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First Community Bancshares, Inc. Announces First Quarter 2017 Results and Quarterly Dividend

BLUEFIELD, Va., April 25, 2017 (GLOBE NEWSWIRE) -- First Community Bancshares, Inc. (NASDAQ:FCBC) (www.fcbinc.com) (the “Company”) today reported its unaudited results of operations and other financial information for the quarter ended March 31, 2017. The Company reported net income available to common shareholders of $6.20 million, or $0.36 per diluted common share for the quarter ended March 31, 2017, which represents a 5.88% increase in per share diluted earnings compared to the same quarter of 2016.

The Company also announced today that the Board of Directors declared a quarterly cash dividend to common shareholders of sixteen cents ($0.16) per common share, which represents an increase of 14.29% over the first quarter of 2016. The quarterly dividend is payable to common shareholders of record on May 5, 2017, and is expected to be paid on or about May 19, 2017. The current year marks the 32nd consecutive year of cash dividends paid to stockholders.

First Quarter 2017 Highlights

  • Income Statement
    • Net income available to common shareholders increased $118 thousand, or 1.94%, to $6.20 million compared to the same quarter of 2016.
    • Diluted earnings per share increased $0.02, or 5.88%, to $0.36 compared to the same quarter of 2016.
    • Core, non-GAAP diluted earnings per common share increased $0.03, or 9.09%, to $0.36 compared to the same quarter of 2016.
    • Net interest margin increased 16 basis points to 4.17%, and normalized net interest margin increased 21 basis points to 3.95% compared to the same quarter of 2016.
  • Balance Sheet
    • Book value per common share increased $0.23 to $20.18 compared to December 31, 2016.
    • On January 9, 2017, the Company redeemed all of its previously issued trust preferred securities totaling $15.46 million. The callable trust preferred securities bore an interest rate of three-month LIBOR plus 2.95% with a maturity date of October 8, 2033.
    • The Company and its subsidiary bank both significantly exceed regulatory “well capitalized” targets as of March 31, 2017.

Non-GAAP Financial Measures

The Company prepares its financial statements in accordance with generally accepted accounting principles in the United States (“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 45 branch banking locations in Virginia, West Virginia, North Carolina, and Tennessee as of March 31, 2017. First Community Bank provides insurance services through First Community Insurance Services, which operated 6 in-branch locations in Virginia and West Virginia as of March 31, 2017, and offers wealth management and investment advice through its Trust Division and First Community Wealth Management, which collectively managed $906 million in combined assets as of March 31, 2017. The Company reported consolidated assets of $2.43 billion as of March 31, 2017. 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.fcbinc.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) 2017 2016 2016 2016 2016
Interest income
Interest and fees on loans$ 21,827 $ 21,956 $ 21,952 $ 22,237 $ 21,573
Interest on securities 1,206 1,362 1,643 1,891 1,957
Interest on deposits in banks 159 98 26 9 20
Total interest income 23,192 23,416 23,621 24,137 23,550
Interest expense
Interest on deposits 1,166 1,145 1,133 1,087 1,114
Interest on borrowings 885 1,314 1,367 1,359 1,325
Total interest expense 2,051 2,459 2,500 2,446 2,439
Net interest income 21,141 20,957 21,121 21,691 21,111
Provision for (recovery of) loan losses 492 500 (1,154) 722 1,187
Net interest income after
provision (recovery) 20,649 20,457 22,275 20,969 19,924
Total noninterest income 5,691 6,238 5,895 7,030 7,903
Total noninterest expense 17,083 16,653 18,557 18,722 18,814
Income before income taxes 9,257 10,042 9,613 9,277 9,013
Income tax expense 3,055 3,638 3,230 3,022 2,929
Net income 6,202 6,404 6,383 6,255 6,084
Dividends on preferred stock - - - - -
Net income available to common shareholders$ 6,202 $ 6,404 $ 6,383 $ 6,255 $ 6,084
Earnings per common share
Basic$ 0.36 $ 0.38 $ 0.37 $ 0.36 $ 0.34
Diluted 0.36 0.38 0.37 0.36 0.34
Cash dividends per common share 0.16 0.16 0.16 0.14 0.14
Weighted average shares outstanding
Basic 16,998,125 16,891,010 17,031,074 17,414,320 17,859,197
Diluted 17,072,174 17,043,869 17,083,526 17,462,845 17,892,531
Performance ratios
Return on average assets 1.06% 1.05% 1.03% 1.02% 0.99%
Return on average common equity 7.35% 7.49% 7.58% 7.47% 7.15%
Return on average tangible common equity(1) 10.50% 10.75% 11.07% 10.88% 10.34%
(1) A non-GAAP financial measure defined as average stockholders’ equity less average goodwill, other intangibles, and preferred stock liquidation preference

