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/	fcbc20200727_8k.htm

Exhibit 99.1


NEWS RELEASE
FOR IMMEDIATE RELEASE:		FOR MORE INFORMATION, CONTACT:
July 28, 2020		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, 2020. The Company reported net income of $8.24 million, or $0.46 per diluted common share, for the quarter ended June 30, 2020, which was a decrease of $0.20, or 30.30%, over the same quarter of 2019. Net income was $16.11 million, or $0.90 per diluted common share, for the six months ended June 30, 2020, which represents a 29.13% 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 August 7, 2020, and is expected to be paid on or about August 21, 2020. The current year is the 35^th consecutive year of regular dividends to common shareholders.

Second Quarter 2020 and Current Highlights

●	Pandemic and General

The Company’s social distancing practices at its branches and corporate offices continue today. Remote working environments remain in place for approximately 60% of the Company’s back office workforce.

The Company implemented a pay differential for employees working at branch and back-office locations which ended May 31, 2020. As a result of the pay differential and other COVID-19 related expenses, the Company incurred approximately $612 thousand in additional expenses for the quarter.

In order to aid its affected customers, the Company modified or deferred payments on 1,277 commercial loans totaling $340.00 million in principal balances and 1,820 retail loans totaling $96.11 million in principal balances.

Through June 30, 2020, the Company processed 758 loans with original principal balances totaling $60.23 million through the SBA’s Paycheck Protection Program.

As a result of the low interest rate environment, the Company’s pipeline for mortgage loans grew to approximately $99.75 million at June 30, 2020, and stood at $101.39 million at July 24, 2020.

●	Income Statement

Second quarter earnings reflect a loan loss provision of $3.83 million, an increase of $2.25 million over second quarter of 2019, to recognize the impact of the coronavirus slowdown. Coupled with the provision in the first quarter of 2020, the second quarter provision had the cumulative effect of increasing loan loss reserve $5.33 million.

Despite the significant increase in loan loss provision, return on average assets remained strong at 1.15% for both the second quarter and the six month period. The significant increase in loan loss provision over previous quarterly provisions reduced return on average assets for the quarter by 0.24%.

Net interest margin decreased 50 basis points to 4.22% compared to the same quarter of 2019. Net interest margin decreased 20 basis points to 4.46% for the six months compared to the same period of 2019. Both period decreases are reflective of the current historic low interest rate environment.

Pandemic shutdowns and stay-at-home orders had a significant negative impact on deposit service charges.

●	Balance Sheet

As of June 30, 2020, the Company continues to significantly exceed regulatory “well capitalized” targets, as well as all capital targets of its capital management plan. The Company completed its previous share repurchase authorization in the first quarter of 2020, prior to the onset of the current coronavirus pandemic, which completed a strategic objective of acquiring 6.6 million shares, returning over $149 million in surplus capital to shareholders. In light of the uncertain economic forecast, the Company has temporarily delayed consideration of a new share repurchase authorization to preserve and further accumulate surplus capital.

Total deposits have grown $167.93 million, or 7.21%, during 2020 with $125.03 million of the increase coming in interest free categories.

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 58 branch banking locations in Virginia, West Virginia, North Carolina, and Tennessee as of June 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 $1.10 billion in combined assets as of June 30, 2020. The Company reported consolidated assets of $2.95 billion as of June 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															Six Months Ended
	June 30,			March 31,			December 31,			September 30,			June 30,			June 30,
(Amounts in thousands, except share and per share data)	2020			2020			2019			2019			2019			2020			2019
Interest income
Interest and fees on loans	$	26,991		$	28,058		$	21,837		$	22,068		$	22,721		$	55,049		$	44,900
Interest on securities		713			918			870			857			895			1,631			1,989
Interest on deposits in banks		82			533			663			680			766			615			1,104
Total interest income		27,786			29,509			23,370			23,605			24,382			57,295			47,993
Interest expense
Interest on deposits		1,445			1,825			1,312			1,383			1,392			3,270			2,697
Interest on borrowings		2			2			1			1			1			4			121
Total interest expense		1,447			1,827			1,313			1,384			1,393			3,274			2,818
Net interest income		26,339			27,682			22,057			22,221			22,989			54,021			45,175
Provision for loan losses		3,831			3,500			91			675			1,585			7,331			2,805
Net interest income after provision		22,508			24,182			21,966			21,546			21,404			46,690			42,370
Noninterest income		6,913			7,549			9,314			7,634			8,649			14,462			16,729
Noninterest expense		18,913			21,664			18,883			17,444			16,651			40,577			33,436
Income before income taxes		10,508			10,067			12,397			11,736			13,402			20,575			25,663
Income tax expense		2,270			2,195			2,833			2,580			2,951			4,465			5,581
Net income	$	8,238		$	7,872		$	9,564		$	9,156		$	10,451		$	16,110		$	20,082

