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First Community Bankshares, Inc. Announces Record Fourth Quarter and Record Full Year Results and Quarterly Dividend

First Community Bankshares, Inc. Announces Record Fourth Quarter and Record Full Year Results and Quarterly Dividend

BLUEFIELD, Va., Jan. 23, 2019 (GLOBE NEWSWIRE) -- First Community Bankshares, Inc. (FCBC) (www.firstcommunitybank.com) (the “Company”) today reported its unaudited results of operations and other financial information for the quarter and year ended December 31, 2018. The Company reported net income of $9.31 million, or $0.57 per diluted common share, for the quarter ended December 31, 2018, which was an increase of $8.09 million from the same quarter of 2017. The Company also reported $36.34 million, or $2.18 per diluted common share, for the year ended December 31, 2018, which was an increase of $14.86 million from 2017. The fourth quarter and full year both constitute net income records for the respective periods.

The Company also announced today that the Board of Directors declared a quarterly cash dividend to common shareholders of twenty-one cents ($0.21) per common share. The quarterly dividend is payable to common shareholders of record on February 1, 2019, and is expected to be paid on or about February 15, 2019. The current year marks the 34th consecutive year of regular cash dividends paid to shareholders.

The Company’s capital management plan and philosophy require maintenance of a strong capital base from which to grow and serve customers. As reported in early 2018, absent other needs, the Company’s capital management plan aspires to return current earnings not needed to fund growth in core operations back to shareholders through regular cash dividends and stock repurchases. The Company earned approximately $36.34 million in 2018, from which it paid regular cash dividends of approximately $12.96 million.  The Company also repurchased 1,060,312 common shares for approximately $34.41 million.  Since regular dividends and stock repurchases returned all current earnings to shareholders, the Board of Directors determined not to declare a special dividend related to 2018 earnings. As of December 31, 2018, the Company continues to significantly exceed regulatory “well capitalized” targets, as well as all capital targets of its capital management plan.

Fourth Quarter 2018 Highlights

  • General
    • On October 1, 2018, the Company completed the sale of its remaining insurance agency assets to Bankers Insurance, LLC of Glen Allen, Virginia (“BI”) in exchange for an equity interest in BI.
    • On October 2, 2018, the Company completed its Plan of Reincorporation and Merger, the sole purpose of which was to change the Company’s state of incorporation from Nevada to Virginia.
       
  • Income Statement
    • Net income increased $8.09 million to $9.31 million compared to the same quarter of 2017. The large increase reflects the deferred tax asset revaluation charge taken in the fourth quarter of 2017. Non-GAAP adjusted earnings increased $1.82 million to $9.50 million compared to the same quarter of 2017.
    • Diluted earnings per share increased $0.50 to $0.57 compared to the same quarter of 2017. Again, the large increase reflects the deferred tax asset revaluation charge taken in the fourth quarter of 2017. Non-GAAP adjusted diluted earnings per share increased $0.13 to $0.58 compared to the same quarter of 2017.
    • Return on average assets (“ROAA”) for the quarter increased to 1.63%, the highest reported quarterly ROAA for the Company in 15 years. Return on average equity for the quarter increased to 11.01%.
    • Net interest margin increased 63 basis points to 4.80% compared to the same quarter of 2017. 

  • Balance Sheet
    • Book value per common share increased $0.16 to $20.79, and tangible book value per common share increased $0.05 to $14.69, compared to December 31, 2017.
    • The Company repurchased 390,296 common shares for $13.12 million during the quarter and 1,060,312 common shares for $34.41 million during the year ended December 31, 2018.
    • The Company and its subsidiary bank both significantly exceed regulatory “well capitalized” targets as of December 31, 2018.

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% for periods after January 1, 2018, and 35% for periods prior to January 1, 2018.  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 December 31, 2018. First Community Bank offers wealth management and investment advice through its Trust Division and First Community Wealth Management, which collectively managed and administered $975 million in combined assets as of December 31, 2018. The Company reported consolidated assets of $2.24 billion as of December 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.