RECONCILIATION OF GAAP NET INCOME TO CORE EARNINGS (Unaudited)
Three Months Ended
March 31, December 31, September 30, June 30, March 31,
2017 2016 2016 2016 2016
(Amounts in thousands, except per share data)
Net income, GAAP$ 6,202 $ 6,404 $ 6,383 $ 6,255 $ 6,084
Non-GAAP adjustments:
Net gain on divestitures - (619) (3,065) - -
Allowance reversal for sold loans - - (1,354) - -
Merger, acquisition, and divestiture expense - 55 226 410 39
Net (gain) loss on sale of securities - (388) (25) 79 (1)
Net impairment losses - - 4,635 11 -
Other non-core items (18) (48) (264) - (240)
Total adjustments to core earnings (18) (1,000) 153 500 (202)
Tax effect (7) (708) 56 184 (74)
Core earnings, non-GAAP(1)$ 6,191 $ 6,112 $ 6,480 $ 6,571 $ 5,956
Core diluted earnings per common share$ 0.36 $ 0.36 $ 0.38 $ 0.38 $ 0.33
Performance ratios
Core return on average assets 1.06% 1.01% 1.05% 1.07% 0.97%
Core return on average common equity 7.33% 7.15% 7.70% 7.85% 7.00%
Core return on average tangible common equity(2) 10.48% 10.26% 11.24% 11.43% 10.12%
(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, other intangibles, and preferred stock liquidation preference


Net Interest Income and Margin

AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited)
Three Months Ended March 31,
2017 2016
Average Average Yield/ Average Average Yield/
(Amounts in thousands)Balance Interest(1) Rate(1) Balance Interest(1) Rate(1)
Assets
Earning assets
Loans(2)$ 1,838,837 $ 21,895 4.83% $ 1,730,401 $ 21,599 5.02%
Securities available for sale 161,738 1,483 3.72% 354,582 2,268 2.57%
Securities held to maturity 47,112 152 1.31% 72,512 194 1.08%
Interest-bearing deposits 55,754 159 1.16% 15,591 20 0.52%
Total earning assets 2,103,441 23,689 4.57% 2,173,086 24,081 4.45%
Other assets 270,597 297,156
Total assets$ 2,374,038 $ 2,470,242
Liabilities and stockholders' equity
Interest-bearing deposits
Demand deposits $ 381,050 $ 102 0.11% $ 342,524 $ 57 0.07%
Savings deposits 525,573 36 0.03% 535,769 66 0.05%
Time deposits 515,506 1,028 0.81% 533,635 991 0.75%
Total interest-bearing deposits 1,422,129 1,166 0.33% 1,411,928 1,114 0.32%
Borrowings
Federal funds purchased - - - 3,424 5 0.59%
Retail repurchase agreements 66,947 11 0.07% 77,993 13 0.07%
Wholesale repurchase agreements 25,000 199 3.23% 50,000 468 3.76%
FHLB advances and other borrowings 66,618 675 4.11% 108,013 839 3.12%
Total borrowings 158,565 885 2.26% 239,430 1,325 2.23%
Total interest-bearing liabilities 1,580,694 2,051 0.53% 1,651,358 2,439 0.59%
Noninterest-bearing demand deposits 425,540 448,849
Other liabilities 25,477 27,784
Total liabilities 2,031,711 2,127,991
Stockholders' equity 342,327 342,251
Total liabilities and stockholders' equity$ 2,374,038 $ 2,470,242
Net interest income, FTE $ 21,638 $ 21,642
Net interest rate spread 4.04% 3.86%
Net interest margin 4.17% 4.01%
(1) Fully taxable equivalent ("FTE") basis based on the federal statutory rate of 35%
(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,
2017 2016
(Amounts in thousands)Interest(1) Average Yield/
Rate
(1)
Interest(1) Average Yield/
Rate
(1)
Earning assets
Loans(2)$ 21,895 4.83% $ 21,599 5.02%
Accretion income 1,784 2,252
Less: cash accretion income 650 805
Non-cash accretion income 1,134 1,447
Loans, normalized(3) 20,761 4.58% 20,152 4.68%
Other earning assets 1,794 2.75% 2,482 2.26%
Total earning assets 22,555 4.35% 22,634 4.18%
Total interest-bearing liabilities 2,051 0.53% 2,439 0.59%
Net interest income, FTE(3)$ 20,504 $ 20,195
Net interest rate spread, normalized(3) 3.82% 3.60%
Net interest margin, normalized(3) 3.95% 3.74%
(1) FTE basis based on the federal statutory rate of 35%
(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) 2017 2016 2016 2016 2016
Noninterest income
Wealth management$ 790 $ 681 $ 653 $ 810 $ 684
Service charges on deposits 3,113 3,442 3,494 3,361 3,291
Other service charges and fees 2,078 2,014 2,024 2,054 2,010
Insurance commissions 373 59 1,592 1,600 2,191
Net impairment losses recognized in earnings - - (4,635) (11) -
Net gain (loss) on sale of securities - 388 25 (79) 1
Net FDIC indemnification asset amortization (1,332) (1,618) (1,369) (1,328) (1,159)
Net gain on divestitures - 619 3,065 - -
Other operating income 669 653 1,046 623 885
Total noninterest income 5,691 6,238 5,895 7,030 7,903
Noninterest expense
Salaries and employee benefits 8,884 9,411 9,828 10,198 10,475
Occupancy expense 1,248 1,158 1,249 1,359 1,531
Furniture and equipment expense 1,091 1,070 1,066 1,109 1,096
Amortization of intangibles 261 265 316 277 278
FDIC premiums and assessments 244 274 363 372 374
Merger, acquisition, and divestiture expense - 55 226 410 39
Other operating expense 5,355 4,420 5,509 4,997 5,021
Total noninterest expense 17,083 16,653 18,557 18,722 18,814