Earnings per common share
Basic	$	0.47		$	0.44		$	0.61		$	0.59		$	0.67		$	0.90		$	1.27
Diluted		0.46			0.44			0.61			0.58			0.66			0.90			1.27
Cash dividends per common share
Regular		0.25			0.25			0.25			0.25			0.25			0.50			0.46
Weighted average shares outstanding
Basic		17,701,853			17,998,994			15,611,093			15,603,992			15,712,204			17,850,423			15,775,462
Diluted		17,728,300			18,050,071			15,670,047			15,664,587			15,775,320			17,888,325			15,847,498
Performance ratios
Return on average assets		1.15	%		1.16	%		1.71	%		1.65	%		1.89	%		1.15	%		1.82	%
Return on average common equity		7.97	%		7.49	%		11.08	%		10.80	%		12.57	%		7.73	%		12.17	%
Return on average tangible common equity⁽¹⁾		11.91	%		11.12	%		15.33	%		15.19	%		17.57	%		11.51	%		17.04	%

(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,
	2020			2020			2019			2019			2019			2020			2019
(Amounts in thousands, except per share data)
Net income	$	8,238		$	7,872		$	9,564		$	9,156		$	10,451		$	16,110		$	20,082
Adjustments:
Net (gain) loss on sale of securities		-			(385	)		-			-			43			(385	)		43
Merger, acquisition, and divestiture expense		-			1,893			1,532			592			-			1,893			-
Other items⁽¹⁾		-			-			(2,395	)		(900	)		(2,025	)		-			(3,700	)
Total adjustments		-			1,508			(863	)		(308	)		(1,982	)		1,508			(3,657	)
Tax effect		-			354			(331	)		(134	)		(550	)		354			(878	)
Adjusted earnings, non-GAAP	$	8,238		$	9,026		$	9,032		$	8,982		$	9,019		$	17,264		$	17,303

Adjusted diluted earnings per common share, non-GAAP	$	0.46		$	0.50		$	0.58		$	0.57		$	0.57		$	0.97		$	1.09
Performance ratios, non-GAAP
Adjusted return on average assets		1.15	%		1.33	%		1.61	%		1.62	%		1.63	%		1.24	%		1.57	%
Adjusted return on average common equity		7.97	%		8.59	%		10.46	%		10.59	%		10.84	%		8.28	%		10.48	%
Adjusted return on average tangible common equity⁽²⁾		11.91	%		12.75	%		14.48	%		14.90	%		15.16	%		12.33	%		14.68	%

(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,
	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⁾	$	2,129,513	$	27,040		5.11	%	$	1,721,392	$	22,772		5.31	%
Securities available for sale		103,378		839		3.26	%		126,153		1,068		3.41	%
Interest-bearing deposits		293,791		81		0.11	%		125,759		766		2.44	%
Total earning assets		2,526,682		27,960		4.45	%		1,973,304		24,606		5.00	%
Other assets		356,913							248,270
Total assets	$	2,883,595						$	2,221,574

Liabilities and stockholders' equity
Interest-bearing deposits
Demand deposits	$	547,445	$	98		0.07	%	$	454,246	$	77		0.07	%
Savings deposits		707,298		240		0.14	%		504,854		192		0.15	%
Time deposits		465,212		1,107		0.96	%		429,469		1,123		1.05	%
Total interest-bearing deposits		1,719,955		1,445		0.34	%		1,388,569		1,392		0.40	%
Borrowings
Retail repurchase agreements		1,244		1		0.14	%		3,024		1		0.13	%
FHLB advances and other borrowings		-		-		-			-		-		-
Total borrowings		1,244		1		0.32	%		3,024		1		0.13	%
Total interest-bearing liabilities		1,721,199		1,446		0.34	%		1,391,593		1,393		0.40	%
Noninterest-bearing demand deposits		711,174							468,782
Other liabilities		35,467							27,604
Total liabilities		2,467,840							1,887,979
Stockholders' equity		415,755							333,595
Total liabilities and stockholders' equity	$	2,883,595						$	2,221,574
Net interest income, FTE⁽¹⁾			$	26,514						$	23,213
Net interest rate spread						4.11	%						4.60	%
Net interest margin, FTE⁽¹⁾						4.22	%						4.72	%

(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 $1.50 million and $1.39 million for the three months ended June 30, 2020 and 2019, respectively.

AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited)

	Six Months Ended June 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⁾	$	2,105,323	$	55,145		5.27	%	$	1,743,141	$	45,008		5.21	%
Securities available for sale		119,744		1,899		3.19	%		135,914		2,299		3.41	%
Securities held to maturity		-		-		-			6,140		45		1.48	%
Interest-bearing deposits		228,636		616		0.53	%		90,423		1,104		2.46	%
Total earning assets		2,453,703		57,660		4.73	%		1,975,618		48,456		4.95	%
Other assets		355,280							248,118
Total assets	$	2,808,983						$	2,223,736

Liabilities and stockholders' equity
Interest-bearing deposits
Demand deposits	$	525,024	$	188		0.07	%	$	450,655	$	114		0.05	%
Savings deposits		693,477		654		0.19	%		503,075		367		0.15	%
Time deposits		475,149		2,429		1.03	%		433,936		2,216		1.03	%
Total interest-bearing deposits		1,693,650		3,271		0.39	%		1,387,666		2,697		0.39	%
Borrowings
Retail repurchase agreements		1,346		3		0.39	%		3,141		2		0.13	%
Wholesale repurchase agreements		-		-		-			7,597		119		3.16	%
FHLB advances and other borrowings		72		1		2.23	%		-		-		-
Total borrowings		1,418		4		0.57	%		10,738		121		2.27	%
Total interest-bearing liabilities		1,695,068		3,275		0.39	%		1,398,404		2,818		0.41	%
Noninterest-bearing demand deposits		655,906							464,299
Other liabilities		38,820							28,245
Total liabilities		2,389,794							1,890,948
Stockholders' equity		419,189							332,788
Total liabilities and stockholders' equity	$	2,808,983						$	2,223,736
Net interest income, FTE⁽¹⁾			$	54,385						$	45,638
Net interest rate spread						4.34	%						4.54	%
Net interest margin, FTE⁽¹⁾						4.46	%						4.66	%

(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 $3.46 million and $2.15 million for the six months ended June 30, 2020 and 2019, 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)	2020			2020			2019			2019			2019			2020			2019
Noninterest income
Wealth management	$	854		$	844		$	842		$	952		$	884		$	1,698		$	1,629
Service charges on deposits		2,560			3,731			3,702			3,785			3,699			6,291			7,107
Other service charges and fees		2,617			2,231			2,096			2,007			2,129			4,848			4,178
Net gain (loss) on sale of securities		-			385			-			-			(43	)		385			(43	)
Net FDIC indemnification asset amortization		(483	)		(486	)		(590	)		(719	)		(516	)		(969	)		(1,068	)
Other income		-			-			2,395			900			2,025			-			3,700
Other operating income		1,365			844			869			709			471			2,209			1,226
Total noninterest income	$	6,913		$	7,549		$	9,314		$	7,634		$	8,649		$	14,462		$	16,729
Noninterest expense
Salaries and employee benefits	$	11,015		$	11,386		$	9,495		$	9,334		$	9,153		$	22,401		$	18,319
Occupancy expense		1,275			1,315			1,057			1,042			1,082			2,590			2,235
Furniture and equipment expense		1,316			1,384			1,179			1,183			1,062			2,700			2,095
Service fees		1,329			1,523			721			1,053			1,231			2,852			2,261
Advertising and public relations		475			512			478			795			513			987			1,037
Professional fees		307			233			408			375			328			540			742
Amortization of intangibles		360			361			251			251			249			721			495
FDIC premiums and assessments		33			-			-			-			150			33			318
Merger, acquisition, and divestiture expense		-			1,893			1,532			592			-			1,893			-
Other operating expense		2,803			3,057			3,762			2,819			2,883			5,860			5,934
Total noninterest expense	$	18,913		$	21,664		$	18,883		$	17,444		$	16,651		$	40,577		$	33,436

CONDENSED CONSOLIDATED QUARTERLY BALANCE SHEETS (Unaudited)

	June 30,			March 31,			December 31,			September 30,			June 30,
(Amounts in thousands, except per share data)	2020			2020			2019			2019			2019
Assets
Cash and cash equivalents	$	421,492		$	241,613		$	217,009		$	182,458		$	156,478
Debt securities available for sale		98,367			107,753			169,574			115,537			119,076
Loans held for sale		-			-			263			-			-
Loans held for investment, net of unearned income
Noncovered		2,125,560			2,084,610			2,101,599			1,679,958			1,705,408
Covered		11,257			12,115			12,861			14,158			15,520
Allowance for loan losses		(23,758	)		(21,137	)		(18,425	)		(18,493	)		(18,540	)
Loans held for investment, net		2,113,059			2,075,588			2,096,035			1,675,623			1,702,388
FDIC indemnification asset		1,943			2,433			2,883			3,458			4,020
Premises and equipment, net		62,658			63,319			62,824			48,521			48,262
Other real estate owned, noncovered		2,181			2,502			3,969			2,528			3,810
Other real estate owned, covered		-			-			-			-			152
Interest receivable		8,380			6,117			6,677			4,842			5,317
Goodwill		129,565			129,565			129,565			92,744			92,744
Other intangible assets		7,798			8,159			8,519			4,280			4,532
Other assets		103,623			101,912			101,529			75,056			75,248
Total assets	$	2,949,066		$	2,738,961		$	2,798,847		$	2,205,047		$	2,212,027