 
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
                             
    Three Months Ended   Year Ended
(Amounts in thousands, except share and per share data)
December 31,   September 30,   June 30,   March 31,   December 31,   December 31,
  2018       2018       2018       2018       2017       2018       2017  
Interest income                          
  Interest and fees on loans $   23,938     $   22,556     $   22,422     $   22,755     $   22,314     $   91,671     $   89,749  
  Interest on securities     1,249         1,372         1,361         1,104         1,095         5,086         4,551  
  Interest on deposits in banks     194         358         514         471         353         1,537         1,008  
Total interest income     25,381         24,286         24,297         24,330         23,762         98,294         95,308  
Interest expense                          
  Interest on deposits     1,297         1,269         1,327         1,251         1,313         5,144         4,987  
  Interest on borrowings     205         692         708         700         716         2,305         3,103  
Total interest expense     1,502         1,961         2,035         1,951         2,029         7,449         8,090  
Net interest income     23,879         22,325         22,262         22,379         21,733         90,845         87,218  
Provision for loan losses     908         495         495         495         615         2,393         2,771  
Net interest income after provision     22,971         21,830         21,767         21,884         21,118         88,452         84,447  
Noninterest income      6,297         6,519         6,959         6,668         7,498         26,443         24,568  
Noninterest expense     17,366         18,131         17,160         17,116         16,683         69,773         66,902  
Income before income taxes     11,902         10,218         11,566         11,436         11,933         45,122         42,113  
Income tax expense     2,596         1,118         2,500         2,568         10,720         8,782         20,628  
Net income $   9,306     $   9,100     $   9,066     $   8,868     $   1,213     $   36,340     $   21,485  
                             
Earnings per common share                          
  Basic $   0.57     $   0.55     $   0.54     $   0.52     $   0.07     $   2.19     $   1.26  
  Diluted     0.57         0.55         0.54         0.52         0.07         2.18         1.26  
Cash dividends per common share                          
  Regular     0.21         0.21         0.18         0.18         0.18         0.78         0.68  
  Special     -          -          -          0.48         -          0.48         -   
Weighted average shares outstanding                          
  Basic     16,201,148         16,512,823         16,689,398         16,955,758         16,992,519         16,587,504         17,002,116  
  Diluted     16,280,404         16,612,416         16,788,615         17,047,638         17,083,949         16,666,385         17,077,842  
Performance ratios                          
  Return on average assets   1.63 %     1.55 %     1.53 %     1.52 %     0.20 %     1.56 %     0.91 %
  Return on average common equity   11.01 %     10.59 %     10.68 %     10.30 %     1.35 %     10.64 %     6.14 %
  Return on average tangible common equity(1)   15.58 %     15.06 %     15.21 %     14.53 %     1.89 %     15.09 %     8.69 %
                             
   
(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   Year Ended
    December 31,   September 30,   June 30,   March 31,   December 31,   December 31,
      2018       2018       2018       2018       2017       2018       2017  
(Amounts in thousands, except per share data)                          
Net income $   9,306     $   9,100     $   9,066     $   8,868     $   1,213     $   36,340     $   21,485  
Non-GAAP adjustments:                          
  Net loss on sale of securities     -         618         -         -         4         618         661  
  Loss on extinguishment of debt     -         1,096         -         -         -         1,096         -  
  Goodwill impairment     -         1,492         -         -         -         1,492         -  
  Deferred tax asset revaluation     -         (1,669 )       -         -         6,552         (1,669 )       6,552  
  Other items(1)     254         -         297         (130 )       (140 )       421         (298 )
Total adjustments     254         1,537         297         (130 )       6,416         1,958         6,915  
Tax effect      61         411         96         (24 )       (50 )       544         301  
Adjusted earnings, non-GAAP $   9,499     $   10,226     $   9,267     $   8,762     $   7,679     $   37,754     $   28,099  
                             
Adjusted diluted earnings per common share, non-GAAP $   0.58     $   0.62     $   0.55     $   0.51     $   0.45     $   2.27     $   1.65  
Performance ratios, non-GAAP                          
  Adjusted return on average assets   1.67 %     1.74 %     1.57 %     1.50 %     1.28 %     1.62 %     1.19 %
  Adjusted return on average common equity   11.23 %     11.90 %     10.91 %     10.17 %     8.56 %     11.05 %     8.04 %
  Adjusted return on average tangible common equity(2)   15.90 %     16.93 %     15.55 %     14.36 %     11.99 %     15.68 %     11.36 %
                             