Efficiency Ratio

EFFICIENCY RATIO CALCULATION (Unaudited)
Three Months Ended
March 31, December 31, September 30, June 30, March 31,
2017 2016 2016 2016 2016
(Amounts in thousands)
Noninterest expense, GAAP$ 17,083 $ 16,653 $ 18,557 $ 18,722 $ 18,814
Non-GAAP adjustments
Merger, acquisition, and divestiture expense - (55) (226) (410) (39)
OREO expense and net loss (328) (184) (278) (247) (711)
Other non-core items - 8 (168) (30) (174)
Adjusted noninterest expense 16,755 16,422 17,885 18,035 17,890
Net interest income, GAAP 21,141 20,957 21,121 21,691 21,111
Noninterest income, GAAP 5,691 6,238 5,895 7,030 7,903
Non-GAAP adjustments
Tax equivalency adjustment 497 520 509 521 531
Net impairment losses - - 4,635 11 -
Net (gain) loss on sale of securities - (388) (25) 79 (1)
Net gain on divestitures - (619) (3,065) - -
Other non-core items (18) (40) (432) (30) (414)
Adjusted net interest and noninterest income 27,311 26,668 28,638 29,302 29,130
Non-GAAP efficiency ratio(1) 61.35% 61.58% 62.45% 61.55% 61.41%
GAAP efficiency ratio 63.67% 61.24% 68.69% 65.19% 64.84%
(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) 2017 2016 2016 2016 2016
Assets
Total cash and cash equivalents$ 152,851 $ 76,307 $ 65,929 $ 44,301 $ 39,587
Securities available for sale 158,685 165,579 220,856 322,699 338,469
Securities held to maturity 47,092 47,133 72,182 72,239 72,485
Loans held for investment, net of unearned income
Non-covered 1,784,371 1,795,954 1,774,547 1,733,398 1,685,891
Covered 51,412 56,994 61,837 68,585 76,538
Less allowance for loan losses (18,458) (17,948) (19,633) (21,099) (20,467)
Loans held for investment, net 1,817,325 1,835,000 1,816,751 1,780,884 1,741,962
FDIC indemnification asset 9,931 12,173 14,332 16,431 18,787
Premises and equipment, net 50,057 50,085 50,564 50,199 50,799
Other real estate owned, non-covered 4,477 5,109 4,052 4,187 5,313
Other real estate owned, covered 241 276 2,437 2,017 2,279
Interest receivable 5,059 5,553 5,498 6,115 5,968
Goodwill 95,779 95,779 101,776 100,486 100,486
Other intangible assets 6,947 7,207 7,964 4,688 4,965
Other assets 82,069 86,197 87,932 91,082 89,187
Total assets$ 2,430,513 $ 2,386,398 $ 2,450,273 $ 2,495,328 $ 2,470,287
Liabilities
Deposits
Noninterest-bearing$ 467,677 $ 427,705 $ 473,509 $ 451,003 $ 453,336
Interest-bearing 1,438,917 1,413,633 1,388,390 1,373,412 1,421,329
Total deposits 1,906,594 1,841,338 1,861,899 1,824,415 1,874,665
Federal funds purchased - - - 42,000 18,000
Securities sold under agreements to repurchase 90,653 98,005 118,532 113,392 134,661
FHLB borrowings 65,000 65,000 90,000 140,000 65,000
Other borrowings 244 15,708 15,707 15,756 15,756
Interest, taxes, and other liabilities 24,618 27,290 26,599 25,553 24,576
Total liabilities 2,087,109 2,047,341 2,112,737 2,161,116 2,132,658
Stockholders' equity
Common stock 21,382 21,382 21,382 21,382 21,382
Additional paid-in capital 228,176 228,142 227,884 227,791 227,725
Retained earnings 173,860 170,377 166,689 163,030 159,223
Treasury stock, at cost (78,533) (78,833) (78,789) (74,974) (64,968)
Accumulated other comprehensive (loss) income (1,481) (2,011) 370 (3,017) (5,733)
Total stockholders' equity 343,404 339,057 337,536 334,212 337,629
Total liabilities and stockholders' equity$ 2,430,513 $ 2,386,398 $ 2,450,273 $ 2,495,328 $ 2,470,287
Shares outstanding at period-end 17,013,185 16,994,208 16,988,972 17,155,322 17,631,011
Book value per common share(1)$ 20.18 $ 19.95 $ 19.87 $ 19.48 $ 19.15
Tangible book value per common share(2) 14.15 13.89 13.41 13.35 13.17
(1) Stockholders' equity divided by as-converted common shares outstanding
(2) A non-GAAP financial measure defined as stockholders’ equity less goodwill and other intangibles, divided by as-converted common shares outstanding