Liabilities
Deposits
Noninterest-bearing	$	752,899		$	620,292		$	627,868		$	472,478		$	480,573
Interest-bearing		1,744,947			1,668,122			1,702,044			1,364,374			1,367,465
Total deposits		2,497,846			2,288,414			2,329,912			1,836,852			1,848,038
Securities sold under agreements to repurchase		1,100			1,348			1,601			1,863			3,083
FHLB and other borrowings		-			1,000			-			-			-
Interest, taxes, and other liabilities		34,290			36,593			38,515			28,969			27,220
Total liabilities		2,533,236			2,327,355			2,370,028			1,867,684			1,878,341

Stockholders' equity
Common stock		17,710			17,700			18,377			15,580			15,633
Additional paid-in capital		172,601			172,231			192,413			108,222			109,816
Retained earnings		226,627			222,814			219,535			213,866			208,618
Accumulated other comprehensive loss		(1,108	)		(1,139	)		(1,506	)		(305	)		(381	)
Total stockholders' equity		415,830			411,606			428,819			337,363			333,686
Total liabilities and stockholders' equity	$	2,949,066		$	2,738,961		$	2,798,847		$	2,205,047		$	2,212,027

Shares outstanding at period-end		17,709,569			17,700,140			18,376,991			15,579,740			15,633,388
Book value per common share	$	23.48		$	23.25		$	23.33		$	21.65		$	21.34
Tangible book value per common share⁽¹⁾		15.72			15.47			15.82			15.43			15.12

(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)

	June 30,			March31,			December 31,			September 30,			June 30,
(Amounts in thousands)	2020			2020			2019			2019			2019
Allowance for Loan Losses
Beginning balance	$	21,137		$	18,425		$	18,493		$	18,540		$	18,243
Provision for loan losses charged to operations		3,831			3,500			91			675			1,585
Charge-offs		(1,672	)		(1,194	)		(1,353	)		(964	)		(2,114	)
Recoveries		462			406			1,194			242			826
Net charge-offs		(1,210	)		(788	)		(159	)		(722	)		(1,288	)
Ending balance	$	23,758		$	21,137		$	18,425		$	18,493		$	18,540

Nonperforming Assets
Non-covered nonperforming assets
Nonaccrual loans	$	24,471		$	20,263		$	16,113		$	16,701		$	16,368
Accruing loans past due 90 days or more		284			329			144			107			37
Troubled debt restructurings ("TDRs")⁽¹⁾		598			623			720			668			821
Total non-covered nonperforming loans		23,353			21,215			16,977			17,476			17,226
OREO		2,181			2,502			3,969			2,528			3,810
Total non-covered nonperforming assets	$	27,534		$	23,717		$	20,946		$	20,004		$	21,036

Covered nonperforming assets
Nonaccrual loans	$	299		$	145		$	244		$	243		$	203
Total covered nonperforming loans		299			145			244			243			203
OREO		-			-			-			-			152
Total covered nonperforming assets	$	299		$	145		$	244		$	243		$	355

Additional Information
Performing TDRs⁽²⁾	$	10,822		$	8,429		$	5,855		$	5,635		$	5,676
Total Accruing TDRs⁽³⁾		11,420			9,052			6,575			6,303			6,497

Non-covered ratios
Nonperforming loans to total loans		1.19	%		1.02	%		0.81	%		1.04	%		1.01	%
Nonperforming assets to total assets		0.94	%		0.87	%		0.75	%		0.91	%		0.96	%
Non-PCI allowance to nonperforming loans		93.71	%		99.63	%		108.53	%		105.82	%		107.63	%
Non-PCI allowance to total loans		1.12	%		1.01	%		0.88	%		1.10	%		1.09	%
Annualized net charge-offs to average loans		0.23	%		0.15	%		0.04	%		0.17	%		0.30	%

Total ratios
Nonperforming loans to total loans		1.20	%		1.02	%		0.81	%		1.05	%		1.01	%
Nonperforming assets to total assets		0.94	%		0.87	%		0.76	%		0.92	%		0.97	%
Allowance for loan losses to nonperforming loans		92.62	%		98.96	%		106.99	%		104.37	%		106.37	%
Allowance for loan losses to total loans		1.11	%		1.01	%		0.87	%		1.09	%		1.08	%
Annualized net charge-offs to average loans		0.23	%		0.15	%		0.04	%		0.17	%		0.30	%

(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 - July 28, 2020

Attached files

FIRST COMMUNITY BANKSHARES INC /VA/ Reports