   
(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 December 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)(3) $   1,788,570   $   24,017   5.33%   $   1,822,583   $   22,387   4.87%
  Securities available for sale     162,330       1,518   3.71%       171,288       1,383   3.20%
  Securities held to maturity     25,030       104   1.65%       25,165       105   1.66%
  Interest-bearing deposits     33,736       194   2.28%       95,174       353   1.47%
Total earning assets     2,009,666       25,833   5.10%       2,114,210       24,228   4.55%
Other assets      249,056               256,591        
Total assets $   2,258,722           $   2,370,801        
                         
Liabilities and stockholders' equity                      
Interest-bearing deposits                      
  Demand deposits  $   458,458   $   40   0.03%   $   451,024   $   62   0.05%
  Savings deposits      494,868       132   0.11%       512,156       83   0.06%
  Time deposits     450,770       1,125   0.99%       502,515       1,168   0.92%
Total interest-bearing deposits     1,404,096       1,297   0.37%       1,465,695       1,313   0.36%
Borrowings                      
  Retail repurchase agreements     4,526       2   0.18%       5,470       1   0.07%
  Wholesale repurchase agreements     25,000       203   3.22%       25,000       204   3.24%
  FHLB advances and other borrowings     -       -   -       50,000       511   4.05%
Total borrowings     29,526       205   2.75%       80,470       716   3.53%
Total interest-bearing liabilities     1,433,622       1,502   0.42%       1,546,165       2,029   0.52%
Noninterest-bearing demand deposits     461,457               446,487        
Other liabilities     28,188               22,103        
Total liabilities     1,923,267               2,014,755        
Stockholders' equity     335,455               356,046        
Total liabilities and stockholders' equity $   2,258,722           $   2,370,801        
Net interest income, FTE(1)     $   24,331           $   22,199    
Net interest rate spread         4.68%           4.03%
Net interest margin, FTE(1)         4.80%           4.17%
                         
   
(1)  Interest income and average yield/rate are presented on a FTE, non-GAAP, basis using the federal statutory income tax rate of 21% for periods after January 1, 2018, and 35% for periods prior to January 1, 2018.
(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 include non-cash purchase accounting accretion of $2.13 million and $1.16 million for the three months ended December 31, 2018 and 2017, respectively.
                         


AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited)
                         
    Year Ended December 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)(3) $   1,795,391   $   91,971   5.12%   $   1,837,092   $   90,032   4.90%
  Securities available for sale     176,766       6,190   3.50%       164,489       5,695   3.46%
  Securities held to maturity     25,081       418   1.67%       32,954       487   1.48%
  Interest-bearing deposits     81,520       1,537   1.89%       73,405       1,008   1.37%
Total earning assets     2,078,758       100,116   4.82%       2,107,940       97,222   4.61%
Other assets      251,853               262,381        
Total assets $   2,330,611           $   2,370,321        
                         
Liabilities and stockholders' equity                      
Interest-bearing deposits                      
  Demand deposits  $   466,403   $   246   0.05%   $   401,092   $   224   0.06%
  Savings deposits      508,353       382   0.08%       520,430       336   0.06%
  Time deposits     471,335       4,516   0.96%       510,411       4,427   0.87%
Total interest-bearing deposits     1,446,091       5,144   0.36%       1,431,933       4,987   0.35%
Borrowings                      
  Federal funds purchased     -       -   -       1       -   -
  Retail repurchase agreements     4,010       5   0.12%       47,716       32   0.07%
  Wholesale repurchase agreements     25,000       806   3.22%       25,000       806   3.22%
  FHLB advances and other borrowings     36,849       1,494   4.05%       55,502       2,265   4.08%
Total borrowings     65,859       2,305   3.50%       128,219       3,103   2.42%
Total interest-bearing liabilities     1,511,950       7,449   0.49%       1,560,152       8,090   0.52%
Noninterest-bearing demand deposits     448,903               438,513        
Other liabilities     28,239               21,955        
Total liabilities     1,989,092               2,020,620        
Stockholders' equity     341,519               349,701        
Total liabilities and stockholders' equity $   2,330,611           $   2,370,321        
Net interest income, FTE(1)     $   92,667           $   89,132    
Net interest rate spread         4.33%           4.09%
Net interest margin, FTE(1)         4.46%           4.23%
                         
   
(1)  Interest income and average yield/rate are presented on a FTE, non-GAAP, basis using the federal statutory income tax rate of 21% for periods after January 1, 2018, and 35% for periods prior to January 1, 2018.
(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 include non-cash purchase accounting accretion of $6.39 million and $5.42 million for the year ended December 31, 2018 and 2017, respectively.
                         


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