Asset Quality

SELECTED CREDIT QUALITY INFORMATION (Unaudited)
March 31, December 31, September 30, June 30, March 31,
(Amounts in thousands) 2017 2016 2016 2016 2016
Allowance for Loan Losses
Beginning balance$ 17,948 $ 19,633 $ 21,099 $ 20,467 $ 20,233
Provision for (recovery of) loan losses charged
to operations 492 500 (1,154) 722 1,187
(Recovery of) provision for loan losses recorded
through the FDIC indemnification asset - - - (10) 9
Charge-offs (357) (2,485) (772) (691) (1,228)
Recoveries 375 300 460 611 266
Net recoveries (charge-offs) 18 (2,185) (312) (80) (962)
Ending balance$ 18,458 $ 17,948 $ 19,633 $ 21,099 $ 20,467
Nonperforming Assets
Non-covered nonperforming assets
Nonaccrual loans $ 18,537 $ 15,854 $ 17,487 $ 16,626 $ 16,196
Accruing loans past due 90 days or more 20 - 62 64 243
Troubled debt restructurings ("TDRs")(1) - 114 115 115 158
Total non-covered nonperforming loans 18,557 15,968 17,664 16,805 16,597
OREO 4,477 5,109 4,052 4,187 5,313
Total non-covered nonperforming assets$ 23,034 $ 21,077 $ 21,716 $ 20,992 $ 21,910
Covered nonperforming assets
Nonaccrual loans $ 918 $ 608 $ 688 $ 680 $ 1,955
Total covered nonperforming loans 918 608 688 680 1,955
OREO 241 276 2,437 2,017 2,279
Total covered nonperforming assets$ 1,159 $ 884 $ 3,125 $ 2,697 $ 4,234
Additional Information
Performing TDRs(2)$ 8,593 $ 12,838 $ 13,336 $ 13,562 $ 13,474
Total TDRs(3) 8,593 12,952 13,451 13,677 13,632
Non-covered ratios
Nonperforming loans to total loans 1.04% 0.89% 1.00% 0.97% 0.98%
Nonperforming assets to total assets 0.97% 0.90% 0.91% 0.87% 0.92%
Non-PCI allowance to nonperforming loans 99.40% 112.32% 111.08% 125.48% 123.17%
Non-PCI allowance to total loans 1.03% 1.00% 1.11% 1.22% 1.21%
Annualized net charge-offs to average loans 0.00% 0.49% 0.07% 0.02% 0.23%
Total ratios
Nonperforming loans to total loans 1.06% 0.89% 1.00% 0.97% 1.05%
Nonperforming assets to total assets 1.00% 0.92% 1.01% 0.95% 1.06%
Allowance for loan losses to nonperforming loans 94.78% 108.28% 106.98% 120.67% 110.32%
Allowance for loan losses to total loans 1.01% 0.97% 1.07% 1.17% 1.16%
Annualized net charge-offs to average loans 0.00% 0.47% 0.07% 0.02% 0.22%
(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

FOR MORE INFORMATION, CONTACT: David D. Brown (276) 326-9000

Source:First Community Bancshares, Inc.