4,780			5,026			5,366			5,628
Other assets		75,248			84,035			74,573			73,701			75,435
Total assets	$	2,212,027		$	2,242,335		$	2,244,374		$	2,269,688		$	2,348,120

Liabilities
Deposits
Noninterest-bearing	$	480,573		$	479,299		$	459,550		$	463,945		$	462,851
Interest-bearing		1,367,465			1,399,138			1,396,200			1,411,906			1,441,887
Total deposits		1,848,038			1,878,437			1,855,750			1,875,851			1,904,738
Securities sold under agreements to repurchase		3,083			3,700			29,370			30,151			27,869
FHLB borrowings		-			-			-			-			50,000
Interest, taxes, and other liabilities		27,220			27,096			26,397			25,284			26,392
Total liabilities		1,878,341			1,909,233			1,911,517			1,931,286			2,008,999

Stockholders' equity
Common stock⁽²⁾		15,633			15,818			16,007			21,382			21,382
Additional paid-in capital⁽²⁾		109,816			115,914			122,486			229,182			228,949
Retained earnings		208,618			202,103			195,793			189,902			184,279
Treasury stock, at cost⁽²⁾		-			-			-			(99,247	)		(92,904	)
Accumulated other comprehensive loss		(381	)		(733	)		(1,429	)		(2,817	)		(2,585	)
Total stockholders' equity		333,686			333,102			332,857			338,402			339,121
Total liabilities and stockholders' equity	$	2,212,027		$	2,242,335		$	2,244,374		$	2,269,688		$	2,348,120

Shares outstanding at period-end		15,633,388			15,818,368			16,007,263			16,390,502			16,574,347
Book value per common share	$	21.34		$	21.06		$	20.79		$	20.65		$	20.46
Tangible book value per common share⁽¹⁾		15.12			14.89			14.69			14.57			14.34

(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)

	June 30,			March 31,			December 31,			September 30,			June 30,
(Amounts in thousands)	2019			2019			2018			2018			2018
Allowance for Loan Losses
Beginning balance	$	18,243		$	18,267		$	18,256		$	19,583		$	19,500
Provision for loan losses charged to operations		1,585			1,220			908			495			495
Charge-offs		(2,114	)		(1,622	)		(1,282	)		(2,177	)		(750	)
Recoveries		826			378			385			355			338
Net charge-offs		(1,288	)		(1,244	)		(897	)		(1,822	)		(412	)
Ending balance	$	18,540		$	18,243		$	18,267		$	18,256		$	19,583

Nonperforming Assets
Non-covered nonperforming assets
Nonaccrual loans	$	16,368		$	18,544		$	19,583		$	20,542		$	21,467
Accruing loans past due 90 days or more		37			156			58			46			-
Troubled debt restructurings ("TDRs")⁽¹⁾		821			835			161			189			133
Total non-covered nonperforming loans		17,226			19,535			19,802			20,777			21,600
OREO		3,810			3,903			3,806			4,754			4,805
Total non-covered nonperforming assets	$	21,036		$	23,438		$	23,608		$	25,531		$	26,405

Covered nonperforming assets
Nonaccrual loans	$	203		$	237		$	322		$	330		$	509
Total covered nonperforming loans		203			237			322			330			509
OREO		152			152			32			44			44
Total covered nonperforming assets	$	355		$	389		$	354		$	374		$	553

Additional Information
Performing TDRs⁽²⁾	$	5,676		$	5,654		$	6,266		$	6,953		$	6,847
Total TDRs⁽³⁾		6,497			6,489			6,427			7,142			6,980

Non-covered ratios
Nonperforming loans to total loans		1.01	%		1.14	%		1.13	%		1.17	%		1.22	%
Nonperforming assets to total assets		0.96	%		1.05	%		1.06	%		1.14	%		1.14	%
Non-PCI allowance to nonperforming loans		107.63	%		93.39	%		92.25	%		87.87	%		90.66	%
Non-PCI allowance to total loans		1.09	%		1.06	%		1.04	%		1.03	%		1.10	%
Annualized net charge-offs to average loans		0.30	%		0.29	%		0.20	%		0.41	%		0.09	%

Total ratios
Nonperforming loans to total loans		1.01	%		1.14	%		1.13	%		1.18	%		1.23	%
Nonperforming assets to total assets		0.97	%		1.06	%		1.07	%		1.14	%		1.15	%
Allowance for loan losses to nonperforming loans		106.37	%		92.27	%		90.77	%		86.49	%		88.57	%
Allowance for loan losses to total loans		1.08	%		1.05	%		1.03	%		1.02	%		1.09	%
Annualized net charge-offs to average loans		0.30	%		0.29	%		0.20	%		0.40	%		0.09	%

(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